To Say The Lease
Monday, June 2, 2014
Orlando REALTOR® | May/June 2014
When it comes to discussing
the terms of a residential lease,
less is decidedly more
By Andrew Fisher, M.B.A., J.D.
Note: This is an expansion of the version that appeared in the print issue of Orlando REALTOR®.
Florida real estate licensees (“licensees”) often ask whether they should use the Supreme Court of Florida (“Court”) approved form leases or a lease prepared by their attorney. The question is usually prefaced by the idea that licensees focusing on property management (or licensees handling the occasional rental property) want to protect their landlords to the fullest extent of the law.
While there is no clear answer, the response usually depends on how much interaction with landlords and tenants the licensee desires and how much input the licensee wants to have in the lease signing process. Many licensees want to focus their interaction with landlords and tenants on the terms of the tenancy, and not on the drafting and filling out of the actual lease. If the focus of the licensee is not on the drafting of the actual lease, which, when properly completed and executed, can be an enforceable contract, the attorney prepared lease could be a good option. When using the attorney prepared lease, the attorney should handle the drafting of the lease and provide a final copy for signature, with the licensee only providing the completed lease to the landlord and tenant, without doing anything else (as described below) and with the proper required nonlawyer disclosures (as described below).
On the other hand, for those licensees that want to participate in the lease drafting process, there are serious concerns to contemplate regarding the potential for Florida Real Estate Commission (“FREC”) complaint and liability under the unlicensed practice of law (“UPL”), especially when using a lease other than a Court approved lease. UPL is a concept established by the Court to protect the public against harm caused by unlicensed individuals practicing law, which is a third degree felony in Florida.
When the Court provided their opinion approving their form leases, the opinion discussed the Rules Regulating the Florida Bar (“Rules”), stating that UPL means the practice of law, as prohibited by statute, court rule and case law of the state of Florida. When applying the Rules to licensees, it can be interpreted that a licensee may engage in limited oral communication to assist a landlord or tenant in the completion of the blanks on the Court approved lease without being subject to UPL. This assistance in the completion of a Court approved form may include oral communication, restricted to those communications reasonably necessary to elicit factual information to complete the blanks on the lease. However, the Rules state that the licensee may not give legal advice regarding the terms of the lease.
For clarification, regarding forms which have not been approved by the Court (i.e. an attorney provided lease), a licensee may only engage in secretarial type services, such as filling in the blanks with information provided, similar to copying information given by the landlord or tenant. Provided however, the licensee must transcribe the information exactly as provided in writing, without addition, deletion, correction or editorial comment, and may not engage in any oral communication with the landlord or tenant, not even to discuss the contents or meaning of the blanks or anything else related to the lease.
Basically, if a licensee uses the Court approved lease forms, the licensee may assist the landlord or tenant in the filling in the blanks, including having limited oral communications regarding the blanks, as long as no legal advice is provided. On the other hand, if a licensee uses any other form (i.e. the licensee’s attorney provided lease form), the licensee may only provide a questionnaire that includes the necessary information to fill in the blanks of the form lease, but may not correct, edit, delete or do anything else related to the lease. The licensee may not have any oral communications with the landlord or tenant regarding the lease at all.
The problem arises for licensees because, for many, it is quite difficult to refrain from providing any oral communications when completing a lease. If using an attorney provided lease, and a licensee violates the concepts above, the licensee is opening potential liability for a FREC complaint and under UPL.
As to all legal forms in use by licensees, whether using the Court approved lease or an attorney provided lease, in addition to the permitted limited secretarial services provided above, the Rules provide that all such legal forms completed by a nonlawyer must contain specific disclosure language regarding the nonlawyer assisting in the completion of the legal form. These disclosures can be found on the first page of the Court approved lease, but should also be included in an attorney provided lease, even if the licensee is only providing the limited secretarial services.
For a real life example, a tenant client of mine asked me to review the lease they received from the landlord’s licensee. The lease was not a Court approved lease, but one that appeared to be drafted by an attorney. My comments/revisions on the lease were many to protect the tenant, and I provided my comments/revision directly to my tenant client, who then provided them to the landlord’s licensee, who then negotiated directly with the tenant on what revisions were and were not acceptable. While my tenant client and the licensee agreed on the final terms, the actions of the landlord’s licensee were clearly an instance of UPL and if there later turns out to be litigation on the lease, that licensee will likely be the subject of a FREC (Florida Real Estate Commission) complaint in addition being found guilty of UPL, which among other things, will be putting their license and their livelihood in jeopardy.
In summary, it is up to the licensee to decide whether to use a Court approved lease or their attorney provided lease. If using the Court approved lease, the licensee may engage in limited oral communications with the landlord and tenant regarding filling in the blanks on the lease, but may not make any modifications or add any addenda to the lease. If using an attorney provided lease, the licensee should not engage in any oral communications regarding filling out the lease or make any corrections to the information provided by the landlord or tenant. However, no matter which form is being used, the licensee should not provide legal advise to the landlord or tenant. For further protection of licensees, if a landlord or tenant asks questions regarding the Court approved lease that are not factual in nature, or any questions on an attorney provided lease, the best course of action is for the licensee to recommend that the questioner consult with their attorney for answers. Please note that this article is not to scare licensees in to calling their friendly real estate attorney for every lease issue, but to protect the licensee from potential FREC complaints and for opening themselves up to liability under UPL.
Andrew M. Fisher, Fisher Law, P.A., is a Florida Bar Certified Real Estate Attorney, the past president of the Central Florida Real Estate Attorneys Council, and a frequent ORRA instructor. Andre's law practice specializes in real estate law, including title services, short-sale negotiation, broker/buyer/seller representation, and DBPR and FREC matters. He can be reached at firstname.lastname@example.org.
i. Promulgated by In re Revisions to Simplified Forms Pursuant to Rule 10-2.1(A) of the Rules Regulating the Florida Bar, 50 So.3d 503, No. SC09-250 (Fla. 2010).
ii. See Section 10-2.1(a) of the Rules.
iii. See Section 10-2.2(a) of the Rules.
iv. See Section 10-2.2(b)(1) of the Rules
v. See Section 10-2.2(c) of the Rules.
Contracts and the Unlicensed Practice of Law
The unlicensed practice of law (UPL) concept was established by the Supreme Court of Florida to protect the public. It’s also a concept that frequently trips up real estate licensees.
The court has held that a real estate licensee should be restricted in the drafting of papers to those such as a memorandum or deposit receipt. Generally, if a licensee is simply filling in the blanks on forms contained in TransactionDesk or Forms Simplicity, then there should not be any UPL issues. The potential for problem arises when a licensee writes in additional terms, crosses out or changes preprinted language, or, as we’ll discuss in depth later, explains the legal significance of certain terms contained in a contract or other form.
Licensees will most likely not be found guilty of UPL if cross-outs or changes pertain specifically to a fact. For example, changing the numbers of days to perform an inspection or writing in a disclosure that the seller is a licensee (which is required under the Code of Ethics), should be fine. However, drafting language about back-up offers or writing kick-out clauses regarding below-price appraisals are examples of actions that would most likely be considered UPL. The good news is that most of the issues commonly addressed in handwriting by licensees are contained in Florida REALTORS®/Florida Comprehensive riders. Use them!
There are two specific areas of potential UPL to be aware of when you are preparing contract documents and presenting them to clients: oral communications and the filling in of blanks.
Rule 10-2.1(a)(1) of the Rules Regulating The Florida Bar states, "It shall not constitute the unlicensed practice of law for a nonlawyer to engage in limited oral communications to assist a person in the completion of blanks on a legal form approved by the Supreme Court of Florida.” It further states, "Oral communications by nonlawyers are restricted to those communications reasonably necessary to elicit factual information to complete the blanks on the form and to inform the person how to file the form.”
The moral of the story here is that it is okay to help your clients fill in the blanks and to discuss the facts, but you need to leave interpretation of the terms of the contract to your clients themselves or advise them to contact a real estate attorney for further understanding or clarification.
Keep in mind that an enforceable contract is one that contains the material terms of the deal. This detail is important because if a contract (or rider) is only partially completed or contains blank fields, whether or not the contract is enforceable will depend on the missing fields and whether such fields are considered material to the deal (i.e. purchase price, closing date, or legal description). I recommend that you carefully and properly fill in all blanks on a contract, especially those blanks that do not contain a default (such as a time period to perform).
--By Andrew Fisher