Q&A of the Day – Paying a Fee vs. Security Deposit When Renting in Florida
Each day I feature a listener question sent by one of these methods.
Email: brianmudd@iheartmedia.com
Social: @brianmuddradio
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Today’s entry: Do you know anything about the new law that doesn’t allow landlords to require first, last & security in Florida?
Bottom Line: Yes, the law in question is 2023’s Fees in Lieu of Security Deposits. The law, which took effect July 1st in 2023, was established for the purpose of attempting to aid in affordability for low-income tenants while balancing landlord rights. As the legislature determined, for a low-income family, a security deposit may be unaffordable, preventing the family from obtaining housing, or keeping the family in substandard housing even when the family could otherwise afford to move. Recognizing this, some landlords began to offer their tenants security deposit alternatives, including fees paid in lieu of a security deposit, however there weren’t any protections under law for either party in those situations which prompted the passage of the law.
The law authorizes but does not require a landlord to offer a tenant the option to pay a fee; if a landlord offers this option, they must give the tenant written notice:
- That the tenant has the option to pay a security deposit instead of the fee, the fee may not be increased during the rental agreement’s term
- The tenant may, at any time, terminate the fee payment agreement and instead pay a security deposit in the amount specified in the rental agreement or, if not specified, in the amount otherwise offered to new tenants for substantially similar units on the date the tenant terminates the agreement
- That the fee is nonrefundable
- That the fee is only for securing occupancy without needing to pay a security deposit
- That the fee payment does not change the tenant’s obligation to pay rent and fees or the costs of repairing premises damage above normal wear and tear
- That if the landlord uses any portion of the fee to purchase insurance, the tenant is not the insured or a beneficiary of such insurance, and the insurance does not change the tenant’s obligation to pay rent and fees or the costs of repairing premises damage above normal wear and tear.
The law also created these changes in rental processes:
- Authorizes a landlord to give the tenant the option of paying a security deposit in monthly installments while participating in the fee program and specifies notice requirements for such an option
- Requires that, if the tenant chooses the fee option, the landlord and the tenant must sign a written fee payment agreement
- Provides that a fee in lieu of a security deposit may be a recurring monthly fee, payable on the same date that the rent is due under the lease, or payable upon another chosen schedule
- Sets requirements for a landlord claiming unpaid rent or fees under a lease agreement or premises damages where the tenant paid a fee in lieu of a security deposit
It’s unclear what the impact has been through the first couple of years since this law has been in effect. There’s not a legal reporting requirement for landlords to disclose whether their tenants have paid fees or deposits. It’s also unclear how many tenants are aware of the option to potentially pursue it.
A 2024 study of property management companies showed that about 25% were offering deposit alternatives and 33% of renters preferred having access to a non-refundable fee over refundable first, last and security deposits.
On balance there appears to be a bit of an information disconnect about this recently enacted state law. In 2023, prior to the passage of the legislation, 51% of Florida’s renters surveyed said they would opt for a reasonable non-refundable fee given the opportunity as 72% of renters said they struggled to come up with the needed money for first, last and a security deposit.
With three-quarters of property management companies not offering the fee alternative as of last year, it would appear most landlords prefer the status quo or perhaps aren’t versed in the changes in the law supporting fee alternatives to security deposits.
This is in contrast to the recent federal change in real estate transaction fees – where buyers are now responsible for the buyer’s real estate fees. Most recently, 65% of real estate transactions involve negotiations over which party will pay real estate fees. It’s clear there’s more work to do to inform renters and perhaps landlords about the change in state law and the increased options that have resulted.