How companies shape FL bills: a lease security deposit bill as an example

By Jeffrey Schweers, The Capital Bureau | USA TODAY NETWORK FLORIDA, Feb 6, 2022.

LeaseLock, a California-based company with $3 billion in insured leases, is the sole company behind a bill that would codify its business model in the state, providing renters with a nonrefundable fee alternative as an option to traditional security deposits.

The idea seems simple enough: Landlords charge tenants a small monthly fee instead of a massive security deposit that is frequently equivalent to a full month’s rent, the company explains on its website. “In turn, the property is protected against missed rent and damages.”

Emails and text messages obtained by the USA TODAY Network – Florida show that LeaseLock’s Florida lobbyist provided the language for state Sen. Jim Boyd, R-Bradenton, to file in bill drafting and offered talking points for the bill.

The House version of the bill is sponsored by Rep. Jim Mooney, R-Islamorada.

The measure is being promoted as a way to help ease the state’s current affordable housing crisis, especially for working families. But affordable housing advocates say it lacks consumer protections, like placing caps on security deposits.

“This bill is LeaseLock’s idea, and it’s all LeaseLock’s language,” said Jay Mobley, senior housing and consumer attorney for the Legal Aid Society of the Orange County Bar Association.

Campaign finance records show the company gave Boyd’s political committee, Building on Your Dreams, a $2,000 contribution at the beginning of January, three months after the bill was submitted to bill drafting and six days before the legislative session began. Lawmakers are prohibited from soliciting campaign contributions during the two months of the state’s legislative session.

LeaseLock also contributed $1,000 in December to Mooney.

The records offer a textbook example of the influence one company can have on a piece of legislation that could potentially affect millions of Floridians. “That’s a perfect storm of circumstances,” said Ben Wilcox, research director for Integrity Florida, a nonpartisan government watchdog group.

The story behind the bill also shows how business gets done in Tallahassee, Wilcox said: “But how does the public’s interest get protected in that process?”

Boyd’s and Mooney’s offices did not respond to emailed requests for comment.

State records show that LeaseLock hired The Advocacy Group at Cardenas Partners last year and paid them under $10,000 between July 1 and September 30, the most recent reporting period available. State rules governing lobbyists require them to make quarterly disclosures of payments from clients in ranges of $10,000 increments rather than specific amounts.

A LeaseLock spokesperson said the company is paying the group $6,000 per month to represent its interests before the Florida Legislature: “The purpose of this bill is to normalize the deposit fee alternative and provide a baseline of consumer protections throughout Florida.”

The bill (SB 884, HB 537) is based loosely on a Texas law adopted in September. It would give landlords the exclusive right to offer tenants the option of paying a monthly fee instead of a security deposit, as well as the option to discontinue the offer at any time and revert to the traditional security deposit arrangement.

Unlike the Texas law, Boyd’s bill doesn’t require the landlord to use the fees to purchase property insurance to cover damages and charges the tenant is liable for under the lease, and it doesn’t protect the renter from attempts to collect claims paid to the landlord.

It also wouldn’t protect the tenant from paying the costs of any damages beyond normal wear and tear, and doesn’t protect them against being sued for damages and other fees.

“They are not getting absolution by paying a $25-a-month fee,” Jon Potter, a Washington D.C. lobbyist for Lease-Lock, told members of the House Judiciary Committee on Tuesday.

The House Judiciary Committee approved Mooney’s amended bill Tuesday morning by a vote of 14-5. It includes requiring the landlord to notify the tenant after they move out of any unpaid rent, fees, or excessive damages, and before filing a claim for such fees and damages. While not illegal, deposit waivers are currently not covered under Florida law. “They are already doing business here, mostly in the middle to highbracket rental properties,” said Mobley, the Orange county legal aid lawyer. “They say they want to be regulated but this creates an open-ended, no-limit fee the landlord could charge instead of a security deposit.”

For example, the landlord could charge double the fee to LeaseLock and pocket the rest for himself. Or keep it all to himself.

“They’re telling us the landlord can self-insure with no guardrails,” Mobley said.

Also, the bill doesn’t provide regulations on how a fee is arrived at, how it can be spent, or whether a small administrative fee can be charged, he said.

Boyd has said these types of arrangements are already happening in Florida, and this bill just “makes it official.”

Nationwide, LeaseLock partners with more than 1,000 multifamily properties, the company spokesperson said. In Florida, it has 129 multifamily properties that offer renters the option of paying a full security deposit or monthly fee. More than 9,000 renters have opted to pay the nonrefundable deposit waiver fees, avoiding more than $18 million in security deposits, LeaseLock said.

Company officials said lease insurance is legal in Florida, “but because it is an alternative to security deposits … we are engaging in discussions with policymakers and other stakeholders in many states.” Other states where LeaseLock has introduced legislation include Washington and Oregon.

Deposit waiver alternatives are a relatively new product in the property insurance field. Several companies currently offer some version of it, including Rhino, an insurance company that has been around for decades but two years ago began offering what it called “Renter’s Choice.”

LeaseLock has been offering its “deposit waiver fee” alternative to security deposits for around the same amount of time.

And it’s already run afoul of security deposit laws in at least one state.

Just this week, Maryland Attorney General Brian E. Frosh announced that the state has entered into a settlement with LeaseLock, “resolving allegations that its deposit waiver products violated the Security Deposit Law” because the tenant payments were nonrefundable and state law provided tenant protections not offered by LeaseLock.

“LeaseLock’s program effectively had tenants paying their security deposits monthly, but, at the end of the lease, tenants got nothing back,” Frosh said.

Rather than litigate the meaning of a decades-old security deposit law, LeaseLock agreed to the settlement and is working with “Maryland stakeholders to amend the law so we can once again offer property owners and tenants a very attractive deposit fee alternative,” the spokesperson said.

Fee alternatives don’t protect renters in the same way as security deposits, and could leave them vulnerable to thousands of dollars in hidden costs for damages, repairs and cleaning bills after they move out.

Rhino, for example, has paid out claims to landlords for damages and fees, and then gone to court seeking reimbursement from tenants. LeaseLock said it has never done that, and never would. Rhino hired a Miami lobbying firm, Converge Public Strategies, recently to represent its legislative interests.

Florida’s Security Deposit Law similarly requires a landlord to return the security deposit to tenants within 15 to 60 days after they move out, with all accrued interest. If the landlord intends to deduct anything from the security deposit, the law requires them to notify the tenant in writing of their intentions within 30 days of the lease’s termination.

“When I look at how complicated the balancing act is between landlord rights and tenants rights are and how we strike that in the security deposit statute, we are not there yet,” Rep. Ben Diamond, D-St. Petersburg, said Tuesday.

LeaseLock’s lobbyists approached Boyd in September about sponsoring their bill.

Slater Bayliss of The Advocacy Group sends Boyd’s legislative aide, Jack Rogers, language based on a Texas law, with the advisory that the word “landlord” could be placed lower in the bill text to avoid the appearance that this bill appeared to be “regulatory” in nature.

“Following up our conversation of late last week regarding ensuring options and flexibility for both renters and landlords, while also reducing barriers to housing without mandates, rent control or subsidies, attached is draft language modeled after the bill that passed unanimously in Texas and some Florida- specific talking points,” Bayliss says in a Sept. 19 email. “Perhaps once you have digested, we could circle back?”

Two weeks later, Bayliss follows up with a request to Rogers to drop it off into bill drafting to “preserve options.” Kathy Galea, a legislative aide, replies she dropped it off, and asked who the House sponsor would be. Bayliss replied that it would be Mooney.

On Nov. 2, Galea sends the lobbyist an email with a copy of the bill draft attached: “Please find attached the Senate draft relating to deposits/fees for renters and landlords, for your review. Please let me know if you have any changes, otherwise I will file it once Sen. Boyd approves it.”

Fast forward to Jan. 12, six days before the bill’s first Senate hearing, before the Judiciary Committee. Rogers sends Bayliss an email “reaching out to see if you all have some talking points for SB 884 Fees in lieu of security deposits or if you are able to jump on a call.” He says he would be briefing

the senator on the legislation and wanted to include all the information Bayliss had on it.

The bill had its second hearing before the Senate Community Affairs Committee on Wednesday morning, where after a brief period of public testimony and even briefer debate, was voted favorably 6-3. It heads to the Rules Committee next, before a full floor vote.

A bill amendment supported by Rhino and adopted by the Senate committee would allow tenants to buy lease insurance or surety bonds in lieu of a security deposit, causing further concern for housing advocates.

“The amendment is more alarming than the original bill,” said Ida Eskamani, representing the Florida Housing Justice Coalition, because it is now including dubious surety bonds and still doesn’t provide caps on fees or protect renters from hidden costs.

“These are out-of-state companies creating a cottage industry in to further take untold sums from folks already facing a housing crisis,” Eskamani said.

LeaseLock insists the bills have protections in it, mainly that tenants have the option between deposits and fees, and have the option at any time to opt out of monthly fees and pay the security deposit.

Mobley said he doesn’t see much of an option. “By opting out they have to come up with the entire security deposit,” he said. “For low-income tenants that is often not a choice.”

The landlord would be allowed to charge tenants a fee to revert back to the security deposit, without a cap, Eskamani said, calling the bill in its current form a “poor tax.”

“The bill is just ripe for exploitation and abuse beyond the current law,” Eskamani said.

 

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