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The landlord had a lease with rent set at $800 per month plus the obligation to reimburse landlord for utilities  that were in the landlord’s name.   The lease imposed a late fee on non-payment of rent at $10 per day plus another late fee for the non-payment of  utilities at $10 per day.  Tenant failed to pay December 2009 rent and utilities and the landlord.   The landlord sued for eviction and damages demanding both late fees totaling  $20 per day and also attempting to impose an additional set of late fees as each new month became delinquent,  so that the claim rose to $40 and then $60 per day as the months went by.  In February the water was turned off because the landlord had not been paying the utility bill.

The court ruled that the tenant was entitled to triple damages for the month the water was off and gave her a $2400 credit on the amount owed to the landlord.   The court ruled the second late fee on the utilities was unconscionable and the attempt to compound the late fees as additional months accrued was also unconscionable.

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Here is the full account of the judge’s reasoning:

Conclusions of Law. In regards to unconscionable rental agreement provisions, Florida Statute §83.45 reads:

(1) If the court as a matter of law finds a rental agreement or any provision of a rental agreement to have been unconscionable at the time it was made, the court may refuse to enforce the rental agreement, enforce the remainder of the rental agreement without the unconscionable provision, or so limit the application of any unconscionable provision as to avoid any unconscionable result.

(2) When it is claimed or appears to the court that the rental agreement or any provision thereof may be unconscionable, the parties shall be afforded a reasonable opportunity to present evidence as to meaning, the relationship of the parties, purpose, and effect to aid the court in making the determination.

The Florida statute closely follows the language of the unconscionability section of the Uniform Residential and Landlord Tenant Act §1.303. Before a case for unconscionability is made out, a court must find both procedural and substantive unconscionability. Steinhardt v. Rudolph, 422 So.2d 884 (Fla. 3d DCA 1982). Substantive unconscionability requires a showing of commercial unreasonableness — i.e, does the late charge “grossly exceed what others similarly situated are charged?” Garrett v. Janiewski, 480 So.2d 1324, 1326 (Fla. 4th DCA 1985). Procedural unconscionability refers to an individual’s particular circumstances — i.e., is the late charge calculation a very real issue in this particular party’s case? See id.

To examine the possible ramifications of the lease provisions in question, one need only consider the following example: in a 30-day month, whether the tenant owes $800 in rent or only $1 in rent, she could be subjected to a $10 per day late fee for a total of $290 in late rent fees by the end of the month. Additionally, even a $1 late utility payment could subject the tenant to $190 in late utility fees (minus the 10 day grace period). Consequently the amount due, which could be as nominal as $2, could subject the tenant to as much as $480 in late fees. To make matters worse, if the late rent or utilities payment continues into the next month, the Plaintiff contends he could charge up to $40 late fees per day, calculated by levying a $10 daily late charge for each month and each component past due. In the third month, it would rise to $60 per day, and so on.

In the Court’s research, the Court notes that State courts have generally held that fees ranging from 25% to over 30% percent not to be unconscionable, either procedurally or substantively. The Court was unable to finding any case allowing the compounding of late fees as urged by Buckholz. While the Florida courts have not addressed a case on point, the case of Kohl v. Bay Colony Club Condominium, Inc., 398 So.2d 865 (Fla. 4th DCA 1981) has provided a framework for consideration.

In Kohl, tenants brought suit because they were required to pay monthly fees for a recreation area that they may not even use and had long since been paid for. The tenants argued that the fee was unconscionable and should not be enforced. The court found that while the lessor was entitled to compensation for the cost of building the recreation area, he would have to show that any on-going fees were fair and reasonable.

Like the original lessor in Kohl who bore the initial expenses and was entitled to profit from his endeavor, so too is the Plaintiff entitled to reimbursement for his expenses as well as compensation for the additional burden of the late payments. However, as the court concluded in Kohl, once the lessor is able to recoup his investment and reasonable compensation it should be on the lessor to establish fairness and reasonableness when challenged by the tenant.

Therefore in the present case, the landlord has the burden of proving that the fees he is charging in excess of the actual utility bill and associated with the additional burden is reasonable. The Court conducted its own research nationwide and was unable to find a single reported case where courts have found fees in excess of 60% of the actual amount past due to be reasonable, and this Court does not see fit to be the first. The Court finds that the compounding of late fees starting at $10 per day, as urged by Buckholz under the lease, to be substantively unconscionable under the Florida Landlord-Tenant Act. While a $10 per day late fee is not unreasonable on its own, the ability to charge increasingly greater daily late charges is, in the Court’s view, not only unreasonable, but as the facts bear out in the instant case, unconscionable. As a result, the Court finds procedural unconscionability as well, because in this case the landlord is actually seeking exponentially greater daily late charges.

Unlike contractual unconscionability which would result in voiding the contract, the statutory provision in a residential landlord tenant case allows the court to enforce the contract while ignoring the unconscionable provision. In this case, the Court will therefore ignore the provision that arguably allows the landlord  to charge ever-increasing late charges as the months go by. See Fla. Stat. §83.45(1).

BUCKHOLZ vs KING. County Court, 17th Judicial Circuit in and for Broward County. Case No. 10-3259 COCE (53), Case No. 10-3769 COCE (53). August 16, 2010. Robert W. Lee, Judge.

17 Fla. L. Weekly Supp. 1258a,  Online Reference: FLWSUPP 1712BUCK

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