Many times, property owners want to avoid personal liability and create tax benefits in their rental business. One way to do that is to create a corporation or company (“company”) and transfer ownership of the rental property to those entities. Also, many times, landlord companies (especially professional property management companies and apartments) prefer to do business as a fictitious entity so they can use more market-friendly names for their rental communities.
However, what commonly occurs is that the company does not properly use and disclose the company or fictitious entity correctly in their rental and legal documents, which can have negative consequences for the company. Here are some rules of thumb.
Use the Company’s Legal Name
Perhaps it should go without saying, but all corporation and company entities must be registered with the Division of Corporations in the State of Florida and be kept in active status.
If the rental property is owned by a company, the company (and all its agents and employees) must use the correct legal name of the company as it is registered with the Division of Corporations, including the company abbreviation, such as “Co.”, “Inc.”, “LLC”, etc. Never exclude the company abbreviation from the name, because:
F.S. 607.0401(1)(a) requires the following of corporation names:
(1) A corporate name:
(a) Must contain the word “corporation,” “company,” or “incorporated” or the abbreviation “Corp.,” or “Inc.,” or “Co.,” or the designation “Corp,” or “Inc,” or “Co,” as will clearly indicate that it is a corporation instead of a natural person, partnership, or other eligible entity.
See F.S. ch. 607, et. al. for more provisions regarding legal requirements of corporations.
and
F.S. 605.0112(2) requires the following of limited liability company names:
(1) The name of a limited liability company:
(a) Must contain the words “limited liability company” or the abbreviation “L.L.C.” or “LLC” as will clearly indicate that it is a limited liability company instead of a natural person, partnership, corporation, or other business entity.
See F.S. ch. 605, et. al. for more provisions regarding legal requirements of companies.
This means that anytime you are identifying or using the name of the company property owner (the landlord), use the complete legal name of the company, including in the lease agreement, addenda, notices, letters, demands, advertisement, etc.—anything and everything.
Of course, any legal actions, like evictions, must be filed in the legal name of the company, and only attorneys can file eviction actions for companies. Failure to file an eviction action in the correct legal name of the property owner is a legally defective eviction, and failing to use an attorney to file the eviction may also result in the dismissal of the eviction.
Corporations and companies can be created in Florida by using the state’s website, sunbiz.org, and must be renewed as required by law. If the company entity is dissolved or inactive, the company cannot bring any legal action against the tenant until the company bring the status to active status with the Division of Corporations. Thus, it is important to comply with this statute by registering the company with the Division of Corporations and keeping up with all renewal requirements.
Register the Fictitious Entity
If your company does business as a fictitious entity, that entity name must be registered in the state of Florida with the Division of Corporations, just as the company must be registered and then you may use that entity name for all purposes of landlord information and disclosures. Fictitious entities can be created by using the state’s website, sunbiz.org, and must be renewed as required by law.
If the company operates as a fictitious entity but does not register the entity with the Division of Corporations, here is the penalty as provided in F.S. 865.09(9)(a):
If a business fails to comply with this section, neither the business nor the person or persons engaging in the business may maintain any action, suit, or proceeding in any court of this state with respect to or on behalf of such business until this section is complied with. An action, suit, or proceeding may not be maintained in any court of this state by any successor or assignee of such business on any right, claim, or demand arising out of the transaction of business by such business in this state until this section has been complied with.
Not only that, but also the party who is aggrieved by the company’s not complying with this statute is entitled to reasonable attorney’s fees and costs associated with the legal actions necessitated by the noncompliance. F.S. 865.09(9)(b) states,
a party aggrieved by a noncomplying business may be awarded reasonable attorney fees and court costs necessitated by the noncomplying business.
This means that the company cannot file an eviction against a tenant until the company complies with F.S. 865.09. Thus, it is important to comply with this statute by registering the entity with the Division of Corporations and keeping up with all renewal requirements.
Apartment companies are particularly susceptible to the problems with having to registry fictitious entities, more likely when the apartment complex is sold and the new owner fails to register the fictitious name. Apartment owners and managers should be careful to register any new fictitious entity under which the company is doing business.
Property Management Law Solutions, LLC is a Florida law firm that specializes in landlord-tenant law and is a landlord-only law firm. We provide statewide services including evictions, consultation plans, education and training, membership plans, lease agreement plans and more. If you are a landlord or property manager, contact us today or subscribe to one of our online membership plans.