VOLUME 4 - ISSUE 2 LEGAL UPDATE
- 2007 Legislative Priorities
- Interest Bearing Security Deposits
- Foreclosure and the Residential Property Manager
- The Basics of the “Uncontested” Tenant Eviction- The Timeline
- What’s Reasonable About an Accommodation
2007 LEGISLATIVE PRIORITIES
by Harry Anthony Heist, Attorney at Law
The 2007 Legislative Session may be one of the most important to the property manager in a long while. A number of bills are being addressed which directly impact the property manager and their day to day operations. This article will attempt to explain these issues in a nutshell. Please feel free to call our office if you have any questions regarding the current bills that have been filed. Things change fast and amendments are filed, so it is crucial that if you follow the bills, you make certain that you are up to date. We recommend that you check with us or Jeff Rogo the Governmental Affairs Director for the Florida Apartment Association. We all need to be on the same page and unified in our approach to legislators, to make sure there is no confusion or complication of the issues. The Florida Apartment Association has a lobbying team Ron L. Book, P.A. working on these issues, and they keep us all informed as to the progress.
Liquidated Damages and Termination Fees SB 1596
Due to the ridiculous outcome of a Circuit Court case a number of years ago, the property management industry was turned upside down with litigation. For years, property managers have charged a set fee when a tenant broke a lease or wished to voluntarily break the lease by paying a fee and giving notice. This practice was essentially made illegal by the outcome of the court case. Passage of this bill will fix this problem, clarify the law and allow property managers to get back to doing what is fair to both landlords and tenants.
Abandonment and the Deceased Tenant HB 647, SB 400
When the last remaining tenant in a rental unit dies leaving personal property behind, the property manager is put in a strange “hold” position. If no personal representative (executor) is appointed, the property manager is held hostage by the tenant’s personal property. The reality is that in most cases, no personal representative is appointed; a relative will arrive on the scene, gain access through whatever means it takes, remove what they want, and leave the remainder of the personal property behind. The unit is not considered abandoned under Florida law, even if no one attempts to or takes all the property out of the unit. Simply put, this bill states that if no estate is opened up within 60 days, the unit shall be considered abandoned and the property manager can dispose of the abandoned property. This bill will streamline the tenant /death/property issues significantly and fixes a “glitch” or omission in the current law.
Early Lease Termination due to Domestic Violence HB 373 and SB 880
This bill was introduced in previous years and is intended to enable victims of domestic violence to be relieved of their lease obligation. The Florida Apartment Association is carefully monitoring this bill to be certain that there are no unintended results or loopholes which could allow tenants who are not in fact victims of domestic violence to break their leases
Code Violation Disclosure Requirements
This bill will require landlords to disclose to a potential tenant all building, health or housing code violations for the prior 5 years. If the landlord fails to do so or make a material misrepresentation, the tenant can break the lease. While this bill may seem good for a tenant, it often will have no relation to the health, welfare and safety of a tenant. A landlord may have had code issues in the past due to problems with the property, or even problems caused by a tenant , in response to which the landlord diligently restored the property to a good condition. This landlord will be regarded by the prospective tenant unfairly and unjustly as a problem landlord who fails to maintain the property. This bill, though well intentioned, is NO GOOD for tenants or landlords.
Property Tax Issues and Insurance Reform
These two monster issues are being monitored and worked on tirelessly by parties affected by the massive cost increases, which by necessity must be passed on to the tenant. The issues strike at the core of Florida’s history of being a state of affordable housing and have caused intense pressure to be placed on landlords and tenants. These issues will continue to be top priorities, as the fear is relief for homeowners will be borne by providers of rental property, as the classification for apartment communities is “commercial”, and rental houses are not protected by the Save Our Homes caps or Homestead Exemption laws. We urge you to keep informed and get involved.
What can you do to help?
It is crucial that you maintain contact with your local Representatives and Senators and let them know your situation. We urge each and every one of you to attend legislative days for FAR, FAA and FARPM. The few hours you spend in Tallahassee can make a huge difference and save our industry.
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INTEREST BEARING SECURITY DEPOSITS
by Harry Anthony Heist, Attorney at Law
Most tenant security deposits are held in non-interest bearing accounts in a Florida banking institution. This is due to the fact that most property managers do not feel it is worthwhile to keep the funds in an interest bearing account, as under current Florida law, the landlord will be required to account for the interest each year and either give this interest to the tenant in whole or part. Often the banks will not impose their monthly fees if the account is non-interest bearing, as the banks are reaping the rewards of the money held by them. Even in light of Florida law, many property managers see these often large deposits building in the bank accounts and are desirous of keeping the interest for their company. If you have 200 tenants each paying $500.00 in a security deposit, this amounts to $100,000.00 sitting in a bank, and potentially $5,000.00 in interest, assuming a 5% interest rate, being lost to the banks and not being received by the property manager. Unfortunately, Florida law simply does not allow the property manager to keep all the interest. This article will examine the current law regarding security deposits, how they are held and where the interest can go.
What must be held in that Escrow Account?
Deposit money must be held in the escrow account. Deposit money is defined by Florida law as any money held by the landlord on behalf of the tenant, including, but not limited to, damage deposits, security deposits, advance rent deposit, pet deposit, or any contractual deposit agreed to between landlord and tenant either in writing or orally. "Security deposits" means any moneys held by the landlord as security for the performance of the rental agreement, including but not limited to monetary damage to the landlord caused by the tenant's breach of lease prior to the expiration thereof. By the way, this definition is word for word from Florida Statutes Section 83.43 (11) and (12). As you can see, if you collect money from a tenant and that money is not a “fee” but a potentially refundable “deposit” or “advance rent”, it must be retained in the escrow account and accounted for by the property manager.
The Non-Interest Bearing Account
Unfortunately, most deposit money is held in a non-interest bearing account for reasons previously mentioned. The bank retains all the interest, and the property manager and tenant get absolutely nothing in return. If anything, the property manager may get their bank fees waived, and this is common practice in many banks. The money must be in a separate escrow account in a Florida banking institution.
The Interest Bearing Account
Florida law states that if the deposit money is held in an interest bearing account, the property manager has two choices when dealing with the interest.
Choice #1: The tenant must receive of that interest paid at least 75% of the annualized average rate payable on such account. For the sake of simplicity, let’s say that the deposit was $1000.00 and the interest paid on that money was $50.00. The property manager can choose to give the entire $50.00 to the tenant OR can give the tenant $37.50 and retain $12.50 for the property management company.
Choice #2: The property manager must pay the tenant 5% simple interest per year.
When and How Must Interest be Paid to the Tenant if Choice #1 or #2 is picked?
While this may come as a surprise to many property managers, the interest must be paid to the tenant directly or as a rent credit at least once annually, which means usually at the time of the lease end or renewal of the lease. Many property managers roll over the deposit money into a renewal, forgetting that they must account to the tenant for the interest and pay this interest or credit this interest to the rent. While there is no specific penalty to a landlord listed in the Landlord/Tenant Act, landlords who are licensed by the Division of Real Estate could find themselves subject to a serious FREC complaint for a simple mistake such as this.
So you still want to keep all the interest?
Some of our clients, against our advice, specifically agree with the tenant in writing in the lease agreement that the property manager shall retain all the interest on the deposits. These staunch believers in freedom of contract feel that if all parties are in agreement, it should be allowed and will not be challenged. Unfortunately, Florida law does not draw clear lines of when and where we can move outside of the Landlord/Tenant Act and contractually agree to something that is not specifically permitted in the Act. Florida Real Estate Law specifically allows parties to a sales transaction to agree who retains the interest on the deposits, but unfortunately, we do not have this specific authorization in the Act. We have seen clients who retain the interest in full audited on a regular basis, and the auditors have not cited them for this practice. If you choose to keep all the interest, do so at your own risk, and remember that in the event of litigated disputes, you always have to fear the potential of class action litigation. If you do the same or similar thing to all your tenants, attorneys can and will sue you in a class action. This can result in huge sums, including attorney fees and costs, paid by your company to your attorney, whether you win or lose, AND the plaintiff’s attorney, if you end up losing in court.
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FORECLOSURE AND THE RESIDENTIAL PROPERTY MANAGER
by Cathy L. Lucrezi, Attorney at Law
Just when you think you finally understand the ins and outs of landlord tenant law, you get a frantic call from the tenant with a foreclosure question. Now what? Do you have to learn about foreclosures in addition to evictions?
You don’t need a lot of information about foreclosure procedures in order to cope. The information in this article should do the trick.
Why is the tenant served with foreclosure papers?
It is standard practice for the lawyer who is handling a foreclosure to name the tenant as a defendant in the lawsuit and to serve the tenant with a copy of the summons and complaint. This is done so that, at the end of the foreclosure, the new owner of the property is able to take possession very quickly.
The foreclosure is based on the owner’s mortgage (or it might be a lien of some sort). It does not involve any money owed by the tenant to the owner. So, even though the tenant was served with a copy of the foreclosure lawsuit, it does not mean that the plaintiff is trying to make the tenant responsible for the debt.
Does the foreclosure affect the lease?
The filing of the foreclosure lawsuit does not mean the lease is ended. The owner is still the owner. Both the landlord and the tenant remain obligated to perform the lease. The lease will stay in effect until a foreclosure judgment is entered by a judge. That can be two or more months after the tenant received the foreclosure lawsuit.
The tenant’s obligation to pay rent continues even though there is a foreclosure lawsuit. Thus, if the tenant fails to pay rent, you should serve a three day notice. The tenant is not entitled to break the lease due to the foreclosure, though it is possible that a judge could allow the tenant to break the lease, as the tenant’s peaceful quiet enjoyment of the premises is being interfered with and the tenant’s continued uninterrupted occupancy is at risk of ending suddenly and without much warning.
Must the tenant move?
Although the lease will end as of the day the foreclosure judgment is entered, the tenant will be able to occupy the premises until the day the property is sold at a foreclosure sale. The new owner will be entitled to get a writ of possession on the eleventh day after the sale.
Lots of things can happen between the day the foreclosure papers are served to the tenant and the foreclosure sale date. The owner might sell the property or refinance. In both of those situations, the lease would continue.
What should I tell the tenant?
It is tempting to help the tenant figure out what to do with the foreclosure papers. Even so, you should not offer legal advice. Do not advise him on what he should do in response to the lawsuit. You are not an attorney and should avoid the “quicksand” of offering “a bit of advice”. If the tenant wants advice, he will need to consult with an attorney on his own.
You can tell the tenant that he should read the papers he received. The papers will tell him what he must do.
Should I continue managing the property?
This is a tough question. Does the rent continue to go to the property owner? Do the mortgage documents require that the bank begins to receive the rent money? We recommend that you call your attorney to discuss the matter, especially if you are notified or contacted by the bank or its attorneys. We recommend that you place a clause in your property management agreement whereby you have the right to terminate the management agreement in the event the owner has a foreclosure action filed against her. This will give you greater flexibility in making your decisions.
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THE BASICS OF THE “UNCONTESTED” TENANT EVICTION - THE TIMELINE
by Harry Anthony Heist, Attorney at Law
Almost every property manager has or will eventually have to deal with filing an eviction. While those who file often are fully aware of the procedure, the new or “lucky” property manager often does not know the timeline in the process. A process it is indeed, and there are many steps along the way. The initial filing of the eviction is only the first step in a process in which the paperwork passes through many hands, and eventually ends on the day when the Sheriff meets you at the door and gives you possession of the premises. This article will set out the timeline for an UNCONTESTED eviction and give you an idea on why a typical tenant eviction takes between 20 to 45 days from beginning to end.
1. The Three Day Notice, Seven Day Notice to Terminate, Agreement to Vacate or Non-Renewal Notice has expired.
2. The Lease and Notice is transmitted to the attorney, usually by fax.
3. The attorney and legal assistants review the documents for problems, and the legal assistants input the case into the law firm’s computer system.
4. The “Complaint” and “Summons” is generated by the law firm.
5. The “Eviction Package” consisting of the “Complaint”, “Summons”, attachments, stamped enveloped and checks for the Clerk of Court and the Process Server (or Sheriff in some counties) is given to the Clerk of Court.
6. The Clerk of Court files the eviction by entering the information into the court computer system and in many counties, scans the documents into their system.
7. The Clerk of Court mails a copy of the “Complaint”, “Summons” and attachments to the tenant in the envelope your attorney has provided to them.
8. The “Summons”, “Complaint” and attachment are picked up by the Process Server or Sheriff’s Deputy.
9. The Process Server or Sheriff’s Deputy goes to the rental unit and attempts to serve the tenant.
10. If the tenant is not home, the Process Server or Sheriff’s Deputy must make a return trip no less than 6 hours later, and if the tenant is still not home, tapes the Complaint, Summons and attachments to the door. The tenant is now SERVED.
11. The Process Server or Sheriff’s Deputy then enters the information into their computer system and generates a “Return of Service”, which tells the Clerk how and when the documents were “Served”. The Process Server faxes the Return of Service to your attorney.
12. The Process Server or Sheriff’s Department clerk then files the “Return of Service” with the Clerk of Court.
13. The Clerk of Court enters this information into the computer system and files the “Return of Service” in the file.
14. The tenant now has five full business days, not including Saturdays, Sundays or legal holidays, to “Answer” the Complaint by writing a letter to the Court giving the reasons why he/she should not be evicted.
15. If the tenant does not file an “Answer” to the Court, the case is UNCONTESTED.
16. On the 6th business day after the tenant has been served, the attorney should or will file a “Motion for Default” with the Clerk of Court.
17. If the Clerk of Court is satisfied that the tenant has not filed an “Answer”, the Clerk of Court will enter a “Clerk’s Default”, file this and enter it into the computer system. NOTE: The Clerk of Court must go through all the mail it has received by the Default date, or it will not enter the “Clerk’s Default”. This means that if the Clerk of Court is behind in opening mail, a delay can occur.
18. Once the “Clerk’s Default” is entered, the file is brought to the Judge by the Clerk along with the unsigned “Final Judgment” the attorney has prepared and stamped envelopes for mailing to the tenant.
19. The file is now with the Judge.
20. The Judge reviews the file and if everything is in order, signs the “Final Judgment”. If the Judge is busy, backed up, on vacation, in a Judge’s conference or stuck in trial, a delay can occur in signing the “Final Judgment”.
21. The Judge signs the “Final Judgment”, and his/her Judicial Assistant mails out the “Final Judgment” to the attorney and the tenant.
22. Your attorney’s legal assistants track the file and often know that the “Final Judgment” has been signed before the mail arrives.
23. Your attorney will notify you that a “Final Judgment” has been signed and ask you if you want a “Writ of Possession”.
24. You check the unit, are absolutely sure the tenant has abandoned, nothing is in the unit, no one has been in the unit for a full 15 days, and you may notify the attorney’s office that you do not need a “Writ of Possession”. NOTE: We recommend you do request a “Writ of Possession” and finish up the eviction. It costs nothing for attorney’s fees, it is a $70.00 fee from the Sheriff’s Department, (more in a few counties) but money well spent. THE EVICTION APPEARS OVER, BUT YOU HAVE NOT ACTUALLY COMPLETED IT IF YOU DO NOT REQUEST A “WRIT OF POSSESSION” AND MEET THE SHERIFF AT THE DOOR.
25. You tell the attorney that you want a “Writ of Possession”.
26. Your attorney submits a “Writ of Possession” to the Clerk, who “issues” it.
27. A check for $70.00 (more in a few counties) is attached to the “Writ of Possession” form, which is given to the Sheriff’s Department with the issued writ.
28. The Sheriff’s Department processes the “Writ of Possession” into their system and assigns it to a Sheriff’s Deputy.
29. The Sheriff’s Deputy goes to the unit and either tapes the “Writ of Possession” to the door or hands it to the tenant.
30. The “Writ of Possession” gives the tenant between 24 and 48 hours to vacate the premises, sometimes a longer period due to weekends and holidays.
31. The Sheriff’s deputy calls you and tells you that he/she has posted the Writ of Possession and asks you if the tenant has vacated. YOU SAY: “I don’t know and I want to meet you at the property when you execute the Writ of Possession”. You do not say, “I will check the unit,” or “Yes, the tenant has vacated.”
32. You meet the Sheriff’s Deputy at the unit and change the locks; the Sheriff’s Deputy removes the tenant, and you take all the tenant’s belongings to the property line.
a. If the unit is full, the tenant is not present, and you feel the tenant may have not known about the eviction, CALL YOUR ATTORNEY.
b. The unit has some belongings, trash, etc.; you remove it all to the property line.
c. If you did not bring help with you to remove the property, you can remove it at a later time.
d. You NEVER make an agreement with the tenant that you will extend the Writ of Possession or allow the tenant to “come back later” and retrieve the belongings.
FINALLY, ALWAYS CALL YOUR LAWYER IF SOMETHING IS ODD, YOU EXPERIENCE PROBLEMS WHEN EXECUTING THE WRIT OF POSSESSION, OR IF IT APPEARS THAT THE TENANT IS NOWHERE TO BE FOUND, BUT THE UNIT IS FULL OF BELONGINGS AS IF THE TENANT DID NOT KNOW ABOUT THE EVICTION.
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WHAT’S REASONABLE ABOUT AN ACCOMMODATION
by Cathy L. Lucrezi, Attorney at Law
Fair housing laws require that a landlord permit reasonable modifications to a rental unit and make reasonable accommodations in rules, policies, practices or service. [Next newsletter, look for a discussion of reasonable modifications (e.g., grab bars and ramps).]
An accommodation is some “bending” of a rule so that a handicapped person can live in the rental unit. It can mean changing some rule that is generally applicable to everyone so as to make its burden less onerous on the handicapped individual. The landlord must make the accommodation if it is reasonable to do so.
Unfortunately, the statute does not define the word “reasonable”. HUD regulations don’t shed much light, indicating a reasonable accommodation is one that is “feasible and practical”. Judges have come up with a variety of interpretations.
Generally, the consensus is that an accommodation is considered reasonable if it would: (1) not require a fundamental alteration in the nature of the landlord’s business, and (2) not impose undue financial or administrative burdens on the landlord.
Here are the two examples offered by HUD:
Example #1: A blind applicant for rental housing wants to live in a dwelling unit with a seeing eye dog. The building has a no pets policy. The landlord must permit the applicant to live in the apartment with a seeing eye dog, because without the seeing eye dog, the blind person will not have an equal opportunity to use and enjoy a dwelling.
Example #2: A 300 unit apartment complex has 450 parking spaces which are available to tenants and guests, on a first come, first served basis. An applicant is mobility impaired and unable to walk more than a short distance. He requests that a parking space near his unit be reserved for him, so he will not have to walk very far to get to his apartment. The landlord must make this accommodation. Without a reserved space, the individual might be unable to live in the apartment complex at all, or when he has to park in a space far from his unit, might have great difficulty getting from his car to his unit. The accommodation therefore is necessary to afford the applicant an equal opportunity to use and enjoy a dwelling.
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