Collecting rent has been the biggest and most basic challenge of managers since the first cave was rented out in 1300 BC. Typically, residents are required to pay rent on a specific day of the month, the 1st being the most common day of payment. Situations arise in which residents are desirous of paying rent in advance, and most managers do not perceive this as a problem, but rather see it as a plus. Many reasons abound for a resident’s prepayment of rent. The resident may be going on an extended vacation or job assignment, may have come into a substantial sum of money, or simply doesn’t want to be bothered with making monthly payments and is willing to pay the entire term of the lease, possibly in exchange for a more favorable rent amount. In a perfect world, accepting prepaid or advance rent would be an advantage, but there are many dangers and pitfalls which should be considered before the decision is made to accept prepaid rent. Additionally, there are legal considerations which govern how the prepaid rent is held and disbursed.

The Law and Prepaid Rent

Florida Statutes require that advance rent be kept in the same account in which the security deposit is held. If interest is to be earned, Florida Law must be followed regarding the payment of this interest and notifications to the resident. The money can be removed from this account for use by the manager only as it becomes due. This would prohibit a manager from accepting prepaid rent from the resident and immediately utilizing it for the manager’s general purposes if it has not in fact become due. In a typical lease, the term is for a year, and the payments are made monthly. This means that the manager is only entitled to the rent when the due date arrives.

The Lease and prepaid rent

However, there is a way that a manager can legally take all or part of prepaid rent and utilize it at any time and for any purpose, but the lease must be drawn up differently. Instead of having a lease for a year, payable with monthly rental payments, the lease is for a set term, and the resident is required to pay rent for the entire term, be it 3 months, 6 months or even the entire year. In this case, the lease is not a typical monthly lease, but simply a lease for a fixed term, and the lease states the amount of rent due for that term. Most leases are not structured this way, but this is a possibility and an available option to the manager and resident.

Prepaid Rent and a Resident’s Unwarranted Breach

If the manager is holding prepaid rent, and the resident breaches the lease by vacating prior to the expiration date of the lease, the manager will be able to tap into that prepaid rent that is or should be held in the security deposit account only when it becomes due. Acceleration of rent is not looked upon favorably by the courts in Florida, so the manager would need to wait each month to be able to actually utilize the prepaid rent. The law is not entirely clear regarding any duty by the manager to try to re-rent the unit to mitigate their damages, because presumably, there are no damages if the manager is holding the rent. In the situation in which the resident breaches the lease with no legal basis whatsoever, having prepaid rent will definitely be advantageous to the manager.

Suppose the Resident Has a Warranted Breach?

Many residents who breach a lease by vacating prior to the expiration date have or will fabricate a legal reason why they are breaking the lease. Reasons may include a failure by the manager to provide peaceful quiet enjoyment of the premises to the resident, defects in the property, failure on the part of the manager to make a legally required repair, or a host of other reasons which seem to come out of left field and astound the manager when the breach occurs and the resident is demanding a refund of the prepaid rent. That perfectly nice resident, when faced with having to break a lease for a job transfer or divorce, will come up with novel or bizarre reasons why breaking the lease was completely warranted and legal under Florida law. It is bad enough that resident can completely fabricate reasons why he will break a lease when there is no prepaid rent in the picture, and this only gets worse and more common if in fact the resident has more at stake. Possibly the resident’s breach is completely warranted. Let’s say the resident just moved into an apartment. Two months after move-in, contractors begin replacing or repairing the concrete balconies. This resident, who coincidentally has a night job and sleeps during the day, now is faced with listening to jackhammers and construction crews all day long. Can this person break the lease? While the construction noise may not be the fault of the condo owner, it is clear that the resident’s peaceful quiet enjoyment of the premises is interfered with significantly. If there were no prepaid rent, the resident most likely would simply give notice and walk out of the lease, and the manager would have a difficult time enforcing the remaining balance of the lease, as this would probably be considered a good reason to break a lease by most judges. If there is prepaid rent, many managers will insist on keeping the rent, and many residents will insist on getting it back. The result? Litigation. In the event of litigation, the manager will be faced with trying to convince a judge that the resident’s breach was improper, illegal and unwarranted. The resident will have an entirely different story, and if there are attorneys involved in the case, it will often become a bad situation.

Is the Manager “Used” to Accepting Prepaid Rent?

Most managers are not accustomed to accepting prepaid rent. They are more accustomed to chasing after current or past rent owed! This increases the risk that the prepaid rent is mis-posted in the computer system that the manager uses for managing the property. Recently a client accidentally failed to post the rent prepaid by a resident. The computer system incorrectly showed that the rent was delinquent, the resident was evicted, and all his possessions were removed to the street. The resident returned a month later, only to find that all his possession were gone and that he had been evicted. The result? Most likely a lawsuit will be filed. If a manager is not accustomed to accepting prepaid rent, the danger increases dramatically.

The Conclusion

Are you convinced yet? Often things that appear good turn out to be fraught with dangers. We urge you to think long and hard before you deviate from the standard and time tested way of charging and accepting rent monthly.

“Serving the Property Management Professional”

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Collecting rent has been the biggest and most basic challenge of managers since the first cave was rented out. Typically, tenants are required to pay rent on a specific day of the month, the 1st being the most common day of payment. Situations arise in which tenants are desirous of paying rent in advance, and most managers do not perceive this as a problem, but rather see it as a plus. Many reasons abound for a tenant’s prepayment of rent. The tenant may be going on an extended vacation or job assignment, may have come into a substantial sum of money, or simply doesn’t want to be bothered with making monthly payments and is willing to pay the entire term of the lease, possibly in exchange for a more favorable rent amount. In a perfect world, accepting prepaid or advance rent would be an advantage, but there are many dangers and pitfalls which should be considered before the decision is made to accept prepaid rent. Additionally, there are legal considerations which govern how the prepaid rent is held and disbursed.

The Law and Prepaid Rent

Florida Statutes require that advance rent be kept in the same account in which the security deposit is held. If interest is to be earned, Florida Law must be followed regarding the payment of this interest and notifications to the tenant. The money can be removed from this account for use by the manager only as it becomes due. This would prohibit a manager from accepting prepaid rent from the tenant and immediately utilizing it for the manager’s general purposes if it has not in fact become due. In a typical lease, the term is for a year, and the payments are made monthly. This means that the manager is only entitled to the rent when the due date arrives.

The Lease and prepaid rent

However, there is a way that a manager can legally take all or part of prepaid rent and utilize it at any time and for any purpose, but the lease must be drawn up differently. Instead of having a lease for a year, payable with monthly rental payments, the lease is for a set term, and the tenant is required to pay rent for the entire term, be it 3 months, 6 months or even the entire year. In this case, the lease is not a typical monthly lease, but simply a lease for a fixed term, and the lease states the amount of rent due for that term. Most leases are not structured this way, but this is a possibility and an available option to the manager and tenant.

Prepaid Rent and a Tenant’s Unwarranted Breach

If the manager is holding prepaid rent, and the tenant breaches the lease by vacating prior to the expiration date of the lease, the manager will be able to tap into that prepaid rent that is or should be held in the security deposit account only when it becomes due. Acceleration of rent is not looked upon favorably by the courts in Florida, so the manager would need to wait each month to be able to actually utilize the prepaid rent. The law is not entirely clear regarding any duty by the manager to try to re-rent the unit to mitigate their damages, because presumably, there are no damages if the manager is holding the rent. In the situation in which the tenant breaches the lease with no legal basis whatsoever, having prepaid rent will definitely be advantageous to the manager.

Suppose the Tenant Has a Warranted Breach?

Many tenants who breach a lease by vacating prior to the expiration date have or will fabricate a legal reason why they are breaking the lease. Reasons may include a failure by the manager to provide peaceful quiet enjoyment of the premises to the tenant, defects in the property, failure on the part of the manager to make a legally required repair, or a host of other reasons which seem to come out of left field and astound the manager when the breach occurs and the tenant is demanding a refund of the prepaid rent. That perfectly nice tenant, when faced with having to break a lease for a job transfer or divorce, will come up with novel or bizarre reasons why breaking the lease was completely warranted and legal under Florida law. It is bad enough that the tenant can completely fabricate reasons why he will break a lease when there is no prepaid rent in the picture, and this only gets worse and more common if in fact the tenant has more at stake. Possibly the tenant’s breach is completely warranted. Let’s say the tenant just moved into an apartment. Two months after move-in, contractors begin replacing or repairing the concrete balconies. This tenant, who coincidentally has a night job and sleeps during the day, now is faced with listening to jackhammers and construction crews all day long. Can this person break the lease? While the construction noise may not be the fault of the condo owner, it is clear that the tenant’s peaceful quiet enjoyment of the premises is interfered with significantly. If there were no prepaid rent, the tenant most likely would simply give notice and walk out of the lease, and the manager would have a difficult time enforcing the remaining balance of the lease, as this would probably be considered a good reason to break a lease by most judges. If there is prepaid rent, many managers will insist on keeping the rent, and many tenants will insist on getting it back. The result? Litigation. In the event of litigation, the manager will be faced with trying to convince a judge that the tenant’s breach was improper, illegal and unwarranted. The tenant will have an entirely different story, and if there are attorneys involved in the case, it will often become a bad situation.

Is the Manager “Used” to Accepting Prepaid Rent?

Most managers are not accustomed to accepting prepaid rent. They are more accustomed to chasing after current or past rent owed! This increases the risk that the prepaid rent is mis-posted in the computer system that the manager uses for managing the property. Recently a client accidentally failed to post the rent prepaid by a tenant. The computer system incorrectly showed that the rent was delinquent, the tenant was evicted, and all his possessions were removed to the street. The tenant returned a month later, only to find that all his possession were gone and that he had been evicted. The result? Most likely a lawsuit will be filed. If a manager is not accustomed to accepting prepaid rent, the danger increases dramatically.

The Conclusion

Are you convinced yet? Often things that appear good turn out to be fraught with dangers. We urge you to think long and hard before you deviate from the standard and time tested way of charging and accepting rent monthly.

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?

“Serving the Property Management Professional”

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Florida law does NOT specifically state that the property manager can transfer deposits to the CURRENT property owner.

Any transfer is done at the risk of the property manager unless the tenant agrees in writing to such transfer.

Please see below:

NOTE IT DOES NOT SAY “TRANSFER TO CURRENT OWNER”

FS 83.49  Deposit money or advance rent; duty of landlord and tenant.--

(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 to the new owner or agent, and upon transmittal of a written receipt therefor, the transferor is free from the obligation imposed in subsection (1) to hold such moneys on behalf of the tenant. There is a rebuttable presumption that any new owner or agent received the security deposit from the previous owner or agent; however, this presumption is limited to 1 month's rent. This subsection does not excuse the landlord or agent for a violation of other provisions of this section while in possession of such deposits.  

“Serving the Property Management Professional”

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One of the most common areas of confusion regarding security deposits is knowing what to put on the Notice of Intention to Impose Claim on Security Deposit, hereinafter called the “Notice”, the form which according to FS 83.49 must be sent out to the tenant within 30 days of the tenant vacating the premises. We find landlords do their best to figure out what the tenant owes, either due to breaking the lease, or simply leaving at the end of the lease with damages to the premise or otherwise owing the landlord money. The problem is that this form only is dealing with the security deposit, or in some cases, advance rent that the landlord is holding. This is not a “final bill” to the tenant or the total amount a tenant will possibly eventually owe. This common misconception causes landlords to frequently fill out the Notice incorrectly.

What amounts are put on the “Notice”

A security deposit is the amount the tenant owes to cover damages to the premises, all monies owed to the landlord under the terms of the lease and for full and faithful performance of the lease terms.

1. The tenant breaks the lease by vacating

If the tenant simply “skips” out of the lease, the landlord can charge the tenant rent that is owed at the time the tenant skips out. The landlord cannot accelerate the rent. Acceleration occurs when the tenant is immediately charged for all the remaining rent owed under the terms of the lease. While the lease may provide for this, and it seems logical, acceleration is not a specific collection right granted to landlords under Florida default remedies. A “skipping” tenant owes rent due at the time of the skip, damages to the premises which exceed ordinary wear and tear, and any other amount legally chargeable to the tenant under the lease terms. If a tenant paid rent for June and skipped out June 20, it would seem that the tenant would owe no rent, and that no rent could be placed upon the Notice. This is certainly not the intent of the statute, and since the landlord has 30 days to send out the Notice, by July 1, the tenant will owe another month’s rent which can and should be put on the Notice. You do not want to be returning the full security deposit if the tenant skips out on the lease, as he will owe you rent. As you can see though, if the unit stays vacant, the tenant will owe you more rent, presumably until the earlier of the end of the lease or until the unit is re-rented. How can you put this on the Notice? You can’t, and you don’t need to. The notice is only dealing with the SECURITY DEPOSIT and ADVANCE RENT funds!!!!

2. The tenant is evicted

If your tenant is evicted, you will be charging them everything in paragraph 1 above, plus your attorney’s fees and court costs, if your lease states that you are entitled to these sums

3. The tenant vacates at the end of the lease

If your tenant vacates as planned at the end of the lease owing no rent, you will not be charging the tenant any rent on the notice, just damages that exceed ordinary wear and tear, and any other sums due under the terms of the lease.

Sums owed that exceed the Security Deposits

Often a tenant will owe significant sums that exceed the security deposit, or after you send the Notice, you discover at a later time some further damage that was not caught or actually hidden from the landlord. If you already claimed the entire deposit, this is not relevant to the prior Notice. While you do want to list on the Notice everything possible that is owed by the tenant within the 30 days window you have to send the Notice, if there are other amounts that the tenant owes you as time goes on, these amounts will still be owed to you by the tenant.

The Danger of the “Notice”

As many landlords incorrectly think that the amount on the Notice is the end all total amount owed, the tenant also may think this. If a landlord were to later sue a tenant for accrued rent or later discovered damage, the tenant could conceivably convince a judge that since it was not on the Notice, it is not owed. This common misconception can be cleared up by placing the following wording on the bottom of the Notice. This wording, though not required by Florida law, is a reminder to the tenant and to the landlord that the amounts you have listed on the Notice may not be the actual total amount that the tenant will owe you.

This Notice Of Intention to Impose Claim on Security Deposit does not waive or limit any of landlord's rights to damages or amounts due which may exceed security deposit or amounts listed on this form.

“Serving the Property Management Professional”

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A common request by the vacating tenant is that she accompany you during the move-out inspection. Sounds reasonable enough, but the practice of walking a unit with the tenant upon move–out is fraught with problems.

Why is the tenant making this request?

There is a good chance that a previous landlord of the tenant took all or part of the tenant’s security deposit in a prior tenancy, and the tenant is now expecting that you will do the same. The tenant is afraid that you may charge her for something for which she is not responsible, or damage which she did not do. This should be your first clue that the tenant is suspect. The tenant may be hiding something, and if he accompanies you on the walk-through, he may be successful. The tenant may be intimidating, and he knows that you may not charge him for something due to the intimidation factor. Finally, the tenant may just be an honest person who feels that it is best that she do the walk-through with you, so she can show you how nice everything was left. Be afraid. Be very afraid.

The typical accompanied walk-through scenario

Here you are, walking through a home with the tenant behind you. There is a hint of Febreze in the air. You feel a bit uncomfortable and maybe even a little intimidated. Will you look carefully inside the oven? Will you inspect the bathroom? Open drawers? Smell the carpet? Most likely not. You smell some cigarette odor but really don’t want to mention it. The walls look yellow, but you are not sure if they were this color at move-in. You will not want to engage in any controversy or altercation with the tenant, and even if you think there may be a charge for some damage, you avoid bringing the issue up. Probably you will want to get the inspection over with as soon as possible and will be asked the usual question, “When will we be receiving the security deposit back?” You tell the tenant that everything looks fine, and that she will get her deposit back within a couple weeks. This is a huge mistake. She will hang on these words and not let you forget them.

Fast Forward one week

Your maintenance person has headed over to the unit to do the usual cleaning, touch up and the like. Upon entering the hot unit, as the electric has been turned off, he immediately detects an odor of pet urine and smoke. Walking around the unit, the pet urine odor become stronger, and he kneels down in a corner and smells the carpet, only to come to the conclusion that it is cat urine. Standing up, he sees fleas jumping on his pant legs. This is interesting. The tenant was not supposed to have any pets, and no cat was present during the walk-through inspection. Walking through the house, he lifts up a throw rug; under the rug is a large bleach stain on the carpet. The walls seem to have been touched up, and it is quite evident, as the paint is bubbling up in each spot where the new paint was applied. Your maintenance person heads out back and sees a huge oil stain on the floor of the driveway, and behind a newly planted bush in the patio area, he notices that the vinyl siding is warped from a “grill gone wild”. But wait. You told the tenant everything looked fine and that she would be getting back her deposit.

The problem

By initially telling the tenant that everything looked fine, you created an expectation on the tenant’s part that the security deposit would be returned. This will be used against you in the event that you make a claim on the deposit. Once the tenant receives your claim, she will be sure to dispute the claim, and if you were to go to court, you would need to explain to the Judge why you said what you said, and why you made a claim contrary to those statements. Often there is undiscovered damage which becomes evident only later when the property is properly inspected at your leisure by you or your staff. Proper inspection is the key here, and no property can be properly inspected with the tenant in tow.

Proper procedure

You need to develop a firm policy and procedure on inspecting the premises upon move-out. This will mean that never will you inspect a property upon move- out with the tenant present. Immediate inspection upon move-out, without the tenant, is a must, but more importantly, a later inspection when the air conditioning may be off is in order, so previously masked odors can be detected. All throw rugs should be moved and inspections made of all the appliances, closets, garage, storage areas and every other area which may not be immediately apparent. The next time tenants ask or demand that they be present with you on the move-out inspection, simply tell them that it is not your company policy to allow this, and if they are afraid you will treat them unfairly, they should take their own photographs of the premises.

“Serving the Property Management Professional”

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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.

“Serving the Property Management Professional”

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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.

“Serving the Property Management Professional”

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