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Understanding the New Liquidated Damages Law
Before the law change Before the recent change to Florida Statute 83.595, when a tenant chose to break a lease by vacating before the end of the lease, commonly called "skipping" or vacating early, the landlord was only allowed to charge the tenant rent through the earlier of the lease expiration date or the date a replacement tenant took occupancy. In addition, many companies also charged a Termination Fee, Termination Penalty or Liquidated Damages charge, BUT in a major Florida class action lawsuit, the judge in that particular case ruled that these various practices were unlawful and inconsistent with Florida Statute 83.595. The New Law A common misconception is that under the new law, when a tenant vacates early, you can NOW charge the tenant a Liquidated Damage or Early Termination Fee. This is only partially correct, and it is crucial that you understand the law. Under the new law, you can give the tenant a CHOICE to either owe a flat fee "Liquidated Damage/Early Termination Fee" OR owe rent until the unit is re-rented. The TENANT makes the choice, NOT you. If you do not want to give the tenant this choice, you will not use the Addendum, and you can ONLY charge the tenant your rent loss, as has been the law. Suppose you want to hold the tenant to all the rent due under the lease? If this is what you want to do, then simply do it. The law still allows you to do this. You will not give tenants a choice in the matter, and if a particular tenant vacates early, you will charge rent as it becomes due under the terms of the lease until the unit is re-rented. In a soft market, when it may take a while to re-rent a unit, this is your best bet, and you really do not need to read any further, AND you will NOT use the Addendum. Suppose you want to charge the tenant a "Liquidated Damage/Early Termination Fee" when they vacate early? You CAN if and only if 2 things occur: A. You present the attached Addendum to the Tenant AT THE TIME OF LEASE SIGNING AND B. The tenant picks Choice #1 ________________________________________________________________________ What happens if the tenant picks Choice #1? You can charge the tenant a flat "Liquidated Damage/Early Termination Fee" of a maximum of 2 months' rent when they vacate early and NOTHING more other than rent and charges they may owe at the time of vacating early. They may or not pay it, but if they don't, this 2 months' rent can be sent to collections. What happens if the tenant picks Choice #2? You can charge the tenant rent that he owes at the time he vacates and rent as it becomes due until the unit is re-rented or the end of the lease, whatever occurs first, just like you have been doing or should have been doing all along. Can you charge the tenant a Concession payback? The law does not say you can or you cannot. If the tenant picks Choice #1, you definitely should NOT charge a concession payback, because Choice #1 is a clear 2 months' rent "Liquidated Damage". Now for some Q&A: Q - Do I have to use the Addendum? A - Absolutely not. It is your choice. If you don't provide the Addendum to the tenant to sign, the tenant will owe rent that is owed at the time the tenant leaves early PLUS all rent as it becomes due until the unit is re-rented or the end of the lease, whatever occurs first. Q - Can I have current residents come in and sign the Addendum? A - No. You can only use the Addendum at lease or renewal signing. Q - Do I need to fill in all the amounts on the addendum before I give it to the tenant? A - Yes, do not leave anything blank. Q - Suppose I use the Addendum and the tenant picks Choice #1? A - If the tenant chooses to vacate early, you can only charge the tenant 2 months' rent plus whatever they already owed you for rent or other amounts under the terms of the lease. NOTHING MORE. Q - Suppose I use the Addendum and the tenant picks Choice #2? A - You can charge the tenant rent that is owed at the time the tenant leaves early PLUS all rent as it becomes due until the unit is re-rented or the end of the lease, whatever occurs first. Q - Can I force the tenant to sign the Addendum? A - No. If the tenant refuses to sign, they simply will owe rent that is owed at the time the tenant leaves early PLUS all rent as it becomes due until the unit is re-rented or the end of the lease, whatever occurs first. Q - Should I utilize the new law and use the Addendum? A - It is purely a business decision. In a soft market, it would be better not to utilize the new law and the Addendum. If you feel you will rent out the unit in less than 2 months, it would be better to use the Addendum IF the tenant picked Choice #1. There is no guarantee what the tenant will choose. Q - Can I force the tenant to pick a particular Choice, #1 or #2? A - No. If you use the Addendum, you are at the mercy of the tenant and his choice. Q - Can we require the tenant to give notice before he vacates early if he picks Choice #1? A - Yes, but if he does not, you can only charge the 2 months' rent amount as if he simply walked out on you tomorrow. Q - If the tenant picks Choice #1 and gives us notice, can we charge the tenant through the notice period PLUS the 2 month's rent? A - NO. You can ask the tenant to give you notice, BUT you cannot hold them to it. Q - If I decide to use the Addendum, must I use it on everyone? A - For Fair Housing purposes if you use it for one, you should use it for all, at least in a given time frame. Q - Why does the tenant get to make a choice? Why can't we just charge them a liquidated damage? A - The tenant only gets to make a choice if you decide to use the Addendum. The Governor said he would not sign the bill into law unless the tenant was given a choice, so the bill was amended late in session to get it through. |
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