INCARCERATED RESIDENT

 

You have not received rent for the month, go out to the property to serve your Three Day Notice, and the next door neighbor informs you that the resident is in county jail. The property is full of belongings, and the resident’s car is parked in the driveway. Can you evict? Should you post the Three Day Notice on the door? Do you want your resident to come out of jail and find he has been evicted and everything he owns is gone? This situation will occur if you manage property long enough and you need to know how to deal with it properly to avoid liability and/or a serious dispute.

 

Where Is the Resident?

 

You may or may not know if in fact the resident is incarcerated. If you were lucky enough to have your property on the news the night before when they did the grow house bust at your rental home, you can be fairly sure that the resident is in the county jail. In other situations, you were simply told the resident was in jail by a neighbor or someone you may have contacted on your emergency number list. To confirm the resident is in jail, you need to call the county jail system and ask for inmate information. This is public record in most cases, and you will be able to find out if the resident is in jail and where, as some counties have more than one location for their jails. If you are unsuccessful, look up the arrest report from the sheriff’s department website and give them a call if necessary.

 

Do You Need to Locate the Resident?

 

There is nothing in Florida law that provides you must hunt down a resident in order to serve a Three Day Notice. The law states that you can serve the resident in person or post the notice on the premises in the resident’s absence. In an incarceration situation, clearly the resident is absent; therefore, you could legally post the notice on the door and thus satisfy the requirements of Florida law as far as notice goes. The question then is, “should you locate the resident?” We feel that you should make an attempt.

 

Why Bother Locating the Resident?

 

If you post a Three day Notice on the door of the home, you will eventually file an eviction, and at the end of the eviction, you will remove all the resident‘s personal belongings to the street, where the neighbors and passerbys will rummage through everything and take anything of value. Personal items will be taken as well, some with sentimental value. Your resident may get out of jail only to find out that his key no longer works in the door. Your resident then contacts you, only to find out that he has been evicted and everything he owns is now gone. What can happen? The resident can go ballistic and cause you great harm, or decide to destroy or damage your property or the home. A surprised, evicted resident is an extremely dangerous and volatile person. While you may have done everything according to the law, this will not matter with the recently released resident.

 

You Have Tried to Locate the Resident But Cannot

 

At this point you need to jump into action, review the file, and begin calling your emergency numbers, contact numbers and employers. Do not give any information, other than you are the manager and just need to contact the resident. Do not tell anyone you know or heard the resident is in jail. Simply work hard to track the resident’s information down. If you cannot locate the resident or get any information that will help you, serve your notice to the property; knock first, and if there is no response, serve the Three Day Notice by posting on the premises. If you do not receive the rent, file an eviction as you would with any other resident.

 

You Locate the Resident

 

Now that you have located the resident and know what jail he is in, you can serve your Three Day Notice to him in jail or have a process server do this. Better yet, you can possibly avoid an eviction altogether! Many incarcerated residents do not want to deal with an eviction and would just rather surrender possession to you, if they feel they will be incarcerated for some time. If you are able to call the resident in jail or have the resident call you collect, the resident may tell you to give access to a friend or relative. While this is great, you must get something in writing from the resident under which he is giving possession to you, who is allowed access to the unit, and when you will have possession. We recommend getting the following form signed by the resident while he is in jail. You must be sure that the resident did in fact sign the form, and make sure that no other people are living in the rental unit. You can often make an appointment with the jail’s social worker and visit the resident directly in jail.

 

ACKNOWLEDGMENT OF VACATING AND DIRECTION AS TO DISPOSITION OF PERSONAL PROPERTY FROM INCARCERATED RESIDENT

 

I _________________ hereby agree that I have completely vacated the premises located at___________________________________________. 

 

I agree that any personal property that is left behind in the unit or on the premises may be disposed of by Management and/or Owner without notice, and I agree to hold Management, the owners of the premises and any agents or employees harmless for such disposal of personal property.

 

I agree that this document and my vacating shall have no effect upon any financial obligations under the lease or Florida law unless otherwise agreed to in writing by Management. I agree that my Notice of Intention to Impose Claim on Security Deposit if any shall be sent to the address of my former unit, and I am responsible for putting a forwarding order in with the US Postal Service.

 

ADD IN SIGNATURE LINE FOR RESIDENT AND 2 LINES FOR WITNESSES 

 

Can You Take Possession of the Unit by “Abandonment”?

 

Under Florida law, there is a presumption that a unit is considered “abandoned” if it is vacant for one half of the payment period (usually this is 15 days on a monthly payment period), the rent is unpaid, and, the resident has not given you anything in writing telling you that he would be back at some later time. While it may appear that an incommunicado, incarcerated resident would qualify as having abandoned the unit, we do not recommend that you take this route. If you are unable to get possession from the resident in writing by the above form or through an eviction, taking the “abandonment” route is just too dangerous.

 

Conclusion

It is not every day that you must deal with an incarcerated resident. While this is a good thing, it underscores that you most likely do not have much experience in handling such a situation. In these odd types of situations, we always recommend that you call your attorney for advice before you take any action. There is just no reason to go it alone.

 

IMPORTANCE OF UPDATED CONTACT INFORMATION

A major repair must be made to the property you are managing, and this repair requires authorization from the property owner, as it exceeds the amount you can spend according to your management agreement. The air conditioning has ceased to work, and the inside temperature is exceeding 100 degrees. You try to contact the property owner, but there is no answer on the phone number you call. Do you go ahead, take a chance and get the repair done? You are not sure if your resident has vacated and want to avoid a potential wasted eviction action, so you try to contact the resident. His phone number is disconnected, he no longer works at the job he had at application, and the emergency number is out of service. Do you file the eviction or take a chance and take possession? The problem in both of these scenarios is that you simply cannot communicate because the information you have is insufficient.

Initial Information

The Resident: Typically through the application process, the manager will ask for the resident‘s phone number and an emergency contact. After a few months, there is a good chance that the resident has defaulted on his cell phone contract and/or has acquired a different phone number. The emergency contact was a friend who has moved and who also has a new number which you do not know. The property manager may have a work number for the resident, but when this number is called, the resident no longer works at that job, and no one there wants to give out any information. This is the reality of residents in Florida. We are a transient population here in Florida, and information and addresses change fast and furiously.

The Manager: When a property is managed by a local property manager, that manager will get the manager’s information at the time the Property Management Agreement is entered into. This information is often the out-of-state manager’s address, home phone number and nothing more. If the manager is not home, the property manager simply does not have any ability to make contact and communicate.

Email: Most residents and managers have email addresses. A few years ago this may not have been the case, but the reality today is that most individuals have email addresses, and many check them on a frequent basis. With multiple residents you will have multiple email addresses, and often you will have work and personal email addresses. The same will apply to the manager. Never assume that if a resident or manager is elderly that they are not computer savvy or do not have email. Often people give an incorrect email address by accident. We recommend that you send a confirmatory email after the resident moves in or after the property owner has signed a management agreement, just to be sure you have not been given incorrect information.

Home and Cell Phone Numbers: While a land line in the past has been the main contact number for most managers and residents, many are now opting to do away with the cost of the land line for cell phones or phone service provided by the local cable company. The property manager may be the last person to find out that the manager or resident no longer has a land line. Cell numbers of all the residents should be acquired at the time of move-in, or in the case of the manager, at the time the property management agreement is signed. The key is to get all the numbers, not simply one person as a contact. The more numbers you have, the greater chance you will be able to make contact.

Work Numbers: Acquiring the work numbers of both the manager and the resident is crucial. In the event you are having difficulty with all other numbers you may have, the work number may provide you with the information needed to track down the party. Most of the time we see the work number of the resident on an application, but in our experience, the property manager often does not have the owner’s work number. In the event the manager or resident is on vacation, you may be able to get information by simply calling and listening to a recording the party has left, or if you must speak to a co-worker, you may find the party. Be extremely careful never to use this method to transmit private information or imply that you are attempting collect rent. When calling a work number, how you identify yourself and the fact that the person you are calling may have caller ID could result in an accusation by the resident that you spoke to a co-worker about the resident’s rent obligation. A desperate resident will make up a story that you called and harassed her boss or spoke to a co-worker about private information.

Fax numbers: A large number of residents and managers have separate fax numbers due to home offices. Make sure that if you acquire a work fax number, care is taken that other employees of the fax recipient will not be viewing private information, and that express written authorization is obtained to transmit private information.

Keeping the information up to date

All information can and does change. Your information may have been accurate at the time it was acquired, but after a few months or sometimes years, this information is useless. It is crucial that the property manager has a system in place to regularly check this information for accuracy; we recommend at least every six months. Sending out requests for information in the owner’s statement or periodically to the resident may achieve the desired results, but if not, property managers need to affirmatively take the time to go through their records and update everything. Updated information will reduce liability, decrease evictions and make property management easier.

 

HURRICANES AND TROPICAL STORMS

It’s that time of year again. A tropical storm will cause mischief somewhere and damage someone’s rental premises. The havoc will interrupt the resident’s possession of the premises as well as the manager’s income. Here are some important repair matters to keep in mind:

Damaged and uninhabitable. If rental premises are damaged in a way that renders them uninhabitable, the resident is not liable for rent for the period that the premises are uninhabitable. The owner is not obligated to pay for a hotel or move the resident to another unit (unless the lease specifically says he should).

Repairs should be completed as quickly as is reasonable. This is often difficult in a post-hurricane period, given the great demand on services. Documentation is key to show that you are making best efforts to get the premises repaired.

Damaged but still habitable. If the premises are damaged but not destroyed, it is wise to work out some "credit" to the rent until repairs are done. How much of a credit depends on the facts of the particular situation. Alternatively, a wise manager will have a clause in the lease that allows the manager the right to terminate the tenancy in the event the premises are “damaged”.

The resident cannot refuse to pay rent. However, some compromise should be reached. If you served a three day notice while significant repairs were ongoing, and then filed an eviction, it is very likely that a judge would consider the damage to be a "diminution" in value. That's enough to mess up an otherwise good eviction case.

When repairs are completed, you will be on solid footing to demand the full rent.

Destruction of premises. If the rental premises are destroyed, the owner might wish to terminate the lease rather than do repairs. Unfortunately, the option to do this is limited. Florida statutes does not entitle the manager to terminate the tenancy under these conditions. The resident can do so, but not the manager.

The manager can terminate the tenancy due to destruction only if the lease says he can. This language is usually found in a paragraph titled “Casualty” or “Maintenance”.

If the lease does not contain language that permits the manager to terminate the tenancy, yet repairs are out of the question, the owner may want to "invite" the resident to terminate the tenancy. The manager would suggest to the resident that the resident could give notice to vacate and be released from the lease.

Data and documentation Sure, everyone knows to take photos of damage after the hurricane, but do you have photos of what the place looks like now? It is sometimes hard to fully appreciate an “after” picture without having a “before”. You should record and document the condition of the rental premises now, before the winds blow.

 

HOW TO RECEIVE A PROPER

7 DAY NOTICE OF TERMINATION

 

1. Send us the 7 DAY NOTICE TO CURE that you already gave.

 

2. Tell us when rent was accepted last.

 

3. Fill out the REQUEST FORM.

 

4. Don’t send us all your proof at this time.

 

              TIPS WHEN PREPARING THE REQUEST FORM

 

a. Be clear and concise. A long narrative is not necessary.

 

b. Tell us how the Resident is still in noncompliance.

 

c. Begin gathering your proof

 

The more specific, detailed and concise you are, the faster we can evaluate the matter and prepare the notice if everything is in order  

 

NOTE:  TERMINATING IS HARDER THAN YOU THINK!!!!  WE NEED TO WIN

 

CALL US AND DISCUSS ALL 7 DAY TERMINATIONS

SPEAK TO ONE OF THE LAWYERS

 

99% OF PROPERTY MANAGERS HAVE NEVER GONE TO COURT ON A CONTESTED 7 DAY TERMINATION CASE AND HAVE NO IDEA HOW HARD IT CAN GET.  YOU DO NOT WANT TO BE PART OF THE 1%!!!

 

info@evict.com

1800 253 8428

HOW TO RECEIVE A PROPER

7 DAY NOTICE TO CURE

 

For years our office has been preparing 7 Day Notices for our clients. The service is still free and we are usually able to prepare a notice for the client the same day. Obviously other items take priority over this FREE service.

 

We have in our database thousands of prepared 7 day notices. Some are usable as is but most have to be tweaked for the client.

 

To promptly receive a 7 Day Notice from us we need your assistance or you will not get your notice and we are serious!

 

TIPS WHEN PREPARING THE REQUEST FORM

 

1. Be clear and concise. A long narrative is not necessary.

 

2. Stick to the facts. Suspicions are not enough.

 

3. List out the noncompliances. Example: loud yelling, loud music, screaming, loud profanities, rotting rood, noxious odors etc.

 

4. Be specific. Avoid general statements like “NOISE”, “HOUSEKEEPING”, “PETS”  “TRASH”, “DISTURBANCES”, “LOUD NOISES”, “DIRTY APARTMENT”. We are not at the property. You need to explain it to us or you will not get your notice.

 

5. If attaching a lease or rules and regs, circle the section that is violated. We will not read the whole lease to find the clause or wade through the letters and attachments. It is just impossible for us to do this and keep the service free.

 

6. If you have bad handwriting, please try to print or use the computer version.

The more specific, detailed and concise you are, the faster you will receive a completed 7 Day Notice. If we need to figure out what the problem is, you will not get your notice.  

 

If we need more info, we will ask for it BUT you have to put it on the 7 Day Notice Request Form. If you put it on our fax cover sheet, we will NOT prepare the notice.  Please remember, we are doing this work for free so you need to give us what we need on the 7 Day Notice Wording Request Form.  

GUARANTORS AND THE LEASE RENEWAL

In these tough economic times, property managers have a vested interest in working together during the application approval process. As occupancy rates decrease, and the pool of applicants with strong credit histories shrinks, creative leasing tools must be utilized by property managers. One such tool is allowing the applicant to obtain a guarantor in order to pass the lease approval process. It is usually cut and dry that the guarantor of an initial lease term can be held responsible for the rent during the term of the lease. However, as you will see, the law may not be on the side of the manager who is attempting to enforce a guarantee agreement for any lease extension or renewal term.

 

What are Guarantee Agreements?

 

The typical guarantee agreement involves somebody who agrees to be responsible for the financial obligations of a resident, including the rent as provided under the lease. This person is known as the guarantor. The guarantor is usually not listed on the lease as the resident or occupant of the apartment. Often, but not always, the guarantor is a close relative such as a parent or uncle. If the resident fails to pay rent, the manager has recourse against the guarantor and can recover money damages owed to the manager by the resident.

 

Are Guarantee Agreements Enforceable?

 

Florida courts enforce guarantee agreements if the document is worded correctly. While the promise of one person to meet the financial obligations of another is allowed in Florida, the agreement must be in writing according to Sec 725.01 of the Florida Statutes. Therefore, never believe that an oral guarantee agreement will be enforced by a judge, because it will not!

 

How Should the Guarantee Agreement be Worded?

 

Be very specific. Courts attempt to look at what the intentions of the parties were at the time of entering in to the contract or agreement. Since it is usually the manager that has drafted the agreement, any ambiguity in regards to the terms of the guarantee will be construed against the manager. What does that mean? If the terms of the agreement are vague enough that there could be multiple meanings, then the resident will “get the benefit of the doubt,” and the court will likely enforce the resident’s belief as to the meaning of the disputed term. Among other things, you should list the names of the parties, reference the lease that the guarantee applies to, and of course the guarantee agreement should spell out in detailed fashion the obligations for which the guarantor will be responsible.

 

The Lease Renewal Scenario

 

Bob moved to your apartment community ten years ago from Kansas in order to attend college. Bob, like most college students, was short on cash at the time. Based on his situation, he was advised that he needed to obtain a guarantor in order to have his rental application approved. Lucky for Bob, Uncle Jeb agreed to be the guarantor. As it turns out, Bob was timely in making all of his rental payments for the first nine years and ten months of his tenancy. Bob failed to make his final two rent payments and hopped on a plane for Jakarta, Indonesia, never to be heard from again! You decide to go after Uncle Jeb for the balance of the rent owed by Bob. Uncle Jeb is upset and does not believe that he should be held responsible for nine renewal terms, and claims he should have been notified of each renewal transaction. Your regional manager receives an email from Uncle Jeb’s attorney threatening legal action.

 

Is Uncle Jeb Responsible Under the Guarantee Agreement for the Lease Renewal Term?

 

The answer to the above question will depend on how the guarantee agreement was worded. Under Florida law, a guarantee for a lease can be continuing, but it must expressly state that it is intended to cover future transactions for the guarantor to be liable for extensions and renewals. The terms should contemplate a future course of dealing during an indefinite period. If the above conditions are met, the manager would not have a legal duty to notify the guarantor of each transaction between the manager and resident, provided that the particular transactions fall within the description of the terms of the guarantee agreement. Therefore, if there is no mention of the lease renewal in the guarantee agreement, then Uncle Jeb would not have liability in the above fact pattern, because the agreement did not expressly state that he would be responsible for the renewal terms.”

 

Is Uncle Jeb Financially Responsible if the Lease Guarantee Agreement Specifies That it Applies to Lease Renewals?

 

As a general rule, if the renewal period mirrors the lease term in every manner, then the guarantee would be enforceable against the guarantor, if the agreement specified that the agreement applied to renewal terms. However, if the renewal lease contains different provisions other than the original lease term, a court may not enforce the guarantee agreement. For example, if the rent has been increased during the renewal term, the court may possibly hold that the lease is not a true “renewal lease”, because not all of the terms were “renewed”. Instead the court may treat the “renewal” lease as a new lease, thereby extinguishing the obligations of the guarantor. The court may refuse to enforce the guarantee agreement in that situation, on the premise that the guarantor never intended to be liable for the higher rent amount. It is possible that a court may enforce the guarantee, if the terms expressly state that the guarantor will remain responsible for any changes, renewals or amendments to the lease that would increase the guarantor’s risk, such as rental increases.

 

The main point is that courts really prefer to err on the side of caution if the terms of a guarantee agreement are ambiguous and are reluctant to hold the guarantor liable.

 

What Do We Recommend?

 

Our firm’s recommendation is both very practical and very simple!

 

You should update each guarantee agreement for each renewal or lease extension period. Have the guarantor sign again, so that it is clear as to exactly what his financial obligations are to you.

If you really are banking on the guarantor to pay you, it would be risky to leave it in the hands of the courts, when you have the ability to firm up your guarantee agreement by updating it each renewal or lease extension period.

 

 

FORGETTING TO SEND THE NOTICE OF INTENTION TO IMPOSE CLAIM ON SECURITY DEPOSIT

 

Did you ever get that horrible feeling when you realized that you forgot to send the “Notice of Intention to Impose Claim on the Security Deposit” out to the resident? For years we have drilled into our clients’ heads the importance of sending the Notice (we will call it that from this point on) out within 30 days of the resident vacating, but sometimes it just gets forgotten. You may have evicted the resident, and the last thing on your mind is returning any money to the resident as the resident owes so much to you. The resident may have skipped out in the middle of the night owing 3 months’ rent, and again you would not think of returning any money to him, or you realize the resident is gone and there is $5000.00 worth of damage to the unit. Unfortunately, the fact that the resident owes you and will not be getting a dime back does not excuse you from sending out the Notice. Your failure to send out the notice within the time period as required by law could result in you having to return the entire security deposit to the resident. This could be a devastating occurrence especially if the security deposit was a significant amount of money. So, you forgot to send the Notice out within 30 days of the resident vacating. Is it over now? Do you have to return the money to the resident? Possibly NOT. Florida law has carved out an exception to the 30 day rule which MAY be able to save you.

 

The General Rule

 

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

 

The Penalty For Not Following the Rule

 

If you fail to send the Notice out within 30 days, you forfeit the right to impose a claim on the security deposit. In other words, you must return the full security deposit to the resident.

 

The Exception to the Rule

 

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

 

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

 

An Examination of this Exception

 

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

 

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

 

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

 

Why Does the Law Provide This Exception?

 

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

 

The Danger of Using the Exception

 

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

 

You Know the Exception, Now What?

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

 

FORFEITURE OF THE SECURITY DEPOSIT

A common misconception among managers is that the resident who breaches his lease automatically forfeits his security deposit as the minimum damages. Some managers believe the forfeited security deposit is in addition to any other damages. Most managers bolster their claim to the automatic forfeiture of the security deposit for breach of the lease with supporting lease language. As a general rule we advise that managers avoid automatic security deposit forfeitures for breach of the lease. There are some exceptions to the general rule and I touch on them at the end of the article.

An Invitation to Litigation

The automatic security deposit forfeiture is an invitation to litigation. First, the fact that it is an automatic forfeiture doesn’t relieve the manager of the responsibility of timely sending the notice of claim on the security deposit. Second, the resident receives a notice of claim that states the deposit is forfeited. It may or may not include additional itemized damages for the lease breach.

Most Florida county court judges will feel that the automatic security deposit forfeiture is inequitable. They will find the lease forfeiture clause unconscionable and refuse to enforce it, citing the Florida statute that permits them to do so. If that is the manager’s only reason on the notice for claiming the deposit, the manager’s reason is now invalid, and the notice of claim may be found to be statutorily insufficient. The manager may lose at this point without any opportunity to present his case.

The judge may allow the manager to present proof of the damages. Relying on the automatic forfeiture clause, the manager may not have done an inspection of the premises or obtained any proof of the damage (pictures) or saved any evidence of the cost of repair. Even the fair claims of the manager can fail for lack of proof.

The Lawsuit Scenario

Unfortunately for the manager the scenario in which this happens is the resident’s lawsuit for return of his security deposit. If the resident recovers any portion of his security deposit, he is generally entitled to his attorney fees. As we are all too well aware, attorney fees can be astronomical compared to the small amount of deposit money recovered.

A Trap For the Unwary

If the litigation risk wasn’t enough, the automatic security deposit forfeiture is a trap for the unwary manager. The legally unsophisticated manager or the attorney inexperienced in landlord/tenant law may draft an automatic forfeiture clause that inadvertently limits the manager to the security deposit as the only damages amount.

The rules of lease interpretation provide that ambiguities are decided against the lease drafter. Managers commonly include lease provisions providing for other damages (rent until relet, cleaning charges, use beyond ordinary wear and tear) or for damages as provided under Florida law. These provisions are in addition to the automatic security deposit forfeiture for breach of the lease. Poorly drafted lease language can result in the court holding that the damages clauses are confusing, ambiguous or even contradictory. The security deposit forfeiture can become the manager’s exclusive remedy, in spite of actual damages exceeding the security deposit amount.

The Exception

As I indicated above there are exceptions to the rule. Security deposit forfeiture clauses may be found valid when used as the damages for the failure to give notice at the end of the lease. This is treated in other articles. They are valid as part of well drafted vacate agreements.

Having read this article I hope managers will see that the automatic security deposit forfeiture for breach of the lease is a risky method to collect a deposit. If the resident’s breach results in damages in excess of the security deposit, then the manager should forego even mentioning any automatic forfeiture and apply the damages to the deposit. If they are less than the deposit, then the manager should contemplate his explanation to a judge for keeping the “unearned” money, while the resident’s attorney smiles at his easy attorney fees.

Foreclosure Quick Q & A
 

 

The following are some of the most common questions we deal with on a day to day basis regarding foreclosures in the single family home setting and some short answers. The answer to a particular question you may have depends on the factual circumstances, so do not rely upon this information as a final answer, but a starting point in your journey through the foreclosure maze.  

Q. My tenant just got a copy of a “lis pendens” in the mail. Does this mean the property is in foreclosure?

A. No. A “lis pendens” is a document which must be filed before a foreclosure action is filed. A foreclosure may or may not be filed, but probably will be soon.

Q. My tenant received a letter on their door from a bank stating that they have to move out in 10 days. Is this legal? Must they move?

A. This is not legal, and the tenant does not have to move. Only the Sheriff’s Department can make the tenant move out upon order of the Court, and at a minimum, the foreclosure would have to be finalized, with a Writ of Possession at some later time being issued and executed. Under a new federal law, the bank or third party purchaser will acquire the property subject to the existing tenancy.

Q. My owner told me that he is not really in foreclosure but trying to make a loan modification. Is this true?

A. That one is too funny. If the owner received foreclosure paperwork, the owner is in foreclosure. While they may end up modifying the loan and getting out of foreclosure, the truth is that they are IN FORECLOSURE. Some owners do not like to admit the truth.

Q. Does my tenant have to respond to the court within 20 days like the foreclosure summons states?

A. The tenant does not need to respond but can if they wish. Do not give them any advice.

Q. What should my tenants put in their response to the court?

A. That is up to the tenant, You should give them no advice at all. Their response will not make much difference in the foreclosure action other than to delay it a bit more.

Q. Do my tenants still have to pay rent?

A. Yes. Nothing has changed. The rent obligation to the owner continues.

Q. My tenant is claiming that they are not going to pay the rent but instead put it into “escrow”. What are they talking about?

A. There is no recognized mechanism for putting the rent into “escrow” prior to litigation. The tenant may decide to hire an attorney who may place the rent his or her “Trust Account”, but this would probably not be a good thing for the tenant to do and has no basis in law.

Q. Does the bank have a right to the rent money?

A. Yes, but the banks needs to exercise the Assignment of Rent clause in the lease and notify you, most likely through court documents. The bank usually does not do this in the residential setting.

Q. What should I tell the tenant when they say they are refusing to pay rent?

A. Tell them that if they do not pay rent they will be served a Three Day Notice and be evicted if they fail to comply.

Q. Can I file an eviction if they fail to pay?

A. Yes. If the owner instructs you to file, you should proceed as normal. Make sure you tell your attorney that the owner is in foreclosure.

Q. My owner is broke and does not have the money for the eviction. Should I advance the money to pay for the eviction?

A. Do so at your own risk. We highly recommend against this.

Q. I feel sorry for the tenant and have so many vacant homes. Can I find the tenant another home to move into?

A. Absolutely NOT, UNLESS you get permission from the owner in writing. Make sure all parties agree on any money you are holding so there is no misunderstanding.

Q. Can the tenant win the eviction if the owner is in foreclosure?

A. The tenant can bring up the owner’s foreclosure as a defense, but most judges will evict the tenant anyway if the tenant fails to place the rent into the court registry. The owner does have a greater risk the eviction will be contested, and a judge may feel that the tenant can stay.

Q. The owner does not want to pay for an eviction and has told me not to file one. What should I do?

A. Get this in writing from the owner so that later, the owner does not try to say that you should have filed an eviction and did not do so.

Q. The tenants just up and skipped on me. What do I do with the security deposit?

A. Process it as normal, deducting the rent that is owed and any damages and send your Notice of Intention to Impose Claim on Security Deposit out by certified mail.

Q. Can I let the tenant out of the lease?

A. If the owner instructs you in writing to let the tenant out of the lease, you certainly may, BUT it is crucial that you use a proper form, a Mutual General Release Agreement (which we can provide), to settle all monetary and other issues, and have each party release the other in that form.

Q. Does the tenant receive back their security deposit/last month’s rent or any other sums we are holding if we let them out of the lease?

A. This must all be decided between you, the owner and the tenant and memorialized in writing on the Mutual General Release Agreement.

Q. If the owner is agreeing that we return the escrow money we are holding to the tenant, when can the tenant get the money?

A. At any time the money can be disbursed to the tenant, but we would not recommend doing so unless the tenant has given you the keys, turned over possession to you, the property was inspected for damages, and the tenant signed a Confirmation of Vacating Premises.

Q. We don’t want to work for the owner anymore as he has no money for repairs, and this is causing us a major headache. Can we fire the owner?

A. Most property management agreements state you can terminate the management agreement within 30 days, and the good agreement states that you can terminate immediately. Look at your agreement and call your attorney.

Q. What do we do with the tenant’s security deposit and other escrowed funds if we terminate management?

A. You need to hold it in your escrow account until the tenant agrees it can be put in the owners’ Florida account. Most tenants will not agree to this.

Q. The owner told me that the property is being sold in a short sale. What does this mean?

A. A short sale is nothing more than a sale where the payoff the bank takes is less money than what is actually owed. It is simply a sale just like any other sale as far as the tenant is concerned.

Q. Is the lease still in force after a short sale?

A. Yes. It is just like any other sale and the lease survives unless there is a termination on sale or contract clause in the lease agreement.

 

FLORIDA USE TAX ON INTERNET PURCHASES

Many companies, including our law firm, purchase goods through the internet or by phone from out of state companies. In our case, it may be computer equipment, video recording equipment, office supplies, electronics, marketing materials, evict.com T-Shirts, paper or the myriad items a firm of our size uses throughout the year in conducting business. These purchases are usually delivered by UPS, FedEx, the USPS and other common carriers. The reason for these purchases is simple. We try to save money so we can pass these savings along to our clients, make more money, and not have to raise our rates. When we can buy locally and support Florida businesses, we do, but money is money, and if a product is less expensive and equivalent in value, we will buy from an out of state company. We are not alone. Millions of Floridians, individuals and businesses buy products through the internet.

Sales Tax

You may have noticed that most out of state purchases do not include sales tax. Unless a company has an agreement with the Department of Revenue (DOR) or otherwise operates and is registered in Florida, the out of state company does not charge you Florida sales tax or sales tax from its respective state, as it is not required to do so. This amounts to a nice savings indeed. An apartment community may purchase thousands of dollars in supplies or equipment from an out of state company. There may be a great deal on patio furniture or fitness room equipment from a company you found on the internet and you may be able to save a substantial amount of money. You may even attend a trade show where a national supplier who does not have a location in Florida is exhibiting, and one of its selling points is that if you purchase from it, not only are you getting a significantly reduced price, but since the items are coming from its North Carolina location, there is no sales tax, and you will thus save another 6% or more. What a great deal! If you can avoid legally paying a tax, why not? Do not the Florida coffers get enough from us already? Not so fast! You may be doing something completely illegal by not paying the taxes, even though you were not charged the taxes, and NOW, the DOR is beginning to crack down.

Do You Have to Pay Taxes on These Internet or Out of State Purchases?

The purchaser of goods from Florida or any other state MUST pay tax on these purchases, and this means YOU. The tax is not called a sales tax, but rather is called a “use” tax. This use tax is a minimum of 6% and may be more in certain counties or municipalities that have an additional “local option tax” or “discretionary sales surtax”. In fact, 59 of Florida’s 67 counties have a sales tax that exceeds 6%. Here are some examples below.

1. Mountain View Apartments in Collier County purchases a $20,000 set of patio furniture from Fred’s Patio World in South Carolina. There is a shipping charge but no sales tax. Result: Mountain View Apartments now owes the DOR a 6% use tax totaling $1200 and MUST report the purchase and pay the use tax.

 

2. XYZ Property Management Company in Orange County needs a new computer router and while looking on Amazon.com finds a great deal on a Linksys router for $600 from Computer World in Chicago. The purchase is made online, and the only extra charge is shipping. Result: XYZ Property management Company now owes the DOR a 7% use tax totaling $42 and MUST report the purchase and pay the use tax.

Why is This Use Tax Just Appearing Now?

The use tax has been in place for years, but most business and individuals are completely unaware of it. Until recently, the DOR did not vigorously pursue the collection or this tax, but the party is OVER. Thousands of businesses like yours and ours were recently sent letters offering Tax Amnesty (which expired on September 30) whereby if you went back 3 years and calculated all that you spent on these out of state purchases and “came clean” on the taxes, there would be no penalty, and only half of the interest on the unpaid amounts were due. Did you throw that letter out when it came in? The Florida DOR collected millions of dollars in use tax in 2010, and they are sure to continue to enforce the tax laws now more than ever. State and county governments are doing everything possible to collect the taxes that already are on the books. For years, state governments have been losing out on billions of dollars due to the massive increase in internet and out of state purchases, and they are not taking it anymore. That company you may be buying products from may receive subpoenas or requests for information from the Florida DOR, and through that information, they WILL find you out. You can run, but you cannot hide.

Are ALL Out of State Purchases Subject to the Use Tax?

The short answer is NO, but MOST are. Let’s say you purchased a Dell computer online. If you look at the bill, you will see that Dell charges you a sales tax, even though you bought it online and it was shipped from Nevada. You see, Dell is registered with Florida or otherwise does actual business in Florida through the use of stores or distribution centers. Therefore, Dell goes ahead and collects and remits the sales tax at the time of sale, and you now owe no further sales tax or use tax. Many other large companies are in this position, so now you need to begin to look at your invoices carefully to see if you have in fact paid the sales tax, as you certainly would not want to pay a use tax that is now not owed. Some, but very few indeed, out of state companies charge you the sales tax that is due in their state when you make a purchase. If that sales tax is less than 6%, you will need to pay the difference in the sales tax paid and the minimum Florida 6% (more in some counties) tax to the DOR. Example the supply costs $100, you paid the 4% Michigan sales tax at the time of purchase, and you now owe at least 2% use tax to the DOR.

How to Begin Paying the Use Tax

There is no better time to start properly paying the taxes that you legitimately owe right now. To do it right, you will need to go back 3 years and look at all your internet or out of state purchases and determine whether you were charged sales tax or not. If you were not, you simply obtain the forms from the DOR, complete them, calculate your interest and penalties, and pay the tax. Once done, they must be paid each quarter and you can rest assured that once you begin paying the use taxes, the DOR will be on top of you to collect them in the future, so do not forget to file or have your accountant file for you.

Is this Something to Worry About?

We feel that paying use taxes is your legal obligation under Florida law, whether we or you like it or not. Evading taxes can result in substantial fines, interest and penalties. If you have made significant purchases and realize you owe use taxes, you may be able to get the interest reduced or penalties waived by the DOR, so we highly recommend you contact your accountant and discuss this issue getting professional tax guidance. The collection efforts of the DOR are not going to stop, but rather they will be on the rise. The DOR has provided online interest calculators if you want to try to do this yourself, and you can register with the DOR online and pay online, with the taxes, penalties and interest, if any due, automatically deducted from the bank account you provide them. If you do not wish to file online, simply download the Out of State Purchase Return, which is form DR-15 MO, fill it out and send it in.

Our necessary disclaimer!

We are not tax professionals or CPA’s, but ignorance is not always bliss when it comes to tax obligations. We highly recommend you speak to your company’s accountant right away, copy this article and send it to your corporate attorney, CFO or broker. Our firm used Noack Mitchell & Company Certified Public Accountants, whose phone number is (239) 936-6144, found on the web at www.noackmitchellcpa.com.