USING A PET DEPOSIT FOR NON-PET DAMAGES

Occasionally a manager will be faced with that unfortunate situation where a resident who has an authorized pet, signed a pet addendum and paid a pet deposit, vacates owing rent, has damaged the premises, but none of the damage is pet related. It is extremely difficult for the manager to accept that the resident may be entitled to a refund of the pet deposit, in light of all the other money that is owed by the resident who breached the lease agreement. Unless the manager has structured the deposit agreement the correct way, the manager has no choice but to refund the pet deposit. Having to return a pet deposit to a resident who owes you money, or worse yet, a resident who was evicted, can be frustrating indeed. The problem can be solved simply by proper lease and/or pet addendum wording.

Collecting a Pet Deposit - A pet deposit is by its nature refundable. All “deposits” are refundable, while fees are non-refundable. If something is designated a pet deposit with no other qualifying language, that refundable deposit is for pet damage, and in the event there is no pet damage, the deposit gets refunded. There is no such thing as a non-refundable pet deposit. This is an oxymoron, since all deposits are refundable. If the manager collects a pet deposit, this amount must be kept in the same account that the manager keeps the security deposit or any other advanced rent, and the deposit is treated the same as a security deposit. The deposit cannot be used by the manager while the resident is residing on the premises, unless the resident specifically agrees in writing that the manager is permitted to use this money.

Collecting a “Pet Fee” – A pet fee is an amount paid to the manager for the resident to have the privilege of having a pet on the premises. Once paid, this fee belongs to the manager at the time of payment. It is never refundable, as it would then be a deposit.

Should you collect a Fee or Deposit? – We recommend collecting both a pet fee and a deposit, as there is a high likelihood that even if there is no obvious pet damage, the unit will have fleas which will become evident 1-2 weeks after the residents and their pet(s) vacate the premises. As most pet owners do not believe that their pets have fleas, but most managers know what occurs when a pet is taken from the premises, and the flea eggs hatch and do not have an animal on which to live, there is an almost guaranteed problem and dispute with the resident when the resident is told that he or she will be charged for flea extermination. Since the damage to the premises could be more substantial than just a flea infestation, taking a deposit in addition to a fee is advisable.

The Pet Addendum problem – Most pet addendums simply make a statement that there will be a pet deposit or a pet fee which will be used for pet damage. Even if it does not specifically state that it will be used for pet damage, there is an implication that a pet deposit will only be used for pet related damages. This prevents the manager from using the money for anything other than pet related damage.

The easy solution - In your lease or pet addendum, there needs to be a sentence similar to this: “The pet deposit may be used by management/manager for any damage related to the pet(s) and for ANY other monies owed by resident under the terms of the lease and for physical premises damages, whether pet related or not”.

As you can see, this clause allows you to use the pet deposit for non-pet related damages or other monies which the resident may owe. Some property managers avoid the pet deposit issue altogether by simply charging a higher security deposit which can be used for any monies owed under the lease terms. If you make a decision to charge residents with pets a higher security deposit, make sure that it is clear that the higher security deposit requirement is due to the fact that the resident has a pet. One of our clients was wrongfully charged with discrimination when a fair housing tester who was a member of a protected class was quoted a higher security deposit by the manager, and another tester who was not from a protected class was quoted a lower deposit. On its face, it appears that discrimination had indeed occurred, but the facts showed that the first tester stated that they had a pet, and the manager upped the security deposit accordingly due to the pet. The second tester did not mention the possibility of a pet and thus was quoted a lower security deposit.  

 

US CENSUS AND PROPERTY MANAGER COMPLIANCE

A census is the legally mandated counting of people in the United States and its territories. It fulfills an important constitutional purpose. While each state has two Senators to represent it in the United States Senate, the number of Representatives in the United States House of Representatives is based upon the population of the state: the greater the population, the greater the number of Representatives. The power of any state to advance its legislative agenda and to secure benefits for its citizens increases with the number of Representatives which it has. In addition, the census is the basis for distribution of many government benefits and programs for schools, hospitals, transportation, and most importantly to managers, housing. It is particularly important for Florida, whose population has increased since the last census, to get every person counted.

National Census Day

National Census Day  is the day on which the “count” is fixed. April 1st is the relevant day, whether the questionnaire is completed or the census worker visits before or after April 1st. Census takers are more properly called “enumerators”. During March of that year, questionnaires are mailed to residences to be returned in April. From April through July, enumerators will visit homes that did not return the questionnaires. In an accommodation to America’s multi-lingual nature, enumerators will carry cards in numerous languages. The cards will inform non-English speaking interviewees that they should tell the enumerators their language, and the Census Bureau will follow up with someone speaking their language. If the resident is not home at the time of the enumerator’s visit, the enumerator will leave a notice of visit on the resident’s door. The resident can use the contact information to arrange a convenient time for the re-visit. The personal interviews take less than half an hour.

Legally mandated

The census is “legally mandated”. Enumerators have the legal right to have access to individual homes and multi-family properties to collect census information. Enumerators may have to return several times to collect the information. Various other census workers may seek access to the residents for census related operations, such as non-response follow-up re-interviews (quality check of an enumerator’s prior interview), census coverage follow-up (check possible double counting or clarify responses to prior questions), and field verification of mismatching addresses. There is the possibility that enumerators will contact some residents several times in the various follow-up and verification interviews. Managers should recognize this and expect some resident complaints about multiple interviews. Residents should be told to direct any complaints or comments to the Census Bureau, as the manager cannot prevent, limit or interfere with enumerators.

As part of the census the Census Bureau is performing another mandatory survey: the American Community Survey. The ACS collects population and housing information. Managers are required to cooperate in the ACS.

Managers’ Cooperation Required

Managers and their agents are required to cooperate and take reasonable steps to assist the enumerators by permitting access. If the enumerator is unable to make contact, the manager/agent should also assist by indicating the best time to contact residents, if known to the manager/agent. Finally, the enumerator may not be able to establish contact, and request the manager/agent to compile certain information on the occupants. The law does not provide for the option to demand written notice or written requests from enumerators as to what they want. So, managers/agents should neither expect nor require that enumerators give written demands for information. Enumerators will attempt to schedule mutually convenient times for meetings and allow managers/agents adequate time to gather and respond to information requests. However, given the deadlines imposed on the Census Bureau for completion of the census, the enumerators will expect a quick response.

The Census Bureau’s position

The U.S. Census Bureau has advised the National Multi-Housing Council as follows:

If the enumerator is unable to contact the occupant within the specified number of attempts, the enumerator may ask for as much information as the owner/manager can provide for an occupied unit. However, if the owner/manager states that the unit was not occupied on April 1, 2010, the enumerator will complete the questionnaire using the owner/manager as a knowledgeable respondent for the vacant unit.

The owner/manager should provide the information necessary to complete the census questionnaire, to the best of his or her knowledge. Questions on the census questionnaire have been approved by law, and the owner/manager is not in violation of any privacy laws if he or she provides the requested information. Although the owner/manager may not be able to answer all questions, such as race or ethnicity, an attempt by the owner/manager to provide available information should be made.

Verification

Managers/agents can demand to see the enumerator’s identification. The Census Bureau indicates that all enumerators will have official government ID badges and may be carrying “US Census Bureau” bags. Managers/agents can request that the enumerator present his government ID badge and another picture ID badge. If a Florida manager/agent wants further verification, he can contact the Regional Census Center for Florida in Atlanta, Georgia at 404-335-1555. Enumerators are not permitted to enter the residents’ homes, and therefore, they should never request to do so.

Notifying Residents

Since managers and their agents will be the secondary source of information, the more residents that the enumerators contact, the less time and work will be needed by managers/agents with enumerators. Managers may wish to alert their residents that census workers will be on the property. Managers may also want to inform residents that census workers may not request to enter residences, and that residents can verify their identity by requesting to see their ID badges, and if in doubt, they can contact the Regional Census Center. Follow-up notices will be left on a resident’s door, if the resident is not home at the time of the census worker’s visit. (For simplicity in notice to residents, we advise referring to them as “census workers” rather than “enumerators”.)

Scams

Managers should be aware that like any other government program, the census will have its fair share of scams and scam artists impersonating enumerators. Enumerators do not use email or the internet to contact anyone. Enumerators will not ask to enter the home “to go to the bathroom” or for any other reason. Enumerators or census forms do not request donations, social security numbers, or detailed financial, banking or credit card information. Enumerators may use the phone to follow up on questions on a returned questionnaire, but will never ask questions beyond the ones on the census questionnaire. Be careful of relying on caller-id as proof of the caller’s identity, as scam artists can make it appear to be from the “Census Bureau”.

Privacy

Managers are not violating the privacy of their residents, as managers are required by law (Section 223 of Title 13, United States Code) to comply, and are subject to a fine for failure to comply. Enumerators should have available for managers/agents a Confidentiality Notice. The Census Bureau only collects the information required by the law and imposes strict confidentiality requirements on those collecting and processing the census information. Federal law provides penalties of up to five years in prison and a $25,000 fine for the unauthorized disclosure of personal data by any enumerator or other census worker. Anyone who suspects an unauthorized disclosure can contact the Chief Privacy Officer for the Census Bureau, who is responsible for implementing privacy policies.

Information Requested

Managers/agents should expect that their files may very well lack some information sought. Fair Housing concerns have limited managers from acquiring information on ethnicity or race. Managers/agents are only required to supply the information that they have. The questionnaire consists of only 10 questions, but 5 of the questions have to be answered and re-answered for each occupant of the residence. The enumerator will assist the manager/agent with any interpretations of what a question is seeking.

In conclusion, managers have a vested interest in cooperating in the census. It brings some of those hard-earned tax dollars back to Florida and the manager’s community. Managers have a legal obligation and an economic incentive to see that every person in their apartment communities or rentals is counted. For more information on a Census, visit the website of the US Census Bureau.

 

UNDERSTANDING THE EARLY TERMINATION LAW

Before The Law Change

Before the recent change to Florida Statute 83.595, when a resident chose to break a lease by vacating before the end of the lease, commonly called “skipping” or vacating early, the manager was only allowed to charge the resident rent through the earlier of the lease expiration date or the date a replacement resident took occupancy. In addition, many companies also charged a Termination Fee, Termination Penalty or Liquidated Damages charge, BUT in a major Florida class action lawsuit, the judge in that particular case ruled that these various practices were unlawful and inconsistent with Florida Statute 83.595.

The New Law

A common misconception is that under the new law, when a resident vacates early, you can NOW charge the resident a Liquidated Damages or Early Termination Fee. This is only partially correct, and it is crucial that you understand the law.

Under the new law, you can give the resident a CHOICE to either owe a flat fee “Liquidated Damages/Early Termination Fee” OR owe rent until the unit is re-rented. The RESIDENT makes the choice, NOT you. If you do not want to give the resident this choice, you will not use the Addendum, and you can ONLY charge the resident your rent loss, as has been the law.

Suppose You Want To Hold The Resident To All The Rent Due Under The Lease?

If this is what you want to do, then simply do it. The law still allows you to do this. You will not give residents a choice in the matter, and if a particular resident vacates early, you will charge rent as it becomes due under the terms of the lease until the unit is re-rented. In a soft market, when it may take a while to re-rent a unit, this is your best bet; you really do not need to read any further, AND you will NOT use the Addendum.

Suppose You Want To Charge The Resident a “Liquidated Damages/Early Termination Fee” When They Vacate Early?

You CAN if and only if 2 things occur:

A. You present the attached Addendum to the Resident AT THE TIME OF LEASE SIGNING

AND

B. The resident picks Choice #1

What Happens If The Resident Picks Choice #1?

You can charge the resident a flat “Liquidated Damages/Early Termination Fee” of a maximum of 2 months’ rent when they vacate early and NOTHING more other than rent, and charges they may owe at the time of vacating early. The resident may or not pay it, but if not paid, this 2 months’ rent can be sent to collections.

What Happens If The Resident Picks Choice #2?

You can charge the resident rent that he owes at the time he vacates and rent as it becomes due until the unit is re-rented or the end of the lease, whichever occurs first, just like you have been doing or should have been doing all along.

Can You Charge the Resident a Concession Payback?

The law does not clearly provide that you can or you cannot. If the resident picks Choice #1, it may be dangerous to charge a concession payback, because some judges are apt to consider a liquidated damages charge as exclusive.

Now For Some Q&A:

Q—Do I have to use the Addendum?

A- Absolutely not. It is your choice. If you don’t provide the Addendum to the resident to sign, the resident will owe rent that is owed at the time the resident leaves early PLUS all rent as it becomes due until the unit is re-rented or the end of the lease, whichever occurs first.

Q—Can I have current residents come in and sign the Addendum?

A—No. You can only use the Addendum at lease or renewal signing.

Q—Do I need to fill in all the amounts on the addendum before I give it to the resident?

A—Yes, do not leave anything blank.

Q—Suppose I use the Addendum and the resident picks Choice #1?

A—If the resident chooses to vacate early, you can only charge the resident 2 months’ rent plus whatever they already owed you for rent or other amounts under the terms of the lease. NOTHING MORE.

Q—Suppose I use the Addendum and the resident picks Choice #2?

A—You can charge the resident rent that is owed at the time the resident leaves early PLUS all rent as it becomes due until the unit is re-rented or the end of the lease, whichever occurs first.

Q—Can I force the resident to sign the Addendum?

A—No. If the resident refuses to sign, they simply will owe rent that is owed at the time the resident leaves early PLUS all rent as it becomes due until the unit is re-rented or the end of the lease, whichever occurs first.

Q—Should I utilize the new law and use the Addendum?

A- It is purely a business decision. In a soft market, it would be better not to utilize the new law and the Addendum. If you feel you will rent out the unit in less than 2 months, it would be better to use the Addendum IF the resident picked Choice #1. There is no guarantee what the resident will choose.

Q—Can I force the resident to pick a particular Choice, #1 or #2?

A—No. If you use the Addendum, you are at the mercy of the resident and his choice.

Q—Can we require the resident to give notice before he vacates early if he picks Choice #1?

A—Yes, but if he does not, you can only charge the 2 months’ rent amount as if he simply walked out on you tomorrow.

Q—If the resident picks Choice #1 and gives us notice, can we charge the resident through the notice period PLUS the 2 months’ rent?

A—NO. You can ask the resident to give you notice, BUT you cannot hold him to it.

Q—If I decide to use the Addendum, must I offer it to everyone?

A— For Fair Housing purposes if you use it for one, you should use it for all, at least in a given time frame.

Q—Why does the resident get to make a choice? Why can’t we just charge them liquidated damages?

A—The resident only gets to make a choice if you decide to use the Addendum. The Governor said he would not sign the bill into law unless the resident was given a choice, so the bill was amended late in session to get it passed.

 

 

UNCONTESTED EVICTION TIMELINE

Almost every property manager has or will eventually have to deal with filing an eviction. While those who file often are fully aware of the procedure, the new or “lucky” property manager often does not know the timeline in the process. A process it is indeed, and there are many steps along the way. The initial filing of the eviction is only the first step in a process in which the paperwork passes through many hands, and eventually ends on the day when the Sheriff meets you at the door and gives you possession of the premises. This article will set out the timeline for an UNCONTESTED eviction and give you an idea on why a typical eviction takes between 20 to 45 days from beginning to end.

1. The Three Day Notice, Seven Day Notice to Terminate, Agreement to Vacate or Non-Renewal Notice has expired.

 

2. The Lease and Notice is transmitted to the attorney, usually by fax or email.

 

3. The attorney and legal assistants review the documents for problems, and the legal assistants input the case into the law firm’s computer system.

 

4. The “Complaint” and “Summons” is generated by the law firm.

 

5. The “Eviction Package” consisting of the “Complaint”, “Summons”, attachments, stamped enveloped and checks for the Clerk of Court and the Process Server (or Sheriff in some counties) is given to the Clerk of Court.

 

6. The Clerk of Court files the eviction by entering the information into the court computer system and in many counties, scans the documents into their system.

 

7. The Clerk of Court mails a copy of the “Complaint”, “Summons” and attachments to the resident in the envelope your attorney has provided to them.

 

8. The “Summons”, “Complaint” and attachment are picked up by the Process Server or Sheriff’s Deputy.

 

9. The Process Server or Sheriff’s Deputy goes to the rental unit and attempts to serve the resident.

 

10. If the resident is not home, the Process Server or Sheriff’s Deputy must make a return trip no less than 6 hours later, and if the resident is still not home, tapes the Complaint, Summons and attachments to the door. The resident is now SERVED.

 

11. The Process Server or Sheriff’s Deputy then enters the information into their computer system and generates a “Return of Service”, which tells the Clerk how and when the documents were “Served”. The Process Server faxes the Return of Service to your attorney.

 

12. The Process Server or Sheriff’s Department clerk then files the “Return of Service” with the Clerk of Court.

 

13. The Clerk of Court enters this information into the computer system and files the “Return of Service” in the file.

 

14. The resident now has five full business days, not including Saturdays, Sundays or legal holidays, to “Answer” the Complaint by writing a letter to the Court giving the reasons why he/she should not be evicted.

 

15. If the resident does not file an “Answer” to the Court, the case is UNCONTESTED.

 

16. On the 6th business day after the resident has been served, the attorney should or will file a “Motion for Default” with the Clerk of Court.

 

17. If the Clerk of Court is satisfied that the resident has not filed an “Answer”, the Clerk of Court will enter a “Clerk’s Default”, file this and enter it into the computer system. NOTE: The Clerk of Court must go through all the mail it has received by the Default date, or it will not enter the “Clerk’s Default”. This means that if the Clerk of Court is behind in opening mail, a delay can occur.

 

18. Once the “Clerk’s Default” is entered, the file is brought to the Judge by the Clerk along with the unsigned “Final Judgment” the attorney has prepared and stamped envelopes for mailing to the resident.

 

19. The file is now with the Judge.

 

20. The Judge reviews the file and if everything is in order, signs the “Final Judgment”. If the Judge is busy, backed up, on vacation, in a Judge’s conference or stuck in trial, a delay can occur in signing the “Final Judgment”.

 

21. The Judge signs the “Final Judgment”, and his/her Judicial Assistant mails out the “Final Judgment” to the attorney and the resident.

 

22. Your attorney’s legal assistants track the file and often know that the “Final Judgment” has been signed before the mail arrives.

 

23. Your attorney will notify you that a “Final Judgment” has been signed and ask you if you want a “Writ of Possession”.

 

24. You check the unit, are absolutely sure the resident has abandoned, nothing is in the unit, no one has been in the unit for a full 15 days, and you may notify the attorney’s office that you do not need a “Writ of Possession”. NOTE: We recommend you do request a “Writ of Possession” and finish up the eviction. It costs nothing for attorney’s fees; it is a $90.00 fee from the Sheriff’s Department, (more in a few counties) but money well spent. THE EVICTION APPEARS OVER, BUT YOU HAVE NOT ACTUALLY COMPLETED IT IF YOU DO NOT REQUEST A “WRIT OF POSSESSION” AND MEET THE SHERIFF AT THE DOOR.

 

25. You tell the attorney that you want a “Writ of Possession”.

 

26. Your attorney submits a “Writ of Possession” to the Clerk, who “issues” it.

 

27. A check for $90.00 (more in a few counties) is attached to the “Writ of Possession” form, which is given to the Sheriff’s Department with the issued writ.

 

28. The Sheriff’s Department processes the “Writ of Possession” into their system and assigns it to a Sheriff’s Deputy.

 

29. The Sheriff’s Deputy goes to the unit and either tapes the “Writ of Possession” to the door or hands it to the resident.

 

30. The “Writ of Possession” gives the resident between 24 and 48 hours to vacate the premises, sometimes a longer period due to weekends and holidays.

 

31. The Sheriff’s deputy calls you and tells you that he/she has posted the Writ of Possession and asks you if the resident has vacated. YOU SAY: “I don’t know and I want to meet you at the property when you execute the Writ of Possession”. You do not say, “I will check the unit,” or “Yes, the resident has vacated.”

 

32. You meet the Sheriff’s Deputy at the unit and change the locks; the Sheriff’s Deputy removes the resident, and you take all the resident’s belongings to the property line.

 

1. If the unit is full, the resident is not present, and you feel the resident may have not known about the eviction, CALL YOUR ATTORNEY.

 

2. The unit has some belongings, trash, etc.; you remove it all to the property line.

 

3. If you did not bring help with you to remove the property, you can remove it at a later time.

 

4. You NEVER make an agreement with the resident that you will extend the Writ of Possession or allow the resident to “come back later” and retrieve the belongings unless you are sure what you are doing and have read the article on this.

FINALLY, ALWAYS CALL YOUR LAWYER IF SOMETHING IS ODD, YOU EXPERIENCE PROBLEMS WHEN EXECUTING THE WRIT OF POSSESSION, OR IF IT APPEARS THAT THE RESIDENT IS NOWHERE TO BE FOUND, BUT THE UNIT IS FULL OF BELONGINGS AS IF THE RESIDENT DID NOT KNOW ABOUT THE EVICTION.

UNCLAIMED SECURITY DEPOSIT FUND PROCEDURE

Your resident has vacated, you sent a partial or full refund of the security deposit by certified mail, and it is returned to you unclaimed. What do you do with the funds? Hold them forever? Disburse them to your owner or company? Florida law specifically deals with the procedure a property manager must take with these funds in Florida Statute 717, the Florida Disposition of Unclaimed Property Act.

What Type of Funds Will You Be Holding

Most commonly, you will be holding the security deposit or a partial security deposit. Other deposits may include but are not limited to the pet deposit, key deposit or a deposit the condominium association may have required.

Are These Funds Unclaimed?

Typically, you have sent out the Notice of Intention to Impose Claim on Security Deposit, and this has come back to you “unclaimed”. The refund check is still in the envelope. In other less common situations, there is evidence of receipt of the certified mail, as you have received back the return receipt “green card”, but for some unknown reason, the check is never cashed, and each month it shows up in your escrow account as an outstanding sum paid but not cashed. This can be an annoyance as time goes on, as this will inevitably occur in property management multiple times.

Due Diligence

Since you may not have a forwarding address, you have sent the funds to the “last known address,” which is indeed the home or apartment which the residents were renting. Since many vacating residents do not put in a forwarding order with the post office, it becomes difficult to discover a new address absent notification from the resident. This is where some investigation needs to begin, and this investigation can save you significant time and aggravation later. In the first place, you need to send it again by regular mail, unless it was sent back to you with notification that the resident had moved and no forwarding address is on file.

The “Certified Mail Conundrum”

It is quite possible that the certified mail did indeed get forwarded to the new address, was refused, unclaimed and still never made it back to you, or was in fact claimed, but the “green card” did not show that the mail had been forwarded. There is a strange aversion by many people to claiming certified mail which results in a large percentage of the certified mail never making it to the recipient. Many individuals feel that by accepting the certified mail, something ”bad” will occur to them, hence the certified mail is refused. In many other cases, the certified mail is indeed accepted, but the “green card” somehow never makes it back to the sender. There seems to be no reasonable explanation for this common occurrence, other than often the postal worker fails to remove the “green card” from the back of the envelope, and the recipient then has both the green card and the certified mail in his or her possession. We recommend that you first send the Notice of Intention to Impose Claim on Security Deposit and refund check by certified mail, but if this is returned to you, you follow this up with regular mail of a copy of the Notice of Intention to Impose Claim on Security Deposit and a replacement check; the original certified mail envelope should be left intact (unopened), and the check within that envelope can be voided on your check records. You are not required to send a refund check by certified mail. You are only required to send the Notice of Intention to Impose Claim in this fashion.

Locating the Resident

In the old days, you could simply find out the forwarding address from the post office if there was one on file. This is not possible anymore. Now comes the time to begin to dig into the file to see if the application gives any clues where the resident works or worked, emergency numbers, or any other names or addresses you can find which you can call or write to possibly gain a proper address. There is no prohibition on calling any of the numbers you may have in the application or writing to any addresses you may have, since you are now simply trying to return some money, and you are not engaged in any collection activities. You may glean some information by talking to neighbors of the former resident as to the new address. Remember, you have already sent the Notice of Intention to Impose Claim on Security Deposit out. You DON’T need to send it out again. You simply need to send back the money.

Cutting a New Check

If you have previously sent out the refund check and it has not been returned to you, you certainly do not want to cut a new check to the former resident unless you have stopped payment on the first check, and a significant amount of time has elapsed. We recommend waiting at least three months before taking any action. If you send a new check to the now located prior resident, and the resident somehow received or has been holding the original refund check, you could be in for an unpleasant surprise if both checks now are cashed.

Pulling Another Credit Report or Skip Tracing

If the resident originally gave you permission to pull a credit report in the application process, it is permissible to do this again in order to potentially find a new address. After some period of time, a new credit report will most likely contain information on the current resident address. Many companies offer reasonable skip tracing services as well, and the small amount of money spent could save time and money later.

You Have Exhausted All Your Resources But Cannot Locate the Former Resident. Now What?

If the refund is for more than $10.00, you are required to hold the funds in your escrow account for 5 years. Yes, you read that correctly. Florida law requires this extremely long time period to safeguard the funds from the time the funds were due to the resident and provides a means to dispose of these funds upon the end of the 5 years.

What Florida Law Requires

The Florida Disposition of Unclaimed Property Act requires you to exercise due diligence in attempting to locate the former resident. This means the use of “reasonable and prudent means under particular circumstances to locate apparent owners”. The exact requirements are listed in the Act and include using the Social Security number if you have one, using nationwide databases, mailing to the last know address unless you know for sure it is inaccurate, or engaging a licensed skip tracing company. You are required to send in a report to the State of Florida on the forms that they provide prior to May 1 of each year, or you could be subject to a penalty imposed upon you. You must send a final letter to the former resident no more than 120 days and no less than 60 days prior to filing the report with the State informing the resident that you are still in possession of the unclaimed refund. When you finally file the report, you must include the refund money with the report, and upon payment and delivery to the State, you will have no further liability to anyone and can remove the amount from your escrow account records.

The Moral of the Story?

A diligent property manager tries on a regular basis to keep updated information on his or her resident, including updated emergency numbers, addresses of emergency contacts, new phone numbers, new work numbers and addresses. By doing so, it will be easier to locate the resident and get the money OUT of your account!! When was the last time you updated your resident information?

 

UNAUTHORIZED OCCUPANT NOT CAUSING A PROBLEM

At any given moment, people who are not authorized occupants or residents on a lease are living in an apartment with the authorized resident. This is just a fact of life. Possibly the occupant is there on a temporary basis or just has decided to move in with the resident. Often the occupant is there for a long period of time, uses the amenities, makes repair requests, stops by the office and pays the rent and acts just like an authorized occupant or resident. The unauthorized person become familiar to staff, and many of the staff members have no idea the person is not in fact authorized.

The Resident And The Unauthorized Occupant

A resident who allows an unauthorized occupant to reside on the premises is in default of the lease and is blatantly disregarding the terms of the lease. That resident is no different than the resident who gets the unauthorized pet, parks improperly, causes a disturbance or does not pay rent. They are in default, pure and simple.

Why Do We Treat The Unauthorized Resident Lightly?

Usually if a property manager is not dealing with a HUD property or Low Income Housing Tax Credit Property, an unauthorized occupant is overlooked. If the resident is paying the rent, the property is kept up, there are not an excessive number of residents in a unit, occupancy is low, and parking is adequate, a property manager will overlook the unauthorized occupant.

The Huge Danger of Overlooking the Unauthorized Occupant

An unauthorized occupant is living on the premises without having gone through the normal credit or criminal background check. He or she may have an extensive criminal record, or even be a sexual offender or predator. The property manager has no idea of this and would have almost certainly turned this person does under normal application screening procedures. Nevertheless, the mystery person is now living on the premises.

The Unauthorized Occupant is Locked Out And Needs To Be Let In

One of our clients recently had a situation in which a woman that the maintenance tech recognized needed the maintenance tech to open the apartment in the early morning hours, as she had locked herself out. Since she was familiar looking to the maintenance tech, as she had lived on the property for quite some time, he opened up the apartment for her. She then decided to remove everything of value from the apartment. Later that day, the actual resident came home to find all his items of value taken, and the maintenance tech admitted he had let the woman in the night before. Problem? She was not an authorized occupant, and maintenance had no right letting her into the unit. Liability? What do you think?

A Recent Tragic Case Underscoring Potential Liability

Here is the scenario. This same scenario can apply to a resident renting in a condominium or single family home. An unauthorized occupant becomes familiar to the staff and has resided on the property for some time. The unauthorized occupant kills another resident in the apartment community. Is the apartment community liable? Over the next couple years, this exact case will be tried and a jury will decide. How would you decide?

 

Our Recommendations

We strongly urge that you take an unauthorized occupant seriously and consider it a serious lease default. If you wish to authorize this person, please read the article Authorizing the Unauthorized Occupant and take the steps to authorize the occupant if you so desire. Otherwise, serve your Seven Day Notice With Opportunity to Cure, refuse any rent payments, call your attorney, and evict everyone if the resident refuses to remove the unauthorized occupant. Remember that once you know there is or was an unauthorized occupant, make sure you follow up to confirm that the person is truly gone and not just being more careful about being caught.

 

TRUSS MARKING RULE

Do you own or manage buildings that consist of 3 units or greater? If so, new Fire Code rules will affect you. On December 13, 2009, new regulations were passed which require special signage to be affixed to buildings, and failure to comply could result in substantial fines. Compliance is easy. Just purchase your signs and affix them to the building. There are three different signs though, and you need to know which one you need and where to place them. The most important thing is to make sure you are in compliance, as your deadline was March 13, 2010, which is already past. The local Fire Marshals are just beginning their inspections, and you are now on notice! There is no grandfathering, and if you are not in compliance, it will be up to the local Fire Marshal to determine whether fines are imposed.

The Aldridge-Benge Firefighter Safety Act

The Act which was signed into law on December 13 by Governor Crist is in honor of 2 Orange County Florida firefighters, Todd Aldridge and Mark Benge, who were killed when the roof of a burning gift shop collapsed. The purpose of the law is to alert firefighters to the construction type of a structure they may enter in the event of a fire or other emergency operations they may be conducting requiring entry into the building, so they can better prepare for the hazards involved. The State of Florida Fire Marshal’s Office implemented Rule 69-A-60.0081 under the authority of Florida Statutes Section 633.027.

The Type of Construction the Rule Covers

The construction type that is at issue is known as “light frame”, which means construction in which repetitive wood such as beams or trusses are used, or light gauge steel is used, for either roofs, floors or walls. This pretty much covers almost all the construction in Florida with the exception of a concrete building with concrete floors and a heavy gauge steel roofing system. Trusses are prone to failure in a fire, and once one truss fails, the load is shifted to the other remaining trusses, which in turn can cause a catastrophic failure and collapse. Compounding the problem are heavy items which are often placed on floors and roofs, such as air conditioning units, which further contribute to potential roof and/or floor failure.

Are all Structures Covered?

The Rule covers all “commercial structures” of 3 units or more. From a triplex to large multifamily buildings, the Rule would apply. Although you may not look at a triplex as a “commercial” structure, for the purposes of the Rule, it will be considered commercial and covered. In addition to the typical structures where your residents may live, the Rule also possibly covers your clubhouses, maintenance shops, laundry rooms, fitness centers and any other structure which may be on the multifamily property. Interestingly, townhouses are not considered multi-unit residential structures, so they do not need to comply with the rules.

What Are These “Signs”

The signs required, or “approved symbols” as referred to in the Rule, must be a Maltese Cross which measures 8 inches horizontally and 8 inches vertically of a bright red reflective color. The signs may be as simple as a vinyl stick-on sign, or a more substantial, aluminum or composite type of sign. If the structure has light frame truss roofs, it must be marked with the letter “R”. If the building is constructed with a light frame truss floor system, it must be marked with the letter “F”, and if both light frame truss floors and roof are present, the building should be marked with the letters “RF”.

Where Do You Obtain the Signs?

Many sign makers and supply companies for the multifamily housing industry are providing these signs. They are not cost prohibitive, and most companies have them in stock or can have them made in an extremely short period of time. One such company, Giglio Signs, can assist you, keep the signs in stock and have been providing the signs to hundreds of properties throughout Florida.

Placement of the Signs

As is often the case, some laws or rules create more questions than answers, so the following explanation should be a starting point only and not relied on completely. According to the rule, the “symbol” must be placed within 24 inches of the left of the main entry door of the unit and must be placed no less than 4 feet from the bottom of the symbol to the grade, walking surface or finished floor, and no more than 6 feet from grade to the top of the symbol. Does the rule mean the edge of the symbol or the middle of the symbol? We don’t know. The Fire Marshal can get very picky at times, so we urge you to measure carefully and not try to be too close to the upper or lower limits. You can be sure that they will have their measuring tape with them. Remember that we are talking about the symbol, not the actual sign to which the symbol may be affixed, and this will affect the measurements. The symbol itself must be permanently attached to the structure on a contrasting background, or be mounted on a contrasting base material which is permanently attached to the structure. If you are unsure of the placement of the signs or whether your signs are in compliance, we recommend that you call your local Fire Marshal and have them come out to the property to meet and advise you.

Some Final Notes

Due to the importance of compliance with the new Rule and the possibility of serious multiple fines for noncompliance, we urge you to take this matter seriously. If you have not done so already, purchase your signs and call the local Fire Marshal. Many of the local Fire Marshals are overwhelmed right now with these calls, and some are not sure of the sign placement in unique circumstances. Once you have them come to the property, try to retain some kind of proof that you were told where to place the sign by the Fire Marshal and that you complied. It would be unfortunate indeed if you followed the direction of a person from the Fire Marshal’s office who came out to the property, only to have one next year state that you did not comply. See if you can get something from the Fire Marshal in writing once the signs are affixed to the building stating that you are in compliance. When shopping for the signs, you are going to find a wide range of quality and materials used. There is no prohibition on a simple stick on vinyl sign, but will the sign last, or will it be peeled off by a resident or guest? Look around and see what is available, and finally, once you have the signs affixed to the premises, make sure your maintenance staff routinely checks on the signs to see if they are damaged or missing. The local Fire Marshal will not have sympathy for you if you fail to make sure the signs stay on the premises, so keep spare signs handy, and affix them to the premises in a fashion where they are not easily removed or vandalized. Get into compliance now. Not only is it the law, but it can help save a life.

 

TRANSIENT RENTALS AND SALES TAX

 

Some apartment communities engage in seasonal rentals. Some managers who concentrate primarily on annuals will encounter situations when they are asked to rent one or more units seasonally. Before taking on seasonal rentals, the property manager must understand and follow all the laws set forth by the Florida Department of Revenue, or they could be in for some trouble. Recently, the Department of Revenue, hereinafter DOR, has increased its auditing and has been catching quite a few property managers by surprise. Most of the property managers who were in noncompliance did not fail to collect the taxes intentionally, but simply failed to know the law and made a mistake.

 

This article will address only a small part of the requirements regarding the taxes in seasonal rentals, and we will concentrate on the “non-rent” items which are taxable. Most property managers, if asked, will know that the “rent” is taxable on a seasonal rental, but the DOR goes a bit farther, and there are big traps for the unwary. If you find after reading this article that you have not been properly collecting the taxes, we recommend you contact your accountant right away and see what the best approach would be to avoid bigger problems, if and when you are audited. If you are audited and found to be in noncompliance, you will be subject to the back taxes, interest and penalties. Often the penalties and interest will be waived by the DOR if the mistake was unintentional, but the back taxes could be substantial.

 

What Constitutes a “Transient” Rental?

 

The words seasonal or transient mean the same for the purposes of tax collection. If the rental term is for a period of 6 months or less, the tax must be collected. This would include a verbal month to month tenancy, so it is crucial that you never allow a resident to reside on premises month to month from day one, unless you expect to collect the taxes. Under this scenario, the tax liability is only for the first 6 months and stops after that.

 

What Taxes Need to be Collected?

 

Unfortunately, the typical 6% “state sales tax” is just the beginning. There is also a discretionary sales surtax in many counties, the amount varying by county, and the Local Option Tourist Development Tax, commonly referred to as the Tourist Tax, this amount also varying by county. Some taxes are paid directly to the State of Florida and in some cases paid locally. You need to know your county and know the law that applies. Many counties differ, so make no assumptions.

 

What is Taxable?

 

Here is the issue. It is not simply the base rent that is taxable. According to the DOR, the TOTAL amount charged to the seasonal renter is taxable. Many seasonal rental agreements state the rent amount and also have a cleaning charge. This cleaning charge is taxable and it is the most commonly overlooked tax by the property manager. While the cleaning charge is the most commonly overlooked and incorrectly untaxed charge, it is only the beginning of the items which must be taxed.

 

The List

 

The following are some of the charges the DOR has stated are taxable, but it is not an all inclusive list. You may have other charges which also could be considered by the DOR as taxable. If in doubt, err on the safe side and charge the tax.

 

1. The Base Rent: This is the most obvious charge and is not the problem.

 

2. Electricity: In many but not all seasonal rentals, the electric is included in the rent, especially in weekly rentals. Sometimes though, the resident does pay the electric in full or an amount over and above a particular set amount by the manager. Any amount paid by the resident for electricity is taxable.

 

3. Cleaning: This is the real problem area. Many property managers are not aware that this is taxable and simply add the cleaning charge to the bill. The DOR is fully aware of the lack of knowledge of the property managers, and this is the most common tax that has not been collected.

 

4. Parking: Some condominiums that allow seasonal rentals charge additional vehicle fees or parking fees, and these are taxable.

 

5. Miscellaneous charges: Garbage Pick-up, Life Guard, Security, Furniture rental, Club House use. If these amounts are extra, and the resident must pay for them, the amounts are taxable.

 

Other potentially taxable amounts:

 

1. Application fee: If an application fee is required, this fee may also be subject to the tax.

 

2. Condo Approval Fee: The law is unclear, and this may be taxable.

 

Phone and Long Distance Charges:

 

Phone and long distance charges that the resident incurs are not additionally taxable to the resident, most likely because the DOR and all the other taxing authorities have already handled that on the phone bills.

 

Exceptions to the Tax:

 

Most, but not all seasonal rentals, are subject to taxation. There are some exceptions carved out but not frequently encountered. A seasonal rental to a full time college student is exempt from taxation. Rentals to federal employees are exempted out as well, if they are performing work related duties. This would be encountered in such hurricane related situations when FEMA employees needed a place to rent on a short term basis. Military personnel and diplomats are also exempt, and in the case of military personnel, they must be traveling under military orders. It is the responsibility of the lessor to obtain all the necessary documentation from the resident before any exemption should be given. If in doubt, check with your accountant or attorney.

 

Are You In Compliance?

 

If you are not, get into compliance immediately. Make sure your lease or reservation agreement states that the amounts are taxable, and if you already have leases for next season, take a look at them and make it clear to the residents that they must pay sales tax. If they refuse to pay, refer them to the law. If the lease or reservation agreement did not properly address the fact that the seasonal resident would be liable for the sales tax and the resident refuses to pay, you may be put in a position in which you or the owner must pay the amount due. In any event, make sure you do a self-audit immediately of your files and those of the agents you may be in charge of in your office. We highly recommend you download the DOR publication called SAKES AND USE TAX GUIDE FOR TRANSIENT RENTALS and contact your CPA for guidance.