On-site Employee Rentals
By Michael Geo. F. Davis, Attorney at Law


A common employee benefit in the multi-family industry is to give employees discounted rent in an on-site rental. This can be mutually beneficial to the employee and the employer/landlord. The employee obviously benefits economically. The landlord has another set of eyes on the property and an individual who may be available in times of emergency. This arrangement can also be a problem for the landlord if the employee quits or is terminated from employment. A disgruntled former employee, who remains a resident on-site, can be a source of numerous difficulties. He or she is familiar with past and present management concerns, maintenance issues, and perhaps even some irregularities. It is often in the landlord's best interest to terminate the former employee's tenancy and have him leave the community to reside elsewhere.

Market rent lease

A solid employee lease termination case begins at lease preparation. The lease should be prepared without regard to status of the prospective resident as an employee. In other words, ignore that the fact that the lease is being prepared for an employee. The employee lease should be a standard lease with market rent listed. All addenda that would normally be signed in a lease transaction should be prepared. If the employee is receiving a parking space, garage, washer/dryer, additional storage or anything else that is normally the subject of an addendum, then those addenda should be prepared. If all residents at lease signing also execute community policies, good neighbor pledges, rules and regulations or any other ancillary documents, they too should be prepared. (However, it is advisable to forego the use of a concession addendum, if the rent will be reduced on the employee addendum). The lease should reflect the rent without the employee discount. While the landlord can try to avoid errors in leasing to an employee, mistakes can happen, and the terminated employee could end up remaining as a resident. By having a standard set of leasing documents, the landlord is able to demand the undiscounted rent for the apartment, and can also require the former employee/resident to adhere to the same lease, addenda, rules, regulations, etc., as all the other residents.

Employee lease addendum

Now that the landlord has the standard lease documents prepared, he can prepare the employee lease addendum or "employee addendum". The purposes of the employee addendum are to provide the employee's discounted rent, condition the discounted rent on continued employment, provide for termination of the employee's tenancy in the event of employment termination, including the amount of notice required to terminate the tenancy in the event of employment termination. The employee addendum is not the place to set forth the terms of employment, itemize the employee's job requirements, list the causes for employment termination, or any other human resources matters. Some landlords use special employee leases instead of their standard lease. When doing so, landlords should carefully check these special leases after preparation, because leasing agents often make mistakes while executing them, due to their infrequent use.

Employee addendum terms

The sole purpose of the employee addendum is to deal with the employee's tenancy. The employee addendum should be clear and unambiguous. It is advisable to list the employee rent as a dollar amount of rent due (e.g., $250 rent per month) rather then a discount from market rent or a percent of market rent. If no rent is due, then enter "$0". It should contain a provision that upon termination or cessation of employment, rent is immediately payable at the full rental rate listed in the lease. The employee addendum should also allow the landlord to terminate the existing tenancy upon so many days' written notice.

Signing, Additions, Renewals

As with any other lease, all adult residents sign the lease and all addenda, including the employee addendum. It is imperative that all lease signers sign the employee addendum. A lease signer who has not signed the employee addendum is not bound by the addendum and is not required to vacate upon termination of the employee's employment. The employee addendum may contain language indicating that its terms and conditions will remain in effect for any subsequent lease renewals. The addition of a new resident should be handled carefully. The preferred method would be new lease documents and employee addendum with the new resident and the remaining resident(s), including the employee/resident. Certainly, if there is any question that the form adding the new resident binds the new resident to the previously executed lease and employee addendum, new lease documents are mandatory.

Unsigned employee addendum

A completely unsigned employee addendum is of no value. An employee's initials on it are not an acceptable substitute for a signature. Failing to obtain the signature of an employee's spouse or other roommate is a common and serious mistake. If the employee and his spouse or other roommate can afford the lease rate rent, the non-employee's tenancy will continue after the employee's separation from employment. The problem becomes even greater if the lease reflects the discounted rental rate. In all likelihood the former employee will continue to reside in the apartment. The landlord could attempt to pursue a Seven Day Notice case for unauthorized occupancy by the former employee, but many judges will be unsympathetic to the landlord.

Where to keep the employee lease documents

Without impugning the integrity of any employee, the original employee lease documents should be kept off-site, for instance, in a locked file cabinet in the landlord's regional or home office or with the employee's employment file. A copy of the lease documents can remain in the community leasing office for ready reference. Over the years too many employee lease files have disappeared with the original documents in them. Situations also arise in which the employee addendum shows up missing, but the lease with a zero rent amount or significantly discounted rental amount remains intact in the file.

Termination of on-site employees

Upon being notified of the employee's termination or quitting, the first thing the landlord should do is to check the employee's lease file. The lease documents should be examined. If the file or documents within the file are missing, copies can be secured from the off-site location where the original documents are kept. If there is any reason to think that the former employee will not voluntarily vacate upon notice, then the landlord should contact his attorney. Small mistakes in the termination procedure can result in significant delays later.

Notice confirming rent discount or lease termination

Any provision in the employee addendum providing for the form, method and timing of notice to the employee of the termination of the employee's rent discount and/or the termination of the lease should be followed in detail. The employee addendum itself may not contain a notice requirement, but the lease may. The employee addendum supplements the lease and to the extent that it doesn't contradict the lease, the lease applies. Thus, any lease provisions governing the form, method or timing of notices will apply to the employee addendum if not inconsistent with the addendum. There may be a tendency on the part of the landlord to do nothing, if the employee addendum contains a provision providing for the automatic termination of the employee's rent discount and lease upon separation from employment. It is a mistake to do nothing, even if the lease and employee addendum don't specifically require notice to the former employee. Most courts will consider notice a matter of good faith and fair dealing, and the landlord will avoid the resident claiming lack of notice.

Post-notice rent or noncompliances

The landlord must be careful when accepting payment from the former employee. The landlord should not accept rent in an amount greater than the prorated amount due through the vacating date required in the lease or employee addendum, as confirmed in the lease termination notice. Acceptance of additional rent will likely be construed by a court as a waiver of the lease termination notice and perhaps even of the employee addendum's termination of lease provision. If the landlord intends to terminate the tenancy on short notice, we recommend against making demands for the prorated rent, whether it be by billing or a formal three-day notice. Note that some courts hold that the landlord may not bill for any additional rent in the month employment was terminated, if the employee's discounted rent for that month was already accepted, or if no rent was due under employee addendum. In particular, delivery of a Three Day Notice to Pay Rent or Deliver Possession can convey the wrong message: the recently fired employee will often interpret a Three Day Notice as a signal that the tenancy will continue if the demanded payment is made.

Granting extensions/agreement to vacate

Since most employee addendums require quick vacating dates, it is not surprising that the former employee will often seek an extension of the vacating date. Almost just as often, the solid employee lease termination case becomes a morass of oral conversations and alleged promises. Some of the on-site personnel are bound to be friends with the former employee, sympathetic to his plight and inclined to give an extension. The landlord should have a written policy as to who can grant employee vacating extensions, under what circumstances they can be granted and for what additional time. The policy should be enforced. Remember that both fair housing and employment discrimination laws will apply to the granting of vacating extensions. Any extension should be in writing. A vacating agreement would be the appropriate writing. It must be signed by all lease signers.

The employee addendum can be the solution to a potentially messy, on-site situation after the employee is terminated. This can only be accomplished if care is taken at document preparation and signing, as well as at the time notice of lease termination is delivered.


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Advertising the Property and Dealing with Prospects Part 1
by Harry A. Heist, Attorney at Law


When advertising the property in any media form, be it print, internet, radio or any other media, it is crucial to be honest and accurate. Advertising amenities that are no longer available or that are not yet available, "starting" or "from" prices for units when none or only a few exist at the advertised price, or any other tactic used to draw a potential renter in that is not 100% accurate, could open up the management and owners to charges of false advertising and/or unfair and deceptive trade practices. Care must be taken to constantly check all advertising for accuracy, including advertising controlled by third parties.

Below Market Prices

A troublesome situation arises when units are advertised for a below market price, when the intention of the apartment community is to only have a few of these apartments at that price, but all other similar apartment at a higher price. At the time the ad was placed, these few below market apartments were available, but in no time, they now are no longer available. If below markets apartment are to be set aside, the number of the apartments must be clearly indicated in the ad, shown as limited quantities, or at least be available to the public when the ad is published, no matter what media is used. Many of you may be familiar with the hotel advertisement magazines found in highway rest areas where extremely low prices are advertised. If you look closer though, you will see the fine print often limiting the number of these rooms. There is a reason for this fine print, and this is simply to avoid lawsuits for unfair and deceptive trade practices or false advertising.

Floorplans and Location

In the event there are multiple floorplans of varying square footage, design or both, it is crucial that the advertising is accurate. When the prospect is deciding on an apartment, if she has not seen the apartment that she will be occupying, due to it being occupied or because she is renting site unseen from afar, the floorplan should be given to her, and you should have an affirmation from the prospect that she was provided with the floorplan and location of the unit. If a particular unit is NOT guaranteed to the prospect, the prospect must be told in writing that no particular unit or floorplan is guaranteed, and the applicant is agreeing to accept the unit that becomes available, even if it is not exactly the same in size, floorplan or view as the model unit previously viewed. If possible, provide the applicant with copies of all the floorplans. The key is not to create an expectation in the prospect that cannot be fulfilled. Location is very important to many residents. There is a big difference between the apartment overlooking the serene lake or wildlife refuge, and the one that is next to the dumpster or overlooks the 24 hour convenience store and busy road. Needless to say, some floorplans and locations are far more desirable than others. Surprising the resident with a location or floorplan that is far different than expected could be met with a desire on the part of the new resident to break the lease, refusal to move in, and a demand for all funds previously paid. The apartment you think will be vacated next week could end up being the eviction for holdover, as the current resident refuses to vacate, or the apartment may be infested with bedbugs, or something else may occur which makes the expected apartment otherwise unavailable. We strongly recommend that unless you are certain that your prospect will get a particular apartment, the applicant should always sign a document, under which it is acknowledged and agreed that the apartment being requested may not be the one ultimately received, despite your best efforts.


Often the advertising media of a new property under construction will show amenities that are not complete. Sometimes the artist's digital renderings in the advertisements are nearly impossible to tell apart from actual photos. For instance, the prospect is told that a pool is not yet complete, with the lower price of the apartment reflecting that fact. Certain amenities simply may not yet be available for the use of the residents. Unfortunately, no one can ever guarantee when an amenity will in fact be complete, regardless of the contractor's promises. Your prospect becomes an applicant and then becomes your resident; six months later, the amenity or amenities are still not available for the use of the resident. This development can result in the resident attempting to withhold rent, banding together with other residents and hiring an attorney who may file a class action lawsuit, breaking his lease, or suing for breach of contract. While you fully intended the amenity to be complete by a certain date at the time of lease signing, the fact remains that the resident did not get what he bargained for. Your claims that the rent was lower and below market for the unit because an amenity or amenities were not yet complete will be met with an accusation by the resident that you TOLD him that an amenity or amenities will be completed by a certain time, and that he relied upon this. Whether or not the completion and availability of an amenity is in your control has no bearing on the matter. It is crucial that if certain amenities are not completed or otherwise unavailable, the resident signs a special "Amenities Addendum", under which he acknowledges that an amenity is not yet complete, and the applicant has been notified before signing the lease that you made no guarantees whatsoever as to the date of the completion or availability of an amenity.

Construction or improvements on the property

If you expect to be making any major alterations, repairs or construction on the premises that could cause any possible inconvenience to the resident or disruption to the resident's peaceful quiet enjoyment of the premises, these need to be disclosed prior to lease signing and be reflected in an agreement between you and the resident. Often a resident will move in to the unit, and a month later, construction begins on each building's roof or siding, when there is excessive construction noise, traffic, dust, debris and the usual nails in the tires. The resident you rented to just happens to work the night shift and sleeps during the day. A "Construction Addendum" explains and fully discloses to the resident that there may be construction, repairs or alterations occurring on the premises which may cause inconveniences, and the resident acknowledges and agrees that this has been disclosed. Failure to disclose the possibility of construction related disturbances or inconveniences, especially when management is fully aware that the work will begin shortly, could result in the resident looking to break the lease or seeking other legal recourse. Will the resident be able to break the lease without penalty? Quite possibly.

Disclosure of All Fees

Administrative fees and redecorating charges are routinely charged as a condition of occupancy. They commonly range from $50 to $250 in many Florida apartment communities. The legality of these charges is not certain. Florida law does not specifically prohibit or allow such charges, so we recommend you speak with your corporate and local counsel to decide if or what to charge. The main issue here is disclosure. The typical problematic scenario is as follows: an individual out apartment hunting calls the property inquiring about the price for a one bedroom unit. The leasing agent cheerfully tells the prospect that there are apartments available for $600 a month. The prospect, calling from 2 hours away, jumps into his car and head out to look at the apartment. The prospect comes to the apartment community, tours the property, and decides on a one bedroom unit. The application process begins, and the applicant is told that the application fee is $50, there is a key deposit for the tennis courts, a nonrefundable administrative fee of $150, and a security/damage deposit of $200. The applicant immediately questions the administrative fee, inquiring as to its purpose and why it is mandatory. He asks that it be waived, and you refuse, as it is company policy to charge this to all residents. Frankly, it is the first time he ever seen such a "fee", and he has been renting at apartments for years. The leasing agent, at a loss for words to explain the purpose of the fee, simply says that it is a fee that the company requires to be paid by all residents, and that it is nonrefundable. What is the problem here? If the administrative fee is nonrefundable, then in actuality, the rent is not $600 a month, but is really $600 a month plus $200 more, as the $200 is being required to be paid prior to move in. The application fee, security/damage deposit, and key deposits are no problem, because the application fee is being used by the property to pay for the screening of the applicant through a third party, the key deposit will be returned if the key is returned, and the security/damage deposit will be returned if the resident vacates owing nothing and leaving the unit without any damage that exceeds ordinary wear and tear. The formerly cheerful individual who called the apartment community 2 hours previously now walks out of your office feeling cheated or misled. The problem was lack of "disclosure", and the solution is "full disclosure" at first contact. It is imperative that the leasing agent, property manager or anyone who will be handling inquiries from any source, be it the internet, text messaging or phone, disclose any nonrefundable "fees" at the very first contact. The first contact for the individual in the above example may have been a print ad. Disclose the nonrefundable fees in all your print ads and internet advertising. The next contact was the phone call. Disclose this fee in the phone call when the prospect is asking what the rent is. The next contact is in person: before you even think of taking the prospect on a tour of the property, provide the prospect with a sheet detailing the prices, fees, deposits and any other monetary requirements necessary to apply for and obtain an apartment. But you exclaim that no one else discloses these fees! That is their problem, and they will be at a higher risk of a potential lawsuit by a disgruntled prospect.

Available Apartment Lists

Every apartment manager should be able to know what exact apartments were available on a particular date in the past. Why would we need such seemingly useless information? The scenario is simple. A person or persons of a protected class status come into your office asking if you have a 2 bedroom apartment available. You just got into the office late due to a massive traffic jam, your car broke down on the way to the office, it is the middle of summer, it has been raining solid and heavy since your day began, and you just dealt with an irate resident who has a roof leak. Let's just say it is not a good day. Appearing short or even rude, you hastily tell the prospects that you have no two bedroom apartments available. Stunned, they leave driving past your signs and banners offering great deals and concessions. Suspicious that they have been the subject of discrimination, they or an employee from the local fair housing office decide to test you. Two days later, they or the tester calls your office to see if a two bedroom apartment is available, and your extremely friendly leasing agent says, "Yes, we have 2 available". AHA. You were discriminating against them and lied to them about the availability of the two bedroom apartment on that awful day, so they think and so it appears! A year goes by, and you are hit with a discrimination complaint, in which you and your company are accused of discrimination again the prospects because of their particular protected class status. Did you discriminate? No. On that day, you had no two bedroom apartments available, but two days later, because of an eviction and a skip, you did indeed have two two bedroom apartments available. How do you prove it? You simply use your "Available Apartment List" that you have in electronic format or that you print out each day and carefully have filed at the end of each day, to prove what apartments were available on what particular days. You don't produce and keep an "Available Apartment List"? Beware of how difficult it will be to prove that you did not engage in illegal discrimination.


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Understanding Small Claims Court
by Brian P. Wolk Attorney at Law


Most property managers are familiar with county court, since residential eviction actions for possession are filed at this level. Some property managers have had exposure to circuit court cases, perhaps for personal reasons, either dealing with probate or family law issues. However, what about small claims court? It is not unusual for the property manager to learn that the landlord has been sued by a former tenant and is now the defendant in a lawsuit filed in small claims court. More often than not, the suit is filed over a security deposit dispute, but there are many other less common scenarios which lead to the small claims suit. Many property managers are at a loss as to what the small claims process entails. On the other hand, the former tenant could find himself being sued in small claims court as part of the collections process. Small claims cases are handled differently than other lawsuits, and often the process is quicker. Make no mistake about it; the potential stakes can still be high. It is crucial that the property manager be familiar with this process, as a loss in court could mean that the landlord will end up paying substantial legal fees to the former resident if that resident has hired an attorney.

What is Small Claims Court?

Small claims court, like its title suggests, is the court level for which lawsuits seeking relatively small amounts of money are filed. It is a simplified court process for disputes of $5000.00 or less. The previous limit was $2500.00, and most people would not consider $5000.00 to be a "small" amount. The Florida Small Claims Rules are applicable to those actions at law of a civil nature in which the demand or value of the property does not exceed $5000.00, exclusive of costs, interest and attorney's fees. By way of comparison, the jurisdictional range for county court cases is for those suits seeking in excess of $5000.00 but not exceeding $15,000.00, and suits seeking more than $15000.00 must be filed in circuit court. In both county court and circuit court civil disputes, the rules of evidence and court procedure are applied much more strictly than they are in small claims court disputes. Any person 18 years of age or older may sue in small claims court. A person under 18 years old may also sue in small claims court, but only if his parents or legal guardian files the suit on his behalf. Also, a business can bring suit, regardless of whether it is owned by an individual, corporation or partnership.

Typical Cases

The highest percentage of small claims court cases a property manager will encounter involves security deposit disputes. Those cases usually start out with the property manager sending the deposit claim letter by certified mail to the former resident. The resident then objects in writing to the deduction within 15 days of receiving the landlord's notice, or in some other way expresses disapproval of the landlord's decision regarding the security deposit. The landlord then refuses to return the security deposit to the resident, who in turn files suit in small claims court. The resident in that situation usually alleges that the landlord's charges for damages were either excessive, or were for damages not caused at all by the resident. The resident may also claim that the security deposit claim letter was not mailed by the landlord in the time frame required by law. The amount sought will often be the entire deposit, plus the costs of filing the lawsuit. However, if the resident has obtained an attorney, then attorney's fees will also be sought. The property manager should be fully aware that security deposit litigation can be filed in court anytime within five years of the resident vacating pursuant to Florida Statute 95.11, which creates a five year statute of limitations for suits concerning written contacts. The former resident does not lose the right to bring suit if a dispute letter is not sent within 15 days of receipt of the security deposit claim letter. A written lease is a written contract. Less typical are cases in which the landlord is the plaintiff, who sues the former resident for skipping out, leaving physical damages and an unpaid rent balance exceeding the available security deposit.

Filing the Small Claims Case

The plaintiff must file the small claims case in the county where the property is located, even if the former resident no longer resides in that county. A statement of claim must be filled out, and it must contain the legal names of the plaintiff and the defendant, the alleged amount owed, along with a narrative and supporting documentation. The paperwork must also indicate how the defendant will be served. That document is called the summons. The service of process will either be by mail, sheriff or by a private process server, if authorized in the particular county. The proper filing fee amount must also be paid.

Pretrial Conference

Usually within 50 days of the filing of the small claims suit, a pretrial conference is scheduled. In fact, the pretrial conference date is specified on the initial filing paperwork. At the pretrial conference, and in all phases of the small claims process, an employee of the corporation can represent the corporation, as long as written authorization is obtained from an officer of that corporation. If the representative appearing is a corporate officer, then no authorization is needed. The corporation in a small claims suit does not need to retain an attorney. Note that a corporation in a county or circuit court case must be represented by an attorney. If the plaintiff fails to appear, then the judge will generally dismiss the case. If the defendant fails to appear, then a default will typically be entered, and the defendant will potentially become liable for the amount of money alleged by the plaintiff. Far too many property managers make the fatal mistake of forgetting to attend the pretrial conference, subjecting them to embarrassment, and making the landlord responsible for amounts claimed that may even be bogus. The successful property manager stays organized and pencils in the court date into her calendar. At this conference, the judge may also dismiss the claim if it fails to state a legal claim or cause of action. If both the plaintiff and defendant attend, the judge will send the parties to mediation.

Pretrial Mediation

Most cases are settled at mediation. With that said, property managers should use their best efforts to settle their case prior to the pretrial conference, so that company time need not be spent off property. Mediation is typically conducted in a private room, where each party will have the chance to tell his or her version of events to the mediator, an impartial person, who will attempt to help the parties resolve their differences by having the parties sign a written settlement or stipulation. When attending mediation, the property manager should be very clear about the full extent of any settlement authority possessed. Settlement at mediation is often an attractive option for the landlord when being sued in the typical security deposit dispute scenario. Even when the landlord has evidence to support its case, there are often some really weak points as well. It is worth noting that judges will recognize that the security deposit is the resident's money, and will force the landlord to bear the burden of proof as to why the money should not be returned to the former resident. The same judge who was sympathetic to the property manager's plight during an eviction case will often side with the resident in deposit disputes if given the opportunity to do so. The pretrial process can resolve quickly, or can take many hours, depending on how many cases are on the particular judge's docket and how many mediators are available.


Any claim of the defendant against the plaintiff, arising out of the same transaction or occurrence which is the subject matter of the plaintiff's claim, known a compulsory counterclaim, should be filed not less than five days prior to the pretrial conference, unless the court designates otherwise, or the counterclaim is deemed to be abandoned. In a typical deposit dispute filed by the former resident, if the landlord believes more money is owed beyond the deposit money retained (which is usually the case), it is very important to file this counterclaim. If for no other reason, the landlord will gain legitimate leverage in the mediation process. There may be a filing fee involved in filing the counterclaim, but it will still be a worthwhile investment in many cases. A permissive counterclaim is a claim of the defendant filed against plaintiff which is not arising out of the transaction or occurrence which is the subject matter of the plaintiff's claim. The permissive counterclaim, provided that it is within the court's jurisdiction, may not be filed less than five days prior to the pretrial conference or within a time frame authorized by the court, or it also will be deemed to be abandoned. Small Claims Court Trial


If the parties fail to settle at mediation, the court will then schedule a trial date, usually within 60 days from the date of the pretrial conference. Besides accidentally missing the pretrial conference, many disorganized property managers forget to attend the trial, causing a default to be entered against the landlord. At trial, each party must convince the judge as to the merits of their case. Witnesses, photographs and other appropriate proof must be presented in court. If it is suspected that a witness will not attend, then that person should be subpoenaed. The sheriff or process server will serve the subpoena on the witness. At trial, each party has the opportunity to give a brief opening statement. The plaintiff will first present its case along with witnesses, and the defendant will cross-examine the plaintiff's witnesses. Next the defendant will present its case, including witnesses. The plaintiff will have a chance for rebuttal and the ability to cross-examine the Defendant. Proper decorum must be maintained in the courtroom, and the judge must receive the property manager's utmost respect at all times. Is an attorney necessary?

The answer depends on the type of case. For instance, hiring an attorney to file a collections action is often a waste of time and money, as the resident has little if any assets. It may make sense if there is a lease guarantor involved. On the other hand, the minute you are served with a small claims lawsuit because your company is being sued by a current or former resident, you should notify your attorney so the case can be evaluated. Your attorney may urge you to settle the case if the law is not on your side. If the resident has not obtained counsel, then it will be a judgment call as to whether an attorney is needed. Having an attorney involved may cause the unrepresented resident to be more inclined to settle the matter, but it can also lead the other party to retain counsel, which will then cause the potential stakes to multiply rapidly. If the resident has hired an attorney, then the property manager should obtain an attorney to defend the case. It is not unheard of for a resident's attorney prevailing in small claims court to receive 20-100 times more in legal fees than the actual amount in controversy. That can translate to the landlord being on the hook for many thousands of dollars.


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Reporting Procedures for Rental Agents
by Thomas C. Roberge & Company, St. Petersburg and Sarasota


This is a good time for rental agents to review documentation requirements you will be responsible for in dealing with foreign landlord clients. Failure to comply with these rules could subject you to substantial monetary penalties by the Internal Revenue Service.

The first requirement is that you identify which foreign landlord clients need to furnish you a new Form W-8ECI, Certificate of Foreign Persons Claim for Exemption From Withholding on Income Effectively Connected With the Conduct of a Trade or Business in the United States. This is the form you need on file to avoid 30% withholding tax on the rental income you collect for your foreign clients. For this form to be effective, the foreign property owner must furnish you his or her US tax identification number on Line 6 of the form.

Without a properly completed W-8ECI, which includes a valid US tax indentification number, the property manager is required to withhold 30% of the gross rent and deposit it with the IRS.

A form W-8ECI remains in effect from the date the form is signed until the last day of the third succeeding calendar year. For example, a Form W-8ECI signed on October 10, 2007 remains valid only through December 31, 2010. For the year beginning January 1, 2011 you will need a new, fully executed Form W-8ECI completed with the foreign person's tax identification number. Otherwise you are required to withhold and deposit with the IRS 30% of the gross rent you collect for that foreign client until you receive the executed form.

Unfortunately, the IRS can hold you and/or your company responsible for penalties and even the 30% tax if you have not complied with these rules!

You should request an ID number from your foreign client in writing. The document should state that the identifying number is required to be furnished under U.S. tax law. Keep this signed document in your client's file.

The next requirement is the annual filing of Form 1042-S. Form 1042-S (and not Form 1099-MISC) is required to be used to report rental income collected for foreign persons. When submitting 1042-S forms to the IRS, attach a signed affidavit (no special format is required) to the form, listing the names of all non-resident aliens from whom the withholding agent requested tax ID numbers and was not able to secure such. Even if you did not withhold any tax form 1042 (annual return) and form 1042-S are required to be filed reporting gross rents. These forms are due by March 15 for 2010 reporting. Even if these are filed after March 15th, it's still better than not filing these forms. The penalty for filing Form 1042-S after March 15th is negligable in comparison to the penalties for non-compliance with these rules.

Reprinted with permission of Thomas C. Roberge & Company U.S. International Tax Services One Beach Drive S.E., Ste. 220 St. Petersburg, Florida 33701 St. Petersburg Office Telephone 727 822 9393 Sarasota Office Telephone 941 952 5848 Email: Info@RobergeCo.com Fax: 727 823 6781 Websitewww.robergeco.com


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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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