For over two years, property management companies have been sued in huge class action lawsuits for practices that most property management companies have engaged in for years. Common practices and agreed upon terms are under attack, and as a result of a judicial decision, have caused property management companies to incur millions of dollars in fees, costs and loss of the ability to collect sums owed to them. Most property manager companies have not revised their leases or procedures, and as a result, are a huge target for the lawsuits. Currently, the attorney filing these lawsuits is not taking the cases to trial but quickly entering into class action settlements. While this may lessen the effect of a huge, drawn out trial, the companies being sued are still paying small fortunes to settle the suits. Each one of these suits and settlements are costing the companies in excess of $1,000,000. There is no indication that the attorney filing these suits has any intention whatsoever of stopping. Our firm is recommending that you take action immediately to avoid becoming a target. Our recommendations are not our interpretation of the law, and we do not agree with the outcome of the lawsuit which started this incredible chain of events, but we feel that until the law is changed, property management companies need to take heed immediately and change their leases and practices.

IMPORTANT:

If your company has already been sued and is currently under a class action settlement agreement, please follow the advice of your attorney, as special conditions apply per the settlement agreement.

REDECORATING CHARGES

Current Law: Florida Statutes says absolutely nothing about redecorating charges, but are they legal? Are they being disclosed?

Cases: Other states have begun interpreting these fees as a way managers are making residents pay for ordinary wear and tear.

Recommendation: Cease charging redecorating charges. If you still insist on charging them, make sure they are disclosed in your advertising and in the first contact.

ADMINISTRATIVE FEES

Current Law: Florida Statutes say absolutely nothing about administrative fees. We fear that they may be challenged as anti-consumer or in some way in violation of Florida’s Unfair and Deceptive Trade Practices Act. Florida Statutes include a provision allowing a judge to strike down “unconscionable” provisions in a lease and award damages to the resident. Often these administrative fees are not being disclosed on first contact with the applicant.

Recommendation: Cease charging administrative fees. If you still insist on charging them, make sure they are disclosed in your advertising and in the first contact.

TERMINATION FEES

Current Law: Florida Statutes gives specific remedies to a manager when a resident breaks a lease or gets evicted. Termination fees for a lease break, voluntary or involuntary, are nowhere to be found in Florida law. Common practice for years has been to charge these fees to cover the costs incurred due to the resident’s lease break.

Cases: Recent court cases have held that these fees are unlawful, as they can result in the collection of double rent if the resident breaks the lease, a new resident moves in right away, and the termination fee exceeds the actual lost rent. Ridiculous? Yes, but some courts feel otherwise.

Recommendation: Cease charging termination fees

INSUFFICIENT NOTICE FEES

Current Law: Florida Statutes says absolutely nothing about insufficient notice fees for residents who break their lease.

Cases: Recent cases have stated that these are completely unlawful UNLESS specifically allowed by Florida law for notice prior to lease end.

Recommendation: Cease charging insufficient notice fees UNLESS they are those specifically authorized by law for notice prior to lease end.

AUTOMATIC FORFEITURE OF SECURITY DEPOSITS

Current Law: Florida Statutes do not state that security deposits are automatically forfeited when the resident breaks the lease. It has been common practice and makes good sense. After all, a security deposit is for the full and faithful performance of the lease.

Cases: The class action cases dealing with termination fees can be construed as prohibiting the automatic forfeiture of a security deposit upon resident breach

Recommendation: Cease automatically forfeiting a resident’s security deposit upon lease break. Most companies still forfeit the resident’s security deposit if they break the lease AND charge them rent on top of this. This can trigger a lawsuit.

LATE CHARGES

Current Law: Florida Statutes say nothing about late charges.

Cases: Some states are interpreting their usury laws to apply to rent owed.

Recommendation: Cease charging excessive late charges and cap them at 10%.

A Final Note

Most readers of this article will go away angry and confused. How could these perfectly fair charges and practices be illegal? Law is made two ways: (1) by statute, in which the legislature enacts a bill which becomes law, and (2) by court cases, in which a judge makes a decision interpreting existing statutes, and under the principal of judicial precedent, it becomes law that other courts will follow. In the current cases which have triggered this entire mess, the result is from a Circuit Court case in Palm Beach County, Florida. This case created law for any company which operates in the 15th judicial circuit, which encompasses a large area. When a judge makes a decision in circuit court, that judge will look to circuit court cases and higher. While a circuit court does not make law in another circuit, judges often will base their decision on that court’s decision, if there are no other cases in their circuit to the contrary or on point.

 

“Serving the Property Management Professional”

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