The Real Deal Miami

New legislation could bite landlords in the wallet

By Jennifer LeClaire | June 26, 2008 03:17PM

A Florida landlord can now charge liquidated damages or an early termination fee under HB 1489 – a bill signed into law last week by Gov. Charlie Crist – even if the property is re-rented immediately.

That may sound like a positive change for landlords, but after examining the possibilities some legal experts aren’t so sure the new law will benefit property owners, at least in the short-term.

“Rental prices are going down month by month in a battered housing market,” said Steven Hemmert, an attorney in the Boca Raton law office of Buckingham, Doolittle & Burroughs LLP. “Liquidated damages are probably going to give the landlord a lower recovery than they would have in a normal housing market.”

Before the bill was signed into law, liquidated damages provisions were illegal in residential leases in Florida. Tenants can now choose between liquidated damage and an early termination fee.

Under the new law, the early termination fee cannot exceed two months rent, and the landlord cannot require the tenant to give more than 60 days notice.

When the market tightens up again, this legislation could be a positive remedy for landlords – if the tenant obliges. But with rental rates down, collecting the liquidated damages may not be the boon landlords hoped for when they first supported the bill in a booming housing market, Hemmert said.

It’s not completely cut and dried, either. The tenant has to agree to pay the fees as part of the contract. The tenant can opt to sign a separate lease addendum that offers two choices: agree to pay the fee should he choose to move before the end of the lease period, or acknowledge that the landlord could still seek damages as provided by law.

“In the current market, it may take the landlord more than two months to get a tenant. Even if the landlord does get a tenant, they may not get as much rent as what they were originally entitled to under the original lease,” Hemmert said.

The good news is liquidated damages and early termination fees do not include other damages, unpaid rent or accrued charges. And damages will be easier to calculate under the new law and it will be easier for landlords to get damage awards more quickly.

“It usually takes about six weeks to actually get a tenant out, then you have to go back and prove damages. If the landlord still doesn’t have a new tenant, they don’t know what the damages are. So this law helps in that regard,” Hemmert said. “Still, the landlord is more likely to come out on the losing end” in the current market.

Despite the market realities, the Florida Association of Realtors (FAR) is applauding the new legislation. The FAR has supported the bill for many years. Crist vetoed it in 2007.

Trey Price, a public policy representative at the FAR, said it remedies a long-term problem.

“This is a make sense bill,” Price said. “We’ve heard from many of our members who have had problems with recouping lost rent because a tenant breaks the lease. This is an important bill for the future.”