WHAT IS A FEE IN LIEU OF THE SECURITY DEPOSIT?
How is a security deposit defined?
Florida State Statute 83.43(14) defines a security deposit as money held by the Landlord as security for the performance by the Tenant to the terms and conditions of the Rental Agreement. This can include damages caused by the Tenant such as failure to comply with monthly rental payments, property damage, or damages arising for the enforcement of the Rental Agreement.
When is the security deposit collected?
The Landlord generally collects the security deposit upon the signing of the Lease Agreement. If the Landlord does not collect the security deposit upon the signing of the Lease Agreement, it generally will be difficult for the Landlord to mitigate losses arising from a breach of the Lease Agreement by the Tenant.
What is the Tenant cannot pay the security deposit?
Florida State Statute 83.491 provides that the Landlord may offer the Tenant an option to pay a fee in lieu of a security deposit.
How does a fee in lieu of a security deposit work?
The Landlord may offer a monthly payment option agreed upon by the Tenant. If the Landlord and Tenant have entered into a payment option, the Landlord Thirty (30) days prior to the expiration of the Lease Agreement must notify the Tenant of the following:
1. Any costs or fees due to unpaid rent.
2. Any costs for repair of any damages beyond normal wear and tear.
3. The Landlord must wait Fifteen (15) days after providing the Tenant the Notice before submitting a claim to an insurer.
How can I claim damages to my insurer?
Claims submitted to an insurer must include the following:
1. List of unpaid rents and payment dates were due.
2. Documentation of repairs and costs of repairs.
3. A copy of any written objection or report of any communication of objection by the Tenant when Landlord submits the claim.
What happens if the Insurer pays the claim?
If the insurer has subrogation rights, the insurer may within one (1) year after the Lease expiration, seek reimbursement from the Tenant.
What happens if the Insurer seeks reimbursement from the Tenant? The insurer must provide documentation of all losses provided by the Landlord, a copy of the settlement agreement, and insurer’s payment of the claim. The Tenant retains any defenses against the insurer and the Landlord cannot accept payment from the Tenant and insurer for amounts associated with the claim.
What are the requirements if the Landlord offers the option to pay a Fee in Lieu of Security Deposit?
1. The Tenant has the option to a security deposit instead of the fee option at any time.
2. The Tenant may at any time terminate the fee agreement and pay the security deposit as listed in the Lease Agreement. If a security deposit was not agreed upon then the amount offered new tenants for a similar dwelling.
3. The Tenant may choose to pay the security deposit in monthly installments agreed upon by the parties while participating in the fee agreement.
4. Any additional charges that may apply.
5. The amount of payments required for each option.
6. If applicable, the fee is non refundable.
7. The fee is for only securing occupancy without paying a security deposit.
8. The fee does not change the Tenant’s obligation to pay rent or the costs of repairing damage.
What if the Landlord uses a portion of the Fee to pay insurance?
The Tenant is not insured and not a beneficiary of the Landlord’s insurance coverage. The insurance does not limit the Tenant’s obligations to pay rent, fees, or costs associated with repairing damage.
How does the Landlord collect the Fee in Lieu of Security Deposit?
The Landlord and Tenant must enter into a written agreement signed by the Landlord, Landlord’s agent, and Tenant. The agreement must provide the following:
1. The amount of the fee – no increases during term of Rental Agreement.
2. How and when the fee is paid and collected.
3. The process and time the Tenant must pay the security deposit and if the Tenant defaults on paying the fee – the default will not adversely affect the Tenant's credit rating if the security deposit is not paid.
4. Tenant may terminate the written agreement any time as long as security deposit is paid as specified in the Rental Agreement.
5. If the Tenant pays the security deposit and defaults in paying the fee – the default may not adversely affect the Tenant's credit report.
The written agreement must contain the following disclosure:
“FEE IN LIEU OF SECURITY DEPOSIT
THIS FEE IS NOT A SECURITY DEPOSIT AND PAYMENT OF THE FEE DOES NOT ABSOLVE THE TENANT OF ANY OBLIGATIONS UNDER THE RENTAL AGREEMENT, INCLUDING THE OBLIGATION TO PAY RENT AS IT BECOMES DUE AND ANY COSTS AND DAMAGES BEYOND NORMAL WEAR AND TEAR WHICH THE TENANT OR HIS OR HER GUESTS MAY CAUSE.
THE TENANT MAY TERMINATE THIS AGREEMENT AT ANY TIME AND STOP PAYING THE FEE AND INSTEAD PAY THE SECURITY DEPOSIT AS PROVIDED IN SECTION 83.491, FLORIDA STATUTES.
THIS AGREEMENT HAS BEEN ENTERED INTO VOLUNTARILY BY BOTH PARTIES AND THE TENANT AGREES TO PAY THE LANDLORD A FEE IN LIEU OF A SECURITY DEPOSIT AS AUTHORIZED UNDER SECTION 83.491, FLORIDA STATUTES. IF THE LANDLORD USES ANY PORTION OF THE TENANT’S FEE TO PURCHASE INSURANCE, THE TENANT IS NOT INSURED AND IS NOT A BENEFICIARY OF SUCH COVERAGE, AND THE INSURANCE DOES NOT CHANGE THE TENANT’S FINANCIAL OBLIGATIONS UNDER THE RENTAL AGREEMENT.
THIS DISCLOSURE IS BASIC. PLEASE REFER TO PART II OF CHAPTER 83, FLORIDA STATUTES, TO DETERMINE YOUR LEGAL RIGHTS AND OBLIGATIONS.”
How are the payments collected for a fee in lieu of security deposit?
1. Monthly fees are payable on the same date as rent.
2. Payable upon a schedule of which the parties choose by written agreement.
3. The fee collected is not a security deposit.
Is the Landlord required to offer a fee in lieu of security deposit?
No, the Landlord reserves the right of discretion and is not required to offer the fee option to Tenants. However, if the Landlord offers the fee option the Landlord may not use as criteria to approve or deny an application for tenancy. The Landlord must offer all new tenants renting at same premises the option to pay unless the Landlord terminates the option for all new rental agreements.
Final points the Statute concerning the Fee in Lieu of Security Deposit:
· Does not require a fee collected in lieu of the security deposit to be used to purchase and insurance product or surety bond.
· Prohibit the Tenant from insurance product or surety bond to present to Landlord in Lieu of Security Deposit as long as it complies with State law.
· Acceptance by Landlord of insurance product or surety bond purchased by the Tenant – may not be considered an offer on part of Landlord to allow Tenant to pay a Fee in Lieu of Security Deposit. The Landlord still has discretion.