Will collecting rents from tenants of delinquent owners help cash strapped associations? Florida enacted Florida Statutes 718.116(11) for condominium associations and 720.3085(8) for homeowner and property associations (and property associations) and 719.108(10) for cooperative associations effective July 1, 2010. These laws are essentially identical and allow an Association to directly collect rents from Tenants occupying the home and if the Tenant fails to pay the Association, to evict the Tenant as if the Association were the landlord.
But I have been fielding many questions regarding this law, so it is time to address the most popular. (A copy of the 720.3085(8) is at the end of this article and the condominium /co-op statute is nearly identical).
1. The Association assessment(s) must be delinquent. The statute does not define delinquent, but the declaration or rules and regulations most likely does. It does not apply to special assessments, but only regular budgeted assessments.
2. The obligation of the Tenant is to future monetary obligations. The statute addresses future monetary obligations. The key here is what is a "future monetary obligation"? We can see from the application of the term that it is not the rent or monies due to the landlord, but only monies due to the Association. Thus we are going to safely assume that future monetary obligation means monies due to the Association in the future, and not the past due assessments. "In the future" means AFTER the mandatory written notice to the Tenant that the assessment or rent (see below) is to be paid to the Association.
3. If the Tenant is paying the Association according to a demand made by the Association, the Owner cannot evict the Tenant. This appears a bit too broad as the statute says that the Tenant is immune from "any claim" from the Owner. If the Tenant has put the property in disrepair does this mean the Owner has no recourse to evict? This is probably not the intent of the statute but it is an area that will need clarification. Also, as you will read below, if the differential between the monetary obligation and the full amount of the rent is not paid by the Tenant to the Owner, the Tenant can be in breach of the lease. The statute says that if the Tenant is paying the monetary obligation, the Owner cannot evict since the Tenant is "immune from any claim" of the Owner. This is problematic for the Owner and subject to interpretation and application by the courts. It would make sense that if the balance of the rent not paid to the Association under the Association demand is not paid to the Owner, the Tenant should be subject to eviction by the Owner. The statute is not meant to be a shield for the wrongful conduct of the Tenant.
4. The Tenant is to pay "the rent" to the Association upon its written demand. This would seem to throw some cloud of doubt as to what the Association is supposed to collect - whether just the "monetary obligations" or is it "the rent"? In this part (sub-paragraph (a) of the section of the statute it says the Tenant pays "the rent" to the Association. There is a distinguishing qualifier though - This seems to apply only in the case where the Tenant has paid "prepaid rent" to the Owner. In such case the statute says that the future rents (rents still to be paid) are to be paid to the Association which seems to mean the entire rental payment and not just the monetary obligation.
5. If the Association is collecting "the rent" and the sums collected exceed the "monetary obligation", what happens to the surplus? The statute is silent on this question. However, the Association will likely have to account to the Owner for the monies (surplus funds) that it holds that are not for "monetary obligations" (ie: assessments) that accrued after the written notice. Since the statute only applies to assessments after delinquency, theoretically the Association could sue the Owner in the appropriate jurisdictional court (County or Circuit, depending on amount) for a money judgment on the delinquency withoutresorting to the long and expensive lien and foreclosure procedure. It could then attach through a Writ of Attachment the surplus funds. The question is actually then, are there really surplus funds? The answer may be that the rents received after the "pre-paid" rents must be applied to all assessments that accrued subsequent to the written notice to the Tenant that it must pay the rents to the Association. (Remember, those assessments did not get paid because the rent has been "pre-paid" to the Owner and the Owner did not submit them to the Association). After those post-notice assessments are paid, any remaining rents would belong to the Owner and must be paid to the Owner, just as if there had been no pre-paid rent.
THE NEXT STEP - Where this is going is already being seen. Associations should consider creating a "pre-notice lease addendum" for all new leases. This addendum (some Associations are already using this concept) becomes part of the lease with the Tenant and advises the Tenant in advance that it is the Tenant's obligation to pay the regular maintenance assessment to the Association, notwithstanding the terms of the lease.
A copy of the general language of the statute follows. There are small technical changes to differentiate between a unit and a parcel.
Section 720.3085(8) - If the parcel is occupied by a Tenant and the parcel Owner is delinquent in paying any monetary obligation due to the association, the association may demand that the Tenant pay to the association the future monetary obligations related to the parcel. The demand is continuing in nature, and upon demand, the Tenant must continue to pay the monetary obligations until the association releases the Tenant or the Tenant discontinues tenancy in the parcel. A Tenant who acts in good faith in response to a written demand from an association is immune from any claim from the parcel Owner.
(a) If the Tenant prepaid rent to the parcel Owner before receiving the demand from the association and provides written evidence of paying the rent to the association within 14 days after receiving the demand, the Tenant shall receive credit for the prepaid rent for the applicable period and must make any subsequent rental payments to the association to be credited against the monetary obligations of the parcel Owner to the association. The association shall, upon request, provide the Tenant with written receipts for payments made. The association shall mail written notice to the parcel Owner of the association's demand that the Tenant pay monetary obligations to the association.
(b) The Tenant is not liable for increases in the amount of the monetary obligations due unless the Tenant was notified in writing of the increase at least 10 days before the date on which the rent is due. The Tenant shall be given a credit against rents due to the parcel Owner in the amount of assessments paid to the association.
(c) The association may issue notices under s. 83.56and may sue for eviction under ss. 83.59-83.625 as if the association were a landlord under part II of chapter 83 if the Tenant fails to pay a monetary obligation. However, the association is not otherwise considered a landlord under chapter 83 and specifically has no duties under s. 83.51.
(d) The Tenant does not, by virtue of payment of monetary obligations, have any of the rights of a parcel Owner to vote in any election or to examine the books and records of the association.
(e) A court may supersede the effect of this subsection by appointing a receiver.
Copyright 2010 Richard P. Zaretsky, Esq.
Be sure to contact your own attorney for your state laws, and always consult your own attorney on any legal decision you need to make. This article is for information purposes and is not specific advice to any one reader.
Richard Zaretsky, Esq., RICHARD P. ZARETSKY P.A. ATTORNEYS AT LAW, 1655 PALM BEACH LAKES BLVD, SUITE 900, WEST PALM BEACH, FLORIDA 33401, PHONE 561 689 6660 email: RPZ99@Florida-Counsel.com - FLORIDA BAR BOARD CERTIFIED IN REAL ESTATE LAW - We assist Brokers and Sellers with Short Sales and Modifications and Consult with Brokers and Sellers Nationwide! Shortsales@Florida-Counsel.com New Website www.Florida-Counsel.com.
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