VOLUME 5 - ISSUE 5 LEGAL UPDATE

- 2008 Legal Update
- Avoiding Acceptance of Rent
- Your "Work Order Policy" and the Law
- The Corporation as a Tenant
- What are Different Terms and Conditions?

 

 

2008 Legal Update
by Harry Anthony Heist, Attorney at Law

 

The past Florida Legislative Session was one of the most challenging and successful to date for the rental housing industry. The members, staff and lobbyist team of the Florida Apartment Association, (FAA) and the Florida Association of Residential Property Managers (FARPM) worked tirelessly to protect the industry's interests. Legislation harmful to the industry was stopped, and the important "Early Termination Bill", while not signed yet by the Governor, passed both the House and the Senate with overwhelming support. Not all was good though, as it appears that eviction filing fees may be raised by 350%, but the budget still has not passed into law. The importance of being politically active cannot be understated, and we are already preparing for 2009. This article will address some important pieces of legislation that would have affected the rental housing industry.

The Sexual Predator and Offender Bill -- SB2236/HB755

This bill when originally filed could have had a serious impact on landlord who rented to sexual offenders or predators. We had concerns that landlords could be subject to criminal liability if they were to rent to a sexual offender or predator. Under the bill as originally filed, burdensome requirements were placed on the landlord, and basically the landlord was being required to do the job of law enforcement and notify law enforcement, due to the fact that many sexual offender or predators fail to register their new addresses in violation of the law. The bills were amended to only impact landlords who actively solicited sexual predators or offenders to live in their rental homes; thus, a landlord who did not engage in active solicitation would not have been affected by the bill if it passed into law. Although it is difficult to believe, some landlords do in fact actively solicit sexual offenders and predators, as it is becoming increasingly difficult for them to find housing. This can result in clusters of sexual predators and offenders in residential neighborhoods. The bill did not pass the Senate.

The Domestic Violence Bill -- SB1408/HB931

This bill sought to give added protections to victims of domestic violence and prevent discrimination by landlords against domestic violence victims. The bill was poorly drafted and among other things would have allowed a domestic violence victim to get out of the financial obligations of a lease agreement, and would have subjected a landlord to potential Fair Housing violations if the landlord failed to rent to a domestic violence victim. While discrimination against a domestic violence victim certainly would never be intentionally done by a professional landlord, a landlord might have been accused of discrimination if the current landlord stated that there were constant fights, disturbances and police activity, and then the prospective landlord denied the application for residency to that person. Currently, domestic violence victims cannot get out of a mortgage, credit card bill or car payment, and we don't feel they should be able to walk away from a lease obligation. The bill was not heard by the Senate.

Access to Dwelling Units "“SB1530/HB823

In response to a situation in which an elderly person was killed by a maintenance person with key access at an apartment community, this bill as originally filed would have required all landlords to run criminal background checks on any employee who had access to a dwelling unit, and if the employee had a felony in Florida, the tenant would need to grant permission for entry for repairs, the landlord would need to accompany the employee to the unit and engage in burdensome record keeping. While well intended, this bill went way too far in creating burdensome requirements, when there was no real showing that crime would have been reduced. Ironically, any employees having a felony outside of Florida would not fall under this bill. This bill was not heard in the Senate.

The Early Lease Termination Bill -- SB2716/ HB1489 and the Civil and Criminal Justice Appropriations Bill -- SB1790

The Early Lease Termination Bill has not gone to the Governor as of this writing, but has passed both the House and Senate. This bill, if it becomes law, will allow the landlord to give the tenant a choice at the beginning of the lease to pay a fixed sum in the event the tenant has to break the lease early or pay rent until the unit is re-rented. It is a very fair bill and allows great flexibility to a tenant in such a transient state as Florida.

The Civil and Criminal Justice Appropriations Bill is very troublesome, as it will potentially raise eviction filing fees from the current $80.00 amount to possibly $280.00, impacting landlords to the tune of $28,000,000. This bill has not been signed into law by the Governor yet, but unfortunately may be due to budgetary shortfalls. Full updates on both these bills will be given in next month's issue.

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Avoiding Acceptance of Rent
by Harry Anthony Heist, Attorney at Law

 

Why would you ever want to refuse rent? The tenant may be currently under eviction, in continuing noncompliance with some other term or condition of the lease, holding over, or making a partial payment. In these cases you would not want to accept rent, but rather you will want to refuse the rent payment, as it could interfere with the tenant removal process. The problem is that the tenant came to your office, paid your front desk person and received a receipt showing that payment has been made! Have you accepted rent? Has a waiver been created such that the tenant now cannot be removed? This article will deal specifically with the "acceptance of rent" and the "receipt" given to the tenant, rather than how to return the "accepted" rent to the tenant.

Rent Acceptance and Evictions

Accepting any rent during an eviction without the parties properly entering into a stipulation is a sure way to kill an eviction action. Most landlords are aware of this and know that when a tenant attempts to pay, the consequences can be severe. If a tenant attempts to pay the rent, the landlord will usually refuse the rent and call the attorney for guidance. Possibly a stipulation will be entered into, or the tenant will simply be told that rent cannot be accepted. Accepting or even holding any rent payment from a tenant under eviction can have dire consequences to the eviction action.

Rent acceptance During Noncompliances

Less obvious are the situations in which a tenant may be in some kind of lease noncompliance and tries to tender the rent during this lease noncompliance. Examples of continuing noncompliances include unauthorized pets, code violations, unauthorized occupants, or some other uninterrupted, ongoing violation of the lease. Accepting the rent from the tenant during a continuing noncompliance creates a serious, potential waiver and estoppel problem, in that the landlord is basically giving the tenant the permission to continue living on the premises for another month, even though there is a noncompliance. Many landlords think that they can accept the rent and then quickly turn around and evict the tenant for some violation of the lease not involving rent. This is a classic case of "trying to have your cake and eat it too", and it is not good practice. Following is a typical situation: a tenant is given a Seven Day Notice of Noncompliance with Opportunity to Cure on May 26 for an unauthorized pet, then comes in on June 1 and pays the rent. Can the landlord turn around and terminate the tenancy? Probably not, if the rent is accepted.

The Accidental Rent Acceptance

In a very small company or when a landlord is in complete control of rent acceptance, the landlord can easily refuse the rent, explaining to the tenant that rent cannot be accepted, possibly because an eviction action has been filed or the tenant is in noncompliance. The tenant comes in to the office, is recognized by the landlord, and the landlord is fully aware of the situation. This is the easy case. The problem starts when a tenant waltzes into a rental office, hands a check or money order to the person at the desk that has no idea about the current eviction or noncompliance, and the tenant is given a receipt and leaves. The landlord may discover this immediately or even a couple days later. Possibly the rent has even been deposited! Now we have a big problem. The tenant has tendered the rent to an employee or agent of the landlord, the rent has been "accepted", and potentially the landlord's ability to remove the tenant has been compromised. Will a judge consider this "rent acceptance"?

The Not So Perfect Solution

In a perfect world, your front desk person or employee would know exactly who was under eviction, who was in noncompliance, and most importantly know not to accept the rent from that tenant. The reality is that companies are dealing with sometimes hundreds or thousands of tenants, and to investigate each tenant at the time he or she comes in to pay the rent, normally on the 1st through 5th of the month, is simply impractical. One solution is to add some wording to the receipt that is given to the tenant. While this wording is not perfect, it makes the person, be it the tenant or a third party tendering the rent, aware that the rent may be returned and the tender and the receipt by the front desk person does not constitute legal "acceptance", which we now know could kill that eviction or hurt the prospects of filing an eviction.

 

Possible wording for your receipts"

This receipt is provided for your convenience to show that you have given a form of payment to our office. In the event you are in default of the lease agreement, you are under a pending or actual eviction process, and/or you are attempting to make a partial payment, your tender of any payment to us and our giving you this rent receipt does not constitute our legal acceptance of the tender, and the payment may be returned to you at our option.

What is being accomplished?

By placing this wording on the receipt that is given to the tenant, you possibly can protect yourself from being considered to have accepted the rent from the tenant. This wording makes the acceptance of the rent from the tenant conditional upon other possible circumstances. Could it be challenged in court? Sure, but it is probably better than what you have on your receipts today.

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Your "Work Order Policy" and the Law
by Harry Anthony Heist, Attorney at Law

 

Most companies have a written policy under which the tenant is instructed to put all work orders for repairs in writing. No work order, no repair. In a typical situation though, your maintenance person is verbally notified of a repair need while on the property. The most common response by your maintenance person is "You need to go to the office and put in a work order". The maintenance person then goes about his or her day doing the normal repairs and maintenance on the property and following the work orders that have been provided by the office. In other words, the maintenance person is doing the jobs as dictated by the office and office policies. The tenant who gave verbal notice is ignored.

Your Company "Work Order Policy"

A typical company policy as outlined in the lease or the Resident Manual dealing with repair requests states that in the event a repair needs to be done in a unit or there is some sort of a problem that needs attention, the tenant is to come to the office and fill out a work order request. There are obvious reasons for this type of policy, as it documents the work order, alerts management and maintenance to the problem, provides evidence why and when maintenance entered an apartment, and establishes that all important paper trail which we are always recommending be created. Generally, if a tenant fails to put in a written work order, maintenance staff will not voluntarily go out to the unit until such time as the work order is in place, unless a true emergency exists.

The Reality of the Tenant's Expectations

The tenant sees Mike the maintenance person driving the golf cart, flags him down and notifies him that the A/C is not cooling properly. Although Mike tells the tenant that she needs to put in a written work order, the tenant expects this to be a mere formality and that Mike will be out nonetheless as soon as possible to fix the problem. Mike, following company policy, fails to go out. A few days go by, and then the tenant calls the office, wondering why the A/C is not being fixed. As far as the tenant is concerned, she put management, through Mike, on notice of a repair need, and Mike did not make the repair. The tenant now begins the process of trying to break their lease, withhold rent or completely badmouthing the property, plastering notices on every resident's door.

Is the Tenant Correct?

Most property managers will feel that the tenant is completely wrong, as the tenant did not follow company policy or procedure. The tenant did not put the work order in writing; therefore, the company is off the hook as far as the property manager is concerned. The tenant withholds rent, breaks the lease or somehow the situation ends up in court. At court, the tenant will testify that she told Mike the maintenance person that a repair was necessary and Mike failed to make the repair. You and Mike will then tell the judge that the tenant never put in a written work order, and that is why the repair was not made. Now for the tough questions. The judge may ask you or maintenance whether the tenant did in fact notify Mike that a repair was needed. If Mike answers "yes", which he would have to do if he were telling the truth, the judge will not be happy with Mike or management. Possibly the tenant was justified in withholding rent or breaking the lease. While we all know that a tenant is required to give a landlord 7 days written notice if they intend to withhold rent or break a lease, some judges will ignore this requirement by Florida law.

Actual Notice Versus Company Policy

In the foregoing example and possible court case, the tenant shows to the judge, a point confirmed by maintenance, that the tenant gave ACTUAL NOTICE of a repair need which was not performed. The fact that the tenant gave actual notice, while not according to company policy, will result in the judge being very unsympathetic to management and maintenance, and could cause you to lose a case in court. Judges are not big on your company policies or procedures. There is nothing in the law that states that a tenant must put a routine repair request in writing. The judge will be more concerned whether the tenant gave some sort of notice, and in this example, the tenant did give notice, corroborated by the maintenance person's testimony.

Do we now ignore company "Work Order Policy"?

As we have seen, requiring a tenant to provide you with a written work order is a good policy and should be continued, pushed and encouraged by all means. On the other hand, if maintenance is notified of a problem by a tenant, be it at the pool, while doing another repair in the apartment, or anywhere on the grounds, that maintenance person needs to be proactive, write a note down on the pad that he will carry at all times, and create a work order from that. Once that work order is created, the scheduling should be done with the tenant to avoid any accusations by a tenant that maintenance entered a unit without authorization or notice. Remember, when you are in court, about the last thing a judge cares about is your "company policy".

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The Corporation as a Tenant
by Harry Anthony Heist, Attorney at Law

 

While we strongly recommend against having corporations as tenants in residential leases, sometimes it is necessary and often actually works out fine. How the lease is executed with the corporation becomes a big problem, and rarely do we see leases with corporations executed correctly. The name of the corporation, who signs, the personal guarantee and how it is signed will determine if you will potentially have a successful lease or major problems later. This article will not address the dangers of the corporate tenant, but will rather show you how to enter into a lease with the corporate tenant in the proper legal fashion.

The "Corporation Only" as a Tenant

There will be times when the tenant will be the corporation. Granted, a human being will be the occupant in the residential property, but the lease named tenant will be a corporation and nothing more. This means that the corporation as tenant is responsible for paying the rent, is bound to the lease and incurs all the obligations and benefits as a leaseholder. If the leaseholder corporation is in default of the lease, the landlord's only recourse will be to sue the corporation as the tenant, and the landlord will be bound by all the legal requirements and procedures necessary to sue a corporation. No individual person is responsible for payment of the rent or liable for failure to pay the rent.

Why would a lease only be in the Corporate tenant's name?

In the case of a medium to large corporation, no one is going to personally sign or guarantee a corporate lease in most situations. Usually the corporation is placing employees, officers or directors in the rental unit. The landlord deals directly with the employee, officer or director of the corporation. Neither the occupant nor the corporation, officers, employees of directors will have any individual being liable under the lease. The corporation is the only liable party.

Who is the Corporation?

Before you can even think of entering into a lease with a corporation, it is crucial to know the exact legal entity's name as it is registered with the Florida Secretary of State or the state in which it is incorporated. "Joe's Painting Company" is not the proper corporate name, if in fact the corporate name filed with the Secretary of State indicates, "Joe's Painting and Contracting, Incorporated". We see a massive amount of sloppiness in how the name appears on the lease. We recommend you always get a printout from the internet, and even possibly get a copy of the Articles of Incorporation. While you may not think this is important, when it comes time for the corporation to break a lease, skip out on you or get evicted, this sloppiness can really cause serious complications. Never assume that the name of the corporation that is being provided to you is in fact the exact legal name of the corporation. Always investigate and confirm.

How is the pure Corporate Tenant Lease drafted?

The corporate tenant should be on the lease exactly as it appears in the Secretary of State records. The lease should clearly state who the occupants will be, and if you routinely do criminal background checks on your tenants, failing to do criminal background checks on the occupants could be a Fair Housing violation. Years ago, a client found out that one of the occupants in a unit rented under a corporate name was in fact a registered sexual offender. Since the occupant never filled out an application and the landlord never did a criminal background check, the occupant could not be evicted.

How does the pure Corporate Tenant Sign?

In the signature section of the lease, the corporate name needs to be listed as the tenant along with the name of the person signing the lease on behalf of the corporation.

Example: XYZ Engineering and Surveying, Inc., by John Smith, President.

Is John Smith now liable at all if the corporation fails to pay the rent or gets evicted? No. John Smith is simply signing as his authorized capacity as president of the corporation.

Who is authorized to sign on behalf of the corporation?

This is not an easy question to answer. Someone may have apparent authority, but due to the bylaws of the corporation, only certain people or persons can actually bind the corporation. Your attorney can help you investigate this. Never assume that the person signing the lease is in fact authorized. You will sadly find out that he was not authorized to sign when the corporation is trying to get out of the lease, and the corporation's attorneys can prove that this person had no actual authority.

The Corporate Tenant and the person with individual liability

Unless you are dealing with a solid corporation with a proven track record and know for sure that the person signing the lease has the absolute authority to bind the corporation, you will want to have someone sign "individually" in addition to signing in a corporate capacity. This person signing "individually" is actually bound to the terms, conditions and all obligations of the lease as if there were no corporation in the picture at all. This is the best possible way you can execute a corporate lease.

Example: In the beginning of the lease, it will state that something like "Bill Jones and Mary Jones, Landlord and XYZ Engineering and Surveying Corporation, through its agent John Smith, President AND John Smith Individually"

At the signatory section of the lease, you will have a place for Bill and Mary Jones to sign (unless you are signing on their behalf with a Power of attorney) and 2 more places for signatures:

XYZ Engineering and Surveying Corporation, by John Smith President _______________________ (sign here)
and

John Smith, Individually ______________________ (sign here)

Common mistakes we see

1. The corporate name is incorrect or incomplete. 2. The lease is signed by a person in the corporation that has no authority. 3. The lease fails to include a signature line creating individual liability. 4. There is a signature line, but it fails to state whether the person signing is doing so individually or on behalf of the corporation, causing legal confusion.

Our Recommendation

Besides all the dangers of entering into corporate leases in residential units which we promised not to address in this article, we strongly recommend that unless you are sure you know how to enter into a corporate lease, give your attorney a call so that you will know how to draft the lease correctly.

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What are Different Terms and Conditions?
by Cathy L. Lucrezi, Attorney at Law

 

The fair housing laws are very clear: it is unlawful to discriminate in the terms and conditions of a rental based on a person's race, color, religion, sex, national origin, familial status, or handicap. There are few people that would do so overtly, but a landlord can be engaging in this form of discrimination without recognizing it.

The stakes are high. If it is determined that a landlord is unlawfully imposing different terms and conditions on a rental, the landlord can become liable for damages, fines, and attorney fees. Examples:

"We will do monthly inspections of your unit."

The landlord plans to do a monthly inspection of the rental unit because (pick one) the tenant has a service animal, the tenant's wheelchair will damage the floor, his "kind" always cause more damage to a place, or it is a large family. Such reasons violate fair housing laws regardless of how a landlord might justify them.

Of course, many landlords have the practice of performing regular inspections of the premises. ["Monthly", though, is too intrusive in almost any scenario.] That practice is fine, because it is for a legitimate business reason that has nothing to do with a person being a member of a protected class.

"You're approved, but only if you erect a child-proof pool fence."

The landlord requires the tenant to erect a child barrier fence because he fears injury of the children who will be living at his property. He is requiring something of the family with minor children that he would not require of other tenants. He is violating the law.

If the landlord is so concerned about the risk of the children being injured, he should install the child barrier fence himself. Note, too, that some local codes require landlords to provide child barrier fencing around a pool.

"Your children can use the pool in the afternoons only."

The landlord's rule is that children can use the community pool only in the afternoons, even though the pool is open until 9:00pm. As a result, the tenant with children in her household is limited in her use of the amenities. The landlord is violating fair housing laws.

Reasonable pool rules are absolutely okay. It is smart to have rules to promote safety. However, rules that limit use, but which have nothing to do with safety, are very likely to violate fair housing law. The fact that the adult tenants would prefer to use the pool at a time that kids aren't around is, well, tough noogies.

The solution

See the pattern? If you are attaching a term or condition to the tenancy that affects only a certain group of people, then it is very likely you are violating fair housing laws. Terms and conditions on a tenancy are perfectly okay "“ after all, that's what a lease is for. Just be sure you have a legitimate, nondiscriminatory reason for what you do. If you are imposing a term or condition on an applicant or tenant because she is a member of a protected class, and not imposing it on others, you should expect to see a HUD complaint arrive in the mail.

 

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Law Offices of Heist, Weisse & Wolk, P.A.
Phone: 1-800-253-8428 Fax: 1-800-367-9038

Serving Florida's Property Managers with main office in Fort Myers Beach. Available by appointment in Orlando and Clearwater


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