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According to Florida law, any person who enters into a
bona fide written lease, for continuous residence of a transient
accommodation for longer than six months, is exempt from Florida sales tax
and local tourist development tax. A “bona fide written lease” is a
written document that clearly demonstrates it is intended for the renter
to have exclusive use of the rental property. There are several elements
which will be considered to validate the lease document and demonstrate
the parties’ intent. These elements include:
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the length of the lease, including the beginning
and ending date;
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a statement giving the lessor the complete and
exclusive use of the property for the entire duration of the lease;
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execution in good faith, without deceit or fraud;
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a sufficient description of the leased property;
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a statement that the lease contains the complete
and sole agreement;
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a provision that the lessee will pay an agreed
amount of rent;
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a statement containing the due date, frequency and
address for payment of the rent;
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a statement specifying what conditions will result
in early termination of the lease, the rights and obligations of the
parties at termination and any penalties that will result from early
termination;
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signatures of the named parties, lessee and lessor.
These are the things that can be reviewed to determine
whether a lease is bona fide and the rental transaction, therefore, exempt
from tax. The Department of Revenue and the Tax Collector can examine the
lease document, as well as all surrounding facts and circumstances,
to determine the parties’ intent at the time of execution of the lease.
This is important because even though all nine above elements are
contained in a written document, it may be determined that the length of
the lease was false and that by either separate verbal agreement or by
prior experiences, it is really a short term, taxable rental. Item 9 is
essential in determining whether the lease is bona fide. A “significant
change in circumstances” that could not have been known at the time of
the rental will generally not endanger the legitimacy of the lease. A
significant change could be an illness, death, bankruptcy, loss of job,
transfer, etc. If the lessor has a pattern of leases being terminated
early, with no significant reason as suggested and no penalty to the
lessee, it could be construed that there was no intent to have a long term
rental, making the entire transaction taxable. This could result in
assessments for back periods plus penalties and interest.
If there is any question about the validity of a
written lease, please contact our office at any time for assistance.
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