VOLUME 4 - ISSUE 3 LEGAL UPDATE
- Releasing Your Tenant From A Lease
- Does a Lease Terminate When a Property Sells?
- Making Reasonable Modifications
RELEASING YOUR TENANT FROM A LEASE
by Harry Anthony Heist, Attorney at Law
Many situations will arise when it is prudent to release a tenant from a lease. The tenant may be making a concerted effort to break the lease by making complaints regarding the property condition, mold, a sexual predator moving nearby, disturbances from neighbors, safety fears, or anything else the tenant can come up with. The reasons may actually be legitimate, but often the tenant simply wants to move for an unrelated reason. The landlord can take a hard line position and refuse to allow the tenant to break the lease and potentially face an even more concerted effort by the tenant, or worse yet, litigation may be threatened or instituted. If a tenant really wishes to break a lease, he simply will. Nothing can force a tenant to remain on the premise for the balance of the lease, and collecting monetary damages from a tenant who has vacated prior to the end of the lease is often hopeless. In some situations a tenant will outright request to be let out of a lease, and in other cases, the tenant should be “helped” out and the offer for a lease break given to the tenant. In such cases, the landlord actually wants the tenant to break the lease.
The Judge vs. The Lease
One of the hardest things for our clients to understand is that although the lease has a beginning and an ending date, a judge may allow the tenant to break the lease. The tenant is the poor helpless “consumer”, and you are the rich landlord trying to penalize the tenant by holding them to the lease. A tenant may come up with an excellent story in court which may be a complete falsehood, and the judge is put in a position to either believe the tenant or the landlord. NEVER underestimate what a tenant can come up with, and do not think that the judge will always believe your set of “facts” over the tenant’s set of “facts”. Often a tenant can lie more convincingly than you can tell the truth.
Legitimate Tenant Complaints
If a tenant complains about a legitimate and verifiable problem that the landlord cannot rectify within a reasonable period of time, we feel that the tenant should be given an offer by the landlord to break the lease. Typical example could be a mold problem not caused by the tenant, some damage to the premises necessitating the tenant to vacate in order for a repair to be effectuated, or serious disturbances caused by neighbors which you cannot rectify. We recommend that the tenant be given a written offer to break the lease without penalty at any time by giving the landlord a particular number of days’ notice. The number of days will depend upon then severity of the problem and how anxious the landlord is for the tenant to vacate. If the tenant fails to vacate, it will be more difficult in the event of a court action for the tenant who remains on the premises and withholds rent if the owner has made the offer to vacate and the tenant did not accept this offer. Occasionally a tenant will state in court that she would have vacated but did not, because she would be held liable for the rent under the lease. By making the offer to the tenant, this argument does not hold up.
Other Tenant Complaints
Many tenant complaints simply will be lame excuses to break the lease. You may feel they are completely ridiculous excuses or possibly even fabricated issues. Tenants may play the “repair game” when they request repairs, but then fail to allow access to the repair person. A tenant may have been subjected to a criminal act or vandalism to the premises. While your opinion is that the excuses are not legitimate or the tenant was involved in some criminal activity which caused a problem on the property, never underestimate what a tenant can do in court to convince a judge that there is some legitimate reason why the tenant’s peaceful quiet enjoyment of the premises is being interfered with to the level at which the tenant should be allowed to break the lease. In many situations it will be best for all to just let the tenant go.
Returning the security deposit immediately
An effective way to help a tenant vacate quicker is to offer to return the security deposit immediately to the tenant upon vacating the premises. Most tenants will not wish to wait for the landlord to follow the security deposit claim procedures, and most will not trust the landlord to return the money. Tenants often request this immediate return as part of the terms of vacating. If this is part of a deal, it must be made clear when and how the money will be transferred, and the landlord needs to understand the risk that in the event there are damages to the premises, the funds will be gone. An inspection of the premises prior will be necessary to see if this is feasible. Your attorney will advise you on the mechanics, and a document should be drawn up detailing all the terms. You never should return the security deposit or any other escrowed funds until such time as the tenant is completely out of the premises, the keys are returned, everything has been removed from the premises, you have inspected the premises one last time, and the tenant has signed a “Confirmation of Vacating Premises”. We do not recommend allowing the tenant to use the security deposit for the last month of occupancy, as you have no assurance that the tenant will in fact vacate the premises. We advise that if the tenant tells you they will vacate on a set date, the “Agreement to Vacate” is used.
Single Family Home Management
While an apartment management company has free reign to allow tenants out of a lease, if you are managing a home for an owner and you do not have full power in your management agreement to make such lease break decisions without owner input, it is crucial that the owner gives you permission in writing to allow the tenant to break the lease. You need to be clear with the owner that the tenant will be breaking the lease with no penalty if this is the case. This permission always needs to be given in writing. Often an owner will agree to a lease break, but is under the impression that the tenant will continue to owe the rent or forfeit escrow money that the manager is holding. It is imperative that all the terms are made perfectly clear to avoid an angry owner who wishes to take out his or her frustrations on the property manager by filing a FREC complaint or civil action.
Resistance by the property owner to a lease break
Most owners will not be sympathetic to a tenant lease break request. They are often absentee owners and do not understand the situation or Florida law. Most think that if a tenant breaks a lease, they will be able to “go after” the tenant for the rent money. Most property managers know that this is simply not feasible, as Florida is a “debtor” state, meaning the collection laws favor the debtor. Use your attorney to encourage the owner to allow the tenant to break the lease. A conversation between the attorney and the owner can often instill some sense and reasonableness in the mind of the absentee owner.
The Mutual Release
If a landlord and tenant agree to ending the relationship, the last thing either party wants is to have a potential lawsuit filed after the agreed upon lease break. This is where a “Mutual Release” will be advantageous to all parties. In this release, all the terms and conditions are set out, and all parties release each other from any legal liability, past, present and future. Can this completely protect the landlord? As for damage to personal property and money issues, the Mutual Release will accomplish the desired results, but beware that the landlord may still have potential liability. A tenant can sign a release and possibly later the tenant or a minor occupant could develop a health issue that he or she attributes to the tenancy. Do not trust a Mutual Release to completely protect the landlord in this situation, but always use one when allowing the lease break.
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DOES A LEASE TERMINATE WHEN THE PROPERTY SELLS?
by Harry Anthony Heist, Attorney at Law
A common question that we get has to do with the status of a lease in the event of the sale of the property. The quick answer is that the property can sell a hundred times, and the lease will survive. When a tenant rents a unit, the tenant has a full right to use that unit for the period of time as defined in the lease agreement. While it is not a right of ownership, it is a right of use, and this right is strong and recognized under law. All terms and conditions of the lease will continue when only the ownership changes. Can the rights of the tenant and landlord be modified by contract? Absolutely, and often leases are prepared which do in fact terminate upon the sale of the premises.
Termination upon Contract
A lease can have a clause which allows termination by the landlord upon a “contract for sale” being entered into on the property. The advantage of this arrangement is that the sale may take place at a future date, and this may allow time for the tenant to vacate the premises so the property can be sold without a tenant in possession. The tenant may not vacate the premises according to the terms of the lease, and an eviction may be necessary. If the sale is contingent on the premises being vacant, termination upon contract for sale is the way to go. A landlord can abuse this clause by entering in a sham contract with a third party, so as to be able to invoke the termination upon contract clause. We do not recommend this ever be done, but we have seen it happen.
Termination upon Sale
In order to terminate a lease agreement upon sale of the property, the lease must contain a clause specifically allowing such termination. Additionally the clause should have a set number of days’ notice for the tenant to vacate the premises upon such sale. Once the sale is consummated, the tenant must vacate within the set number of days. Not all tenants will vacate the premises according to the clause, so a potential buyer needs to be warned that he may be inheriting a potential eviction action.
The Security Deposit and other Escrow Money
A common mistake in property sales is not to address the escrow money. We have seen situations in which disputes arise between the buyer and seller as to who is entitled to the funds. The escrowed funds belong to the tenant. They need to be transferred to the account of the buyer upon closing, and the buyer needs to be made aware of their duties and responsibilities with regard to holding the funds and disposing of the funds upon the end of the tenancy. A common problem occurs when the sale is consummated and the buyer is not given the funds to hold in their escrow account, or the buyer is not made aware of the funds if an estoppel letter was not used. The buyer then finds herself in a position in which she needs to return the funds to the tenant who is vacating, but the buyer has no funds to return. Every real estate deal should carefully address the escrow funds, or the buyer may be put in the position of having to come up with these funds and then try to sue the long gone seller of the property.
Suggested Lease Clauses
1. “Termination upon Contract for Sale”
In the event a Contract for Sale is entered into on the premises by the owner and a third party, the lease shall terminate early at the option of the owner and tenant agrees to vacate within _____days notice from the owner
2. “Termination upon Sale”
In the event the premises is sold by owner to a third party, the lease shall terminate on the date of sale at the option of the owner or successor owner and the tenant agrees to vacate within ________ days from the date of sale
3. “Combo Clause”
In the event the premises is sold by owner to a third party or a Contract for Sale to a third party is entered into on the premises, the lease shall terminate at the option of the owner or new owner, and the tenant agrees to vacate within ________ days notice from owner or successor owner
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MAKING REASONABLE MODIFICATIONS
by Cathy L. Lucrezi, Attorney at Law
First off, it’s important to know the difference between an accommodation and a modification. A modification is a change to the physical structure of the unit, while an accommodation is some “bending” of a rule. Both a modification and an accommodation permit the disabled person to fully enjoy the rental premises.
The landlord must permit “reasonable” modifications. To be reasonable, a modification must: (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.
The tenant is responsible for paying the costs of the modification. If the modification is something that does not diminish the unit’s ability to be rented to the “next” tenant, then the landlord cannot require the tenant to remove the modification when he leaves.
The landlord can insist that the work be done by licensed professionals, that all codes be complied with, and that the design be reviewed by the landlord before work begins. The permission to do the modification should always be done in writing, to avoid confusion later.
A sample letter granting permission might be: “We understand you wish to install a lift chair in the interior stair case, due to your son’s handicap. We consent to such a modification of the unit on the following conditions: 1.) The modification is done at your expense; 2.) Our office reviews the work plan or design before work begins; 3.) All work is done by licensed individuals and complies with local codes; and, 4.) You agree to restore the staircase upon your vacating."
The landlord may not increase any customarily required security deposit due to the modification. However, if the modification is something that would diminish the “next” tenant’s enjoyment of the unit, the landlord can require the tenant to pay, over a reasonable period, an amount of money not to exceed the cost of the restorations. HUD requires that such a deposit be in an interest bearing account, with all the interest going to the tenant.
Whether it’s grab bars or a light-alert system that takes the place of a traditional doorbell, the landlord must permit the disabled tenant to make a modification to the existing premises. Failing to do so may mean that HUD attempts to “modify” the landlord’s pocketbook.
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