Historically, landlords have required tenants to pay a security deposit at the beginning of the lease agreement to help secure the tenant’s faithful performance of the tenant’s lease obligations. But in recent years, insurance companies have been increasingly created to provide a “fee in lieu of security deposit” option for landlords to offer to tenants, which helped to relieve the upfront monetary burden on tenants when entering into a new lease agreement. This trend continued, so much so that Florida created a law in 2023 that governs how landlords must handle a Fee in Lieu of Security Deposit (“FILSD”) situation.
The new statute provision is found at F.S. 83.491 and applies to lease agreements entered into or renewed on or after July 1, 2023. The statute is nearly 1,500 words and imposes numerous obligations on the landlord who want to use a FILSD option for tenants.
Landlord Has the Discretion and Option to Offer FILSD
First, a landlord has the option to offer the tenant to pay a FILSD or to pay a security deposit and is not required to offer a tenant FILSD. F.S. 83.491(7) states, “A landlord has exclusive discretion as to whether to offer tenants the option to pay a fee in lieu of a security deposit and is not required to offer such fee option to tenants.”
Landlord May Not Discriminate Against Tenant Who Does Not Want to Pay FILSD
If a landlord offers a tenant an option to pay a FILSD, the landlord may not use a prospective tenant’s choice to pay or offer to pay a FILSD as criteria in the determination to approve or deny an application for occupancy.
Landlord Must Make Same Offer of FILSD to All New Tenants on the Same Property
A landlord must offer to all new tenants renting a dwelling unit on the same premises the option to pay a fee in lieu of a security deposit unless the landlord chooses to prospectively terminate the fee option for all new rental agreements. This would especially pertain to multi-family properties.
Landlord Must Deliver Notice of Making Claim on the Policy
If the landlord intends to make a claim on the coverage policy, the landlord must deliver written notice to the tenant within 30 days after the conclusion of the tenancy of the costs or fees due resulting in unpaid rent, fees, or other obligations under the rental agreement, including costs for repairs beyond normal wear and tear. However, a landlord may not submit a claim to an insurer until at least 15 days after providing the tenant with said required notice.
Landlord’s Notice Must Itemize Claims
Like normal security deposit claims, in the landlord’s notice of intent to make a claim on the policy, the landlord must include an itemized list of any unpaid amounts and the dates such amounts were due, documentation supporting any itemized damages and costs of repairs, and a copy of any written objection or report of any communication of objection by the tenant when the landlord submits a claim to an insurer.
Insurer’s Right of Reimbursement From Tenant
If the insurer pays any amount on the landlord’s claim, the insurer has the right to seek reimbursement from the tenant, and the insurer must comply with the provisions in F.S. 83.491(2)(a)-(b).
Tenant’s Right to Defend Against Claim
Of course, the tenant may still defend against any claim, just as the tenant has the right to do for a security deposit claim.
Double Recovery From Landlord Prohibited
The landlord cannot accept payment from both the tenant and the insurer on the same item claimed.
Written Notifications to the Tenant Are Required
If a landlord offers a tenant the option to pay a FILSD, the landlord must notify the tenant in writing of all of the following, per F.S. 83.491)3)(a)-(h):
(a) That the tenant has the option to pay a security deposit instead of the fee at any time.
(b) That the tenant may, at any time, terminate the agreement to pay the fee in lieu of the security deposit and instead pay a security deposit as listed in a rental agreement between the landlord and tenant or, if a security deposit was not agreed upon in a rental agreement between the landlord and tenant, in the amount that is otherwise offered to new tenants for a substantially similar dwelling unit on the date that the tenant terminates the agreement.
(c) That the tenant may choose to pay the security deposit in monthly installments in an amount that is agreed upon between the landlord and tenant while participating in the fee program.
(d) Whether any additional charges apply for the options provided in paragraphs (a) and (b).
(e) The amount of the payments required for each option the landlord offers.
(f) That the fee is nonrefundable, if applicable.
(g) That the fee is only for securing occupancy without paying a required security deposit.
(h) That the fee payment does not limit or change the tenant’s obligation to pay rent and fees, if any, under the rental agreement or limit or change the tenant’s obligation to pay the costs of repairing damage to the premises beyond normal wear and tear.
(i) That if the landlord uses any portion of the fee to purchase insurance, the tenant is not insured and is not a beneficiary of the landlord’s insurance coverage, and that the insurance does not limit or change the tenant’s obligations to pay rent and fees under the rental agreement or change the tenant’s obligation to pay the costs of repairing damage to the premises beyond normal wear and tear.
Parties Must Sign a FILSD Agreement
If a tenant agrees to pay a FILSD, the landlord (or landlord’s agent) and tenant must sign a written agreement to collect the fee. The written agreement may not contain any clause that contradicts F.S. 83.45 or 83.47 (that is, the agreement must not be unconscionable and waive rights provided in F.S. ch. 83, pt. 2).
Written Agreement Requirements
Per F.S. 83.491(4)(a), the written agreement must specify the following:
- The amount of the fee, which may not be increased during the term of the rental agreement.
- How and when the fee is to be collected.
- The process and timeframe during which a tenant must pay the security deposit specified in the rental agreement if the tenant defaults on paying the fee, and that such default will not adversely affect the tenant’s credit rating if the security deposit is timely paid.
- That the written agreement may be terminated at any time as long as the tenant pays the amount of the security deposit specified in the rental agreement.
- If the tenant pays the amount of the security deposit specified in the rental agreement, then the tenant’s default on paying the fee or termination of the written agreement may not adversely impact the tenant’s credit report.
Written Disclosure in the Agreement
Additionally, the written agreement must include a disclosure in substantially the following form:
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.
Tenant’s Payment of the FILSD
The landlord may require that the FILSD be paid in the following manner:
(a) A recurring monthly fee, payable on the same date that the rent payment is due under the rental agreement; or
(b) Payable upon a schedule that the landlord and tenant choose and as specified in the written agreement.
FILSD Is Not a Deposit
The fees collected under the FILSD is not a security deposit as defined in F.S. 83.43(12). Accordingly, the landlord is not required to hold the fee into a separate Florida banking institution.
FILSD Does Not Require or Prohibit the Following
This FILSD statutory provision does not:
- Require a fee collected in lieu of a security deposit to be used to purchase an insurance product or a surety bond; or
- Prohibit a tenant from being offered or sold an insurance product or a surety bond to present to the landlord in lieu of a security deposit if the offer or sale of such insurance product or surety bond complies with the laws of this state.
Lastly, the landlord’s acceptance of an insurance product or a surety bond that is purchased or procured by a tenant, a landlord, or an agent of the landlord may not be considered a landlord’s offer to allow a tenant to pay a fee in lieu of a security deposit for the purposes of F.S. 83.491(7).
Navigating the complexities of security deposits and fees in lieu of security deposits (FILSD) requires landlords to adhere to Florida’s new statute, F.S. 83.491. This statute outlines specific obligations, from offering FILSD options to tenants to handling claims and insurance matters. Landlords and tenants alike must understand their rights and responsibilities outlined in the law to ensure fair and lawful rental agreements.
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.