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

Landlords 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.   The money can be removed from this account for use by the Landlord only as it becomes due. This would prohibit a Landlord from accepting prepaid rent from the Tenant and immediately utilizing it for the Landlord’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 Landlord is only entitled to the rent when the due date arrives.

Prepaid Rent and a Tenant’s Unwarranted Breach

If the Landlord is holding prepaid rent, and the Tenant breaches the lease by vacating prior to the expiration date of the lease, the Landlord 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 permitted by the courts in Florida, so the Landlord would need to wait each month to be able to actually utilize the prepaid 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 Landlord.

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 Landlord to provide peaceful quiet enjoyment of the premises to the Tenant, defects in the property, failure on the part of the Landlord to make a legally required repair, or a host of other reasons which seem to come out of left field and astound the Landlord 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 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 Landlord, 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 Landlord 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 Landlords will insist on keeping the rent, and many Tenants will insist on getting it back. The result? Litigation. In the event of litigation, the Landlord will be faced with trying to convince a judge that the Tenant’s breach was improper, illegal and unwarranted. The Landlord will need to explain why he or she violated the law and touched the prepaid rent UNLESS the rent was already due. The Tenant will have an entirely different story, and if there are attorneys involved in the case, it will often become a bad situation.  

SOME NEGATIVE RESULTS OF PREPAID RENT

1. Tenant may break lease for whatever reason they come up with and prepaid rent can cause litigation.

 

2. Something may happen to the property and prepaid rent can cause litigation.

 

3. The tenant can file bankruptcy and you can be drawn into litigation by the Trustee regarding prepaid rent.
    
4. The tenant may be hiding money and this can be a fraudulent transfer so the rent may have to be frozen or returned to someone else.

 

5. You can’t give it all to the Landlord, you must give the monthly rent out each month.

 

6. It causes unnecessary excess money in your trust account and more trust accounting work.

 

7. The parties may divorce or one may vacate and this causes litigation.

 

8. The tenant may be in lease violation and prepaid rent will complicate the eviction and may cause you to lose.

 

9. The tenant may die and you can get dragged into a probate case.

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