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Q&A – Commercial Real Estate Leasing – Rent and Security Deposits

By:  Alejandro E. Jordan, Esq.img_2262

Q.  ARE THERE ANY LEGAL RESTRICTIONS ON: 

        • How much rent the landlord may charge?

        • Whether certain operating expenses (or other additional rent) may be passed through to the tenant?

Maximum Rent

Under Florida law, there are no restrictions on the rent a landlord may charge on commercial leases.

Operating Expenses

There is no limit to the operating expenses that may be passed through to the tenant, but almost all pass-through amounts are considered additional rent and are subject to Florida sales tax.

Q.  FOR SECURITY DEPOSITS: 

  • Must the landlord maintain security deposits in a separate bank account for each tenant?

  • Must a security deposit be in an interest bearing account?

  • Must the landlord pay all interest earned to the tenant or can the landlord retain a percentage of the interest earned as an administrative fee?

Commingling Permitted

Under Florida law, absent specific language in a commercial lease, there are no requirements about how the landlord must maintain a security deposit.

Interest Bearing Account

Security deposits may be held either in interest-bearing or non-interest-bearing accounts.

Administrative Fees

There are no requirements regarding administrative fees for commercial leases.

Transfer Taxes and Other Taxes

Q.  ARE ANY STATE OR LOCAL TRANSFER TAXES TRIGGERED WHEN A LEASE IS SIGNED OR IN THE LATER ASSIGNMENT OF A LEASE?

  •  Rate for the tax and how it is calculated.

  • Returns required.

  • Timing for filing the returns and paying the taxes.

Rate and Calculation

Leases are not subject to transfer taxes in Florida. The assignment or other conveyance of a leasehold interest for consideration, however, is subject to the documentary stamp tax and surtax under §§ 201.02 and 201.031, Fla. Stat., based on the amount of consideration given for the transfer.

The documentary stamp tax is $0.70 on each $100 (or fractional part) of the consideration paid or to be paid (§ 201.02, Fla. Stat.). This rate applies except for in any county that has implemented the surtax provisions of § 201.031, Fla. Stat. Miami-Dade County has a documentary stamp of $0.60 on each $100 of consideration, plus a surtax.

Surtaxes may be levied by on the same documents taxed under § 201.02, Fla. Stat., though conveyances of single-family residences are exempt from surtax (§ 201.031, Fla. Stat.). The rate of the surtax cannot exceed $0.45 for each $100 (or fractional part) of the consideration paid or to be paid and is subject to limits promulgated by the Florida Department of Revenue. Florida law regulates the application of revenue collected from the discretionary surtax. (§ 125.0167, Fla. Stat.)

Returns

Documentary stamp tax and surtax are paid, as a condition of recording, to the clerk of court when the document evidencing the assignment or other conveyance of the leasehold interest is recorded (§ 201.02, Fla. Stat.).

If the instrument is not recorded, then:

  • Registered taxpayers must file a Documentary Stamp Tax Return for Registered Taxpayers’ Unrecorded Documents (Form DR-225).
  • Non-registered taxpayers having fewer than five taxable transactions per month must file a Documentary Stamp Tax Return for Non-Registered Taxpayers’ Unrecorded Documents (Form DR-228).

These forms must be filed by the 20th day of the month following each collection period. (§§ 201.02 and 201.133, Fla. Stat.)

Timing

Documentary stamp tax and surtaxes are typically paid to the clerk of court when the document evidencing the assignment or other conveyance of the leasehold interest is recorded.

Q.  ARE STATE OR LOCAL TRANSFER TAXES TRIGGERED WHEN THE TENANT UNDERGOES A (DIRECT OR INDIRECT) TRANSFER OF ITS OWNERSHIP INTERESTS? IN PARTICULAR, PLEASE SPECIFY THE:

  • Percentage of ownership interest that triggers the taxes.

  • Rates for the taxes and how they are calculated.

  • Returns required.

  • Timing for filing the returns and paying the taxes.

There are no transfer taxes triggered under Florida law when a tenant undergoes a (direct or indirect) transfer of its ownership interests.

Q.  DESCRIBE ANY STATE OR LOCAL TAXES (RENTAL OR OTHER) THAT THE LANDLORD MUST COLLECT FROM THE TENANT.

Generally, lease agreements in Florida provide that the tenant pays to the landlord the sales tax due on rent (and rent in kind), but the landlord is the party that is ultimately responsible for remitting sales tax on rent (and rent in kind) to the Florida Department of Revenue for leases.

Certain types of leases are exempted from these taxes, including leases described in § 212.031(1)(a), Fla. Stat.

JordanLawyers-ICON-Dark-241x300About the Author

Jordan + Lawyers law firm has over 20 years’ experience as advisors to foreign national and domestic real estate investors, real estate owners and tenants, developers, real estate investment companies, and ultra-affluent high net worth individuals. If you have any questions on whether a particular a commercial real estate transaction is right for you, need assistance in leasing or in analyzing due diligence on a particular opportunity, contact us at 305-501-2836 or visit us at www.JordanLawyers.law for immediate assistance.  Our offices are conveniently located in Miami, Florida (Coral Gables), and service clients throughout the State of Florida.

 

 

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