A tenant has just 15 days to dispute the claim on the security deposit, and if they do not, you are in the clear – Right? WRONG. The tenant has up to 5 years to sue you for a refund of all or part of the security deposit. This often comes to a surprise to the landlord, as most professional landlords are very familiar with the wording of Florida Statutes and the timing requirements imposed upon the landlord.

The Landlord’s Duty

The landlord is required to send the Notice of Intention to Impose Claim on Security Deposit to the tenant by certified mail within 30 days of the tenant vacating the premises. Most landlords know this already. In the old days, the landlord had 15 days, now the landlord has 30 days. The timing requirements are described in detail in our article entitled Security Deposit Timing Review We recommend you read this carefully as a refresher. To understand the tenant dispute procedure, we need to look at the relevant portion of the statute.

Florida Statute 83.49 Deposit money or advance rent; duty of landlord and tenant…

The notice shall contain a statement in substantially the following form: This is a notice of my intention to impose a claim for damages in the amount of ____________ upon your security deposit, due to ________. It is sent to you as required by S. 83.49(3), Florida Statutes. You are hereby notified that you must object in writing to this deduction from your security deposit within 15 days from the time you receive this notice or I will be authorized to deduct my claim from your security deposit. Your objection must be sent to (landlord's address). If the landlord fails to give the required notice within the 30 day period, he forfeits his right to impose a claim upon the security deposit.
(b) Unless the tenant objects to the imposition of the landlord's claim or the amount thereof within 15 days after receipt of the landlord's notice of intention to impose a claim, the landlord may then deduct the amount of his claim and shall remit the balance of the deposit to the tenant within 30 days after the date of the notice of intention to impose a claim for damages…

An examination of the statute’s wording

A careful reading of the statute seems to imply that the landlord is only authorized to deduct the money claimed from the security deposit if the tenant fails to object within 15 days of receipt of the Notice of Intention to Impose Claim on Security Deposit. Does this mean that if the tenant objects, the landlord cannot claim the money? If this were the case, what is the landlord to do with the disputed funds? The law is not clear.

The Landlord receives an objection by the tenant, now what?

1. Property Manager is licensed under a Real Estate Broker.

Many years ago, Florida law required a property manager under a real estate broker’s license through the State of Florida to go through certain specific procedures in the event a tenant objected to the landlord’s claim. The real estate broker had to report the dispute to FREC and then ask FREC for an Escrow Disbursement Order, file an interpleader, or file a lawsuit against the tenant, if none were already filed by the tenant. This was a cumbersome and frankly ridiculous burden on the property manager and was removed from the law. Now, the property manager is not required to do any of the aforementioned procedures.

2. Landlord/owner is self-managing

Former and current law does not specifically provide what the actual owner/landlord is to do. The law does not require the landlord to file a lawsuit, hold the disputed funds indefinitely or take any action. Only in the wording of the Notice of Intention to Impose Claim on the Security Deposit does it reference the landlord being “authorized” to deduct the funds from the security deposit. Does this mean if the tenant disputes, the landlord is not “authorized”?

Can the Landlord make the deduction and disburse the funds?

1. Property Manager is licensed under a Real Estate Broker

The law specifically allows the property manager who is licensed under a Florida real estate broker to disburse the disputed funds as they see fit BUT some Judges in Florida feel otherwise.  As you can see in the wording of Florida Statutes 475, the FREC reporting, interpleader or lawsuit requirement is not present anymore as it pertains to a disputed security deposit. If the tenant objects, the property manager can disburse the funds pursuant to the Notice of Intention to Impose a Claim on the Security Deposit, after the 15 days have elapsed from the time the tenant has received the Notice by certified mail BUT there is always a risk that the Judge will see it is “wrong”. The fact that the tenant has objected has lost its relevancy in the law. If you are uncertain or nervous, keep it in escrow, document everything and understand that some judges may have felt you should have disbursed. We simply do not know the answer and FREC has given us no guidance.

83.49 Deposit money or advance rent; duty of landlord and tenant… (d) Compliance with this subsection by an individual or business entity authorized to conduct business in this state, including Florida-licensed real estate brokers and salespersons, shall constitute compliance with all other relevant Florida Statutes pertaining to security deposits held pursuant to a rental agreement or other landlord-tenant relationship. Enforcement personnel shall look solely to this subsection to determine compliance. This subsection prevails over any conflicting provisions in chapter 475 and in other sections of the Florida Statutes, and shall operate to permit licensed real estate brokers to disburse security deposits and deposit money without having to comply with the notice and settlement procedures contained in s. 475.25(1)(d).

2. Landlord/owner is self-managing

Nowhere in the statutes does it impose a penalty on the landlord if the landlord deducts the amount owed from the security deposit per the terms of the Notice of Intention to Impose a Claim on the Security Deposit. It is our opinion that the landlord should simply wait the 15 days after the tenant receives the Notice and then deduct the funds accordingly.

Is it over yet? The tenant has not objected.

Absolutely not. The tenant and the landlord have five years from the date the tenant vacates or the claim is made on the security deposit to institute litigation against each other. This is due to the fact that under Florida law, the parties to a written contract such as a lease have a 5 year statute of limitations, meaning that they have 5 years to sue one another. The common misconception among landlords is that if the tenant does not object, the tenant has implicitly agreed to the landlord’s claim, and everything is over. While it would make sense, this is not the case.

Practical Considerations

When a tenant objects to the security deposit claim, you should give your attorney a call. If you have received a call or letter from the tenant’s attorney, you should never respond other than to tell the attorney that you have received the message or correspondence and are forwarding it to your attorney. You should then examine the facts of your situation, look carefully at the proof you have to justify the deduction, and either stand firm or consider settlement.

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We have all heard the expression “last known address”, but much confusion abounds regarding its actual definition or how it should be defined in the landlord/tenant law context.

When does the “last known address” become relevant?

According to Florida Law, the landlord must send out the Notice of Intention to Impose Claim on the Security Deposit or refund any money that is due to the tenant within a 30 day time frame or 15 day time frame respectively. This is to be sent to the “last known mailing address”.

Florida Statutes Section 83.49 provides as follows:
…(3)(a) Upon the vacating of the premises for termination of the lease, if the landlord does not intend to impose a claim on the security deposit, the landlord shall have 15 days to return the security deposit together with interest if otherwise required, or the landlord shall have 30 days to give the tenant written notice by certified mail to the tenant's last known mailing address of his intention to impose a claim on the deposit and the reason for imposing the claim.

The “last known mailing address”

FS 83.49(3)(a) clarifies the issue stating that it is the “last known mailing address”. The usual last known mailing address will be the address of the premises or the address that you have been sending correspondence to the tenant while the tenant was living on the premises or any other address that the tenant has given you to send correspondence to the tenant by mail.

1. The property where the tenant resided : If the tenant has not given you any other address to which to send mail, this will be the “last known mailing address”. Of course, the tenant no longer resides at the property, but this is where you should send your Notice. The tenant may or may not have put in a forwarding address, but this is not your problem. The law requires you to send out the notice. It does not require you to make sure the tenant actually receives the notice.

2. The address where you have been sending correspondence : The tenant may have given you a mailing address at the beginning or during the tenancy, requesting that you send all mail to that address. Commonly, tenants and landlords alike do not like to use the exposed street side mailboxes due to the high incidence of theft from these mail boxes, resulting in the use of a post office box at the actual post office or at a mailbox/shipping store. If this is the only address you have, this is the “last known mailing address”.

3. The address the tenant gives you when vacating: Often a vacating tenant will give you his or her new address. This may be done by phone or in writing. If the tenant has requested that you send any correspondence to this new address, do as you are instructed. If it was a verbal instruction, denote the date and time of the request in your file, and urge the tenant to give you this instruction in writing.

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When receiving a Notice of Intention to Impose a Claim on the Security Deposit, invariably a Tenant will one day dispute what you have charged. You will usually be notified of this in a long rambling letter, in which the Tenant goes on and on about how the premises were left cleaner than when he/she moved in. The Tenant’s letter usually ends with a threat that if she does not receive her money back within a certain period of time, she will sue. Sometimes you will receive a letter from an attorney and if you do, you MUST take it seriously.

What is the Manager or Landlord Required to Do When a Security Deposit Claim is Disputed?

The easy simple answer is NOTHING. Contrary to popular belief, there is no legal obligation to respond in any way to a Tenant’s verbal or written security deposit dispute. Remember, your response can be used against you so if you respond, chose your words carefully.  Should you completely ignore it though?

The Four Options When There is a Dispute

1. Do absolutely nothing and ignore the Tenant’s dispute. This will most likely infuriate the Tenant. You will either hear nothing from the Tenant or you may receive a letter from an attorney for the Tenant, or a lawsuit could be filed against you, the property owner or both. Chances are you will hear nothing but you never know.

2. Give the Tenant what he or she wants. If the Tenant is demanding a return of the security deposit in full or in part, you can simply cave in and return the money. That is a fairly certain way to calm the Tenant down, but it is doubtful that you or the property owner really wants to do this. If you are the property manager for an owner, it is recommended that you notify the owner of the dispute and ask them if they would like to do this. Many owners do not want to be remotely bothered with a dispute and may choose this to avoid any possibility of litigation. If a dispute blows up into a major lawsuit, the property owner could blame you for not giving them this option in the beginning. Never try to guess what path an owner will take. Let them make this decision.

3. Respond to the Tenant. Tell the Tenant in writing that you have reviewed the file and that the charges stand. There is no need to explain the charges if they are clear. Remember that you are building a paper trail when you respond, so be careful you do not disclose any weaknesses. Your response will at least show that you are not ignoring the Tenant and may calm the Tenant down.

4. Receive settlement authorization from the owner. After review of the file and possibly consultation with the owner, you may feel that certain charges are not easy to prove or were not warranted. If you receive a fixed amount of settlement authority in writing from the owner, you or your attorney can attempt to settle the matter. If settled, a release can be drawn up and the money disbursed according to the agreement. If settling, do not send the Tenant money unless a release is used 

Can You Disburse a Disputed Security Deposit?

The law is 100% unclear. Florida law does not specifically allow you to disburse the security deposit as you see fit. The days of having to notify FREC, file an interpleader or file a lawsuit in court are OVER. Do you increase the chance of getting sued if you disburse the balance to the owner? Yes. 

Suppose the Tenant sues?

If the Tenant hires an attorney and sues, and if the judge determines that you took one cent too much, YOU WILL LOSE the case and you or the owner will have to pay 100% of the attorney’s fees of the Tenant. We have seen as little as $1000 and as much as $35,000 in attorneys fee awards. Can a Tenant pay their attorney? They usually do not have to. There are hundreds of attorneys who will represent the Tenant FOR FREE and on a contingency basis.

Some Final Advice

ALWAYS MAKE SURE YOU SENT OR SEND THE MONEY THAT YOU WERE PLANNING ON GIVING TO THE TENANT. ONE OF THE WORST MISTAKES IS TO HOLD THE TENANT’S MONEY. IF THEY WERE GOING TO GET SOME MONEY BACK, MAKE SURE THEY GET IT BACK WHETHER OR NOT THERE IS A DISPUTE. IF YOU WERE GOING TO GIVE SOME OF THE MONEY BACK, GET IT BACK TO THEM. IT IS THEIR MONEY.

In the event of a lawsuit, if you manage the property for an owner, you do not want to be named a party to the lawsuit. You are merely holding the money, or you may have already disbursed. Always make sure that you have the following wording clearly stated in your lease agreement:

DISPUTES AND LITIGATION: In the event of a dispute concerning the security deposit and tenancy created by this agreement, TENANT agrees that if the premises are being managed by an agent for the record owner TENANT agrees to hold agent, its heirs, employees and assigns harmless and shall look solely to the record owner of the premises in the event of a legal dispute.

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Your former tenants were friends with each other and now are going their separate ways. Both just moved out. Maybe one moved out a long time ago.

You are going to be sending out a Notice of Intention to Impose Claim on Security Deposit or, you already have, and the tenants are entitled to some refund.   Maybe there is no claim on the deposit at all, and the tenants will be receiving a full refund.

Normally, one paper check is made out to both tenants, sent to one of them if they live separately now and it is up to them to deal with splitting it if in fact both feel that they paid a portion of the whole when they originally moved in or for some reason want it split a certain way.   Maybe one paid the whole thing in the beginning, and one wants to keep the whole thing. That’s not your problem.  When sending a paper check, the check is in both names, so they deal with it.

In reality, these days checks are becoming far less used, and the property manager and tenants deal in electronic payments.

You can’t send one tenant an electronic payment in full leaving the other with nothing unless this was agreed to by all parties in writing.  You can’t send the whole sum to both electronically as there is no physical check to have both names on it.  Is there an easy solution?

The solution is simple.  We have a form that the tenants can sign whereby they agree who gets what if anything is going to be refunded.  They may agree that one gets all, maybe it is split 50/50.  Maybe 75/25.  It does not matter.

Using this simple form, which you can convert to an e-signable document, allows you and the tenants to agree on who gets what and allows you to use your electronic payment system with ease.  Still using paper checks?  You can send 2 checks to 2 different people in whatever percentage they agreed to on the same form. Everyone is happy.

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Did you ever get that horrible feeling when you realized that you forgot to send the “Notice of Intention to Impose Claim on the Security Deposit” out to the resident or sent it out late?

For years we have drilled into our clients’ heads the importance of sending the Notice (we will call it that from this point on) out within 30 days of the resident vacating, but sometimes it just gets forgotten.

You may have evicted the resident, and the last thing on your mind is returning any money to the resident as the resident owes so much to you.

The resident may have broken the lease and left early telling you they have vacated.

The resident may have skipped out in the middle of the night owing 3 months’ rent, and again you would not think of returning any money to him, or you realize the resident is gone and there is $5000.00 worth of damage to the unit. Unfortunately, the fact that the resident owes you and will not be getting a dime back does not excuse you from sending out the Notice.

Your failure to send out the notice within the time period as required by law could result in you having to return the entire security deposit to the resident. This could be a devastating occurrence especially if the security deposit was a significant amount of money.

So, you forgot to send the Notice out within 30 days of the resident vacating OR sent it out late. Is it over now? Do you have to return the money to the resident? Possibly NOT. Florida law has carved out an exception to the 30 day rule which MAY be able to save you.

The General Rule

The general rule which almost every property manager knows is found in Florida Statutes 83.49, the security deposit statute. The statute provides that upon the “vacating of the premises for termination of the lease”, the manager shall have 30 days from that date to send out the Notice to the resident’s last known address, which of course is the unit the resident was renting unless they gave you a new address. The law used to be 15 days, but through the efforts of the Florida Apartment Association in getting the law changed, the manager has 30 days to send out this Notice. The confusing part of the statute has to do with the wording “vacating the premise for termination of the lease”. This wording is open to more than one interpretation. Obviously it would apply to the resident leaving at the end of the lease, but what about an eviction? Does an eviction terminate the “lease”, or does it terminate the “tenancy”? A good argument can be made that if a resident does not fulfill the lease term, whether by abandonment, surrender, or eviction, and the manager tries to rerent the unit on the residents’ account under Florida Statute 83.595, the 30-day counting period should not start until the lease expiration date or the date a replacement resident takes occupancy, whichever occurs earlier. Under this statutory interpretation, the date under which the resident loses the right of possession and the date under which the lease obligations are terminated can be two very different dates. However, some judges may not accept this argument, and will start the 30-day counting period strictly from when the unit was physically vacated. Therefore, the safe approach is to remember to send the Notice out within 30 days from the date the resident physically vacates. If you know when the resident vacates, as in an eviction being finalized with the sheriff, or at the end of a lease, you know when to begin counting your 30 days. But wait. We forgot to send the notice out, and this is what this article is all about!!!!

The Penalty For Not Following the Rule

If you fail to send the Notice out within 30 days, you forfeit the right to impose a claim on the security deposit. In other words, you must return the full security deposit to the resident no matter what the resident owes you.

The Exception to the Rule

There is an exception to the rule that you must send out the Notice within 30 days. We are going to tell it to you, but after you read this article, we want you to forget you ever heard about the exception, and we want you to ALWAYS get the Notice mailed within 30 days.

FS 83.49 (5) Except when otherwise provided by the terms of a written lease, any resident who vacates or abandons the premises prior to the expiration of the term specified in the written lease, or any resident who vacates or abandons premises which are the subject of a tenancy from week to week, month to month, quarter to quarter, or year to year, shall give at least 7 days' written notice by certified mail or personal delivery to the manager prior to vacating or abandoning the premises, which notice shall include the address where the resident may be reached. Failure to give such notice shall relieve the manager of the notice requirement of paragraph (3) (a) but shall not waive any right the resident may have to the security deposit or any part of it.

An Examination of this Exception

As you can see under FS 83.49(5), if a resident abandons or vacates before the end of the lease, the resident is required to give at least 7 days’ written notice by certified mail or personal delivery, telling you he is vacating and giving you a forwarding address. AHA! Many residents do not do this. They simply skip out in the middle of the night, or tell you they are leaving and then leave. In this case YOU DO NOT have to send out the NOTICE within 30 days! If the resident is not on a lease but the tenancy is now month to month or week to week, the same rule applies. If the resident fails to give you the notice of vacating and a forwarding address at least 7 days before they vacate, you DO NOT have to send out the Notice to them. Here is a recap.

1. The resident must give you at least 7 days’ written notice before they vacate, advising you that she is vacating.

2. The notice from the resident must be hand delivered or sent to you by certified mail.

Why Does the Law Provide This Exception?

The reason this exception exists is so that you are not under the 30-day requirement when you have no idea if the resident has in fact vacated. Often you do not know the date the resident vacates, so you should not be held to a timetable when you do not know when that time period starts. This is a manager protection exception.

The Danger of Using the Exception

In all the years of training property managers, we frequently avoid talking about the exception to the rule that you must send the Notice out within 30 days, and you might have wondered why. The reason is simple. People are dishonest, and when the resident finds out that he was supposed to give you at least seven days’ written notice by hand delivery or certified mail stating when he was leaving and giving you his new forwarding address, a copy of this notice can miraculously appear, and the resident will tell the judge that he in fact DID give you this notice. Now you are faced with having to explain to a judge that you did not receive the notice, and the resident will try to convince the judge that he did give you the notice. Who will the judge believe? You or the resident? Never underestimate how convincingly someone can lie to a judge.

You Know the Exception, Now What?

Now that you know the exception to the rule, forget about it. Always get the Notice out within the 30-day time period as required by law. Assume the resident will lie and say that he DID give you at least 7 days’ notice before he left, and that he DID give you a forwarding address. Only use the exception to the rule if you are in a bind and have forgotten to send out the Notice within the 30 days; possibly the exception will be there to help you. If you do forget to send out the Notice, go ahead and do it anyway even if you are outside the 30-day window. There is no need to alert the resident to the fact that they did not give you the required 7 day notice, because this will give the resident ample opportunity to fabricate the notice after the fact. A number of years ago, one of our clients was being sued by an attorney who argued to the judge that our client failed to send the Notice out within 30 days. It was true. Our client did not send the Notice out. We turned to the resident and asked if he had given our client a notice at least 7 days prior to vacating with his new forwarding address. The resident said “no”, and we won the case. Let this limited, technical exception work in your favor when needed; don’t open yourself up unnecessarily to having to use it. As soon as you think the resident has vacated, begin counting your days and get your Notice out!!! Whether it be a skip, an eviction or the natural ending of the lease, get the Notice out.

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There will invariably come a time when a property manager’s services are terminated by the owner, and the owner will either want to manage the property himself or will want to hire another property manager. Additionally, a property could sell, and a new property owner will wish to terminate the services of the property manager. In every case, either the new property manager or the owner will demand that you transfer the security deposit out of your escrow account and into their account. Florida law specifically deals with how this is accomplished and must be followed. Failure to follow the law could result in a lawsuit or a FREC complaint. The term licensed property manager in this article refers to those persons holding a real estate sales or broker's license.

1. The licensed property manager is fired, and another licensed property is taking over management.

In this situation, no permission is needed from the tenant to transfer the funds from your escrow account to the escrow account of another licensed property manager. The new property manager must notify the tenant where and how the money is being held. Property managers who are fired are often angry, as they feel that the firing was wrongful and money is owed to them by the owner. Money may indeed be owed and the filing may have been unfair or wrong, but NEVER hold back the transfer of money to the new property management company as an attempt to try to recover owed commissions. This type of an attempt at self-help recovery of commission money by touching the tenant’s money is illegal and wrong.

2. The licensed property manager is fired, and the property owner decides to self-manage

If the owner is self-managing, it is unclear whether the property manager must get permission from the tenant to transfer the funds. The law simply does not address this.  While permission is always advisable, sometimes it is better to ask for forgiveness rather than permission.  The two forms are the Security Deposit Transfer Agreement and the Security Deposit Transfer Notice.

3. The property sells to a new owner, and the property manager is fired.

Oddly enough, the tenant does not have to give permission for the property manager to transfer the funds to a new owner if the property is sold. This makes the reasoning in situation #2 seem faulty, but it is the case. Since a typical owner of rental property will not know how to follow the law, we recommend that you give the new owner a copy of Florida Statutes Section 83.49 and keep a record in your file that you gave the new owner the information.

Transferring the money out of state

Often owners will be out of state and will want you to send the money to them through the mail. Security deposits must be kept in a Florida banking institution. We urge you never to send the escrow funds out of Florida, even if the tenant gives you written permission. If they get pushy, send them a copy of the law and document every conversation and correspondence. Fortunately many banks operate in multiple states, so it has become easier for owners to have a Florida bank account which has branches in their state.

Florida Law excerpt of Section 83.49

(7) Upon the sale or transfer of title of the rental property from one owner to another, or upon a change in the designated rental agent, any and all security deposits or advance rents being held for the benefit of the tenants shall be transferred to the new owner or agent, together with any earned interest and with an accurate accounting showing the amounts to be credited to each tenant account. Upon the transfer of such funds and records as stated herein, and upon transmittal of a written receipt therefore, the transferor shall be free from the obligation imposed in subsection (1) to hold such moneys on behalf of the tenant. However, nothing herein shall excuse the landlord or agent for a violation of the provisions of this section while in possession of such deposits.

                                                   LAW OFFICES OF HEIST, WEISSE & WOLK, PLLC

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All security deposits and advanced rents are governed by Florida Statute Section 83.49.  The statute obligates the manager to inform the resident of particular information whenever a security deposit or advance rent is held.

When Disclosures Must Be Made.

No later than 30 days after a manager receives advance rent or a security deposit, the manager must make the disclosures to the resident.  The notification must be in writing and given in person or mailed to the resident.

Many times, the disclosure is in the lease itself.  This is the best way to present the information, because later, there can be no dispute that the disclosure was made. 

What Must Be Disclosed?

The manager must disclose where and how the security deposit and advance rent is being held.  The disclosure must tell the resident the rate of interest, if any, the resident is to receive and when the interest payments are to be paid to the resident.

The Written Disclosure Must Show:

1. The name and address of the depository where the advance rent or security deposit is being held;

It is best to use the whole street address of the bank, not just the name of the City. However, the complete name of the bank and the name of the City is likely to be considered adequate.

2. Whether the advance rent or security deposit is being held in a separate account for the benefit of the resident or is commingled with other funds of the manager;

This does NOT mean that it is ok to commingle the funds.

3. Whether the funds are deposited in an interest-bearing or non-interest bearing account.

4. If the account is interest-bearing, the disclosure must state when the interest payments will be made to the resident.

5. Include a copy of the provisions of Florida Statute 83.49 (3).

Subsequent Disclosures.

After the manager makes the initial disclosures, circumstances can change – a bank closes, a new owner takes over, etc.  If the manager changes the manner or location in which the funds are being held, the manager must notify the resident, in writing, within 30 days of the change.

Consequences of Non-Disclosure.

Unlike other portions of the security deposit statute, there is no clearly defined “penalty” to be applied to a manager who fails to make the disclosures.  Thus, a resident who sues a manager for failing to make the required disclosures must prove that the non-disclosure resulted in losses suffered by the resident.

For licensed real estate professionals, the failure to make the disclosures can be a violation of FREC rules. 

Even if there is no lawsuit or FREC complaint, the failure to disclose marks a very sloppy lease-up procedure.  It tends to cast the manager in a very poor light, which can be problematic if the manager has to defend himself before a judge. 

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A hundred years ago, a manager had few obligations in how he handled the security deposit. There was no statute telling him to keep it separate from his other funds. There was no obligation to make a “claim” on the deposit. He did not have to tell the resident where the deposit was being held. That was then, this is now.

What Does The Statute Cover?

All security deposits are governed by Florida Statute Section 83.49. The statute defines a security deposit as all funds that are “deposited or advanced by a resident on a rental agreement as security for performance of the rental agreement or as advance rent for other than the next immediate rental period.” That means that any money held for some future event, like future rent coming due or repairing damages after the resident moves out, is covered by the statute.

Three Ways To Hold the Funds.

The manager is obligated to hold the security deposit and advance rent in one of three ways.

The first option is to hold it in a separate non-interest-bearing account in a Florida banking institution. The manager cannot commingle the money with any other funds of his or otherwise make use of the funds, until the funds are actually due the manager.

The second option is to hold the security deposit in a separate interest-bearing account in a Florida banking institution. If this option is used, the resident is entitled to receive interest. The amount of interest shall either be 75 percent of the annualized average interest rate payable on the account OR 5 percent per year, simple interest. The manager chooses. As with the first option, the manager cannot commingle the money with any other funds of his or otherwise make use of the funds, until the funds are actually due the manager.

The third option is to post a surety bond. The bond must be in an amount equal to the total amount of the security deposits and advance rent or $50,000, whichever is less. This option is so rarely used that this article will skip the remaining details.

Keeping the Deposit In A Florida Bank.

Any security deposit account, whether interest bearing or not, MUST be kept in a Florida bank.

The account must be in a bank that is chartered to do business in Florida. Most, but not all, banks that are physically located within the state fit into this category. [Not sure about your bank? Ask them if they are chartered in Florida. They easily know the answer.] If an out-of-state owner wants to hold the deposit in his own account, it needs to meet this criteria. It is not sufficient for the owner to place the deposit in a national bank located in his home state which has branches in Florida.

Keeping Deposit Funds Separate.

The deposit and advance rent must be kept separate from other funds.

If an agent collects the funds on behalf of the manager, the agent should either deposit them into the escrow account that is set up in the agent’s office, OR send the funds to the Florida bank account that the manager has set up. It is not proper to send them directly to the manager.

If an owner is holding a deposit, it must be in an account that is set up for the purpose of holding the deposit. It cannot be mixed in with the owner’s other funds in a checking or saving account.

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A security deposit is collected under most residential leases, and in most of those situations, the manager will seek to make at least some claim against the security deposit after the tenancy has concluded.

Statutory Definition

Florida Statutes 83.43(12) defines security deposits to mean “any moneys held by the manager as security for the performance of the rental agreement, including, but not limited to, monetary damage to the manager caused by the resident's breach of lease prior to the expiration thereof.” Florida Statutes 83.49 permits the manager to impose a claim on the security deposit and sets forth the procedure to do so. Thus, the manager can impose a claim on the security deposit, not only for physical damage claims, but for any failure in the performance of the rental agreement by the resident.

There is a lot of confusion surrounding the term “damages”. As FS 83.43(12) clearly states the term isn’t limited to just monetary damage, such as the lost rent. Damages are the compensation recoverable for any loss suffered by the manager due to the resident’s breach of the lease. In the following paragraphs I have listed some of the common items for which deductions are made. The listings are examples only and are not intended to be exhaustive.

Most Common Damages

The most common damages chargeable against the security deposit are rent (the unpaid rent for the month of vacating: the entire month can be claimed, not just the prorated rent through the vacating date), late charges, NSF fees, accrued utilities, including water, sewer, gas, electric and garbage (utilities are often billed in arrears), pest control, valet trash service, eviction court costs and attorney’s fees. Court Registry funds which are already the subject of a court order in the manager’s favor should not be listed.

Concession recapture is not permitted without clear authorization under the lease. Even then, there may not be a clear answer as to whether a concession can be recaptured. Our firm believes that the recapture should be allowed, since the statute places no prohibition on this. However, a judge could take the position that the statute does not directly provide the manager with this remedy, and therefore the recapture of the concession is prohibited.

Our firm advises against accelerating rent or any other charges in order to deduct them against the security deposit. If after deducting all the current damages, a security deposit balance remains and the lease term has not expired, the manager should contact his attorney to discuss his options.

Physical Damages

Physical damages to the rental in excess of ordinary wear and tear are valid claims against the security deposit. The manager should remember that after a year or more of use, there will be some ordinary wear which should not be charged to the resident. The manager should also remember that many judges will build in a depreciation factor to many items supposedly needing repair or replacement. Thus, a manager should not attempt to charge a resident for the full cost of carpet replacement, when the useful life of the carpet was already 90% exhausted prior to that resident taking occupancy. The term “ordinary wear and tear” does not appear in the Landlord/Tenant Act, but most judges will enforce a variation of this concept. Particularly with regard to physical damage claims, managers would be well advised to settle with residents, if possible, rather than risk an adverse court decision. The amount in dispute is usually small compared to the liability for the prevailing party’s attorney fees.

When the unit has not been left clean, cleaning charges can be deducted. Like ordinary wear and tear, “clean” has no statutory definition, and resident disputes are better settled then litigated. If the manager imposes a standard nonrefundable redecorating or cleaning fee, then the manager may have waived the right to charge for any further painting or cleaning, as the case may be.

If the resident has made unauthorized alterations to the rental, then the removal of the alterations and restoration charges are valid deductions from the security deposit. If the resident has made authorized alterations, which the manager is leaving in place, then there should be no deduction from the security deposit. If the manager is removing the authorized alterations, then the lease should indicate that it is the resident’s duty to restore the premises to the original condition. If the lease is silent or unclear on this duty, then the authorization may be seen as a waiver of any resident obligation to restore.

Most capital improvements are the manager’s responsibility, such as roof, plumping pipes, outside or patio painting. Unless the damage is the result of the resident’s intentional act or negligence, it is inappropriate to charge the resident for these repairs or repainting. Claims based upon the resident’s intentional act or negligence are often difficult to prove.

Problem Areas

Managers, who are placing the rental for sale or re-occupying the rental, are tempted to overreach when charging the resident for cleaning and repairs, and judges are very aware of this dynamic. Another issue arises when a deduction is made without an actual repair subsequently being conducted. There is no legal requirement that a particular damage be repaired in order to entitle the manager to a deduction from the security deposit. However, claiming damages without making the repair will require clear and convincing proof. Managers should have particularly well documented files for any charges in the above scenarios.

Courts have held that certain damages are chargeable against the security deposit only if the lease provides for them in explicit, unambiguous language. Leases can maximize the claims against the security deposit by identifying these items as damages. If the lease isn’t specific, a general catch-all clause may suffice. However, reliance on general language is risky. Examples of these damages are often found when a single family home, townhome or condo lease is breached by a resident vacating early: continuing lawn care and pool service, continuing electric or gas for the fan, air conditioning or heat (to prevent mold or freezing damage to pipes), commissions, re-leasing fees, advertising charges, and administrative or delivery charges for the delivery of Three-Day or Seven-Day Notices. Even if the lease language clearly provides deductions for certain types of damages, a judge can decide not to enforce these charges against the resident, but rather make the manager bear the cost, such as administrative fees of the manager’s agent.

Charge lists for repairs or replacements, when reasonable, will likely be upheld. It is overreaching that leads to judicial skepticism. If a manager doesn't buy at retail, the charge sheets shouldn't be at retail.

Some damages are not chargeable against the security deposit regardless of a lease provision permitting the charge. Any administrative charge for preparing the notice of claim against the security deposit or the certified mail postage on the notice of claim are the manager’s statutory duties and are not chargeable to the resident.

Notice of Claim

The manager must account on the Notice of Intention to Impose Claim on Security Deposit not only for the security deposit, but also for any pet deposit or other deposits, such as appliance, utility, garage or common area deposits. Although not technically required under Florida Statutes, it is good practice to account for the last month’s rent on the notice of claim.

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One of the basic documents used in real property management, whether apartment complex, single family home or condominium, is the Notice of Claim against Security Deposit, referred to in this article as the “Notice”. It is called other names such as Statement of Account (SODA) or Move-Out Reconciliation. It ranges from a standard form used by many owners and management companies to a letter individually drafted for each rental. A suggested form is at the end of this article.

The Statutory Duty

Florida Statutes 83.49(3)(a) states: Upon the vacating of the premises for termination of the lease, if the manager does not intend to impose a claim on the security deposit, the manager shall have 15 days to return the security deposit together with interest if otherwise required, or the manager shall have 30 days to give the resident written notice by certified mail to the resident's last known mailing address of his or her intention to impose a claim on the deposit and the reason for imposing the claim.

When To Use the Notice

The manager only uses the Notice if he is making a claim against the security deposit, other deposits (pet deposit), or any other unused pre-paid amounts (unapplied last month’s rent in case of a resident skip). All of these together will for purposes of this article be referred to as the “deposit”. If the manager is returning the entire deposit, then there is no need to use the Notice. The manager can simply return the entire deposit by first class mail with a cover letter to the last known address. If the manager is claiming any part of the deposit, then the manager must use the Notice. Technically, a good argument can be made that if the only escrow money held by the manager is last month’s rent, then no Notice has to be sent. Nonetheless, we still recommend notifying residents when any escrow money is retained. If the manager is returning part of the deposit, we suggest that the manager send a check for the balance with the Notice, because it provides a certified mail record of the refund check being received (since the Notice must be sent by certified mail), and the check demonstrates to the resident the manager is genuine about returning the portion of the deposit not claimed. If the resident does not get the check with the Notice, then there is a greater chance that he will object to the Notice. One downside to sending the refund check with the initial claim letter occurs when subsequent damages are discovered within the 30-day notice period, and the manager seeks to send a revised claim letter for a greater amount.

If the manager is returning all or a part of the deposit, he should return it to the last known address. In the case of multiple residents, the check should be made payable to all the residents jointly (A, B and C). In the case of a deceased resident, the check should be made payable to “The estate of A”.

Certified Mail

The statute requires that the Notice be sent by certified mail. Use of a return receipt (the green card) is not required, but we have traditionally advised managers to obtain a return receipt. Since managers now have the ability to track receipt of the Notice online, this position can be reconsidered. However, the green card is powerful evidence in court when the resident denies receiving notice. There is an exception to the rule requiring that you send the Notice. We recommend that you not rely upon this exception, unless you have forgotten to send the Notice within 30 days and are now forced to see if you fit within the exception. See our article entitled Forgetting to Send the Security Deposit Claim.

The manager may not charge the resident for the cost of the certified mail. It is a duty imposed on the manager by the statute and is not chargeable to the resident.

Last Known Address

The Notice must be addressed to all the residents. It must be sent to the last known address. If no forwarding address is given, then the “last known address” is the rental, and it is sent to the rental. If the lease contains an address for notice to the resident, then that is the address to use, unless there is a later forwarding address. In the case of multiple residents who may give multiple forwarding addresses, the notice goes to each of the forwarding addresses. If one of the multiple residents gave no forwarding address, that resident’s Notice goes to the rental address. If multiple residents cannot agree in writing to the forwarding address and a check is being sent to them, the manager should send the check to the last agreed address, probably the rental address or the resident notice address in the lease, with copies of the check and the Notice to the resident’s individual forwarding addresses.

Date

FS 83.49(3) (a) states: If the manager fails to give the required notice within the 30-day period, he or she forfeits the right to impose a claim upon the security deposit. Whatever the date on the Notice, the postmark date is conclusive. If the postmark is not within 30 days of vacating, then the Notice is late. The courts accept no excuses. For more information on timing, see our article entitled Security Deposit Claim and Refund Timing. Note that the failure to timely comply with the statute only bars claiming the deposit. It does not release the resident from his financial obligation to pay the damages. The manager must return the deposit, but the resident can be sent to collections or sued for the damages.

Required Statutory Language

FS 83.49(3) (a) states: The notice shall contain a statement in substantially the following form:

This is a notice of my intention to impose a claim for damages in the amount of _____ upon your security deposit, due to _____. It is sent to you as required by s. 83.49(3), Florida Statutes. You are hereby notified that you must object in writing to this deduction from your security deposit within 15 days from the time you receive this notice or I will be authorized to deduct my claim from your security deposit. Your objection must be sent to (manager's address).

Judges are familiar with this wording. While the statute permits some wording changes by only requiring a “substantially” similar statement, you are advised to consult with your attorney before making changes. As you can see, the above wording contains a provision that the manager’s address be included in the Notice. This is the complete manager’s (or agent’s) address, where any resident’s objection should be sent, including P.O. Box/street, city, state and zip.

Listing the Damages

The Notice only deals with the deposit. It is not required by law to be the complete listing of all the damages but it is highly recommended. Confusion can be avoided if the Notice contains a statement to the effect that the Notice does not waive or limit any of the manager’s rights to damages or amounts due, which may exceed the security deposit or the amounts listed on the Notice. The manager may later send the resident a statement of additional amounts due as a result of further damages found or incurred. It is best to send a statement and not a second Notice form, as sending a second Notice may unnecessarily lead the resident to think that the manager was required to send the second Notice within 30 days also.

As used in this article “damages” means physical damages to the premises, cleaning charges, unpaid rent or other accrued charges, and any other amounts charged to the resident. It is good practice to list all known damages at the time the Notice is sent. If the damages exceed the deposit, the resident will have a clearer idea of the true status of the account.

We advise against accelerating rent owed through the lease expiration date. This is not a right created by Florida Statute 83.595, the statutory section outlining a manager’s collection rights. The disclaimer on the Notice indicating that amounts not listed are not waived should eliminate any doubt that future rents will later become a valid, additional claim if the manager is unable to relet the premises prior to the lease expiration date.

Damages Detail

The purpose of the statute is to give notice to the resident of the disposition of his deposit. To effectuate that purpose, the courts require that the Notice contain sufficient detail to apprise a reasonable person such that he could make an informed decision as to objecting to a damage item claimed or the charge for that damage. A manager should ask the question, “If this Notice is given to a judge, will he be able to ascertain what was damaged and how much it cost?”

The following represent bad practice claims: claiming the deposit without listing any damages; listing the damages without amounts; lump-sum damages, such as “rent, damages and cleaning: $900.00”; and summary listings, such as a long paragraph of the individual itemized damages followed by a total amount. If you are considering referencing an automatic deposit forfeiture on the Notice, please first review our article entitled Forfeiture of the Security Deposit.

The Notice can refer to another attached or enclosed list that itemizes the damages and amounts, such as a move-out reconciliation or a final inspection form.

The Math

All too often the math is wrong. Check and re-check your math. Most importantly, is the balance owed the manager or the refund to the resident correct?

An incorrect Notice

If you find that you have made a mistake on the Notice, see our article entitled Revising the Security Deposit Claim.

Resident Objection

FS 83.49(3) (b) states: Unless the resident objects to the imposition of the manager's claim or the amount thereof within 15 days after receipt of the manager's notice of intention to impose a claim, the manager may then deduct the amount of his or her claim and shall remit the balance of the deposit to the resident within 30 days after the date of the notice of intention to impose a claim for damages.

The resident has 15 days from receipt of the Notice within which to object to the Notice. Prudent managers wait 20 days, adding another 5 days in case the resident mails his objection on the last day. Since the Notice is sent certified, the manager can track it on-line at the post office website (www.usps.com\). The manager can see when the certified mail is delivered. If it remains undelivered, it will be returned to the manager, who has fulfilled his statutory duty regardless that the mail has been returned. For more information on the resident’s objection time, especially for realtors disbursing the funds see our article entitled The 15 Day security Deposit Dispute Period.

Although not covered in this article, in case of a resident objection, see our article entitled The Resident Security Deposit Dispute. Note that the debt is now “disputed”, and it must be referred to as “disputed” in any communications. If the debt has been sent to collections or reported to a credit bureau, they must be informed that it is now "disputed".

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