Archive for February, 2012

I recently took over the management duties…..

February, 2012

Q1

I recently took over the management duties of a 10 unit complex in Florida and there are a few tenants that have not paid the rent in over 2 months. The previous management company is not cooperating with me to get copies of the rental agreement(s) or lease(s). therefore I do not have a name to put on to the 3-day notice or know if it is the correct name (whom ever the lease was made out to) or even if the person(s) that originally signed the lease are in fact the ones that are now occupying the units. I also need a copy of the rental agreement or lease to file for the eviction in this county.

A1

I assume that you are not the owner, that you are doing the management for compensation, and that you are properly licensed in Florida to manage property if doing so on a commission basis. If not the owner and not licensed, you should not manage for compensation unless you are legally an employee of the owner – that is, all employment, insurance, and tax laws are being followed. There are potentially serious penalties, from both civil liabilities and criminal prosecution, if caught doing so otherwise. Even managing for some other owner without compensation and avoiding licensing law issues, can pose significant legal risks and financial costs if something goes wrong.

So long as you are legally an employee of the owner or are properly licensed in FL, the most effective action might be to warn the previous management company that you will immediately file a complaint with the real estate licensing agency in your state because of the failure to cooperate unless they immediately provide copies of all documents relative to existing tenants. You might first check that the previous management company was properly licensed, as this could change what you want to say to them.

In some states it may be possible to serve notices, even commence evictions without names. For example, when evicting tenants occupying a unit where non-tenants may also be living, one will
sometimes need to add John/Jane Does 1 through 5 (or some other number to cover all potential unknown occupants). It is even possible that Florida allows service against the unit itself without the exact names of the occupants.

You may be able to easily get an answer to the above issue by asking the court clerk’s office in the court of jurisdiction, as sometimes the office will be willing to provide such information. If Florida
or the specific county or city provides notice forms (as is done in some jurisdictions in the country) the instructions for the form or the form itself may provide information regarding the need to use exact tenant names when serving notices. If all else fails you may need to consult a competent attorney to determine if serving notices to John and Jane Does or against a unit without including names is adequate in your state. This is something that may not be covered by Florida’s landlord-tenant law and asking an attorney may be simpler than researching Florida statutes yourself and would more reliable than searching on the Internet because the answer could vary among courts within the state or other jurisdiction.

Another potential issue revolves around whether or not tenants were adequately noticed regarding change of management. If not, the tenants could have a defense supporting their failures to respond
to the notices.

If the previous management company did not provide notice of the change in management, it should be possible to solve this problem via adequate notice from the owner, perhaps accompanied by proof of ownership.

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Q2

Is there any law for Illinois that helps in ending a lease when a tenant is moving several hundred miles away for a change in job?

A2

I am aware of no state where changing to a job in a distant location, no matter what the reason, allows the tenant to break a lease without the potential for serious ramifications.  However, I am not knowledgeable about potential peculiarities of IL law and local jurisdictions within a particular state can have more restrictive laws than the state. Accordingly, I encourage you to also research the matter via other resources and/or to consult a competent IL landlord-tenant law attorney.

In general, tenants cannot escape liability under their leases due to economic hardship, a job transfer, marital discord, or health issues. In most jurisdictions, even death does not terminate
a lease and the deceased’s estate remains liable for the lease.

While some county or city somewhere in the country may be an exception to the above statements, the only country-wide exception applies to military personnel under specific circumstances. I assume that the tenant is not military, so I’ll not discuss this case.

A tenant who breaks a lease is potentially liable for the rent due for the rest of the lease term even though no longer living in the unit. He would almost certainly forfeit his security deposit
and he could be sued for the rent still due under the lease along with any alleged damages to the unit, something that will be difficult and costly for the tenant to defend against from several hundred miles away. And, if he didn’t defend himself in court, the landlord would likely obtain a default judgment for whatever amount was claimed in the complaint. This judgment would affect
the tenant’s credit record and be collectable even if the tenant moved to another state, assuming the tenant doesn’t discharge the judgment in bankruptcy or the tenant is or becomes judgment proof due to some other reason. The tenant, in addition to owing rent for months that he didn’t even live in the unit, could even have to pay the landlord’s attorney fees and court costs.

Some states’ laws require and many judges in states without such laws would likely require that the landlord make reasonable attempts to re-lease the unit as soon as possible and, absent a
negotiated settlement, a landlord may not be allowed to collect rent beyond the date when the unit is re-leased.
A landlord can always voluntarily release a tenant from their lease obligations with a settlement negotiated between landlord and tenant. A negotiated settlement is usually of benefit to
both the landlord and the tenant, as it avoids the unpleasantness of a broken lease and the potential costs of legal actions with no certainty that the landlord will recover the total costs. Accordingly, in a normal rental market, the landlord may be ahead by collecting for a certain number of months rent and any damages and to find a new tenant as soon as possible. It is usually also
advantageous for a tenant to negotiate a termination if the landlord is willing to be reasonable. Any settlement should always be done with a written agreement.

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Q3

Can I ask applicants for deposit if they want me to hold the apartment for them? In case they change mind later, do I keep the deposit money?

A3

In most states a landlord can take holding deposits. However, considerable care must be exercised when taking them.

The holding deposit is not a security deposit, but is to meant to compensate the landlord for damages suffered for holding a unit off the market in the event that the applicant fails to meet screening qualifications or rescinds his/her agreement to rent the unit.

Although holding deposits may be legal in your state, they can often lead to misunderstandings or even legal hassles. A major problem is that most states do not cover the subject adequately in their
statutes, if at all, and it is often unclear regarding how much of the deposit may be retained by the landlord in the event screening results are unsatisfactory or the applicant cannot come up with the necessary funds or simply changes his mind about wanting the unit.

Some states that cover holding deposits by statute specifically allow a landlord to retain an amount related to the landlord’s cost of holding the unit. This might include the costs of additional
advertising, prorated rent for the holding period, and perhaps a reasonable charge for the time related to paper work and inconvenience to the landlord.  Holding a larger amount puts the landlord at risk for a lawsuit. Some states specifically require that there be a written contract that states the terms and provides a receipt for the amount.

For the landlord’s protection, holding deposits should always be in cash, cashier’s check, or money order and, even if not required by law, for the protection of both parties there should always be
a written agreement detailing the conditions related to the deposit.

When the landlord holds the rental unit for an applicant, it should be considered off the market and unavailable to other qualified prospective tenants who may have to be turned away. If the applicant later changes his/her mind, the landlord may have suffered financial harm. In such a case, the landlord is justified in retaining all or part of the holding deposit within the limits allowed by state law. However, be sure that this scenario is discussed in a signed agreement.

The amount of the holding deposit should be reasonably related to the rent of the unit and should take into account the potential inability of some applicants to immediately put up significant
deposit funds in addition to application and/or screening fees.

The written holding deposit agreement should be in accordance with any applicable state law and unambiguously cover the following issues:

  • The  address of the rental unit,
  • The  names of landlord and applicant,
  • A  clear statement that the deposit is a “holding deposit” rather than a  security deposit,
  • The  amount of the deposit,
  • The  length of time (including exact ending date) the landlord is willing to  hold the rental, taking into account the size of the deposit and other  qualifying information,
  • The  basic terms of the lease agreement,
  • The  conditions under which the landlord will rent the unit to the applicant –  e.g., verification of identity, a fully completed application form,  satisfactory results on all applicable screening reports, verification of  employment, and full payment of the security deposit and first month’s  rent by the end of the holding period,
  • What  will happen to the deposit if the applicant signs a lease agreement –  usually, that the full holding deposit will be credited to the security  deposit,
  • What  will happen if the applicant decides not to rent the unit before being  notified whether or not his/her application has been approved,
  • What  will happen to the holding deposit if the applicant fails to pass  screening – usually the full deposit should be returned if the failure is evident within a couple of days after the landlord has accepted the  holding deposit, and
  • What will happen to the holding deposit if the applicant defaults on the holding agreement – specifically, how much the landlord will retain, and when and how the portion not being retained by the landlord will be returned to the applicant.

In summary, landlords and agents must follow any laws of their states and they should use good judgment and be fair in their holding deposit policy. It is best to avoid the use of holding deposits,
particularly now that most verifications of qualification can usually be done within a relatively short time utilizing today’s technology. An applicant whose holding deposit is retained without adequate justification may well have a cause of action for damages against the landlord which can result in more time and expense than the deposit was worth.