The Pitfalls of Subleasing

Often in this economy, tenants are short on cash and sublease (whether authorized to or not) to others who are not on the lease agreement with the landlord. Whether the person subleasing from the tenant is a tenant themselves or an "occupant" is fact dependent. So let's get to it:

Who is a landlord?

The landlord, by definition, is the owner of the property. Landlords alone have the right to file a lawsuit under Chapter 83, Florida Statutes. There are limited exceptions for a property manager to do so, but that is another topic for another post. To find out who the actual landlord of a property is, look it up either in the official records of the county (the deed) or the property appraiser's database. 

But I'm definitely the landlord, why should I look it up?

Ok. I will not disagree with you. However some landlords have lost money to me on that assertion. If you placed the home under a business entity or trust account, "you" are not the landlord, the business or trust account is the landlord. "You" are the property manager. If you file an action to evict somebody from the property and that person walks into my office you are in for a world of hurt.

I just found out that my tenant has subleased the property but the lease agreement does not allow that. What can I do?

You can send a seven-day notice of material non-compliance to the actual tenant informing them that subleasing is not permitted and giving them seven days to remove the occupant. If they fail to do so within seven days you can file an eviction action against them. If the lease agreement is an oral (unwritten) lease agreement, then you will need to prove to the Court that part of the agreement was that subleasing was not permitted. That will be a difficult task indeed once the tenant testifies that no such discussion took place.

A written lease agreement setting out the terms of the landlord-

tenant relationship can be one of the most important documents

protecting the rights of both parties to such a relationship. While

oral agreements (unwritten) are permitted, they are difficult to 

interpret and/or enforce. For best results, get it in writing.

Who is a tenant?

A tenant is a person who pays rent to the landlord or the landlord's designated agent. The landlord-tenant relationship exists if there is an agreement to occupy another's property in exchange for money (or sometimes work). If "rent" is being paid to somebody other than the landlord under a contract, then there is no landlord-tenant relationship. This mistake often occurs when the "property manager" (I use that term loosely) drafts the contract and place themselves in the landlord position. Not only is it a misrepresentation, but this type of mistake fails to create privity between the landlord and the "tenant" who is technically an occupant. A ratification can correct the privity problem but must be done correctly so as to not run afoul of the requirements of Florida law.

If I am renting property from a tenant: am I a tenant?

You are a tenant if and only if you have paid rent to the property owner directly, not through the actual tenant unless that tenant is a property manager to the landlord as well. It would be highly recommended that you actually get a copy of the lease agreement that the tenant is operating under. Many leases forbid subleases and therefore the act of moving in without the actual landlord's permission would create grounds for the tenant (and you) to get evicted.

If you have never paid rent to the landlord or to the landlord's property manager or agent, you are an occupant. Occupant rights rise and fall with the lease agreement.

The tenant I am renting from is threatening to evict me, is that legal?

A tenant may not evict a person from the property. Only a landlord can file an eviction. A property manager can file a single count non-contested eviction to completion, but once the matter is contested only the landlord (if a natural person) can proceed pro se or hire an attorney to proceed on the landlord's behalf.

Who is an occupant?

An occupant is any person who resides on the landlord's property either through a sublease, as a long-term guest, or as a result of their familial relationship with the tenant (ie: minor children). An occupant has never paid rent to the landlord and therefore their rights rise and fall with the lease agreement. Occupants should never be listed on an eviction action. If you never paid rent to the landlord and happen to be served with an eviction complaint you can defend on privity and your status as a non-tenant.

Minor children are the most common (in my experience) occupant. They should not be listed on the lease agreement by name and instead as Minor Child 1, Minor Child 2,... etc, or by their initials. Remember that should an eviction action be filed the lease agreement needs to be attached. Minor children should never be named in a complaint and should not be named as a party defendant. It is a violation of the rules of procedure in Florida and depending on the disposition of the judge may 

So who can sue who?

Under Chapter 83, Florida Statutes a tenant and landlord may sue each other. An occupant, on the other hand, has no standing to sue the landlord or the tenant. Neither the landlord nor the tenant has standing to sue an occupant.

Landlord-tenant law in Florida seems relatively straightforward until attorneys get involved. The landmines found throughout the statutory framework in Florida can have financially devastating consequences for landlords, tenants, and occupants who are not familiar with the nuances of the practice area. For example:

- Landlord files an eviction action against Tenant1, Tenant2, and Occupant1. Occupant1 grabs an attorney who moves to dismiss and because there is no privity the dismissal is granted. A motion for attorney's fees for anywhere between $1000-$1500 can be anticipated.

On the flip side, Occupant1 does not obtain an attorney and fails to answer appropriately. The attorney who files the action files a motion for attorney's fees. If Occupant1 fails to notify the court that privity does not exist Occupant1 may be on the hook for attorney fees even if unjustified. Unrepresented occupants should realize that the court is not there to represent them.

- Property manager "landlord" files an eviction action against Tenant1, Tenant2, and Occupant1. All three go find attorneys who agree to represent them after discovering that the "landlord" is actually not the person who filed the suit, but a business entity owned by the "landlord". Three motions to dismiss are filed (all three for "lack of standing" and one for "privity) and are granted. Three motions for attorneys fees later and the property manager may be out between $1500 and $3000. Not good.

Learn from the mistakes of others.

The law firm the author words for has represented many tenants and occupants against landlords  or "landlords" who are later shocked to find that they are on the hook for thousands of dollars in attorney fees. The same firm represents landlords who are often at wits end dealing with tenants and occupants they cannot seem to have removed from the property.

The Motion for Attorney Fees: What is Reasonable?

After a review of attorney fees in the landlord - tenant ("LL/T") arena, it was clear that neither judges nor attorneys are really clear as to what is a reasonable fee or not. It's almost as if there is a gut instinct about what is fair and what is not. The result is that either attorneys are not being paid a fair wage for their work, or the landlord is being overcharged. Neither is a good thing.

An informal poll of attorneys indicated that I was worth anywhere from $175 - $250 per hour. Surprise, surprise: the attorneys who represent landlord downplayed my worth, while the attorneys who represent tenants increased my value. So what is the answer? At the time of this writing, I am calculated to be worth $241.34 per hour.

Whoa, Whoa, Whoa... How Did You Arrive at Such an Exact Figure?

Good question. But before I get to that figure let's go over what is happening in the marketplace. The landlord - tenant statutes grant attorney fees to the prevailing party. This is the flip side to the landlord favorable statutes. If a tenant is intelligent enough to grab an attorney and that attorney prevails, the landlord is looking at a financial thumping for messing up. On the other side, if the landlord's attorney wins the chances of regaining money from the tenant is pretty negligible because... well let's face it, a lot of tenants cannot afford a mortgage, much less an attorney bill.

In the beginning, not being familiar with the worth of attorneys and not understanding where these figures came from I did what most newly minted attorneys do, I looked it up and discovered several sources which discussed what a reasonable fee was but either didn't really give a good reason for how they calculated it or what it actually should be (in the form of a convenient chart or formula I could work with). Fla. R. Pro. Conduct 4-1.5 for example outlines "factors" to be considered in determining reasonable fees and costs.

Factors like, "the nature and length of the professional relationship with the client." Really? How does that come into play? If I represent my wife, does the cost go up (because I'll never hear the end of it if I lose) or down (because I have a personal incentive to win)? If I have had the client for years, does it go up or down? If the client is an ex-girlfriend, does the cost go up or down? What if it's my dentist? Accountant? Pharmacist? What about the staff of my favorite restaurant who know my family and I by first name?

The rule goes on to say that "[i]n determining a reasonable fee, the time devoted to the  representation and customary rate of fee need not be the sole or controlling factors. All factors set forth in this rule should be considered, and may be applied, in justification of a fee higher or lower than that which would result from application of only the time and rate factors." Well... I don't know about you, but that cleared it up.

Unsatisfied, I decided there has got to be an easier way, based on empirical methods, to calculate the attorney fees in LL/T matters. So yeah, damn that science background of mine, because here is comes...

Known Orders and Illogical Curves

When I began this study I decided to obtain as many orders detailing the award of attorney fees and see what the data would be like. I was pleasantly surprised because the awards listed hours worked, the worth of the attorney (in $ / hr), years of experience, expert witness fees sometimes, and contingency fee multipliers (which, by the way, is now between 1.5-3 depending on difficulty; but that's another post). Just with the years of experience and hourly values I could put together a fairly decent ball park estimate.

With this kind of data, I should be able to approximate a math formula so that I could calculate my own worth. I was overjoyed, until I saw this:

What is this? Attorneys with 5-7 years of experience making more per hour than attorneys with around 30 years of experience? These were all within the past five years, and most of the data points were between 2012-13. This curvy... curve thing, while a formula, makes no sense.

The problem is that a reasonable attorney fee can only go so high, and any higher it obviously becomes unreasonable. Also, whatever that limit is, anything below it is more than reasonable. Attorneys out there are underpricing themselves, likely in an attempt to assure the judge that their rates are indeed reasonable. But why should an attorney cut him or herself short?

What Type of Curve Should Be Used?

That is a really good question. I settled on a linear function because a linear function would allow the profession to up their worth at certain levels of experience without drastically affecting the remainder of the curve, or giving ridiculous results over time. So if a 1 year attorney was getting $200 and then an order comes out giving that attorney $220, the new standard is $220 and only slightly ups the rates between 1 year and 15-20 years of experience.

Imagine a curve that curves upward from year one and flattens out around 15 years at $400 per hour. Over time, as orders come out giving more worth to beginner attorneys, the experienced attorneys will not progress and soon a flat line will emerge. This would mean that unless experience attorneys are increasing their worth in a field of practice as regularly as young attorneys are, soon a flat line will be observed. Then it will not matter if you are starting out or about to retire, you are worth $400. That hardly seems fair for the extremely experienced attorneys out there.

Next, imagine another curve that starts flat and ramps upward instead. While this may seem grand (and I certainly would appreciate it in 1-2 decades) the curve never stops and the "reasonable" rate for experienced attorneys would certainly be cringe-worthy. While at 15 years an attorney may be worth $400 per hour, soon after that attorney would be worth $500, $1000, $15000, $1,000,000 per hour. Such results are absurd and certainly not what is intended.

Eliminating the Orders Given to Attorneys Who Undervalue Themselves

Next, the values which are obviously undervalued are removed from the dataset, meaning: 1. any order awarding a more experienced attorney less hourly then an attorney with less experience; and 2. any order awarding less hourly to an attorney where another attorney of roughly equivalent experience was awarded more. This is not to say that the other orders were unreasonable, but the purpose of this exercise is to determine the upper limit of attorney fees that should be awarded.

When these orders were eliminated what emerged was a roughly linear trend for attorneys between 4-15 years of experience.

This is really good. Although I initially wanted a linear function it appears that the seemingly random logic of the orders giving attorney fees was that roller-coaster looking curve above, when everything undervalued is extracted what appears is a pretty decent function.

So You Look on the Graph and See What You're Worth?

Yup. Or you can plug your experience (in years) into the following formula (current as of 11/5/2013):

W(y) = (125y + 2525)/11

where W is your worth,

y is your experience in years, and

A is for how awesome this is!

Like all blog entries dealing in the mathematics of law, an example is required:

I've been practicing in landlord - tenant matters for 1.038356164 years (that's so ridiculously precise)

W(1.038356164) = (125*1.038356164 + 2525) / 11

W(1.038356164) = (129.7945205 + 2525) / 11

W(1.038356164) = 2654.7945205 / 11

W = $241.34

And that is how I got such a precise calculation, to answer your earlier question. In other words, I calculate my going rate based on the years I've been practicing measured in days. This means I get regular raises and my reasonable rate is always bumping up against the line and never falling behind where I should be. Tomorrow I get to celebrate when my going rate goes up to $241.35, joy!

For those of you who hate math, you're welcome:

• 0 years = $229.55
• 1 years = $240.91
• 2 years = $252.27
• 3 years = $263.64
• 4 years = $275.00
• 5 years = $286.36
• 6 years = $297.73
• 7 years = $309.09
• 8 years = $320.45
• 9 years = $331.82
• 10 years = $343.18
• 11 years = $354.55
• 12 years = $365.91
• 13 years = $377.27
• 14 years = $388.64
• 15 years = $400.00

Beyond that we have no good data, but to project:

• 16 years = $411.36
• 17 years = $422.73
• 18 years = $434.09
• 19 years = $445.45
• 20 years = $456.82
• 21 years = $468.18
• 22 years = $479.55
• 23 years = $490.91
• 24 years = $502.27
• 25 years = $513.64
• 26 years = $525.00
• 27 years = $536.36
• 28 years = $547.73
• 29 years = $559.09
• 30 years = $570.45

There you have it, what you're worth in Florida's market for landlord - tenant matters. So the question now is this, do you have an order awarding attorney fees in Florida? If so, send it over and I'll include it in the data if it isn't already included which may make things a little more accurate. If there is a change, it will be reflected in this blog.

If you are in need of an expert in attorney fees in a landlord - tenant matter, don't get your briefs in a bunch, give me a call. I'll be happy to review your file, sign an affidavit, and appear in court for you if your file is in order. TTFN.