READY LEGAL

Corporate Housing Scams Deceive Florida Landlords

In the rental property business, landlords must navigate through various challenges, including the alarming rise of corporate housing scams. One particularly insidious scheme involves scammers setting up shell companies to deceive landlords, posing as legitimate entities seeking accommodations for their business’s employees. This blog post aims to shed light on this growing threat.

The Corporate Housing Scam

In this elaborate ploy, fraudsters create a shell company with no real assets or operational history. Armed with a facade of legitimacy, they approach landlords, expressing interest in renting a property for their business’s employees who work in the area. The scammer typically pays the first month’s rent, creating a false sense of security for the landlord. However, once inside the property, the scammer rarely makes another payment, leaving the unsuspecting landlord with a long and painful eviction process.

Motivation Behind the Scam

The perpetrators of this scam often have a checkered financial history, including bad credit or prior evictions, which they aim to conceal from landlords. They may be aiming to sublet the property, or use it for themselves free of charge. By establishing a shell company, scammers redirect the scrutiny of background checks from themselves to the fictitious entity. This not only shields their personal credit but also provides an opportunity to perpetrate the fraud multiple times under different company names.

Identifying the Scam

Landlords must be vigilant in identifying potential red flags to avoid falling victim to corporate housing scams. Here are some key strategies:

Research the Company: Check the creation date of the company. Scammers often hastily establish shell companies, which may have been recently created. Scrutinize the legitimacy of the business by verifying its physical address, website, and contact information. Legitimate companies will have a consistent and credible online presence.
Run a Business Credit Report: Conduct a thorough business credit report on the company. A lack of credit history or suspicious financial activity can be indicative of a shell company.
Verify Operational Status: Confirm the company’s operational status by checking for business licenses, reviews, and any evidence of ongoing business activities. Legitimate companies will have a traceable and verifiable track record.
Speak Directly to Company Representatives: Engage in direct communication with representatives of the company. Scammers may avoid or provide vague answers when pressed for details.

Protecting Against Corporate Housing Scams

To safeguard against such scams, landlords should adopt a proactive approach:

Implement Stringent Background Checks: Conduct comprehensive background checks on both individuals and companies, ensuring that all parties involved are financially stable and trustworthy.
Require Additional Documentation: Request additional documentation, such as proof of business operations, employee rosters, and references, to validate the legitimacy of the corporate tenant.
Consult Legal Professionals: Seek legal advice when drafting lease agreements to include provisions that protect against fraudulent activities and clearly outline the consequences of non-payment.

Closing

As the sophistication of scams continues to evolve, landlords must remain vigilant to protect their investments. By being aware of the signs and implementing robust verification processes, property owners can fortify themselves against the growing threat of corporate housing scams. Stay informed, conduct due diligence, and prioritize the security of your property and financial well-being.

DISCLAIMER: The information provided on this website does not, and is not intended to, constitute legal advice; instead, all information, content, and materials available on this site are for general informational purposes only.

Fraudulent Liens: A Guide for Florida Contractors

As a contractor in Florida’s busy construction industry, it’s crucial to understand the intricacies of lien laws to protect your rights and ensure payment. One aspect that demands attention is the concept of fraudulent liens, a serious matter that can have severe consequences under Florida Statute 713.31.

What is a Fraudulent Lien?

In the construction realm, a lien serves as a security interest granted over the property to ensure payment for work performed or materials supplied. However, a fraudulent lien arises when a contractor: (1) willfully exaggerates the claimed amount, (2) includes charges for work not conducted or materials not provided, or (3) demonstrates such gross negligence in preparing the lien that it amounts to willful exaggeration.

Florida Statute 713.31 explicitly outlines the criteria for a lien to be deemed fraudulent. Contractors need to be aware that intentionally inflating a lien or including false claims can lead to serious repercussions.

Consequences of a Fraudulent Lien

Florida Statute 713.31 is explicit in stating that any lien found to be fraudulent is unenforceable. This means the contractor loses the right to seek payment through the lien on the property in question. However, the consequences don’t stop there.

In addition to the lien becoming unenforceable, the statute outlines the rights of affected parties. An owner or any contractor, subcontractor, or sub-subcontractor who suffers damages as a result of a fraudulent lien has the right to pursue legal action for damages. The prevailing party in such an action is entitled to recover reasonable attorney’s fees and costs. Moreover, if the lienor who files a fraudulent lien is not the prevailing party, they become liable to the owner or the defrauded party who prevails in the action.

The repercussions don’t end with civil liability. The statute also establishes that any person who willfully files a fraudulent lien commits a felony of the third degree.

Defenses Against Fraudulent Liens

While the consequences are substantial, it’s important to note that not every mistake or dispute constitutes a fraudulent lien. Florida Statute 713.31 provides a safeguard for contractors in cases of minor mistakes, errors, or good faith disputes over the amount due. A genuine disagreement on the payment amount does not automatically render a lien fraudulent.

However, contractors should exercise care in accurately documenting and justifying their claims to avoid unintentional errors that could potentially be misconstrued as willful exaggeration.

Closing

Navigating the construction industry in Florida comes with its complexities, and understanding the nuances of lien laws is critical for contractors. The ramifications of asserting a fraudulent lien under Florida Statute 713.31 are severe and can have lasting effects on a contractor’s reputation and financial stability. By exercising caution and maintaining good records, contractors can mitigate the risks associated with fraudulent liens.

Importance of Notices of Commencement in Florida Construction

In the Florida construction industry, contractors face a myriad of challenges and complexities. One often overlooked but critical aspect of the construction process is the Notice of Commencement (NOC). This document may seem like routine paperwork, but for Florida contractors, it is essential for protecting their rights and ensuring smooth project execution. In this blog post, we will delve into three key reasons why contractors should care about NOCs.

Essential Information for Pre-Lien Notices:

One of the primary reasons contractors in Florida should pay close attention to Notices of Commencement is that they provide the crucial information necessary for serving required pre-lien notices, such as the Notice to Owner (NTO). The NTO is a statutory notice designed to inform the property owner of the subcontractor’s or supplier’s involvement in the project. Without a valid NTO, a sub-tier’s lien rights may be jeopardized.

The NOC acts as a key reference point for contractors, offering details about the property owner, general contractor, and other parties involved in the construction project. By obtaining and reviewing the NOC early in the process, contractors can ensure they have accurate information to serve timely and valid pre-lien notices, safeguarding their lien rights throughout the project.

“Relation Back” of Lien Rights:

In the expensive world of construction, it is not uncommon for owners to take out a loan, or multiple loans, on a property while a project is ongoing. The concept of “relation back” provided by Notices of Commencement becomes crucial in such situations. This legal doctrine allows a contractor to maintain their lien priority even if the property’s title has been encumbered by someone else, such as a lender.

To ensure the advantage of this “relation back” priority, it is important for contractors to ensure that the owner has recorded a properly completed NOC before starting work. By doing so, they can establish a priority position for their lien rights, offering a layer of protection in the event they are not paid, resulting in a foreclosure lawsuit.

Information for Recording Liens:

Notices of Commencement are not just about initial project information; they also provide the necessary details for contractors to record their liens. The NOC typically includes specifics about the property, the project’s location, and other vital information required for accurately documenting a contractor’s lien. Additionally, contractors are usually entitled to rely on this information provided by the owner when recording their lien.

Before committing significant time, resources, and effort to a construction project, contractors should obtain and thoroughly review the NOC. Confirming that the information aligns with the project’s scope and understanding the expiration date of the NOC is crucial. An expired NOC can lead to complications in the recording process and potentially jeopardize the contractor’s priority lien rights.

Tenant Considerations: Selling Rental Property in Florida

Selling a rental property in Florida can be a complex process, especially when there’s an existing tenant with a lease extending beyond the closing date. In such scenarios, the rights and obligations of the seller are usually determined by two key documents – the lease agreement with the tenant and the sales contract with the buyer. Let’s explore how these elements interact and impact the seller’s ability to sell a property with a tenant living in the home.

Lease Assignment or Termination:

One of the first considerations for a seller is whether the lease allows for an assignment to the new buyer or, under certain circumstances, an early termination. Lease agreements can differ significantly, and sellers must carefully review the terms and conditions outlined in the lease with the existing tenant. If the lease permits assignment, the seller might be able to transfer its rights (and sometimes obligations) under the lease to the buyer. Additionally, the lease may allow for early termination under certain conditions, such as adequate notice to the tenant.

Seller’s Obligations to the Buyer:

In Florida, real estate transactions are frequently conducted using the Florida Bar and Florida Association of Realtors contract (FARBAR). This standardized contract outlines the rights and responsibilities of both the buyer and seller. A critical provision in the FARBAR contract addresses properties with existing leases or occupancy agreements beyond the closing date. According to this provision:

“If Property is subject to a lease(s) or any occupancy agreements (including seasonal and short-term vacation rentals) after Closing or is intended to be rented or occupied by third parties beyond Closing, the facts and terms thereof shall be disclosed in writing by Seller to Buyer, and copies of the written lease(s) shall be delivered to Buyer, all within 5 days after Effective Date.”

This provision underscores the importance of transparency in the sale process. The seller is obligated to inform the buyer about any existing leases and provide copies of relevant documents within a specified timeframe.

Buyer’s Discretion to Terminate:

Crucially, the FARBAR contract grants the buyer the discretion to terminate the contract if they find the terms of the existing lease or occupancy agreements unacceptable. The relevant section states:

“If Buyer determines, in Buyer’s sole discretion, that the lease(s) or terms of occupancy are not acceptable to Buyer, Buyer may terminate this Contract by delivery of written notice of such election to Seller within 5 days after receipt of the above items from Seller, and Buyer shall be refunded the Deposit thereby releasing Buyer and Seller from all further obligations under this Contract.”

This provision provides a safety net for the buyer, allowing them to assess the terms of existing leases and decide whether to proceed with the purchase. The seller, in turn, must be diligent in providing accurate and timely information to avoid potential complications in the transaction.

Lapsed Lease or Absence of a Written Lease:

In cases where there is no written lease or the existing lease has lapsed, the term of the tenancy becomes crucial. In such scenarios, Florida law dictates the notice period required for termination by the seller. The absence of a written lease does not eliminate the seller’s obligation to provide proper notice to the tenant. Sellers must adhere to the statutory requirements, ensuring a fair and lawful termination process that respects the rights of both parties involved.

Closing:

Selling a rental property in Florida with an existing tenant involves navigating the intricacies of lease agreements and complying with the terms of the sales contract. Sellers must be transparent about existing leases, and buyers have the right to terminate the contract if the lease terms are deemed unacceptable. The FARBAR contract serves as a vital framework, emphasizing the importance of clear communication and adherence to contractual obligations to facilitate a smooth and legally sound real estate transaction. Additionally, when faced with the absence of a written lease or a lapsed lease, sellers must follow the applicable statutory notice periods to ensure a fair and lawful termination process.

Home Damage Before Closing: Buyer and Seller Rights

The journey to homeownership is filled with potential twists and turns, and one such consideration is how to handle property damage when a property is under contract but not yet sold. In the realm of Florida real estate, the FARBAR contract provides a framework for addressing property damage occurring after the contract is entered but prior to closing. Let’s explore the rights of the parties in the event of a “Casualty Loss,” as defined by the FARBAR contract:

Understanding the FARBAR Contract Provision:

In the event of property damage due to fire or another casualty, the FARBAR contract delineates the rights and responsibilities of both parties. If the cost of restoration doesn’t exceed 1.5% of the Purchase Price, it becomes the seller’s obligation, and the closing proceeds according to the terms of the contract.

If restoration isn’t completed by the closing date, 125% of the estimated cost to complete restoration (not exceeding 1.5% of the Purchase Price) is “held back” in escrow for the buyer at closing. If the actual cost to complete the repairs then surpasses the escrowed amount, the seller is responsible for covering the difference (up to 1.5% of the Purchase Price). Any unused portion of the escrowed amount is returned to the seller.

However, if the cost of restoration exceeds 1.5% of the Purchase Price, the buyer has the option to either accept the property “as is” along with the 1.5%, or they can choose to receive a refund of the deposit, releasing both parties from further obligations under the contract.

As one caveat — the FARBAR contract states that the seller’s sole obligation regarding tree damage is limited to the cost of pruning or removal.

Breaking Down the Contract Provision:

Consider a scenario where a property, under contract for purchase, suffers damage from a sudden fire. If the cost of restoration is within the 1.5% threshold, the seller is responsible for covering the expenses, and the closing can proceed. If, however, the restoration extends beyond the closing date, an escrowed amount is set aside.

Now, let’s explore the scenario where the cost of restoration exceeds 1.5% of the Purchase Price. In such cases, the buyer gains additional options. They can choose to accept the property “as is” with the 1.5% contribution from the seller, or they may decide to receive a refund of the deposit, effectively releasing both parties from further obligations under the contract.

Final Thoughts

In the event of property damage while a Home is in the process of being sold, it is important for buyers and sellers to understand their respective rights so they can take the best action possible. In the event of disagreements, such as over the total price of damage, it may be advantageous to consult with an attorney.