APARTMENT LOCATOR SERVICES

There are many apartment locator services operating in Florida who work for the apartment hunter and find an apartment for a fee, paid sometimes by the resident, but more often by the apartment community. Your company may have an ongoing contract with one or more of these locator services, and if so, your company may be legally bound to pay the company if a lease is consummated. Extreme care must be taken to know exactly what the arrangement is with the locator service, the fees involved, and what the current contract states. Prior to entering into any agreement or contract with a locator service, you must know for sure that the company is legally operating in accordance with the licensure requirements of the Florida Division of Real Estate.

Licensure

In order for the owner or management company to legally pay an apartment locator service, that locator service must have a valid and current Florida Real Estate Broker's license. Licensure should not be assumed, as a company can appear to be legitimate and hold itself out to the public as licensed, but no license may exist. Before doing any business with an apartment locator service, and especially before signing any type of contract under which you are binding yourself to payments, research the company by going to the website of the Florida Department of Business and Professional Regulation at (http://www.myfloridalicense.com/dbpr/re/index.html). It is possible that the company has a name it is doing business under which may not match the license name, and this can be determined and verified by going to the website.

What can be paid?

A commission or a fee can be paid to the apartment locator service. There is no monetary limit on this fee, since the apartment locator service is a licensed "real estate broker", and Florida law does not impose any limits on payments in this case. There is no difference in paying a locator service than your local real estate company who sends you a prospect who eventually becomes your resident. The amount paid may be the fee that the locator company charges in its contract, or any other amount that is negotiated between your company and the locator service. Make sure everything is clearly set forth in writing, and have your attorney review the document to make sure that you never have to pay a commission or fee unless a lease is fully consummated, the resident moves in, and all monies collected from the resident have cleared the bank. In some cases, there may be no written contract at all. You may receive a call from a locator service or a real estate company, a prospect is sent to you, a lease is signed, and you pay the commission agreed upon over the phone. Better practice dictates that this all be in writing.

Who can be paid?

Only the licensed real estate broker can be paid by the owner or management company. This may be the individual broker or the licensed brokerage company. No payment may be made by you to any employees or owner of the apartment locator company, whether or not that person holds a real estate license. The payment is made out to the broker or brokerage company, and what happens after that is the business of the apartment locator company.

The Apartment Locator Contract

If your company has no legally binding contract with the locator service, you are under no legal obligation to pay any fee or commission to the service for sending a prospect your way who ends up becoming a resident. If presented with an apartment locator contract, carefully review all its terms and conditions before signing, and have it reviewed first and approved by your regional manager or corporate office. Often, a locator service has entered into a contract with a prior management company or prior owner, a contract of which you had no knowledge. Your company's contractual liability for payment of a commission or fee will depend upon the wording of the contract and whether it applied to new owners or successor management companies. Train your management and leasing staff to never sign any forms or papers presented to them by any locator service, as the apparent authority of the employee and the act of signing can have a binding effect upon the management company or ownership.

RESIDENT REFERRAL FEES

One of the best ways to increase occupancy is through a resident referral. Simply put, one of your satisfied residents refers a friend, coworker or relative to your property. Often the referring resident is rewarded by you with the payment of a sum of money, a gift or a reduction in rent for the next month. This is all completely legal, and is allowed due to the efforts of the Florida Apartment Association in having Florida Statutes Section 475 amended to allow you to give "resident referral fees". However, there are limits in how much you can give as a referral fee to the referring resident, and no matter how desperate you are for residents, you cannot exceed the limits set by Florida law. Many companies operating in Florida are based out of other states and do not know the Florida law regarding referrals, and it is just a matter of time when a company gets in serious trouble, facing hefty fines or ever criminal prosecution.

Florida Law

Chapter 475 of Florida Statutes carves out exemptions addressing who can receive a "commission" for a real estate transaction without having to hold a valid and current real estate license. Florida Statute 475.011 provides the exemption from licensure in part as follows:

"ƒ(13)Any property management firm or any owner of an apartment complex for the act of paying a finder's fee or referral fee to an unlicensed person who is a tenant in such apartment complex provided the value of the fee does not exceed $50 per transaction. Nothing in this subsection authorizes an unlicensed person to advertise or otherwise promote the person's services in procuring or assisting in procuring prospective lessees or tenants of apartment units. For purposes of this subsection, "finder's fee" or "referral fee" means a fee paid, credit towards rent, or some other thing of value provided to a person for introducing or arranging an introduction between parties to a transaction involving the rental or lease of an apartment unit. It is a violation of s. 475.25(1)(h) and punishable under s. 475.42 for a property management firm or any owner of an apartment complex to pay a finder's fee or a referral fee to an unlicensed person unless expressly authorized by this subsection.

Applicability of the Statute

Who can be paid? To examine the statute, we see that it applies to a management company or owner of an apartment community. The person to whom you pay the referral fee must be the resident. The law does not indicate which resident in the case when there are two or more residents on the lease, but it can be safely assumed that the law refers to one and only one resident.

How much can be paid? The statute specifically states that the "value" of the "fee" can be no more than $50. This is clear. Any attempt to circumvent this by giving gift cards that exceed $50, paying $50 to each resident on a lease with multiple residents, giving the resident a product or service valued at more than $50, or giving a rent credit for the current or next month in an amount greater than $50, are all in violation of Florida law and will constitute a felony.

How often can the fee be paid? The statute makes it clear that the resident to whom you pay a referral fee cannot be "in the business" of trying to find residents to refer or advertise your property in any way. That enterprising resident who goes around placing flyers up in businesses or advertising apartments on Craigslist or in any other advertising medium, does not qualify under the exemption and will not be entitled to the referral fee. Exercise extreme care when a resident has multiple referrals to make sure that no violation of the statute is occurring. When dealing with the referred prospect, inquire how the prospect knows the referring resident.

Penalties for violations: The resident referral fee is always an uncomfortable topic with which to deal, as many apartment communities boldly advertise to the residents, often in writing in the resident newsletter or on signs posted prominently on the property, that resident referral fees are paid in amounts or value far exceeding $50. The reasons for payment of referral fees exceeding the $50 cap range from pure ignorance of the existing law to a knowing, calculated violation of the law. Resident referrals play an important role in filling vacancies, and the higher the referral fee, the more referrals an apartment community is going to receive. The problem is that violating Florida Statutes 475 is actually considered a third degree felony, punishable by a fine of up to $5000, and the violator is the person or company paying the referral fee, not the resident receiving it. It is important for the manager to alert his or her company to the existence of this law.

THE RESIDENT REFERRAL FEE AGREEMENT:

While a simple sign offering a resident referral fee will often suffice, situations may arise that are unexpected, and the referring resident may expect a referral fee in a situation that may not be appropriate. Will the referring resident receive the $50 payment or rent concession immediately, or after a specific time period? Suppose the referring resident is in default of his lease or even under eviction? The resident may refer an applicant who is not approved, or if approved, moves in and bounces the rent and security deposit checks. At what point in time will the referring resident receive the $50 payment or credit? Think about this carefully, and create a Referral Fee Terms and Conditions Sheet to avoid any misunderstandings between you and the resident. If you place a sign up on the property or advertise your referral fee in any way, simply print on the bottom of the sign or advertisement, "Terms and conditions apply, see office for details".

 

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