Law Offices of Heist, Weisse, and Wolk, P.A.
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THE SHARKS ARE CIRCLING

IMPORTANT LEASE PREPARATION CLIENT WARNINGS

Florida law does not specifically address all that can and cannot be put into a lease or exactly what can or cannot be charged to a Tenant. This lack of clarity allows consumer law attorneys to come up with reasons to test novel legal theories as to why something should or should not be legal. If there is litigation, this leaves it up to a Judge or Jury to rule upon a specific clause in a lease or a practice.

Unless something is specifically egregious or outright illegal, we will prepare the lease based on what our clients want. It is crucial to understand though that there are gray areas which could put the Property Manager, property management company, and/or Landlord of the property at risk. It is up to you as to how much risk you wish to take.

In the event there is litigation, and the Tenant prevails, there are consequences. In Florida, the Property Manager, property management company, and/or owner is responsible for the legal fees of the tenant if the tenant prevails. A Tenant does not need to actually incur legal fees out of pocket for them to be awarded. A Tenant may find an attorney willing to take the case for free and, if the Tenant prevails, the attorney can go after the legal fees that would have been charged. These fees range from $250 to $450 an hour. To make matters worse, consumer law attorneys can file Class Action lawsuits. The plaintiffs in the Class Action are those Tenants who were impacted by the actions of the Property Manager, property management company, and/or owner. This means if the same conduct occurred with multiple Tenants, you could be subject to a Class Action lawsuit where, win or lose, it could cost you a substantial amount of money and time to defend.

Normally consumer law attorneys do not file Class Actions when the class is small or there are no “deep pockets,” but some do. Your E&O insurance may or may not cover the costs to defend you in such a case.

Please carefully read the following issues that are in a gray area of Florida law.

  • EXCESSIVE LATE FEES – There is no law on the amount of a legal late fee but at some level, a Judge or Jury may feel a late fee is excessive. You may need to prove in court that you sustained “damages” equal to the late fee you are charging. If rent is looked upon as a debt or loan, the “interest” rate would often be usurious.
  • ADMINISTRATIVE FEES – While these are common in the industry, and have been for years, a Judge or Jury may find your fee excessive or illegal. Examples of some "administrative fees" that could be problematic are inspection fees, vendor trip fees, appointment cancellation fees, up-charging vendor repair fees, lease addendum fees, etc.
  • MANDATORY DEDUCTIONS FROM A SECURITY DEPOSIT – A Judge or Jury may feel that only damages that exceed “ordinary wear and tear” can be deducted from a security deposit. Mandatory fees such as key fees, carpet cleaning fees, mandatory repainting fees, and other miscellaneous cleaning/repair fees could be held illegal even though the Tenant agreed to them in the lease.
  • FINES – Florida law does not mention fines for anything in the Landlord/Tenant Act. A Judge or Jury may feel that since they are not in the Act, they are illegal.
  • LEASE RENEWAL FEES – Florida law does not mention any lease renewal fees in the Landlord/Tenant Act. A Judge or Jury may feel that since they are not in the Act, they are illegal.
  • RESIDENT BENEFIT PACKAGES – A growing number of Property Managers are requiring the tenant to pay for “benefits” that they may or may not want. A Judge or Jury may feel that since the “benefits” are mandatory that the cost of these benefits are excessive or one or more of the benefits have no real value to the Tenant. The Property Manager, property management company, and/or owner could be held liable for the “benefit” the Tenant received or was promised. Any revenue made from a resident benefit package must be disclosed to all parties.
  • POSTAGE/PREPARATION FEES – Florida law requires that a Notice of Intention to Impose Claim on Security Deposit be timely mailed to the Tenant by certified US mail in the event that any money will be deducted from the security deposit. Charging the Tenant to prepare the notice or the postage fees could be found illegal by a Judge or Jury.
  • NOTICE POSTING FEES – Florida law requires that certain notices are delivered to the Tenant and some Property Managers and owners are charging the Tenant for the delivery of these notices. Charging the Tenant the notice delivery fees could be found illegal by a Judge or Jury.
  • FAILURE TO DISCLOSE ALL FEES EARLY – If you collect any nonrefundable amounts from an applicant and then ask them to sign a lease that they have never seen that includes your terms and fees, the applicant could claim that you misrepresented the true cost of renting from you. This could be considered bait and switch or an unfair and deceptive trade practice.
  • HIDDEN PROFITS – If you own or have any interest in a vendor providing services to the Tenant, or otherwise profit off of any goods or services provided to the Tenant through kickbacks or discounts with vendors and this is not disclosed to and agreed with by the Tenant, this could be found to be illegal or deceptive by a Judge or Jury.
  • FORFEITURE OF FUNDS – The Landlord/Tenant Act does not allow any automatic forfeiture of the Tenant’s funds in the event the Tenant breaks the lease or is evicted. While it is rare that a Tenant would ever receive their deposit back if they were evicted or left owing sums of money, there is no automatic forfeiture of funds.
  • PAYMENT METHODS – There are many different kinds of payment methods today. Additional charges for certain payment methods are common. It is possible that a Judge or Jury could find these charges illegal.
  • FAILURE TO USE THE PROPER NOTICE OF INTENTION TO IMPOSE CLAIM ON SECURITY DEPOSIT FORM – When making a claim on the Security Deposit it is crucial to use the proper form with the proper wording. Class action lawsuits have been filed against property management companies for failing to use the proper form and using forms called statements, statement of deposit accounts or simply letters. You MUST use the proper form with the proper wording.
  • SECURITY DEPOSIT ALTERNATIVES – There are some products that are alternatives to the usual security deposit collected. These products are untested in Florida, some have been involved in litigation and the Property Managers, property management companies, and/or owners may become embroiled in litigation as many of the products are nearly impossible to understand and may make misrepresentations. If a Property Manager or attorney can barely understand the terms and conditions, a Tenant and owner will surely not understand.
  • ALGORITHMIC RENT-SETTING – Many Property Managers are using third-party software that uses algorithms to set rental rates. Recent class action lawsuits and Department of Justice actions allege that these programs facilitate illegal price-fixing among competitors when multiple Landlords in the same market share their pricing data through these platforms. Property Managers using such software may face antitrust litigation if they appear to be coordinating pricing with competitors, even if the coordination happens through a third-party algorithm.
  • TENANT SCREENING LIABILITY – Property Managers who use third-party tenant screening services may face liability if those services report inaccurate information or have discriminatory impacts on protected classes. Recent litigation has targeted screening companies for Fair Credit Reporting Act violations and Fair Housing Act violations, with settlements in the millions. Property Managers should verify that their screening providers maintain accurate data and validate that their scoring models don't have disparate impacts on protected classes.
  • RENTAL LICENSING AND HABITABILITY – Recent class actions have successfully sought refunds of all rent collected during periods when properties lacked proper licensing or had serious code violations. In some jurisdictions, courts have determined that Landlords have no legal right to collect rent from unlicensed properties, potentially making all collected rent refundable to tenants. Property Managers should ensure all properties maintain proper licensing and promptly address habitability issues.
  • FLAT-FEE UTILITIES AND ADMINISTRATIVE FEES – Florida law does mention in the Landlord/Tenant Act that the Tenant may be obligated to pay the costs for utilities. However, charging a flat-fee utility amount or an administrative fee in addition to the utility bill could be found by a Judge or Jury to be illegal especially if the flat-fee results in a significant overcharging of actual utility charges.
  • MONTH-TO-MONTH FEES – Florida law does not mention any month-to-month fees in the Landlord/Tenant Act. Charging a separate monthly fee because a lease is month-to-month in addition to monthly rent could be found by a Judge or Jury to be illegal especially if the fee is more than a very small percentage of the monthly rent or when no annual lease was offered the tenant.
  • CREDIT CARD SURCHARGES – A Landlord may not impose a surcharge on the tenant for using a credit card instead of other means unless the surcharge is disclosed prior to the transaction and does not exceed the amount charged by the credit card company. Undisclosed and excessive surcharges may constitute an unfair or deceptive trade practice prohibited by Florida law.
  • COMPREHENSIVE FEE DISCLOSURE – The Federal Trade Commission has recently targeted major Landlords for "junk fees" and inadequate disclosure of the true cost of renting. Property Managers should ensure that all potential fees are disclosed up front before a tenant provides any non-refundable payments, and that advertised rental rates reflect the true minimum cost of renting the unit. Consider creating a standard disclosure document listing all possible fees.
  • FEDERAL ENFORCEMENT ACTIONS – Be aware that federal agencies including the Department of Justice, Federal Trade Commission, and Consumer Financial Protection Bureau have in the prior administration increased enforcement actions in the rental housing industry, it is unknown if this increase in enforcement actions will continue. These agencies can impose substantial penalties beyond what might result from individual tenant lawsuits. They have particularly focused on algorithmic pricing, hidden fees, security deposit practices, and deceptive advertising.

Remember that the scale of potential liability in class action lawsuits has grown substantially. Recent settlements have ranged from hundreds of thousands to millions of dollars, particularly when practices affected large numbers of tenants or involved algorithmic systems that impacted entire markets.

Many of the common fees and practices of Florida Landlords are not legal in some other states. Fees have been steadily growing over time and practices by some Florida Property Managers, property management companies, and/or owners have become more risky. This practice has gained nationwide attention and has recently drawn the ire of the Federal executive branch which has called for more regulation.

Take some time to review your company’s practices and decide whether you wish to take certain risks or put the Property Manager, property management company, and/or owner at risk.

Understand that simply because the Tenant agreed to something in a lease by signing that lease, this does not necessarily make the lease or a practice fully legal and could subject the Property Manager, property management company, and/or owner to expensive legal challenges later in court.

Property Management companies and Landlords of all shapes and sizes are subject to lawsuits and class actions against even small companies are becoming common.