With rents across South Florida at astronomical levels, the state Legislature and Gov. Ron DeSantis have moved to standardize a relatively new practice of landlords charging monthly fees instead of large, up-front security deposits.
Getting into a new apartment can often cost the tenant the equivalent of three months of rent that includes a refundable security deposit. But the fee option is touted as a way to ease the financial pain confronting would-be tenants who lack the cash an up-front deposit requires.
Now, a new law which goes into effect July 1 will require a written agreement on the fee amount that would be good for the length of the lease and allows the tenant to opt out and switch to a security deposit.
The sponsor of the bill, Rep. Jim Mooney, a Republican from Islamorada, said in media reports prior to the signing of the bill that the monthly fee alternative to deposits is already in use around the state but the law would put protections in place for tenants.
But opponents of the law raised red flags, noting it places no caps on the monthly fees and opens up opportunities for predatory landlords to take advantage of tenants. In addition, renters would not be refunded the money after the lease expires, as they would a security deposit.
Another potential downside: the law prohibits the fees from being used to pay for damage to the apartment, so tenants may still be forced to shell out money at the end of their lease.
Insurer helped write the bill
Leaselock, a California technology firm that manages monthly payments for property owners and sells them lease insurance, offers a security deposit alternative for thousands of apartments across Florida and the U.S. along with other firms such as Assurant and Rhino. The alternatives are rising in popularity as rents continue to soar. According to the Tallahassee Democrat, text messages and emails showed that a Leaselock lobbyist drafted an initial version of the bill.
On its website, Leaselock says it does not deal with residents themselves. The fees go to the landlords, who buy insurance coverage to protect the property. The company did not immediately respond to an emailed request for comment.
Carline Jean / Sun Sentinel
A new Florida law that takes effect July 1 would allow renters to pay monthly fees to landlords in lieu of security deposits, a maneuver that advocates say would give them easier access to rentals. But critics say the law will invite unscrupulous landlords to exploit low income tenants.
But Jay Mobley, a senior housing and consumer attorney for the Legal Aid Society of the Orange County Bar Association, said there’s no guarantee that a “bad landlord” wouldn’t simply pocket the fees, bypass the insurance and demand payment for any damages directly from the tenant later.
“Basically the bill in and of itself is not necessarily a bad thing — a fee in lieu of paying a security deposit,” Mobley said.
“The problem is when it comes to predators there are no limits to the amount of the fee and there is nothing that says what the landlord has to do with the fee,” he said. “We’re probably going to see a lot of landlords add this as another revenue line.”
Not mandatory
The law does not require renters and landlords to use a fee system in lieu of security deposits. It is an option designed to reduce the upfront cost of renting an apartment or home.
In addition, tenants could opt to pay a security deposit later after initially deciding to go the fee route, said State Sen. Jason Pizzo of Hollywood, a Democrat who voted for the law. His family owns apartments in the Northeast.
“The final version actually gives the tenant the option to terminate the fee if they want to go ahead and pay the security deposit,” he said.
Jeffrey Hittleman, staff attorney at Coast to Coast Legal Aid of South Florida, did not offer an opinion on the law, but has reviewed it. “The facts are there is no cap on the amount of the fees so there is no limit to what a landlord can charge,” Hittleman said. “The bill makes it clear the fees are nonrefundable. Once you pay them, that money is gone.”
Nonetheless, the law calls for a written fee agreement between landlord and tenant that would become an addendum to the lease.
“The landlord just can’t increase the fee randomly in the middle of the lease,” Hittleman said. “I think it will be locked in once the landlord and tenant sign the agreement.”
Easier access?
Pizzo and a real estate firm economist who tracks South Florida home sale and rental traffic believe the law will make it easier for financially-pressed renters to obtain housing in a stubbornly tight market.
The senator asserted the fee system would be financially easier on tenants both before they sign their leases and after the leases expire.
Before signing, they wouldn’t have to put up what is usually the equivalent of a month’s rent for the security deposit. And once the lease expires, they won’t have to undertake a long wait to retrieve a pricey deposit.
“If you’re moving from one place to the next, you need to occupy the (new) unit faster than you can secure the security deposit,” Pizzo said.
Moreover, he noted, the fee system allows tenants to hang onto their money longer instead of relinquishing a big lump sum to the landlord, who would earn interest on a tenant’s money during the life of the lease.
Erin Sykes, chief economist and real estate wealth adviser for Nest Seekers International, said the fee system offers a way “for landlords to increase rent,” while at the same time lowering financial barriers of entry to a still pricey South Florida rental market.
She wouldn’t recommend the fee option for everyone and leans toward sticking with security deposit payments.
“I think that it is a case-by-case basis for some people feeling the challenge of coming up with the first (month’s rent), last and security deposit,” Sykes said. “I believe if you can, you should utilize the standard way of doing things. This fee is not refundable, which would make it more expensive for the tenant.”
That way, renters can achieve the goal she recommends for her clients, which is to rent “at the bottom of your budget.”