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09/27/12 It's The Law: Security Deposit Requires Special Treatment

Question:

I am going to be renting my condominium and understand Florida has a lot of requirements about security deposits. Can you explain?

Answer:

Florida’s Residential Landlord Tenant Act (“Act”) is an effort to protect both landlords and tenants. Section 83.49 of the Act codifies specific and detailed requirements for security deposits and advanced rent. For some aspects, the parties have options.

The deposit must be held in a Florida banking institution. The account must be a separate account for the benefit of the tenant. The funds cannot be co-mingled with any other money of the landlord and the landlord cannot use the funds until the funds are actually due to the landlord. If the account is interest bearing, the tenant must receive at least 75% of the annualized average interest rate payable on the account or interest at the rate of 5% per year simple interest, at the landlord’s option.

If the landlord does not want to place the fund in a separate bank account, the landlord can post a surety bond equal to the total amount of the security deposits and advance rents held by the landlord or $50,000.00, whichever is less. In addition to posting the bond, the landlord must pay the tenant interest at 5% per year on the deposit. If the landlord has rentals in 5 or more counties, the maximum amount of the bond is increased to $250,000.00.

Within 30 days of receipt of a deposit, the landlord must give the tenant written notice of the manner in which the landlord holds the deposit, the rate of any interest which the tenant is to receive, and the time of interest payments. The notice must also include the name and address of the bank where the funds are deposited. The landlord must also include a copy of Florida Statute Section 83.49(3) as part of the notice. But, if the landlord rents less than 5 dwelling units, the landlord is not required to provide the notice concerning deposit.

Section 83.49(3), Fla. Stat. establishes requirements for handling a deposit after the tenant vacates. If the landlord does not intend to impose a claim on the deposit, the landlord must give the tenant the deposit, along with any interest due the tenant, within 15 days after the tenant vacate. If the landlord intends to make a claim, the landlord has 30 days to give the tenant written notice by certified mail to the tenant’s last known mailing address of the landlord’s intention to impose a claim and the reason for imposing the claim. The Statute includes a form which the landlord must substantially follow. Failure to timely give a tenant written notice of a claim on the deposit forfeits the landlord’s right to impose a claim on the deposit. If the tenant does not object to the landlord’s claim within 15 days after receipt of notice, the landlord may deduct the claim and remit the balance of the deposit to the tenant within 30 days after date of landlord’s notice of intent to impose a claim.

Many landlords have found that failure to comply with the Statute results in very bad consequences. When the landlord sues the tenant for unpaid rent or damage to the property, if the landlord has not provided notice to the tenant of claim on the deposit, the tenant can recover the deposit even if the landlord gets a judgment for damages that are more than the deposit. Adding insult to injury, the Statute provides for the award of attorneys fees to the prevailing party in any litigation over the deposit. On the other hand, a tenant disputing a landlord’s wrongful refusal to refund a deposit will likely be able to hire an attorney because the attorney will know that winning the case means not only will the landlord pay the deposit but also attorneys fees to his or her client.

It will be important for you to comply with the statutory requirements for handling deposits to protect your interests. Although you might be able to understand the Statute and meet those requirements, there might be other aspects of the landlord-tenant relationship that will merit good advice from an attorney. I suggest you consult with an attorney for preparation of your lease and to discuss other matters that may be pertinent to your planned rental before proceeding further. An ounce of prevention may be worth a pound of cure.

By: William G. Morris, Esquire

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