On December 20, 2017, I co-authored an article, Business Rent Tax Reduced Beginning January 1, 2018, that discussed the Florida Legislature’s decision to lower the Business Rent Tax (“BRT”) from 6.0 percent to 5.8 percent.

On March 23, 2018, Governor Scott and the Florida Legislature delivered another win for Florida’s business community with House Bill 7087. House Bill 7087 amends section 212.031 of the Florida Statutes to further reduce the BRT from 5.8 percent to 5.7 percent beginning on January 1, 2019.

Considering the impact on occupancy costs, any reduction in the BRT is welcome and those involved in commercial leasing will want to take note of this reduction when preparing leases that commence in 2019.

As with all tax matters, please consult with your tax professional. If you have answer questions regarding the Business Rent Tax reduction and its effects, please contact me at caleb.hinton@henlaw.com or by phone at 239-344-1125.

An interesting ruling came down this week in an Airbnb case stemming from tenants illegally offering apartments for short-term rentals in violation of their lease agreements in South Florida.

Background

Bay Parc Plaza Apartments filed suit in 2017 against Airbnb with multiple claims of trespass, tortious interference with a contract, and violations of the Florida Deceptive and Unfair Trade Practices Act.

Airbnb attempted to have the case dismissed based on protections under the Communications Decency Act (CDA). Because the CDA protects operators of internet services from liability for content posted from third parties who use their services, Airbnb argued that short-term rental listings on their website posted by tenants within an apartment building qualified as third party content and Airbnb, therefore, is immune to suit for that content under the CDA.

Ruling

Continue Reading Does Free Speech Protect Your Right to Sublease in Florida?

Florida law currently caps taxes assessed on commercial and rental property, but that may end come January 1, 2019.

You might be thinking “why do I care because I rent my home or apartment and don’t own either commercial or rental property?” Consider this: if your landlord has to pay higher taxes, guess whose rent is going to increase to offset your landlord’s cost?

For more information, please see a recent article in the Business Observer by Kevin McQuaid, “Commercial landlords could face big tax hike.”

Summer is a busy season for moving in Florida. This time of year is a popular time for families to move because it follows the spring real estate season and because school is out, parents won’t have to deal with enrolling their children in a new school mid-year. Landlords should ensure that they are aware of and in compliance with Florida law prior to renting.

Before signing a rental agreement or lease, landlords are encouraged to seek legal counsel to ensure that their lease complies with Florida law and that they are aware of the laws governing the landlord tenant relationship.

Landlord’s Responsibilities

In Florida, landlords are responsible for maintaining the dwelling. At all times during tenancy, the landlord shall (1) comply with the requirements of applicable building, housing, and health codes; (2) maintain the roofs; (3) doors; (4) floors; (5) steps; (6) porches; (7) exterior walls; (8) foundations; (9) and all other structural components in good repair. The landlord must also maintain the plumbing in reasonable working condition.

Continue Reading Florida Rentals: What is the Landlord’s Responsibility?

In most cases, agreements between landlord and tenant are memorialized in writing that provides a specific procedure for both landlord and tenant default. However, not everyone hires an attorney to draft a lease. So what happens when the tenant stops paying the landlord and there is no written lease? The following is a summary of the process for evicting a commercial tenant and recovering money damages for past due rent.

No Written Lease = Tenancy at Will

In Florida, an unwritten lease is considered a tenancy at will. If rent is paid monthly, then the tenancy at will is regarded as a monthly lease. Either party can terminate a monthly tenancy at will by giving 15 days’ notice before the end of any monthly period.

Continue Reading My Commercial Tenant Quit Paying Rent, Now What?

Box stores won a victory in Palm Beach Gardens, Florida, recently. With the assistance of Henderson Franklin’s Summer Associate Kristen Schalter, we wanted to share the facts and impact of the Sears, Roebuck & Co. v. Forbes/Cohen Fla. Props., L.P. (Fla. App., 2017) case for those involved in commercial leasing.

Background

On July 12, Sears Roebuck (“Sears”) prevailed over the City of Palm Beach Gardens (“The City”) and the owner of the Gardens Mall (“Forbes”) in a commercial sublease dispute involving a violation of the store’s substantive due process rights under the Florida and U.S. Constitutions and unconstitutional impairment of contract.

The Sublease

In 1987, Sears Roebuck entered into a thirty-year lease with Forbes. Sears desired to sublease part of its store in the mall to Dicks Sporting Goods in 2011. Forbes later sent a letter to Sears stating that Sears could not sublease to Dick’s Sporting Goods because Sears had no right to sublease, the sports store lacked signage rights, and Dick’s Sporting Goods “did not belong” at the mall.

Resolution 20-2012

Unbeknownst to Sears, Forbes requested the City enact a resolution granting mall owner (Forbes’) approval over subleases and store modifications. Forbes contributed to the drafting process. The City passed Resolution 20-2012 (“Resolution”) which contained no criteria or grounds for approving or denying of any of the listed modifications or proposed subleases and heard no testimony regarding the Resolution.

Holding

Florida’s 4th District Court of Appeals ultimately agreed with Sears, finding that Resolution 20-2012 unconstitutionally impaired Sears’ right to contract with Dick’s Sporting Goods because it gave unilateral approval to the City and Forbes without specific criteria, which allowed Forbes to arbitrarily deny Sears’ sublease. Most importantly, the court stated the Resolution lacked a legitimate interest for a public purpose and no rational basis. To the court, the existing City Planned Unit Development already accomplished the public purpose of the Resolution.

Accordingly, the court held that Sears had a right to sublease to Dick’s Sporting Goods, that the City had deprived Sears of substantive due process, and awarded Sears reasonable fees and costs as the prevailing party.

Future Action

At trial, Sears conceded that the sublease to Dick’s Sporting Goods would require municipal approval through waivers because the plans for signage did not comply with the City’s zoning standards. However, Sears noted regular industry practice involved working with municipalities obtain approvals and waivers for signage. It will be interesting to observe whether or not the City grants the waivers for the signage now that it has lost to Sears at trial, especially since Sears’ lease is up in 2018.

Take-Away

Always be sure to determine if governing ordinances provide sufficient criteria for unilateral decision-making, otherwise there may be a lurking claim that the decision is arbitrary and the ordinance could be unconstitutional.

 

Photo Courtesy of Wikimedia Commons

Lease.jpg“An ounce of prevention is worth a pound of cure.” “Penny-wise, pound foolish.” “A stitch in time saves nine.” Few would doubt the universal application of these time-honored pearls of wisdom. Yet when it comes to legal documents, common sense goes by the wayside.

Contract? What Contract?

As a litigation attorney, there have been instances too numerous to count where a potential client calls me about a legal problem. When I ask to review the contract or document at issue, I’m usually met with a response that there is no document or, if there is one, it was not drafted by an attorney. The client then spends thousands of dollars in legal fees correcting a problem that should have been avoided in the first place.

Continue Reading Commercial Leasing Best Practices

IMG_3202Relatively recently, sites like VRBO have revolutionized how people travel. They also have made it easier for the average person to rent out their home without the need for professional assistance.

Are you considering renting your second home or condo during this fast-approaching Southwest Florida tourism season? If so, have you considered that you might be fined if you don’t have a license?

What You Need To Know

Florida law requires anyone in Florida renting a home to guests more than three times a year for stays which are less than 30 days to have a license. This means most of the people listing their homes on VRBO or otherwise advertising their house as available for rent to the public need to get a license from the DBPR- Division of Hotels and Restaurants. Continue Reading What You Need to Know if You Are Considering Signing Up with VBRO

Lease.jpgAre you a landlord? It’s a good position to be in, whether you’re a commercial landlord or a residential one. You can build equity in real estate and generate cash flow. Who doesn’t like that?

As a landlord, you’ve probably learned a few lessons, and maybe you’ve even learned some of those lessons the hard way.  Let me know if you’re familiar with these:

Continue Reading Best Practices for Landlords

With property values consistently trending upward, many Florida business owners are deciding whether to purchase or lease commercial real property. Below are a few considerations to keep in mind before making your decision.

Cost of Borrowed Funds

While there has been a stream of positive news about the general health of the economy, the Federal Reserve has kept interest rates considerably low. Therefore, it is an attractive interest rate environment for commercial borrowers who are financing real property. Depending on the term of the loan and type of property, current rates range from 3.50% to 6.50%, while prime rate (a barometer for different types of interest rates and the rate which financial institutions lend to their most prominent and creditworthy customers) remains at 3.25%. To put this into perspective, prime rate was 8.25% in 2007. Lower interest rates obviously lower the monthly payment obligation, and can accommodate a move to a higher tier property.

Judged against lease terms, the comparison changes depending on whether the owner is leasing for use as retail or office space. The former is generally based on a percentage of gross sales generated at the site, the latter normally contains an “escalation clause” that annually increases the rent obligation by 2-3%. Additionally, a commercial tenant (particularly a retail tenant) is likely liable for the real property taxes, utilities, and other expenses, which negates some of the perceived advantage that leasing may have over ownership.

Thus, a lease payment may initially have a lower payment burden but over time could exceed the payment obligation of a loan.

Beyond the Financing

Continue Reading Should I Buy or Lease Commercial Property?