What is a Florida Loan Agreement?
Loan agreements are relatively standard across the United States. However, if you are an attorney drafting a loan agreement for someone in Florida, or going into contract with someone in Florida, there are certain differences in the drafting of the agreement that need to be made to conform to Florida law.
First, a Florida loan agreement is a legal binding contract wherein the lender agrees to lend a sum of money to a borrower , whereby the borrower agrees to pay an interest rate and pay back the loan at a set date in the future. The borrower generally must sign a promissory note and the loan agreement itself. Florida law also calls for both the borrower and the lender to sign the agreement.
A typical loan agreement would state the following:
The loan amount will be given to the borrower in exchange for a promissory note stating that the borrower will pay the sum back in full within a certain period of months, with an interest rate agreed upon.
In Florida, the loan agreement template may be in any form, as long as there are offers and acceptance, and terms to the offer. It does not have to be in writing but in Florida, a legal contract has to be completed within 12 months from when the loan is signed. If the loan is over $250.00, then it must be in writing.
Essential Elements of a Florida Loan Agreement
A Standard Florida Loan Agreement generally contains the following components. All are critically important for both the lender and borrower to understand:
Interest Rate: This is the price at which the borrower agrees to repay the lender for the loan amount. Interest rates must not exceed the limits set by Florida law in order to be enforceable. The 2013 federal law known as Dodd-Frank provides that most residential loans have a maximum rate of 6% plus or minus 2%. It is important to note that interest rates must be agreed to prior to the due date of the first payment.
Repayment Terms: This includes the monthly payment amounts and due dates and the terms of any balloon payments. Repayment terms are also subject to compliance with the legal limits mentioned above.
Collateral: This is property that becomes the security for the loan. If the borrower defaults on the loan, the lender may take possession of the collateral. This means that the bank, credit union or other lender can repossess whatever was given up as security.
Default: This is a failure by the borrower to satisfy the loan requirements. A provision of default will spell out the obligations of both parties if the borrower does default. It will also state any fees or penalties that accompany a default.
It is critical that all components of a Florida loan agreement are carefully crafted so that all parties are fully protected.
Legal Formalities and the Law
Creditors in Florida must be familiar with the legal formalities that must be followed when drafting a loan agreement and enforcing such agreements. For loan agreements involving real property, it is important to prepare an agreement that is compliant with state and federal law (such as the Truth in Lending Act, the Real Estate Settlement and Procedures Act, and the Dodd-Frank Wall Street Reform and Consumer Protection Act). Failure to have a loan agreement that meets these standards may result in decreased enforceability of some or all of its terms or even liability for money damages and/or attorneys’ fees.
State Laws and Regulations: As a practical matter, most people who have the employment of a Florida attorney will not need to worry about the specific requirements established for promissory notes and loan agreement. However, creditors and their attorneys would be wise to keep one eye on the legal requirements enforced by Florida’s legislative and judicial branches. The following are some of the most common rules and regulations creditors must observe if they wish to enforce a loan agreement in a Florida court – or avoid civil liability based on strict compliance with these rules:
• Contracts for amounts greater than $2500 require payment of sales tax.
• Mortgage assignments must be recorded by a Florida lawyer, in accordance with the Florida Statutes.
• Subordination agreements must be executed and delivered by the parties, and must be recorded in the Clerk’s office in the county where the real estate is located.
• Three-day right of rescission must be observed for certain loans that include residential property resulting from how the property is titled, which applies in some cases when the mortgagor is not the only person responsible for payment of the loan.
• Florida courts will not enforce implied contracts and will protect parties from unfair or fraudulent practices (see Business Opportunity Sales Act, Commercial Telephone Seller Act).
How to Create a Loan Agreement Template
Creating a loan agreement template specifically for Florida involves several key steps. First, choose a format that is easy to understand and edit. This may vary from a basic Word document to an online form. Next, outline the terms of the loan, such as the amount, interest rate, repayment schedule, and any collateral involved. It’s crucial to make sure that the terms are in line with state and federal laws governing loans. In Florida, for instance, there are specific regulations on usury, defined as the practice of charging interest rates above the legal limit. The template should also contain sections that cover default procedures, prepayment options, and dispute resolution methods. Finally, include blank spaces for signatures and dates, indicating when the agreement becomes effective. Once the template is complete, it’s wise to consult with a Florida attorney specializing in financial agreements for a final review.
Common Errors
In drafting a loan agreement in Florida, it is easy to make errors that can lead to significant legal headaches. One of the most common pitfalls is using vague language. An agreement that is too ambiguous may be subject to misinterpretation or even deemed unenforceable. For example, failing to clearly define the loan’s purpose, repayment terms, or default conditions can lead to misunderstandings between the parties. It is essential to use precise language to avoid potential arguments or litigation.
Another frequent mistake is not being mindful of state law. Florida has specific statutes governing loans and charging exorbitant interest rates may violate the Florida Consumer Finance Act. Similarly, failure to comply with federal regulations such as the Truth in Lending Act can result in severe penalties. As such, it is critical that both parties are aware of, and comply with, any state or federal regulations pertinent to the loan.
Furthermore, poorly drafted collateral clauses can lead to further disputes. In Florida , it is critical to have a clear agreement concerning what property is being used as collateral, the procedures for securing the collateral, and what happens in the event of default. This can help avoid future conflicts over who may have claim to the assets in question.
Finally, failing to execute the loan agreement properly can also lead to issues down the line. Pursuant to Florida Statute 689.01, any instrument in writing must be signed by the party to be bound or by someone authorized in writing by the signing party. Not complying with this requirement could render the agreement void and unenforceable. Additionally, if the agreement is to be recorded in Florida, proper acknowledgement of the parties is required pursuant to Florida Statute 689.01, and there are certain statutory requirements associated with such an acknowledgment.
To avoid these issues, all parties should take care to ensure that their Florida loan agreements are drafted with precision to limit future liabilities.
Using Online Loan Agreement Template Generators
When it comes to drafting loan documents, it is not uncommon for lenders and borrowers to look for shortcuts or sample agreements online. Online templates can be useful to some degree, but one must be careful when using them. A lender in Florida should avoid simply trying to copy and paste an agreement from the internet. If using a template, understand that it is only a starting point.
How does using a template differ from getting an agreement drafted by an attorney? A major difference comes down to whether an attorney was involved in the drafting process. Specifically, an lender’s attorney will know the appropriate default provisions for a Florida loan agreement. These may include:
Templates from the internet probably will not contain these provisions, unless they are from a Florida attorney that regularly prepares and reviews Florida loan documents. As a result, the lender may need to retain an attorney to modify the template, and those legal fees may exceed what it would have cost to just use an attorney in the first place.
Additionally, many templates online contain clauses that are only useful in other states, or that are not acceptable in Florida. It is very easy for someone to download an agreement or template prepared in another state without realizing that it may not be valid, or may not have clauses that are necessary in Florida. For example, many of these templates will lack the language necessary to create a lien on real estate in Florida, even though the lender plans to secure the loan by a deed of trust.
Getting Legal Help
It is always best practice to seek proper legal advice when creating any binding legal agreement. For Florida loan agreement templates, utilizing an attorney will ensure that the document you create adheres to all Florida state laws, ordinances and regulations. An attorney can help you adjust a template to your specific situation and create long-term protection for you, your money, your business and your relationships . An attorney can additionally advise you on the best methods for collecting on a loan, and help you foresee if there may be a need for a debt collection lawyer in the future. The time and cost of obtaining legal advice and prepared a customized loan agreement template far outweighs the subsequent risk of damage to a relationship, or even costly litigation, once the money is loaned.