VOLUME 3 - ISSUE 2 LEGAL UPDATE
- The Dangers of Prepaid Rent
- Returning Rent During an Eviction
- Squatter or Tenant?
- To Renew or Non-Renew
THE DANGERS OF PREPAID RENT
by Harry Anthony Heist, Attorney at Law
Collecting rent has been the biggest and most basic challenge of landlords since the first cave was rented out in 1300 BC. 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. If interest is to be earned, Florida Law must be followed regarding the payment of this interest and notifications to the tenant. 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 looked upon favorably by the courts in Florida, so the landlord would need to wait each month to be able to actually utilize the prepaid rent. The law is not entirely clear regarding any duty by the landlord to try to rerent the unit to mitigate their damages, because presumably, there are no damages if the landlord is holding the 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 a condominium. 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 condo owner, 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 tenant will have an entirely different story, and if there are attorneys involved in the case, it will often become a bad situation.
Is the landlord “used” to accepting prepaid rent?
Most landlords are not accustomed to accepting prepaid rent. They are more accustomed to chasing after current or past rent owed! This increases the risk that the prepaid rent is mis-posted in the computer system that the landlord uses for managing the property. Recently a client accidentally failed to post the rent prepaid by a tenant. The computer system incorrectly showed that the rent was delinquent, the tenant was evicted, and all his possessions were removed to the street. The tenant returned a month later, only to find that all his possession were gone and that he had been evicted. The result? Most likely a lawsuit will be filed. If a landlord is not accustomed to accepting prepaid rent, the danger increases dramatically.
Are you convinced yet? Often things that appear good turn out to be fraught with dangers. We urge you to think long and hard before you deviate from the standard and time tested way of charging and accepting rent monthly.
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RETURNING RENT DURING AN EVICTION
by Harry Anthony Heist, Attorney at Law
The Three Day Notice has expired, an eviction is filed in county court, and the tenant is served with eviction paperwork. You arrive at your office on a Monday morning, and in the mail slot is a check or money order from the tenant. Most landlords know that accepting this payment without entering into a proper Stipulation with the tenant will immediately kill the eviction action. Acceptance of any rent or amount owed by a tenant will almost surely result in a complete defense to the eviction action, resulting in dismissal of the eviction action or a finding for the tenant in court. When a payment is tendered by a tenant after an eviction has actually been filed with the court, the landlord must return the money. The issue here is the manner in which and when the payment is returned. Failure to return the payment promptly or properly is a common mistake made by landlords.
Can you accept the tenant’s payment?
If the tenant is paying you in full, and this sum includes your attorney’s fees, costs, late charges and any other amount the tenant owes you, there is no great harm in accepting the payment. Under no circumstances should you accept anything other than certified funds such as a certified check or a money order, and you need to be aware that a stop-payment order can actually be made on a certified check or money order, so you are not entirely safe. If the payment is partial and the landlord wishes to work with the tenant, this can be accomplished with a Stipulation BUT, the landlord needs to do this immediately. If the payment is held for more than one day, there is a serious risk of problems.
In our opinion, if you have knowledge of a tenant’s payment and intentionally hold a tenant’s payment for more than one day, this can be considered acceptance of rent. Florida law does not define how long the holding must be before it is considered acceptance, but most judges interpret any delay in returning the money to the tenant as acceptance. If the tenant “thinks” you have accepted the rent, most judges will feel the same. Depositing the rent is almost surely considered acceptance, unless you can prove to a judge that it was purely accidental, it was caught immediately, and the tenant receives the payment rent back immediately. How do you return the payment back if the tenant paid by a check and the money was deposited into your account? You can write the tenant a check back, but there is an incredible danger that the check you gave the tenant will come back NSF and now YOU have paid the tenant rent!
How to return the payment to the tenant
HAND DELIVERY: The best way to return a tenant’s payment is to make a photocopy of the payment, go directly to the tenant with a witness present and hand-deliver the payment back to the tenant. While the tenant may deny receipt in rare circumstances, this is our preferred way to return. At the time you are returning the money, you will have an opportunity to discuss with the tenant the tenant’s plans or enter into a Stipulation or even an Agreement to Vacate. We recommend that you call your attorney and get a Stipulation, so you have this in hand in case you will be able to work things out with the tenant. Never tell a tenant to put the money into the court registry. A landlord is not in the business of educating the tenant on how the tenant can contest an eviction.
CERTIFIED MAIL: If the tenant is not available, not home or refuses to accept back the payment that was tendered to you, the landlord MUST get the money back to the tenant, but at the same time, making sure the tenant knows that the money is not being accepted and it is being returned. Here are some steps you can take.
1. Copy the payment
2. Call the tenant and tell him or her that you are returning the money and that it will not be accepted
3. Prepare and copy a letter to the tenant stating that you cannot accept rent and that the payment is being sent by certified mail back to the tenant that day
4. Place that letter in an envelope and tape it securely to the tenant’s door. If there is back door or garage that the tenant may use, tape an additional envelope and letter to these entrances. The key is to make sure the tenant knows the money is not being accepted.
5. Send the payment back to the tenant by Certified Mail Return Receipt Requested, saving the proof of mailing.
6. Notify your attorney so the attorney can make a note in the file.
1. Landlord receives the payment and holds onto the payment. 2. Landlord calls tenant and tells tenant to pick up payment, the payment is not picked up, and the landlord holds the payment. 3. Tenant’s payment is deposited into landlord’s account. 4. Landlord puts payment in an envelope and tapes it to the tenant’s door. 5. The landlord returns the payment to the tenant and tells the tenant to put the money into the court registry.
Notify everyone in your office that the particular tenant is under eviction, and carefully watch that the tenant does not try to make a payment. Communication with staff is crucial in avoiding the accidental acceptance of a payment. You may want to go as far as placing a note on the office wall out of the sight of other tenants or attaching a note to your bank deposit book simply stating “Do not accept rent from John Doe, Apt 123”. Carefully follow the return of payment steps as outlined above, and be aware that another person may try to slip a payment in or use a check or money order that only indicates to what unit the payment is to be applied. Finally, if a tenant has tendered a payment, you need to think Stipulation. A Stipulation is one of the best rent collection and resident retention tools available to a landlord.
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SQUATTER OR TENANT?
by Harry Anthony Heist, Attorney at Law
Your tenant moves out, and you decide to check out the condition of the property. “Robert” answers the door eating a ham sandwich and says he is living there with the permission of the former tenant. Surprised and angry, you call the police, and they respond, “It is a civil matter, you will need to evict the person.” But wait! Isn’t this person a trespasser or squatter? A typical landlord would make the assumption that this individual is not a tenant but rather an illegal trespasser or squatter on the premises, and in many cases the landlord would be correct. The problem is that law enforcement does not look at this the same way, as well as possibly Florida law.
Is this person an unauthorized occupant?
Often the person who remains behind after the tenant has vacated the premises will claim that she is there with the permission of the tenant. This unsubstantiated claim alone transforms the individual into an unauthorized occupant (unauthorized by you), rather than a squatter or a trespasser, and this prevents law enforcement from using their powers to remove the individual. Law enforcement officers are often called upon by landlords to assist in removing people from rental property, and they are extremely cautious that they are not being used by the landlord to effectuate an “eviction” of a tenant who has a right to be on the premises until legally evicted from the premises. In most cases, law enforcement will inform the landlord that the problem is a “civil matter”, i.e. you need to call your attorney, serve the proper notices and begin the eviction process. While this may seem absurd to the landlord who has never seen the individual occupying the premises, had no contact with this person and never received any rent from this person, unfortunately an eviction will be necessary.
Will law enforcement ever take action?
If pressed hard enough, law enforcement may cooperate with the landlord, if the landlord is insistent that the person is in fact a trespasser or squatter, and the evidence does point to this fact. The landlord needs to be clear with law enforcement that they have no idea who this person is, and they feel that this person has broken into the unit or entered the unit after the prior tenant has vacated. Law enforcement may question the individual and sometimes get an admission from the individual that she indeed does not have a key to the premises and should not be in the unit. In limited situations, law enforcement will then trespass the person and assist you in removing this trespasser from the property. In some cases, people do enter vacant units and camp out until law enforcement involvement. A good relationship with law enforcement and a concerned officer will often aid in assisting the landlord in removing a true trespasser who does not have any permission from the prior tenant to be in the unit. When calling law enforcement, the landlord needs to be clear that the person is a trespasser if they will get law enforcement to even remotely consider any involvement. Any statement by the individual that she is in there with permission will stop the process and force the landlord to begin eviction. If a landlord removes a person from the unit either by himself, uses law enforcement, changes the locks, removes the doors, shuts off utilities or does anything to make this person leave, and this person can then prove in court that she had possession with permission, the landlord will be faced with being sued for an unlawful or wrongful eviction and/or prohibited practice(s).
The individual fails to move and law enforcement does nothing
If the landlord in unsuccessful with law enforcement, the landlord now needs to serve a Seven Day Notice of Noncompliance With Opportunity to Cure to the prior tenant by posting the notice on the door of the unit. The notice will state “You have an unauthorized occupant residing on the premises in violation of the terms of your lease agreement”. The landlord needs to act as if the prior tenant is still in the unit, even though most likely the prior tenant will never get the notice. If the landlord has any way to get in touch with the prior tenant, all efforts should be made to do this, as it is possible that the prior tenant does not even know that his friend or relative is still in the unit, and if faced with a legal action may get this person out for you. If after seven days the person or persons are still in the unit, a Seven Day Notice of Termination needs to be served. After seven days, an eviction can be filed.
Suppose the landlord takes rent from the individual?
If the landlord accepts any rent from the individual, they will have created an even greater problem, as they will have potentially established a landlord/tenant relationship with the person minus any written documents such as a lease. No matter how desperate a landlord may be for the money, taking rent from the individual can be a fatal mistake.
Will the landlord succeed in eviction?
In most of these eviction cases, the “squatter” or “trespasser” will not fight the eviction. We have seen cases where the individual will fight the eviction, claiming that they paid rent to the prior tenant, and that the prior tenant failed to pay the landlord. This is rare, and the landlord can have a fair amount of certainty that they will prevail in the eviction action. The key is making sure that the landlord resists all urges for self-help, as this can completely derail an eviction action and create a major legal problem.
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TO RENEW OR NON-RENEW, THAT IS THE QUESTION – Fair Housing Considerations
by Cathy L. Lucrezi, Attorney at Law
Hamlet only had to decide how to avenge his father’s death. You have to decide whether to non-renew a tenant who has been a problem during the past year – making noise, paying late, yelling at staff. Although you really want the tenant to be gone, you worry that tenant will think you are discriminating against her.
You have the right to non-renew a tenant at the end of a lease term. Florida law does not require that you have a reason for the non-renewal. Nonetheless, you better have one, and it better be documented in your file. Without that documentation, you may be vulnerable if the tenant later claims you are violating the Fair Housing Law. Often, documentation is key to winning a fair housing case.
It is also a good idea if your office develops a renewal policy. The policy will set the standard for who stays and who goes. Thus the decision about renewal will not be arbitrary.
Such a policy can say a tenant will be subject to a non-renewal if one or more of the following conditions apply:
1. The tenant received one or more 7 day Notices of Noncompliance within the preceding twelve months.
2. The tenant was late with rent 2 or more months within the preceding twelve months.
3. The tenant has violated the lease and/or the community rules four or more times within the preceding twelve months, and each of the violations is documented in the tenant’s file.
4. The tenant owes an amount to management for rent, late charges, repairs, or other amounts, and the debt is more than 30 days past due.
5. The owner and/or management plans to use the unit for purposes other than the rental of a residential unit.
This is just an example. Your renewal policy should reflect your property’s priorities. Of course, your policy is only good if it is consistently applied.
To be fair, or not to be fair? That’s the real question.
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