Miami Transfer Fee Controversies: A Wake Up Call for Associations

Condominium associations across South Florida have come under scrutiny for imposing mandatory, non-refundable “transfer fees” on residents in connection with the lease or sale of units. Indeed, several years ago this firm was quoted in an article in the Miami Herald addressing the issue, and this year, a class action lawsuit resulted in an association agreeing to settle for $300,000 in a lawsuit alleging that the association overcharged its residents in connection with lease and move-in applications. The class action lawsuit alleged that the association had been charging its residents a $150 screening/application fee and a $200 move-in/move-out fee. The plaintiffs argued that these were excessive “transfer fees” which are capped by Section 718.112 (2)(i), Florida Statute. 

 

Specifically, the Condominium Act prohibits associations from charging fees greater than $100 per person or married couple in connection with the sale, lease or transfer of a condominium unit. Notably, the term “transfer fees” is vague and undefined, but broadly seems to include any “charge” that is “in connection with the sale, mortgage, lease, sublease, or other transfer of a unit”. This arguably would include clerical fees; fees for background, credit and screening checks; move-in and move-out charges; and possibly even elevator fees. Associations also may not charge a “transfer fee” if the lease or sublease is a renewal. Additionally, associations may only charge such “transfer fees” if (1) the association is required to approve the transfer of units and (2) a fee for such approval is provided for in the governing documents. 

 

While associations do not need approval powers in order to require that prospective lessees place a security deposit, the authority to collect the security deposit must be in the Declaration or Bylaws. Furthermore, associations should ensure that their security deposit policies comply with both the Condominium Act and the Landlord-Tenant Act. Both statutory provisions provide that security deposits must not exceed one (1) month’s rent and must be placed in an escrow account maintained by the association. However, the Landlord-Tenant Act imposes additional requirements on associations in relation to security deposits, such as prohibiting the commingling of funds and governing the timing and requirements for disbursements.  

 

Associations could arguably as attempt to alternatively characterize certain types of fees as “exclusive use fees” rather than “transfer fee” under certain circumstances, and subject to risk. Section 718.111(2) authorizes associations to charge unit owners for the use of common elements or association property if the authority to do so is in the Declaration, if approved by a majority of the membership, or if “the charges relate to expenses incurred by an owner having exclusive use of the common elements or association property.” The provision on “transfer fees” arguably still applies in the event that unit owners only incur “exclusive use fees” when the common element, such as an elevator, is used for move-in/move-out purposes. However, Associations could arguably charge such “exclusive use fees” as long as owners also incur such charges when using the elevator for other purposes, such as construction. 

 

According to the Miami Herald, associations might be able to charge higher fees in the near future – – thanks to members of the property-management industry who are lobbying the Florida legislature to pass a bill increasing the statutory cap on “transfer fees.” However, associations should be mindful of the amount of “transfer fees” that are being charged to residents in total. Furthermore, associations should consider discussing alternative ways to legally cover expenses associated with the sale, lease or transfer of units with their counsel.  

 

The recent settlement and Transfer Fee controversies illustrate that associations should confirm the status of their procedures on lease and sale approval, as well as any associated “transfer fees” and security deposit policies, with legal counsel, rather than assuming that prior board or management policies comply with the Condominium Act.