- Letters of Protection
- Latest Landlord/Tenant Scams
- Sales Tax and Seasonal Rentals
- Carpet Damage




Letters of Protection
By Michael Geo. F. Davis, Attorney at Law

A "Letter of Protection" is a lawyer's representation that his client has agreed that an amount, which is owed to a creditor by the client, will be paid to the creditor by the lawyer from the client's share of a proposed monetary recovery.

Commonly used for medical providers

This letter is commonly given by lawyers on behalf of their clients to medical care providers. Personal injury lawsuits and workman's compensation claims are types of lawsuits in which letters of protection are often used. When a client has suffered a physical injury, he may not have sufficient money to pay for his medical care. Doctors, hospitals, and others who provide the medical care are promised payment from the client's monetary recovery. They are more willing to render the medical care if they have some assurance from the lawyer that they will be paid before the money is distributed to the client. However, letters of protection can be given to any creditor of the client in the hope that the creditor will forego payment, accept the letter of credit and rely upon the possible recovery for payment.

Not much protection

The problem is that such a letter is not much protection for the landlord. If and when the tenant recovers any money in his lawsuit, he has instructed his lawyers to pay his landlord an amount owed from the tenant's share of the recovery. The key words are "if and when" a recovery is made. If the tenant loses his lawsuit or his workman's compensation claim, than there is neither recovery for the tenant nor payment to anyone. If a recovery is made, when it will be made is another question. The tenant's legal action or claim could take months or years.

What is covered by the letter

It is important to understand how much a letter of protection is actually "protecting". The tenant may tell the landlord that the letter will cover the past and future rent. Whatever the tenant is saying, it's the wording of the letter of protection that is important. Some letters are promising payment only of the amount owed at the time the letter is received, not future amounts owed.

No guarantee of full payment

A tenant's recovery doesn't guarantee full payment to his letter of protection creditors. The attorney fees and costs of the lawsuit are first deducted from the client's recovery. It's possible that after payment to the letter of protection creditors, the balance to the client will be little or nothing. Despite having given letters of protection, a lawyer is unlikely to make distribution from the client's recovery without the client's final consent. A client, who is receiving nothing or very little from his recovery, may not be disposed to give final consent. The lawyer might then ask the creditors to agree to accept only a percent of their amount owed, so that the client can receive more. If an agreement cannot be reached that induces the client to consent to distribution, the lawyer is likely to deposit the client's recovery into court and let the court decide who gets what.

Significant risks

After reading this, I am sure you understand why our law firm advises its clients that reliance on letters of protection poses significant risks. Landlords invest in rental units, not in lawsuit recoveries. Foregoing collecting rent to rely on a letter of protection is a voluntary act by the landlord. The landlord is not required to do this. If the landlord is unwilling to rely on a letter of protection, the landlord should write a letter to the tenant, with a copy to the law firm, indicating that the landlord will not accept and rely upon the letter of protection. The rent must be paid timely and in full.


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Latest landlord/Tenant Scams
by Harry A. Heist, Attorney at Law

With every crisis or economic downturn you see an increase in fraud and scam artists seeking to prey on the individual who already is in a weak and vulnerable position. The property manager needs to be keenly aware of what is happening in the online world and how it can affect them and the property owner. The popular website craigslist.org and others have been a fertile breeding ground for scammers, and with the increase in foreclosures and vacant homes, new and improved scams are appearing.

Ads for your rentals at a lower rent amount!

Some property manager have actually found photos, descriptions, addresses and prices of the homes they have on the rental market appear online on other classified ad websites. Often the rent price listed is lower than on the property manager's site. The scammer takes action when an individual interested in the home contacts them. They have the interested party send money to them for the deposit, first month's rent, last month's rent, etc. Some scams involve the "landlord" being out of town, and the prospective tenant is asked to send a small sum to the landlord for the keys to be overnighted so the tenant can check out the property for himself. The scammer then simply takes off with the money, and the prospective "tenant" finds out he has been ripped off. Some of the scammers even go as far as physically showing the home to the prospective tenants, taking phony applications, deposits, etc., and do this multiple times on the same property. Beside the fact that there is fraud, you are now competing with phony ads making it appear your prices are inflated.

The problem

If an individual is ripped off by a scam artist, it is really not your problem or that of the property owner, UNLESS the "tenant" goes as far as moving into the home. Fake landlords seek out vacant homes and are actually placing tenants in these homes. You discover there is a family residing in the home, call the police, and the police refuse to get involved.

Why will the police not get involved?

While the police may be interested in the fraudulent aspect of the matter, you cannot depend upon them or expect them to remove the tenant, who as far as you are concerned is trespassing in the unit. Law enforcement is extremely cautious not to get involved with being "used" by a landlord to evict a tenant, and the standard response is, "It is a civil matter," which means you have to hire an attorney to file some type of dispossession action.

Protecting your owners

Some desperate owners, upon discovering that there is a tenant in their home, will actually seek to cut a deal with the tenant and have the tenant sign a lease with them, thinking that at least they now have a tenant. We advise against this. The owners have no idea whether the "tenant" has been scammed or is in fact a scammer himself. The simple act of trying to cut a deal validates the tenant's occupancy in the unit and complicates the issue further.

Although it may seem burdensome, it is crucial that you constantly inspect your vacant homes for signs of entry or lock tampering. Some property managers have increased their charges to their owner, due to the necessity of the homes being checked more often. The faster it is determined that someone has entered a unit or has taken up residence in a unit, the easier it will be to have them removed. Although law enforcement does not want to get involved, they will be of some help, especially if it can be proven that the person has not been in the unit for any length of time and has absolutely no legal right to be there. Being able to show clear and concise records and inspection reports to law enforcement will assist in having law enforcement at least question the tenant in the unit, and they may encourage the tenants to leave without the necessity of legal action. Keep an eye on craigslist.org for your area and notify them and law enforcement immediately if you see your homes posted on the website.


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Sales Tax and Seasonal Rentals
by Harry A. Heist, Attorney at Law

Seasonal rentals are quite common in Florida, and many property managers specialize in seasonal tenancies, preferring them over annual tenancies. Some managers who concentrate primarily on annuals will encounter situations when they are asked to rent one or more units seasonally for their clients. Before taking on seasonal rentals, the property manager must understand and follow all the laws set forth by the Florida Department of Revenue, or they could be in for some trouble. Recently, the Department of Revenue, hereinafter DOR, has increased its auditing and has been catching quite a few property managers by surprise. Most of the property managers who were in noncompliance did not fail to collect the taxes intentionally, but simply failed to know the law and made a mistake.

This article will address only a small part of the requirements regarding the taxes in seasonal rentals, and we will concentrate on the "non-rent" items which are taxable. Most property managers, if asked, will know that the "rent" is taxable on a seasonal rental ,but the DOR goes a bit farther, and there are big traps for the unwary. If you find after reading this article that you have not been properly collecting the taxes, we recommend you contact your accountant right away and see what the best approach would be to avoid bigger problems, if and when you are audited. If you are audited and found to be in noncompliance, you will be subject to the back taxes, interest and penalties. Often the penalties and interest will be waived by the DOR if the mistake was unintentional, but the back taxes could be substantial.

What constitutes a "transient" rental?

The words seasonal or transient mean the same for the purposes of tax collection. If the rental term is for a period of 6 months or less, the tax must be collected. This would include a verbal month to month tenancy, so it is crucial that you never allow a tenant to reside on a premises month to month from day one, unless you expect to collect the taxes. Under this scenario, the tax liability is only for the first 6 months and stops after that.

What taxes need to be collected?

Unfortunately, the typical 6% "state sales tax" is just the beginning. There is also a discretionary sales surtax in many counties, the amount varying by county, and the Local Option Tourist Development Tax, commonly referred to as the Tourist Tax, this amount also varying by county. Some taxes are paid directly to the State of Florida and in some cases paid locally. You need to know your county and know the law that applies. Many counties differ, so make no assumptions.

What is taxable?

Here is the issue. It is not simply the base rent that is taxable. According to the DOR, the TOTAL amount charged to the seasonal renter is taxable. Many seasonal rental agreements state the rent amount and also have a cleaning charge. This cleaning charge is taxable and it is the most commonly overlooked tax by the property manager. While the cleaning charge is the most commonly overlooked and incorrectly untaxed charge, it is only the beginning of the items which must be taxed.

The List

The following are some of the charges the DOR has stated are taxable, but it is not an all inclusive list. You may have other charges which also could be considered by the DOR as taxable. If in doubt, err on the safe side and charge the tax.

1. The Base Rent: This is the most obvious charge and is not the problem.

2. Electricity: In many but not all seasonal rentals, the electric is included in the rent, especially in weekly rentals. Sometimes though, the tenant does pay the electric in full or an amount over and above a particular set amount by the landlord. Any amount paid by the tenant for electricity is taxable.

3. Cleaning: This is the real problem area. Many property managers are not aware that this is taxable and simply add the cleaning charge to the bill. The DOR is fully aware of the lack of knowledge of the property managers, and this is the most common tax that has not been collected.

4. Parking: Some condominiums that allow seasonal rentals charge additional vehicle fees or parking fees, and these are taxable.

5. Miscellaneous charges: Garbage Pick-up, Life Guard, Security, Furniture rental, Club House use. If these amounts are extra, and the tenant must pay for them, the amounts are taxable.

Other potentially taxable amounts:

1. Application fee: If an application fee is required, this fee may also be subject to the tax. 2. Condo Approval Fee: The law is unclear, and this may be taxable.

Phone and Long Distance Charges:

Phone and long distance charges that the tenant incurs are not additionally taxable to the tenant, most likely because the DOR and all the other taxing authorities have already handled that on the phone bills.

Exceptions to the tax:

Most, but not all seasonal rentals, are subject to taxation. There are some exceptions carved out but not frequently encountered. A seasonal rental to a full time college student is exempt from taxation. Rentals to federal employees are exempted out as well, if they are performing work related duties. This would be encountered in such hurricane related situations when FEMA employees needed a place to rent on a short term basis. Military personnel and diplomats are also exempt, and in the case of military personnel, they must be traveling under military orders. It is the responsibility of the lessor to obtain all the necessary documentation from the tenant before any exemption should be given. If in doubt, check with your accountant or attorney.

Are you in compliance?

If you are not, get into compliance immediately. Make sure your lease or reservation agreement states that the amounts are taxable, and if you already have leases for next season, take a look at them and make it clear to the tenants that they must pay sales tax. If they refuse to pay, refer them to the law. If the lease or reservation agreement did not properly address the fact that the seasonal tenant would be liable for the sales tax and the tenant refuses to pay, you may be put in a position in which you or the owner must pay the amount due. In any event, make sure you do a self-audit immediately of your files and those of the agents you may be in charge of in your office. We highly recommend you download the DOR publication called Sales and Use Tax Guide for Transient Rentals


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Carpet Damage
by Michael Geo. F. Davis, Attorney at Law

The simple question of how much to charge the tenant for carpet damage is often more complex than it appears. Straightforward legal principles become muddied when they have to be applied to real-life situations.

Simple legal principles

The legal principles are simple. The landlord should use the least expensive, practical method to replace or repair. This is known in legal jargon as mitigating your damages. If it's possible to remove a stain from the carpet, the landlord should remove the stain rather than replace the carpet. If the carpet has a small tear that can be repaired, then the landlord should repair rather than replace the whole carpet.


When the landlord must replace the carpet, he should not upgrade at the tenant's expense. He should replace with an equivalent grade. If the same grade is not available, then carpeting at a comparable cost should be used. If upgrading, then the additional upgrade cost should be paid by the landlord. The landlord should not charge the tenant for more than the tenant has damaged. If only the bedroom carpet was damaged, then the landlord shouldn't charge the tenant for re-carpeting the entire apartment.

Undepreciated cost

The landlord cannot charge a tenant the full cost of new carpet to replace carpet that isn't new. This would be charging the replacement cost. The landlord should charge the tenant for the loss of the value that was left in the carpet. This is charging the undepreciated cost. For example, if carpet will last five years (its useful life) and the carpet is three years old when the tenant vacated, then you have used 60% (3yrs/5yrs) of its value. The tenants' destruction of the carpet has prevented you from using the other 40% (2yrs) of value in the carpet. If the new carpet costs $600, you can charge the tenant $240, which is 40% (the value or useful life that you lost) of the full cost of carpet.

Real life isn't as simple

The real life situations are complicated. These are just a few of the host of other factors that are considered. The location of the tear or stain will effect the decision. A tear in the middle of the living room is less acceptable than against the wall under the drapes. The value of the rental as reflected by the amount of monthly rent will affect the latitude the landlord has to repair rather than replace. The landlord of a $5000 per month rental has a reasonable argument that his renters will be less accommodating to carpet imperfections than the $500 per month renter. The single-family home renter's expectations with regard to the carpeting scheme will probably be greater than the college student apartment renter. Industry custom may come into play. Although the padding under a carpet may not be damaged, it may be customary to replace the padding when you replace the carpet.

The concept of presentation

There is some intangible in the way things look, feel, flow and match. There is an entire segment of the multi-family industry devoted to helping landlords convey the right look and feel for their apartments, such that the prospective tenant wants to rent. The tension is between the landlord's desire to preserve presentation to enhance marketability of the apartment versus the tenant's desire to suffer the minimum possible repair or replacement charge.

Uncertain litigation

Finally, these matters are so subjective that they defy prediction of a judicial outcome. The landlord should remember that he carries the burden of proof in any claim against a security deposit or in any lawsuit by the landlord for damages. The landlord must prove the condition of the carpet at move-in and at move-out and that the any damage is greater than ordinary wear and tear. Factors affecting the court's decisions will be the reasonableness of a party's position, the demonstrative evidence (pictures), the credibility of the testimony and independent expertise in the particular area. The landlord's opinion that the tear or stain required replacement, or that mismatched carpet in the bedrooms and hallway affects his ability to market the apartment, may strike the court as simple common sense or as self-serving, depending on the availability of comparison pictures. Testimony from an industry expert, such as a carpet or flooring specialist, or an interior decorator, may be required by the court.


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Law Offices of Heist, Weisse & Wolk, P.A.
Phone: 1-800-253-8428 Fax: 1-800-367-9038

Serving Florida's Property Managers with main office in Fort Myers Beach. Available by appointment in Orlando and Clearwater

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