UNDERSTANDING THE EARLY TERMINATION LAW

Before The Law Change

Before the recent change to Florida Statute 83.595, when a resident chose to break a lease by vacating before the end of the lease, commonly called “skipping” or vacating early, the manager was only allowed to charge the resident rent through the earlier of the lease expiration date or the date a replacement resident took occupancy. In addition, many companies also charged a Termination Fee, Termination Penalty or Liquidated Damages charge, BUT in a major Florida class action lawsuit, the judge in that particular case ruled that these various practices were unlawful and inconsistent with Florida Statute 83.595.

The New Law

A common misconception is that under the new law, when a resident vacates early, you can NOW charge the resident a Liquidated Damages or Early Termination Fee. This is only partially correct, and it is crucial that you understand the law.

Under the new law, you can give the resident a CHOICE to either owe a flat fee “Liquidated Damages/Early Termination Fee” OR owe rent until the unit is re-rented. The RESIDENT makes the choice, NOT you. If you do not want to give the resident this choice, you will not use the Addendum, and you can ONLY charge the resident your rent loss, as has been the law.

Suppose You Want To Hold The Resident To All The Rent Due Under The Lease?

If this is what you want to do, then simply do it. The law still allows you to do this. You will not give residents a choice in the matter, and if a particular resident vacates early, you will charge rent as it becomes due under the terms of the lease until the unit is re-rented. In a soft market, when it may take a while to re-rent a unit, this is your best bet; you really do not need to read any further, AND you will NOT use the Addendum.

Suppose You Want To Charge The Resident a “Liquidated Damages/Early Termination Fee” When They Vacate Early?

You CAN if and only if 2 things occur:

A. You present the attached Addendum to the Resident AT THE TIME OF LEASE SIGNING

AND

B. The resident picks Choice #1

What Happens If The Resident Picks Choice #1?

You can charge the resident a flat “Liquidated Damages/Early Termination Fee” of a maximum of 2 months’ rent when they vacate early and NOTHING more other than rent, and charges they may owe at the time of vacating early. The resident may or not pay it, but if not paid, this 2 months’ rent can be sent to collections.

What Happens If The Resident Picks Choice #2?

You can charge the resident rent that he owes at the time he vacates and rent as it becomes due until the unit is re-rented or the end of the lease, whichever occurs first, just like you have been doing or should have been doing all along.

Can You Charge the Resident a Concession Payback?

The law does not clearly provide that you can or you cannot. If the resident picks Choice #1, it may be dangerous to charge a concession payback, because some judges are apt to consider a liquidated damages charge as exclusive.

Now For Some Q&A:

Q—Do I have to use the Addendum?

A- Absolutely not. It is your choice. If you don’t provide the Addendum to the resident to sign, the resident will owe rent that is owed at the time the resident leaves early PLUS all rent as it becomes due until the unit is re-rented or the end of the lease, whichever occurs first.

Q—Can I have current residents come in and sign the Addendum?

A—No. You can only use the Addendum at lease or renewal signing.

Q—Do I need to fill in all the amounts on the addendum before I give it to the resident?

A—Yes, do not leave anything blank.

Q—Suppose I use the Addendum and the resident picks Choice #1?

A—If the resident chooses to vacate early, you can only charge the resident 2 months’ rent plus whatever they already owed you for rent or other amounts under the terms of the lease. NOTHING MORE.

Q—Suppose I use the Addendum and the resident picks Choice #2?

A—You can charge the resident rent that is owed at the time the resident leaves early PLUS all rent as it becomes due until the unit is re-rented or the end of the lease, whichever occurs first.

Q—Can I force the resident to sign the Addendum?

A—No. If the resident refuses to sign, they simply will owe rent that is owed at the time the resident leaves early PLUS all rent as it becomes due until the unit is re-rented or the end of the lease, whichever occurs first.

Q—Should I utilize the new law and use the Addendum?

A- It is purely a business decision. In a soft market, it would be better not to utilize the new law and the Addendum. If you feel you will rent out the unit in less than 2 months, it would be better to use the Addendum IF the resident picked Choice #1. There is no guarantee what the resident will choose.

Q—Can I force the resident to pick a particular Choice, #1 or #2?

A—No. If you use the Addendum, you are at the mercy of the resident and his choice.

Q—Can we require the resident to give notice before he vacates early if he picks Choice #1?

A—Yes, but if he does not, you can only charge the 2 months’ rent amount as if he simply walked out on you tomorrow.

Q—If the resident picks Choice #1 and gives us notice, can we charge the resident through the notice period PLUS the 2 months’ rent?

A—NO. You can ask the resident to give you notice, BUT you cannot hold him to it.

Q—If I decide to use the Addendum, must I offer it to everyone?

A— For Fair Housing purposes if you use it for one, you should use it for all, at least in a given time frame.

Q—Why does the resident get to make a choice? Why can’t we just charge them liquidated damages?

A—The resident only gets to make a choice if you decide to use the Addendum. The Governor said he would not sign the bill into law unless the resident was given a choice, so the bill was amended late in session to get it passed.