FREC clarifies broker authority
 
The Florida Real Estate Commission (FREC) clarified the authority of brokers to disburse certain funds held in the broker’s escrow account collected as part of a residential landlord and tenant relationship when there is a conflict over distribution.
 
At its February 2009 monthly meeting, FREC issued an interpretation to section 83.49(3)(d) of the Residential Landlord and Tenant Act. According to the interpretation, brokers holding a “security deposit” or “deposit money” in escrow as part of a “contract to lease” (also called a memorandum or agreement to enter into a lease) may disburse the funds at the broker’s discretion when faced with conflicting demands from the landlord and tenant. Previously, brokers who disbursed such funds when faced with a dispute risked being charged by FREC with violating the real estate license law.
 
The specific issue addressed by FREC was: Does a “contract to lease” create a “landlord-tenant relationship”? Under section 83.49(3)(d) a “rental agreement or other landlord- tenant relationship” must exist in order for the broker to have the authority to disburse security deposit/deposit money if there is a dispute. The Residential Landlord and Tenant Act defines a rental agreement as “any written agreement, or oral agreement for a term of less than one year, that provides for use and occupancy of the premises” – but the Act does not clearly define what creates a “landlord-tenant relationship.”
 
In its interpretation of 83.49(3)(d), FREC determined that a “contract to lease” does create a “landlord-tenant relationship.” According to FREC, any verbal or written contract to lease, agreed to by landlord and tenant, constitutes a landlord-tenant relationship, even if the tenant does not take occupancy.
 
While disbursal of escrow money in this case without following the notice and settlement procedures of chapter 475 will no longer be considered a violation of real estate license law, brokers are still civilly liable for escrow money if it’s wrongfully disbursed. If the broker isn’t sure who is entitled to the escrow funds, the broker does not have to disburse the funds.

Questions? Contact FAR’s Legal Hotline at (407) 438-1409.

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