First-step analysis: real estate in USA (Florida)

Rights and registration

What types of holding right over real estate are acknowledged by law in your state?

There are several forms of ownership rights in Florida and the commonly used methods include:

• fee simple;
• joint tenancies (with or without rights of survivorship);
• tenancies in common;
• life estates;
• land trusts; and
• marital estates (including tenancy by the entireties).

Although not commonly used, Florida retains some historic forms of ownership, such as fee tail and fee simple determinable.

Are rights to land and buildings on the land legally separable?

Yes.

Which parties may hold and exercise rights over real estate? Do any special rules, restrictions or requirements apply to foreign owners of property in your state?

Any party with legal capacity may hold and exercise rights over real estate. Foreign owners are not subject to special holding rules by Florida as a result of being a foreign national.

Which real estate rights, interests and transactions are subject to registration in your state? What information is recorded in the relevant state and local registers?

All rights are subject to registration, which is commonly called “recording in the public land records.” Typically, the recorder of legal instruments requests:

• the name of the grantor and grantee;
• their addresses;
• the consideration for the transaction; and
• the legal description of the real estate.

What are the procedural and documentary requirements for entry into state and local registers? What are the legal effects of registration?

Documents that are to be recorded must be acknowledged before recording and documentary and intangible taxes (if applicable to the instrument) must be paid. Florida’s Recording Act is a “notice” type, and the act of recording perfects a party’s claim to the real estate against third parties as long as the recording party had no knowledge of prior claims to the real estate (either actual knowledge or knowledge gained from reviewing the land title records). Buyers should check land title records before purchasing for two reasons:

• to know the status of the land title that they are buying; and
• because the law presumes that a buyer has checked the land title even if they have not (termed a “constructive notice” of the land title).

Sale and purchase

Are there any particular due diligence considerations for real estate sale contracts concluded in your state?

Yes, but too numerous to mention in detail. At the very least, purchasers should check ownership and encumbrances of the property through a title search. Third-party vendors are typically employed to conduct tax and lien searches on the property. Depending on the nature of the transaction, additional searches (e.g., environmental, engineering, or zoning) are also conducted.

Are sale contracts in your state subject to any formal or substantive requirements?

Yes, sale contracts must comply with general contract requirements (e.g., consideration and mutuality of obligation) and the Florida Statute of Frauds (in writing and signed by the party to be charged). Contracts can be concluded electronically, including being signed electronically.

What are the seller’s disclosure obligations and other liabilities, and what are the consequences of breach?

Sellers of residences must disclose defects which materially affect the value of the home, but caveat emptor still applies in commercial contracts (i.e., the onus is on the buyer to conduct due diligence). Both residential and commercial parties are subject to Florida’s fraud and misrepresentation laws with regard to their actions in contract.

Are there any other obligations on the buyer, aside from paying the purchase price?

In general, there are no other obligations on buyers, but they are encouraged to record their sales title (or other documentation) promptly, as doing so preserves their rights under Florida’s Recording Act. Buyers are not required to but often purchase title insurance to protect against off-record title issues. Buyers are cautioned to have casualty and property insurance in place prior to purchase in order to confirm its availability, as insurance is sometimes unavailable due to storm events.

Are there any other special considerations for real estate sale and purchase transactions in your state?

Due to the complexity and diversity of Florida’s real estate market, generalizations are hard to apply to local customs and practices in the locale where the real estate is located. However, at a minimum buyers should engage professionals to:

• search the land title for the property;
• conduct due diligence appropriate for the type of property being purchased and the price of the transaction; and
• obtain title and property/casualty insurance prior to purchasing the property.

Brokerage

What are the registration requirements for real estate brokers in your state?

Florida real estate brokers are governed by Chapter 475 of the Florida Statutes and regulated by the Florida Department of Business and Professional Regulation (DBPR). In general, brokers must:

• maintain a physical office;
• maintain records (electronic is permitted); and
• have a sign outside their offices.

Brokers must obtain and maintain licenses in good standing with the DBPR.

How are the activities of real estate brokers regulated in your state

Florida Statutes Chapter 475 and its enabling regulations dictate the activities of brokers and sales agents. Typically, commissions must be paid to the brokers in the transaction (not the sales agents) and generally range from 2% to 10% of the gross sales price. Brokers in Florida may enter into exclusive rights of sale/listing agreements with:

• sellers (commission is paid even if the broker does not create the sale);
• a single agent (represents only one side of the transaction); or
• transaction brokers (limited representation to buyer, seller, or both).

The difference in duties between single and transaction brokers are subtle, but single brokers typically owe their clients a higher duty (i.e., a fiduciary duty) as opposed to a less onerous duty of good faith.

Leases

Are lease agreements in your state subject to any formal requirements?

Lease agreements for short periods may be oral, but leases for more than one year must be in writing and signed by the party to be charged, and the lessor’s signature must be attested by two witnesses. Lease agreements are typically not recorded and need not be recorded in order to be enforceable.

Do state or local laws set out any mandatory or prohibited provisions in lease agreements?

Chapter 83 of the Florida Statutes provides certain requirements for residential leases, the most onerous being the requirement that security deposits (e.g., advance deposits for faithful performance under the lease and payment of all obligations) be placed into special accounts or otherwise be protected by bonds. There is no such requirement for commercial leases.

Chapter 83 prohibits residential lease provisions that waive the rights, remedies, or requirements of Chapter 83, or that waive liability to the landlord or tenant. Commercial leases contain no such requirements or prohibitions.

What are the standard forms of lease agreement used in your state?

The Florida Association of Realtors propounds a form that is commonly used, and the Florida Supreme Court has approved a form of residential lease that is often used which can be found at www-media.floridabar.org/uploads/2018/08/multi-family-lease.pdf.

Are there any state or local laws regulating the terms of leases? Are long-term tenants accorded any special rights as to extension or renewal of leases?

There are no state laws regarding the length of leases, but many local governments have enacted ordinances limiting or curtailing short-term leases for vacation rentals (“short-term vacation rental” is defined as a property that is rented more than three times a year for less than 30 days at a time). These ordinances are considered enforceable if they were in place before 2011, but generally considered unenforceable if they were enacted after 2011.

Are there any state or local laws regulating rent increases?

There are no state laws in Florida limiting rent increases and there are no local governments that restrict rent increases.

Are there any state or local laws governing rent security deposits?

There is no Florida law restricting or limiting the amount that a landlord can charge for a security deposit, but Florida Statute Section 83.49 contains several requirements regarding treatment of security deposits for residential tenancies. First is the requirement that security deposit must be held in a separate interest or non-interest-bearing account for the benefit of the tenant or, in lieu thereof, a bond must be posted. There are disclosure requirements placed on the landlord to inform the details of the retention of the security deposit. In addition, retention or disbursements of the security deposit are subject to strict notice requirements to the tenant. These provisions do not apply to hotels or motels.

Can the tenant withhold rent payments on any legal grounds?

Yes, but the withholding of rent by residential tenants is subject to prior notice requirements which must be given by the party withholding the rent.

Under what circumstances is sub-letting allowed?

Subletting is neither prohibited nor expressly permitted under Florida law, but instead is subject to any agreement of the parties as set forth in the lease. There are no special conditions to allow subletting, but some leasing agreements prohibit sub-leasing when doing so materially alters the terms of the lease agreement between the parties.

What are the general obligations and liabilities of the landlord in respect of the property and what are the consequences of breach?

Residential tenancies are subject to more requirements than commercial tenancies, which residential requirements are generally described as making the premises “habitable.” Commercial tenancies are still subject to the doctrine of caveat lessee, the landlord-tenant equivalent of caveat emptor (i.e., the onus of due diligence is on the lessee).

What are the general obligations and liabilities of the tenant in respect of the property and what are the consequences of breach?

Florida law neither prohibits nor expressly permits sub-leasing and as such sub-leasing is controlled by the terms of the lease itself. In general, sub-leasing is permitted under Florida law unless there are specific conditions or requirements under the lease that prohibit or limit sub-leasing.

Are the landlord and tenant bound by any insurance requirements?

There are no general insurance requirements on either landlords or tenants, and any such requirements are typically contained in the lease between the parties.

What rules and procedures govern termination of the lease by the landlord and the tenant’s eviction from the property?

Florida has strong laws prohibiting self-help evictions (i.e., the landlord itself evicting the tenant without legal action). Evictions are governed by Florida Statute Section 83.20, which requires a tenant to be in breach of the lease agreement in some fashion (e.g., non-payment of rent or failure to abide by material lease requirements) before they can be evicted. Unless waived by the lease itself, Florida law requires the giving of a specific notice of default under the lease (termed a three-day notice for non-payment of rent and a 15-day notice for breach of other material lease terms) prior to beginning the eviction process. The process begins by filing suit in the Florida courts, and runs quickly compared with other Florida litigation (e.g., an eviction summons requires an answer within five days as opposed to the typical 20 days for other civil litigation). With some exceptions, the tenant must deposit the outstanding rent with the court before contesting the eviction.

Taxes

What taxes are payable on the sale and purchase of real estate? Are any exemptions available?

Payment of U.S. income taxes on the sale of Florida real estate is beyond the scope of this article, but sellers are generally required to retain a portion of sale proceeds under the federal law known as the Foreign Investment in Real Property Act if a party to the transaction is a foreign national. The recording of a deed triggers the requirement to pay Florida documentary stamp taxes at the rate of $0.70 per $100 (i.e., 70 cents of tax per each hundred dollars of value for the property transferred) of the transaction. In addition, intangible taxes are due on notes and mortgages at the rate of $0.35 per $100 of value of the money lent. Florida’s 67 counties can also levy more minor transfer taxes.

Briefly describe the property tax regime in your state.

Florida taxes real estate on an ad valorem basis (i.e., the value of the real property is taxed every year). Florida has a two-step process for valuing and collecting taxes on real estate owned. First, the property appraiser for each Florida county sends out tax notification statements of what they believe the real property to be worth. The county commission or independent taxing district then votes on the millage rate (i.e., the tax rate to be applied to each property). Millage is set by local government per $1,000 of property value. After the appraised value and millage rate are approved by local governments, the tax collector for the county sends out tax bills. Taxes are due in arrears for the previous year on January 1 of each year, and the local tax collector typically gives a 3% discount for early payment in October, a 2% discount for payment in November, and a 1% discount for early payment in December, with corresponding penalties of 1% in February, 2% in March, and so forth. Failure to pay by the specified date results in a tax certificate being sold to the public by June 1 for the outstanding taxes due. Failure to pay outstanding tax certificates for two years permits a certificate owner to apply for a tax deed sale. If the outstanding taxes are not paid by the tax deed sale date, the property is sold at public auction.

Are any taxes payable on rental income? Are any other tax regimes pertinent to the real estate sector?

Yes, Florida sales taxes are due and payable on rental income.

Finance and security

What are the typical sources of real estate financing in your state? Are there any restrictions on who may provide financing?

The traditional forms of financing exist in Florida, including:

• banks;
• pension funds;
• real estate investment trusts;
• trusts; and
• other common forms.

There are no restrictions, except that lenders which lend money for a profit must be licensed and register with the state as a mortgage lender.

What types of security interest are recognized by law in your state? Is your state a lien theory or title theory state?

Florida is a lien theory state and recognizes all forms of security interest in real estate, with mortgages being the most common. Mezzanine and other forms of financing are not prohibited. In addition, security interests in personal property are permitted.

What rules and procedures govern the creation and perfection of real estate security interests in your state?

The security interest must be in writing and acknowledged by the party whose property is being liened, and the applicable documentary and intangible taxes must be paid in order for the security interest to be recorded.

What rules and procedures govern the enforcement of real estate security interests in your state?

Security interests in real estate, including those not titled mortgages but that use real estate as security for a debt, are deemed mortgages under Florida law and must go through the judicial foreclosure process under Florida Statute Chapter 702.

What is the typical timeframe for the enforcement of security?

Foreclosures in Florida are considered civil litigation and can take the same amount of time for some cases as other civil lawsuits (i.e., nine months to two years). There are cases in the extremes (i.e., less than two months for uncontested foreclosures and years for highly contested foreclosures) but most cases are finished within nine months.

Investment

What is the general climate of real estate investment in your state?

Florida is large, with the areas in the southern part being different from the central and northern parts of the state. The same also goes for metropolitan versus rural areas. The economic and legal climate for investment in real estate is good, but the diversity of the state creates pockets that prosper at the same that time that other areas are not doing well. Purchasers and investors are cautioned to investigate the climate particular to the locale in which they are interested.

What legal structures are typically used to invest in real estate in your state and what are the advantages and disadvantages of each (including tax implications)? What rules and procedures govern their formation?

The typical range of structures are used to purchase, invest, and develop Florida real estate include:

• corporations;
• partnerships;
• joint ventures;
• Florida land trusts;
• trusts;
• real estate investment trusts; and
• limited liability companies (LLCs).

LLCs are easily and cheaply formed under Florida law by anyone—a law license is not needed. This can be done online at https://dos.myflorida.com/sunbiz/start-business/.

The tax differences of all the possible vehicles are beyond the scope of this article, but LLCs in Florida can enjoy pass-through tax benefits under the U.S. Internal Revenue (tax) laws. There is no limit on the number of foreign nationals who can be members of a Florida LLC, but at least one member of the LLC must have a U.S. taxpayer identification number. As a result of these factors, LLCs have become the predominant form of real estate investment vehicle in Florida.

Land use

Which authorities regulate real estate zoning in your state and what is the extent of their powers?

With small exceptions, Florida has abolished statewide planning and development requirements for projects. Accordingly, zoning falls to local government (i.e., incorporated municipalities and county government). The zoning powers of local government are broad and are typically limited only by Constitutional requirements (the U.S. and Florida Constitutions prohibit government from taking property without just compensation) and some specific Florida statutes, such as the Bert Harris Act (which states that the Florida government cannot use regulation to inordinately burden real property development).

What are the eligibility, procedural and documentary requirements to obtain planning permission?

The requirements to obtain planning permission vary among Florida’s 67 counties and hundreds of local governments, but generally plans for a development must be submitted to a local planning board, agency, or commission, which reviews the plan for consistency with local ordinances and the local government’s long-range development plan (the comprehensive plan).

What is the appeal procedure for planning decisions?

Planning decisions fall into two categories in Florida, legislative or quasi-judicial, and the remedies differ for each, although the process is typically the same. In terms of process, both are appealed by filing a lawsuit in the circuit court of the locality where the planning decision was made. Legislative decisions are granted broader discretion than quasi-judicial decisions, but both are subject to the restrictions of first-tier certiorari review (i.e., the reviewing court cannot take new evidence but can hear certain arguments). A second appeal is available to the district court of appeal, but this is termed a second-tier certiorari review, and reversals are granted only when there has been an extreme failure to follow the law.

What are the consequences of failure to comply with planning decisions or regulations?

Typically, failure to comply results in a project being “red-tagged” (i.e., a notice is placed on the project stating the local government has given orders to stop development) or fines. However, in extreme cases the Florida courts have upheld the demolition of projects built in violation of regulations.

What state and local regimes govern the protection and development of historic and cultural buildings?

Statewide laws in Florida regarding historic and cultural buildings are limited to collection of information and voluntary efforts to preserve, with the exception of antiquities sites, which may stop development altogether (the first people are believed to have moved into Florida around 12,000 B.C. and some sites—now covered—remain throughout the state). Some local governments, especially cities with historical pasts, have strong historical preservation ordinances. For example, the city of St. Augustine is the oldest continuously settled city in the United States and, accordingly, has strong preservation laws.

What laws and regulations govern the expropriation of property by state and local authorities?

The U.S. and Florida Constitutions prohibit the government from taking property without just compensation and some specific Florida statutes such as the Bert Harris Act (which states that Florida government cannot use regulation to inordinately burden real property development) require compensation to be paid when property is taken by the government.

What is the required notice period for expropriation and how is compensation calculated?

A claim under the Bert Harris Act must be submitted no less than 150 days before filing a lawsuit under the act, and accompanied by an appraisal that supports the claim and demonstrates the loss. The government responds or settles the claim within the 150-day period and must state the allowable uses within the 150-day period.

Environmental issues

What state and local environmental certifications are required for the development of real estate and how are they obtained?

Environmental certifications are not required before purchasing real estate in Florida. However, depending on the type of real estate purchased, many buyers have environmental audits of real estate performed as part of their due diligence investigations. Florida practice generally follows American Society for Testing and Materials schedules for environmental audits (i.e., a Phase I (historical) audit is performed). If indicated, a more thorough Phase II (recognized environmental conditions) audit is performed and, if necessary, the highest-level Phase III (site remediation) audit is performed.

What environmental disclosures in relation to real estate sales are required under state and local laws?

State and local laws do not specifically require environmental disclosures, but the contract between the parties may. In addition, Florida has a strong line of case law authority that awards damages for and possibly rescission of transactions in which the seller fraudulently or negligently misrepresented the condition (including environmental) of real property.

What state and local rules and procedures govern environmental clean-up of property? Which parties are responsible for clean-up and what is the extent of their liability?

Florida has an extensive environmental legal and regulatory scheme, patterned after the U.S. Environmental Protection Agency and enforced by the Florida Department of Environmental Protection. The more populated counties in Florida also have their own (additional) statutory and regulatory schemes for environmental protection. As a result, and depending on the severity of contamination, landowners in Florida may expect regulation from the federal, state, and local governments to make purchasers aware of the environmental conditions of property, so that they can be best advised of the regulatory conditions imposed on certain parcels of real property.

Are there any state or local regulations or incentive schemes in place to promote energy efficiency and emissions reductions in buildings?

Florida has no regulations or incentive schemes to promote energy efficiency, but local governments may have their own.

Update and trends

Have there been any notable recent legal or regulatory developments affecting the real estate market in your state? What are the current trends in and future prospects for the real estate market in your state?

Recent case law has held former local government officials liable for interfering with the development rights of landowners. Although this case has not garnered much attention, it portends a change with how local government deals with disputed development projects, and the measures that can be taken to stop the projects.

Law stated date

Please state the date of which the law stated here is accurate.

December 12, 2019.