Florida State Laws on Cash Flow Notes

A cash flow note is a contract between two parties memorializing a loan agreement. Generally, the terms of the cash flow note include payment schedules, interest rates, final payment dates, and occasionally various types of penalties or fees. The common law and Uniform Commercial Code of Florida are the two bodies of law that regulate the bulk of cash flow note legal issues in the State of Florida.

Usury

Usury is a legal term used to describe the charging of interest rates beyond a level deemed to be fair and equitable. Florida state laws on usury limits, which apply to interest rates on cash flow notes, are fairly lenient on lenders. Florida follows a two-tier system for interest on promissory notes. Loans up to $500,000 have a maximum interest rate of 18 percent, while loans in excess of $500,000 have a maximum interest rate of 25 percent.

Violation of Usury Law

While Florida law sets a fairly high cap on interest rates and can be seen as lenient in that regard, those limits are relatively strictly enforced. A Florida court reviewing a cash flow note or other lending agreement that violates the usury limits will likely strike down such a lending agreement and hold that it is invalid as a matter of law.

Assignment

Assignment refers to the transfer of one's contract obligations to another. In the context of a cash flow note agreement, assignment would mean the transfer of a loan obligation from one party to another, meaning that the original lender will now be owed money by a new borrower, and the original borrower is relieved of his obligation to repay. In Florida, assignment of cash flow note obligations is permitted, so long as the lender consents and the agreement does not significantly hinder the ability to recover on the loan. For example, an assignment to an insolvent third party would probably be held invalid, as this party would be unlikely to be able to satisfy the debt.

Statute of Limitations

A statute of limitations is a legal time limit within which certain actions at law may be initiated. Once a statute of limitations period has run, the affected party generally has lost its legal remedy. In Florida, the statute of limitations for an action regarding a defaulting debtor is four years. This means that if an individual fails to make his payments on a cash flow note, the lender will have to initiate a suit to recover that debt within four years of the default.