You discover that one of your residents has an unauthorized occupant. This may happen when you are doing an inspection, you see more vehicles than usual, you get a complaint form a neighbor, or possibly someone comes into your office and pays the rent or makes a service request and is not even on the lease. How you deal with this unauthorized occupant will determine if the person can be removed from the premises or properly added to the lease.

The Discovery of the Unauthorized Occupant and Waiver

Once you discover there is an unauthorized occupant on the premises, you need to take swift action. Waiver is an important principle of Florida law and basically means that if you know of a noncompliance, in this case an unauthorized occupant, and you fail to take any corrective enforcement actions or delay these actions while continuing to accept rent, you may not be able to enforce your lease terms and have the person removed. You will in a sense have “waived’ the lease provisions by your inaction and thus modified the lease.

Your First Step Upon Unauthorized Occupant Discovery

Serve a Seven Day Notice of Noncompliance with Opportunity to Cure immediately. This notice will simply say something like “You have an unauthorized occupant residing on the premises in violation of the terms of your lease, and this person must be removed”. Whether or not you intend or hope to have this person authorized and allowed to live on the premises, serve this notice without delay. If rent is coming due and the unauthorized person is still there, AND you want this person removed, DO NOT ACCEPT RENT, as this is a lease noncompliance. But wait! This article is not about removing an unauthorized occupant but rather how to authorize an unauthorized occupant. READ ON!

How to Authorize the Unauthorized Occupant

If your policy is that all adult occupants must go through a credit and background check, you should never allow an unauthorized occupant to remain on the premises, unless the person passes your Resident Selection Criteria test, just like the current resident in the unit. The problem though is that you have given the resident a Seven Day Notice of Noncompliance with Opportunity to Cure to have the resident remove the occupant. If you give the unauthorized occupant a Rental Application, it would seem to interfere with the Seven Day Notice, and it does. On one hand you are asking the resident to remove the unauthorized occupant, but on the other hand you are giving the occupant an application which will take time to fill out and process.

1. Serve a Seven Day Notice of Noncompliance with Opportunity to Cure.

 

2. Give the unauthorized occupant an application, and take the application fee in certified funds. Give a strict deadline to the resident for the unauthorized occupant to get you back the application, and this should be no more than 3 days. Make sure it states this on the application or supplemental notice that you give with the application. The application needs to state that the lease or Resident Addition Addendum is to be signed within no more than 3 days after approval.

 

3. Process the application, and if the occupant is approved, have the occupant sign the RESIDENT ADDITION ADDENDUM.

 

4. If the unauthorized occupant is NOT APPROVED, let the occupant know this and serve a BRAND NEW Seven Day Notice of Noncompliance with Opportunity to Cure. If the resident fails to remove the unauthorized occupant within the seven days, call your attorney, and you will be advised on how to take further action, which may include eviction.

Why do we need to serve a NEW Seven Day Notice of Noncompliance with Opportunity to Cure if the occupant is not approved?

Nothing in the law says you do, but think about what has happened, you gave the original Seven Day Notice with Opportunity to Cure, but then you opened up the door for possibly approving the occupant. This gave the occupant an expectation that they could be approved, so therefore they did not vacate pending an answer from you regarding approval. By the time you gave them an answer, possibly 4 of the 7 days had elapsed. We think it is a good idea to serve a new notice rather than to create a defense to the resident.

Should You Authorize the Unauthorized Occupant?

This decision needs to be based on your occupancy limits which should be in accordance with HUD guidelines, and if the occupant is approved through your application process. You are under no legal obligation to approve the unauthorized occupant or offer them the chance to be approved. Remember, your resident has violated the lease by allowing the unauthorized occupant to live with them in the first place. Next it will be the new resident’s pet python.

Common Mistakes

The most common mistake made by managers is to do nothing about the unauthorized occupant. As mentioned earlier in this article, this can by waiver authorize the unauthorized occupant, thus tying the hands of the manager and preventing enforcement of the lease. Another common mistake is to ask the resident to pay you more money for rent because of the unauthorized occupant. Here you are basically saying the resident can breach the lease, but the resident must pay more for the privilege. While it is perfectly acceptable for the rent to be raised if you are going to authorize an occupant, you need to do this carefully, in writing and have it agreed to by all the parties. Often the manager is angry, tries to negotiate, delays occur, and the occupant becomes more deeply entrenched in the premises. When talks break down, the manager comes to the attorney after the damage has been done. There will be times when an unauthorized occupant begins to pay rent, and the manager accepts the rent either on purpose or accidentally due to sloppy procedures. We urge managers to never accept rent from anyone other than the actual resident on the lease. Acceptance of rent from an unauthorized occupant is going straight down the path to authorizing this person, when maybe this was not your intention.

 

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In most legal disputes, each party, the plaintiff and the defendant, the winner and the loser, each have to hire an attorney and pay their own attorney’s fees to that attorney. An example would be a car crash where I smashed into your car and did $500.00 worth of damages to your fender. If we could not come to an agreement, you might hire an attorney and take me to court. A lawyer who represents himself has a fool for a client, so I go out and hire an attorney to represent me. We go to court, and you can prove that the accident was due to my carelessness. The judge awards you $500.00, which presumably I will go ahead and pay you. Let’s assume that each of us paid our attorney the bargain price of $750.00 to represent each of us in court. The end result would be that you would have to pay for your attorney, I would have to pay mine, and we probably should have just settled this out of court, because the attorneys made more money on this than all of us. The reason that I, as the losing party to the lawsuit, did not have to pay you for the attorney’s fee that you expended is that under Florida law, the losing party in an automobile accident case does not have to pay the attorney’s fees of the winner. Each of us had to bear our own fees and costs, because that is what the law says. Now, let’s step into landlord/tenant court. A resident sues you, because he feels that you took too much of his security deposit. The resident has an attorney. The resident’s attorney convinces the judge that you are the evil manager and that you cannot justify the charges you made on the poor resident’s security deposit. The judge awards the resident $300.00 that the judge feels you took unfairly, but now for the zinger. The judge awards the resident $900.00 in attorney’s fees, meaning that you get a judgment against you for not just the $300.00 but also $900.00. You walk out of the courtroom with your head spinning, holding a $1200.00 judgment against you!!! How did that happen?

THE ATTORNEY’S FEE CONUNDRUM IN FS 83.48 ---- Florida Statutes 83.48 Attorney's Fees states as follows “In any civil action brought to enforce the provisions of the rental agreement or this part, the party in whose favor a judgment or decree has been rendered may recover reasonable court costs, including attorney's fees, from the nonprevailing party”. This statute has major ramifications to the manager and can make a simple couple hundred dollar dispute into a $1000.00 plus nightmare very quickly. The prevailing party, meaning the winning party, in any landlord/tenant dispute can and will get an award of attorney’s fees in the event a court case is filed. In most cases the manager wins, as we see so often in eviction actions, but what good is it if you get an award of attorney’s fee against a resident who can’t even pay you the rent? Getting an award of fees certainly does not mean you will ever see the fees. The problem lies in the resident getting an award against the manager, as this judgment will attach to the property and become a judgment lien against the property.

EVICTIONS AND ATTORNEYS FEES-- The prevailing party in an eviction action is entitled to an award of attorney’s fees and costs. This is authorized by statute and is pled for in the eviction lawsuit. Thus, if you are successful in evicting the resident, you can ask the court to award you fees and costs. Let’s say you lose the eviction. You may have to pay the resident’s fees and costs if the resident retained an attorney. Now what if you simply filed an eviction in error against a resident, thinking that she owed you the rent but the resident had in fact paid the rent and you either misplaced or incorrectly posted the payment. You would of course immediately dismiss the case. No harm done, right? Not if the resident retained an attorney and filed and answer or Motion to Dismiss. Here you would possibly be on the hook for the resident’s attorney’s fees, even though you dropped the case quickly and never pursued it further. You may wonder how you can lose an eviction. There are a number of ways: your Three Day Notice could be wrong, you prepared the notice incorrectly, you served the notice incorrectly, the resident had a valid defense of payment, you failed to make a repair, you accepted late rent on a regular basis, or you are an apartment community and failed to get your fictitious name registered. There are many other ways you can lose a case. The last thing you want is to be on the hook for attorney’s fees of the resident.

ATTORNEY’S FEES AND SECURITY DEPOSIT DISPUTES-- Few managers have not experienced a security deposit dispute at one time or another. Routinely, residents feel that the manager unfairly took too much of a security deposit from them for damages that the resident vehemently denies. While most of these disputes should be and are settled prior to any litigation, in the event they end up in court, managers are often surprised to see how the judge acts quite kindly to the resident, and looks upon the resident as the victim and the manager as the evil person who is trying to rip off the resident. The manager must prove that the resident damaged the premises, there is the uncertainty of whether something is over and above ordinary wear and tear, the manager often does not have a detailed move-in and move-out inspection sheet, and often the manager does not have photos to document the property condition before move-in and after move-out. More often than not, the judge ends up ordering the manager to return some of the security deposit to the resident. Now suppose the manager claimed $500.00 of a $750.00 security deposit, and in court the judge feels the manager was only entitled to $450.00 of the security deposit. Who is the prevailing party? Most of the case law unfortunately says that the resident is the prevailing party because he or she sued and got something back from the manager. This does not seem fair, but most judges will consider the resident in a case such as this the prevailing party. If the resident had retained an attorney to represent him in court, the manager will most likely have to pay a significant amount of attorney’s fees to the resident. The amount of the dispute or the amount the resident wins has no relation to what the attorney can ask the judge for in attorney’s fees. If the attorney can convince a judge that 10 hours were spent on the case at $250.00 hour, the manager could end up having to pay the resident’s attorney $2500.00, when the dispute was only about a $500.00 claim that was made on the security deposit. A word to the wise: if the resident gets an attorney and is threatening a lawsuit, make darn sure you are going to win before you take a stance that you are not going to budge and settle the case.

WHY WORRY ABOUT ATTORNEY’S FEES-- Up until around 10 years ago, it was rare that a resident would retain an attorney to defend them in an eviction action or to pursue a security deposit dispute. With close to 100,000 lawyers now in Florida, things have changed. We now have lawyers who are specializing in representing residents for the sole purpose of extracting attorney’s fees out of the manager. These attorneys are advertising and direct mail marketing to residents who are under eviction, offering free consultations. The attorney then examines the case, looks for a weakness and next thing you know, you are up against an attorney in court who has filed an Answer, Counterclaim and three Motions to Dismiss. Take your time when preparing your notices, evict cautiously, and when making a claim on the security deposit, document absolutely everything you can. Most losses by managers in court are completely avoidable.

 

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Many apartment communities today have fitness centers, business centers, pools, gas barbeque grills, tennis courts and other amenities for their residents to enjoy. These amenities are often a great draw in attracting residents to a particular community. In most cases, the amenities, most of which are advertised in print, are available for the use of the resident, operable and in existence at the time of move-in. However, a problem arises when an amenity is not available to the resident for some reason. That wonderful amenity that you advertised becomes a nightmare.

The Amenity Failure

In the case of a pool, a leak may require major work to be done to rectify the problem. There have been many cases where the pool is emptied and the high ground water table has literally pushed the pool up out of the ground, causing a major repair necessity. A pool does not just pop back into the ground!! Fitness centers are often completely equipped with state of the art exercise bikes, treadmills and other mechanically and electrically operated devices. These devices fail in time and need expensive repair. Business centers for the resident’s use are often set up with a number of computers and are subject to viruses or power surges which completely disable the equipment. At some time, some amenity on the property shall fail, and the residents will rise up.

Repairs to the Amenity

Repairs of a particular amenity are often done quickly, and the resident experiences little to no inconvenience. In other cases, repairs take a significantly longer period of time, sometimes at great expense to the apartment community. Some owners who are under severe financial burdens right now are choosing to push off some repairs almost indefinitely. An owner who is considering selling may not wish to invest any further money, as the return on sale may not be there. There are times, as in the pool case, when a simple repair could result in a major multi-month project in which the pool is completely inoperable. Since most properties only have one pool, the problem is obvious.

The Resident’s Expectation

Florida law does not state that a resident has a right to a working pool, exercise bike or business center. This is all governed by contract. While the lease agreement may not specifically state anything about a pool, fitness center or business center, other than in the rules and regulations, these amenities are advertised to the prospective resident as being part of the “package”. The applicant who becomes the resident has a reasonable expectation that the amenities that are advertised or which he or she observes while on the property tour will be available for use throughout the tenancy. These expectations are by no means unreasonable. The question then arises as to whether the amenities advertised are in fact the “basis of the bargain”, or stated differently, did the resident decide to rent at this particular apartment community because of the existence of a certain amenity advertised or observed. It is extremely easy for the resident to make the case that the fitness center, pool or business center was indeed the “reason” why he or she chose the particular apartment community. A health conscious resident may have chosen your apartment community due to its state of the art fitness center. A resident in physical therapy may have been drawn to the community because of the pool. A person without a computer may have been sold on the business center. This creates a serious obligation on the part of the apartment community to make sure the amenity is in fact working at all times, or at least most times.

Amenity Failure Actions

Fortunately, most residents do not even use the pool, fitness center or business center, so a breakdown will not inconvenience most of the residents, but for the residents who do use them, you have a problem on your hands. Since Florida law does not address amenities or compensation, a resident may or may not be entitled to a credit in the event of an amenity failure; the management or owners must come up with something to keep the resident from taking the matter further and potentially suing in a court of law. The first step will be to rectify the problem immediately, if possible, but unfortunately, this may not always be a viable solution. Each situation needs to be dealt with on a case by case basis, but it is crucial to show that the manager is taking reasonable steps to mitigate the problem and make the resident whole again.

Pool Solutions

In the case of an extended pool problem, the apartment community may enter into an agreement with a neighboring apartment community for the temporary use of its pool for some compensation by the apartment community. Residents may be given vouchers to use a community pool, if one is in fact available, or temporary membership to a local gym may be an appropriate option. Finding a contractor and paying more money to get the job done quicker could prevent lawsuits.

Fitness Center Solutions

In the case of a minor fitness center issue, such as an inoperable piece of equipment, we recommend that a replacement piece of equipment is rented immediately until the repair can be effectuated. Many companies are in the business of renting commercial grade exercise equipment. In the case of a serious fitness center problem, such as when the fitness center is completely unusable by the resident, an agreement could be worked up with a nearby gym to provide low cost temporary memberships to residents who may wish to use the gym. Many gyms will jump on this opportunity to get people in the door, in the hopes that they will join permanently in the future.

Business Centers

Most business center problems can be rectified with the expenditure of a relatively small sum of money. If the issue is simply internet access by a resident who already has a computer, a basic internet account can be purchased for the resident to be used in his or her unit, or at a bare minimum, at least one PC should be set up with internet access and a basic printer until further repairs can be made.

Potential Legal Ramifications

A resident who is not receiving all that was bargained for in a deal can sue for breach of contract, and in the event certain things were advertised, false advertising. The resident can also attempt to withhold rent or even break the lease agreement and walk. A property manager may be tempted to compensate one resident for her inconvenience, but this could unleash a floodgate of residents asking for the same compensation. This is when prompt contact with your attorney can potentially avoid a major blow-up on the property. In the worst case scenario, a resident can hire an attorney who will institute a class action lawsuit against the property. While this is rare, class actions are not uncommon in consumer situations, so YOU HAVE BEEN WARNED!

The Amenities Addendum Solution

A simple addendum signed by all residents can significantly minimize the manager’s risk in the event of an amenity loss or malfunction. We cannot forget that the main thing that a resident is renting is an APARTMENT. The amenities are indeed a bonus to the deal, but part and parcel to the deal are the resident’s expectations and your responsibilities. By using the addendum below, you MAY be able to significantly decrease your risk of problems in the event of an amenity problem. Remember, nothing is guaranteed. Please read it carefully.

AMENITIES AND CONSTRUCTION ADDENDUM

It is agreed and understood by all Residents(s) that all amenities on the premises IF ANY EXIST NOW AND IN THE FUTURE including but not limited to balconies, patio(s), pool(s), hot tub(s), fitness center(s), gas grill(s), business center(s), tennis court(s), activities center(s), clubhouse(s), playground(s), playground equipment(s) or any other as specified herein for Resident(s)’ use may be altered, may become inoperable, unusable or out of service for the purposes of repairs, damage by storms or acts of God or man, rendered unusable or removed at any time without notice and without consent of the Resident(s). Resident(s) agree to hold owners, their agents and assigns, harmless for any liability arising from the alteration, removal or failure to be able to use any and all amenities. It is understood by all parties that this agreement has been entered into with good consideration and that it has been read in its entirety.

Amenities for the purpose of this addendum may also include and are not limited to:

__________________________________________________

__________________________________________________

Resident(s) understand that repairs or upgrades to the premises may possibly be made and agree to hold the owners, management, agents, employees and assigns harmless for the absence of or the delay in the availability of any amenities which may have been advertised, appear on any advertising materials, existed at the time of move-in or represented to by any of the staff. Resident(s) agree to hold the owners, management, agents, employees and assigns harmless for any inconveniences, including but not limited to noise, construction traffic, dust, construction equipment, temporary utility outages, etc., and agree that they cannot break their lease, withhold rent or receive a rent abatement because of any construction problem and/or the lack of amenities unless otherwise agreed to in writing.

SIGNATURE AND DATE AREA FOR MANAGEMENT AND RESIDENTS

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The Background

 

The most common cause for resident removal is nonpayment of rent. In most cases the facts are limited and not in dispute. Did the resident pay the rent? If not, a simple eviction usually occurs, with the manager prevailing in most cases. Unfortunately there are many other non-rent related noncompliances which result in the manager having a strong desire to have the resident removed from the property. The problem is that the manager’s desire to remove the resident is often far greater than the manager’s case or evidence against the resident.

 

The Manager’s options – In the event of a noncomplying resident, the manager is faced with a number of options: give the proper notices, gather evidence, prove the noncompliances, file an eviction action, and possibly have to prove the case in court. Another option would be to non-renew the resident if the lease was near completion, and if the resident failed to vacate, simply file an eviction based on the failure to vacate. Finally, there is the option of coming to an agreement with the resident to vacate the premises on a fixed date.

Forced Resident Removal for Noncompliances

In order to legally institute eviction procedures against a resident for noncompliances, certain prerequisites must be met. Depending on the noncompliance, either a Seven Day Notice of Noncompliance with Opportunity to Cure, a Seven Day Notice of Noncompliance Notice of Termination, or both, must be given to the resident. These actions entail informing the resident of the noncompliance, giving the resident time to cure the problem in most cases, if the offense is of a curable nature, and then terminating the resident if the offense continues or occurs again. In the event of a serious non-curable type of noncompliance, the resident is served with a Seven Day Notice of Termination, and an eviction begins right after this notice expires. Eviction cannot even begin until the notices have expired, and in the meantime, you have lost good residents due to your noncomplying resident. Once you file the eviction, you then have to win! This is not always guaranteed. While most managers have served the Notice of Noncompliance with Opportunity to Cure, very few managers have ever filed an eviction for noncompliance, as most residents either cure or vacate prior to the eviction. Far fewer managers have ever filed an eviction and ended up having to prove the noncompliance in court, as many of the residents vacate shortly after getting served with eviction paperwork. The manager who files an eviction for a non-rent related noncompliance and has the case contested is in for a real ride. It is amazing how difficult noncompliances are to prove in court, when your witnesses do not show up, or your solid proof melts away in front of a judge who was so tough on non-paying residents, but now is so sympathetic to the resident before them on a noncompliance case.

Can you really prove to the judge that there is an unauthorized occupant living in the unit? Did the resident remove the unauthorized pet right after or before you filed the eviction? Was it a housekeeping issue that the judge just does not feel so strongly about? Did all your constantly complaining residents who hounded you every Monday morning about the noise from parties suddenly decide not to show up in court? Is the allegation that the strange man who exposed himself by the pool now pretty difficult to prove? Were you surprised that your attorney informed you that affidavits signed by three residents are not admissible in court? Were you shocked when the police officer that responded to two noise complaints decided not to show up in court? Did you think the resident would get an attorney to fight the case and demand a jury trial? The bottom line is anything can happen in a noncompliance eviction, and they should be avoided at all costs.

The “Agreement to Vacate” Alternative – Probably the best possible way to have a resident vacate is to have that resident do so voluntarily. The resident and the manager simply sign an agreement whereby the tenancy is terminated, and the resident agrees to vacate on a fixed date. The “Agreement to Vacate” is this wonderful form, and managers who regularly use the form will attest to the fact that their evictions are reduced, their stress is reduced, and most residents who sign such an agreement vacate on the date they have said that they will vacate.

When is an “Agreement to Vacate” appropriate? – In almost any situation when a noncompliance is occurring or has occurred, including nonpayment of rent, if the manager and resident can agree to a fixed vacating date and memorialize this in writing, the Agreement to Vacate is appropriate: suspected drug use, excessive traffic, domestic disputes, unauthorized occupants, unauthorized pets, noise disturbances, the list goes on. Get the resident to agree to vacate, and you have probably won the battle.

How do you get the Resident to agree? – This takes some skill and experience. Basically the manager needs to approach the resident, explain how things just are not working out, possibly threaten eviction, but give the resident an easy way out. The easy way out is for the resident and the manager to agree to terminate the relationship without the need for further attorney or court intervention. How much time you give the resident to vacate will depend upon the severity of the problem, if the resident has paid rent, or any other factor which will assist you and the resident in just coming to an agreement.

Will the resident always sign an “Agreement to Vacate”? - Absolutely not, but more often than not. Let’s face it, just as the manager is not completely sure that they will win an eviction, neither is the resident. Many residents do not want to go near the courthouse for obvious reasons and will welcome an opportunity to vacate voluntarily. Some of the most belligerent residents, who will scream at you telling you how it will take you six months to evict them, will after some thought sign an Agreement to Vacate. On the sample form below, there is a date that the resident must sign the form by in order for it to be valid. This is used when you want to leave the Agreement to Vacate with the resident, so they can ponder their options, or you feel it would be better for you not to have a face-to-face confrontation with the resident. Once the resident signs the agreement and it is returned to you, you will then sign the agreement and this will create a binding contract. An Agreement to Vacate is no good unless you get all the residents to sign.

What if the resident signs the “Agreement to Vacate” and fails to vacate? – Fortunately most residents who sign the Agreement to Vacate actually leave when they say they are going to leave. If the resident fails to leave, the manager can then immediately begin an eviction action with no further notice, and the manager simply has to prove that the resident has failed to vacate rather than try to prove the underlying reasons why the manager wants the resident gone.

What about the money the resident may owe to the manager? Our sample Agreement to Vacate states that the agreement does not address money issues unless otherwise noted in the agreement. In the space provided, the parties may agree that the security deposit is forfeited, possibly will be returned if there is no damage, or any other financial arrangements can be dealt with directly in the form.

Advantages of the “Agreement to Vacate” – The main advantage is that it is an “agreement”. Emotions do not run as high, eviction may not be necessary, money may be saved, and there is a much higher chance that the resident will not do any intentional damage, as so often occurs in an angry eviction where your success is by no means guaranteed. The next time you have a noncompliance where you “just want them to go”, remember that they just might want to go as well. The Agreement to Vacate is a wonderful form. Help the resident out the door.

SAMPLE AGREEMENT TO VACATE:

AGREEMENT TO VACATE

I/WE ________________________________ hereby agree to vacate the premises which we now are renting no later than _______/______/______. In exchange for vacating at this time, Management agrees to not file any legal action for eviction prior to this time if I/WE continue to comply with the terms of our lease and Florida Law.

I/WE agree that any abandoned property that is left behind after the above date may be disposed of by Management without notice and I/WE agree to hold Management, the owners of the premises and any agents or employees harmless for such abandoned property.

I/WE agree that this AGREEMENT TO VACATE must be signed by us AND returned to Management by hand delivery to the property manager/management or assistant manager no later than 5:00 PM on ______/_____/_____ or Management may begin legal procedures at any time.

I/WE agree that this document and our vacating shall have no effect upon any financial obligations, forfeitures, security deposit forfeitures, early termination clauses etc under the lease or Florida law unless otherwise agreed to in writing by Management.

______________________________   RESIDENT

_______________________________ RESIDENT

_______________________________ RESIDENT

Additional agreements by Management if Residents vacate per this agreement: ____________________________________________________

_______________________________________________________

_______________________________________________________

_______________________________________________________

__________________________ ______/______/______ MANAGEMENT SIGNATURE

 

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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”

www.evict.com      www.evicttv.com      www.evictforms.com      info@evict.com

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”

www.evict.com      www.evicttv.com      www.evictforms.com      info@evict.com