vs. ) CASE NO. 81-328
Respondent. )
The first issue delineated above has in effect been resolved by the First District Court of Appeal. The Declaratory Statement was issued on June 25, 1980, by the Division, declaring that the Master Association was an "association" as defined in Chapter 718(1), Florida Statutes. The Master
Association appealed this Declaratory Statement to the first District Court of Appeal (Exhibit 2). Palm Greens Limited vs. Division of Florida Land Sales and Condominiums, Case No. WW-363. The Respondents filed a petition to stay the Division's proceedings to enforce the rules and the Division denied that petition. The Respondent then filed a petition for review of the denial of the stay in the First District Court of Appeal (Exhibit 5). This petition was denied by the Court.
The appellate case was argued in the District Court of on June 2, 1981, and a per curiam affirmance of the declaratory statement was issued on June 4, 1981. That decision has since become final.
With regard to the second issue referred to above, there is no question that the Master Association failed to allow the members to view the Master Association's books and records, although the Master Association did offer to allow them to view the books and records upon their agreeing to certain conditions. The agreement could not be reached and therefore the Unit One Association members were never allowed to view the books and records. The President of the Master Association, Mr. Lawrence Sadick, admitted in his testimony that the Master Association had not allowed its members to see the books and records. Similarly, in the Respondent's Amended Formal Response to Notice to Show Cause, the Master Association stated that it "admits that it has denied Number One's request for access to its books and records."
The primary dispute to be resolved here is whether the Master Condominium Association, Respondent, increased its 1980 budget assessment over the statutorily prescribed limit of 115 percent of the 1979 assessment. The Respondent, the Master Association, is composed of two members, the Number One Condominium Association and the Number Two Condominium Association. The Number One Association includes those unit owners who purchased units which were constructed in the initial phase of the Palm Greens Condominium development. In 1977, the developer, named above, controlled both the Number One and the Number Two Associations. In 1978, the 678 unit owners in the Number One Association took over control of that sub-association from the developer. The Number Two Association continues to be controlled by the developer. Similarly, the developer controls the Master Association (by control of its Board of Directors) until such time as all the units in the Number Two Association are sold out.
In 1977, Palm Greens Limited and Yusem Properties of Del Ray Limited (Developer) maintained a single set of books, records and accounting procedures for all three of these Associations. The Developer did not prepare a separate 1978 budget for the Master Association. When the unit owners of Number One Association assumed control of Number One from the Developer in 1978, the Developer and the Board of Number One entered into an agreement that Number One would continue the budgeting for the recreation area and allocate its cost to Number One and to the Number Two Associations (although statutory responsibility for the budgeting remained with the Master Association). Thus, at that time, the Master Association's primary responsibility was managing the recreation areas which it owned. Although the Developer delegated the budget preparation responsibility for the recreation areas to Number One, it never terminated its ultimate control and authority over the recreation areas and the Master Association.
With regard to the authority granted by the Master to Number One to operate the recreation area and to set and collect assessments for the two sub- associations, the Respondent maintains that Number One was required as a condition to the delegation of that authority to keep records of the actual receipts and expenditures during that 1979 budget year and that Number One failed to keep those records. There was no showing, however, that the Master Association, although it delegated the budget preparation responsibility for the recreation areas to Number One, ever informed Number One that it would be required to keep the sole set of books and records of receipts and expenditures for 1979 on behalf of the Master Association.
The percentage allocation of the budgetary assessments between Number One and Number Two Associations, of the total Master Association assessment, was based upon the total number of units sold in both associations. As a result, the percentage that each association paid toward the total Master Association assessment changed each year. For example, the total 1979, Master Association assessment was $153,212, of which 73 percent was the percentage contribution of Number One and 27 percent was the percentage contribution of Number Two Association, according to the stipulation entered into between the parties as a result of the pre-hearing conference. The Number One Association Condominium units were essentially sold out at the times pertinent hereto and new sales were continuing in the Number Two Association, such that the percentage contribution between the two associations changed considerably between 1979 and 1980. In effect, Number One Association was paying a smaller portion of the total Master Association assessment and, at the same time, in return for its payment it was sharing a recreation area with many more condominium owners in 1980 than in 1979. Thus, it is not accurate, in determining the percentage amount of change in the total assessment, to compare the amounts each individual unit owner contributed in each year toward the total Master Association assessment. This would in effect, be comparing "apples and oranges" since the total base number of persons paying the Master Association assessment changed considerably from 1979 to 1980 with corresponding changes in the per capita shares of the total assessment paid by each unit owner. The only "similar" assessment which can accurately be used for comparison purposes is the total Master Association assessment for one year against the total Master Association assessment for the succeeding year.
Since the Master Association did not prepare a separate budget or assessment for 1979, the $153,212 figures stipulated to by the parties was the figure that the Number One Association extrapolated from its overall budget which included most of the Master Association's recreational facility expenses. At the close of 1979, the Developer which controlled the Master Association asserted and actively assumed its responsibility for the recreation area services and for the first time prepared a Master Association budget and coextensive assessment.
The Master Association and the Developer admitted on page 1 of the Amended Formal Response to the Notice to Show Cause that on its face, the 1980 Master Association Recreation budget reflects an increase of more than 115 percent over the 1979 recreation budget prepared by Number One Condominium Association [at the behest of the Master Association." The Master Association also admitted at the hearing that it did not obtain approval for the increase from a majority of the unit owners. The Respondent maintains that the total 1980 Master assessment did not exceed 115 percent of the total 1979 Master assessment if deductions are made for reserves for repairs and replacements (which it maintains were authorized by Section 718.112(2)(f)(k) Florida Statutes
[1979]). Thus, the Respondent admitted that on its face the 1900 Master Association budget reflects an increase of more than 115 percent over the 1979 Master Association budget with the qualification that if these reserves for repairs and replacements in the amount of $45,050 are deducted, then the total 1980 Master Association assessment would be within 115 percent of the total Master assessment.
The Number One Association is not claiming any excessive payments which the Number Two Association members may have made toward the total Master Association assessment. The Number One Association established that the amount of the increased budgetary assessment over 115 percent for 1980 is $40,784. (See Exhibit 8.) Accordingly, inasmuch as the Number One Association's 1980 share of the 1980 Master Association budget assessment was 59 percent (by agreement of the parties) Number One Association is therefore Paying the pro- rata excessive amount of $24,062.
CONCLUSIONS OF LAW
The Division of Administrative Hearings has jurisdiction over the parties to and the subject matter of these proceedings. Section 120.57(1), Florida Statutes.
The Respondent Master Association has been determined to be a condominium association pursuant to Chaptor 718, Florida Statutes, by the First District Court of Appeal in its per curiam opinion in Case No. WW-363. Motion for rehearing in that case has been denied and the Court's decision is now final. In that connection the Petitioner had the power to issue a Declaratory Statement pursuant to Section 120.563, Florida Statutes. Further, Section 120.68(3) provides that the filing of a petition in the District Court of Appeal does not stay enforcement of the final agency action on the Petition for Declaratory Statement. This can only be accomplished by securing a supersedes or stay from either the agency or the Court, neither of which course of action was effected in this case. Thus, the right of enforcement of Chapter 718 against the Respondent Master Association remains the prerogative of the Division and there has been no jurisdictional or procedural impediment to the progress of this cause to its present posture. Thus, the Division of Administrative Hearings does have jurisdiction to rule upon the violations of Chapter 718 alleged by the Division of Land Sales and Condominiums, but does not have authority to hear the arguments raised by the Respondent that it is not an association subject to this Chapter. That has already been ruled upon by the District Court of Appeal as discussed above and tie Hearing Officer has no authority for collateral review of a final agency action taken after regular review proceedings have been had pursuant to Chapter 120. State Department of Health and Rehabilitative Services vs. Barr, 359 So 2d 563, (Fla. 1st DCA 1978)
Section 718.111(7), Florida Statutes, provides in pertinent part that:
(7) The association shall maintain accounting records for each condominium it manages in the county where the condo- minium is located, according to good accounting practices. The records shall be open to inspection by unit owners or their authorized representatives at reasonable times . . .
There is no question that the record reveals that the unit owners of Unit One Association were denied access to the records of the Master Association. The Master Association apparently sought to condition their right to view the records upon an agreement regarding the controversy in this case. There is no question, however, that the Unit One Association members did not have free access In the manner prescribed by the Statute to these books and records and indeed the Master Association admits that it denied access by the Unit owners in viewing these records.
Section 718.112(2)(f) provides as follows:
(f) The board of administration shall mail a meeting notice and copies of the proposed annual budget of common expenses to the unit owners not less than 30 days prior to the
meeting at which the budget will be considered. If the bylaws or declaration provides that the budget may be adopted by the board of admin- istration, then the unit owners shall be
given written notice of the time and place of the meeting of the board of administration which will consider the budget. The meeting shall be open to the unit owners. If an adopted budget requires assessment against the on it owners in any fiscal or calendar year exceeding 115 percent of the assessments for the preceding year, the board, upon written application of 10 percent of the
unit owners to the board, shall call a special meeting of the unit owners within
30 days, upon not less than 10 days? written notice to each unit owner. At the special meeting, unit owners shall consider and enact a budget. Unless the bylaws require a larger vote, the adoption of the budget shall require a vote of not less than a majority vote of all unit owners. The board of administration may propose a budget to the unit owners at a meeting of members or in writing, and if the budget
or proposed budget is approved by the unit owners at the meeting or by a majority of
all unit owners iii writing, the budget shall be adopted. In determining whether assess- ments exceed 115 percent of similar in prior years, any authorized provisions for reasonable reserves for repair or replace- ment of the condominium property, antici- pated expenses by the condominium
association which are not anticipated to be incurred on a regular or annual basis, or assessments for betterments to the condo- minium property shall be excluded from the computation. However, as long as the developer is in control of the board of administration, the board shall not impose an assessment for any year greater than
115 percent of the prior fiscal or calendar year's assessment without approval of a majority of all unit owners. (Emphasis supplied)
The Respondent has argued that the Number One Condominium Association, the Intervenor, is estopped to attack the Respondent's 1980 budget since it did not comply with the conditions precedent contained in the above statutory section, to wit, that written application of 10 percent of the unit owners must be had to call a special meeting to protest the budget; and further that its own board of directors has ratified the Master' Association's budget in this instance. There is no question based on this record, however, that the Respondent herein is developer-controlled and the above conditions precedent apply only to a budget promulgated by a board of directors of an association when the majority of the members of the board are elected by unit owners, which is not the case herein. The controlling provision of Section 718.112(2)(f) which applies to the method of approval of a budget by a developer-controlled condominium association board is the last sentence underlined above which contains a flat prohibition that such a developer-controlled board shall not impose an assessment for any year greater than 115 percent of the prior year without the approval of a majority of all unit owners. (Emphasis supplied)
There is no question that under accepted rules of statutory construction the word "shall" must be interpreted as mandatory. The word "however" implies that the language coming after it is distinct and different from that which has gone before and in this instance obviously carves out a different standard for developer-control led condominium association boards. Thus, the developer-controlled condominium board of the Respondent is flatly enjoined by the last sentence of the above section from preparing a budget in excess of 115 percent over the budget of the year before unless a majority of all unit owners approve. The approval of the board of directors of the Number One Association did not fulfill this requirement regardless of the language contained in the Number One Association's bylaws, since Section 718.112(2) provides: "The bylaws shall provide for the following, and if they do not do so, shell be deemed to include the following
Thus, the bylaws of the Number One Association requiring only approval by the Board of Administration is clearly supplanted by the provisions of the last sentence of paragraph (f) quoted above and since the vote of the majority of the unit owners of Number One never was obtained, the budget is improperly adopted.
Further, regardless of the question of the Number One Association's alleged waiver or estoppel, the Division of Land Sales and Condominiums is charged with an independent right to enforce Chapter 718. Section 718.501(1)(b) of the Act states:
(b) Notwithstanding any remedies available to unit owners and associations, if the division has reasonable cause to believe that a violation of any provision of this chapter or rules promulgated pursuant hereto has occurred, the division may institute enforcement proceedings in its own name against any developer or association . . . (Emphasis supplied)
Thus, an act of the Intervenor, Number One, even if it could be construed to waive Number One's right to proceed herein, cannot waive the Division's right and responsibility to enforce Chapter 718.
The Master Association has asserted that the 1980 budget did not exceed 115 percent of the 1979 budget because the assessments to the unit owners were not similar assessments and therefore should be excluded from the 115 percent computation and that since the individual assessment to individual unit owners from one year to the next did not exceed 115% then there has been no violation of Section 715.112(2) (f). The determination of whether or not the assessment is excessive, however, should be determined by comparing the total Master Association assessment applied to all unit owners for 1979 and 1980. The excessive amounts are not determined by a comparison of the assessments paid by each individual owner. Firstly, the applicable statutory provisions, Section 718.112(2)(f) specifically refers to an association's "assessment" in the singular. This is the provision, quoted above, referring to developer- controlled boards of administration and prohibiting them imposing an "assessment" for any year greater than 115 percent of the "assessment" for the prior year. The Respondent's argument ignores the fact that these assessments were for coverage of the same expense items in both years and that both were promulgated under the aegis of the Master Association, since it was legally responsible for budgetary assessment in both the subject years. Moreover, the provision of Section 718.112(2)(f) regarding similar assessments appears in the provision related to "assessments" (plural) by association controlled by unit owners. As previously noted, the last sentence of this statutory provision is directed at developer-controlled associations such as the Respondent involved herein, and refers specifically to "an assessment" (singular) for any year greater than 115 percent of the prior fiscal or calendar year's assessment. There is no mention of the word "similar" in this provision for purposes of calculating the 115 percent qualifying standard. A basic rule of statutory construction is that "where language is used in one section of a statute different from that used in another section of the same chapter, it is presumed that the language is used with a different intent." 30 Fla. Jur. Statutes, Section 96
It should be pointed out that in a phased development, such as Palm Greens, there is a continuing increase in the number of unit owners to which an assessment is applied. Thus, each year there is a change in the percentage interest each on it owner or each sub-association has in the total association assessment. Thus, in each succeeding year an individual member may be paying a larger proportionate share of the total assessment for his association, but he is also having to share the same facilities from one year to the next with a larger number of people. Consequently, comparing the assessment amounts paid by individual members from one year to the next is meaningless, it's like comparing "apples and oranges." They can in no way be "similar" assessments. Contrarily, the total assessment for each year is directly related to the cost of maintenance of the same identical facilities, in essence, from one year to the next and consequently is a valid basis for comparison. To construe the above provision to require the comparison of individual assessments in a phased condominium development would result in there likely never being a 115 percent increase so long as unit owners were being added while the phased development was progressing. To construe this statute in this manner would negate the obvious intent of the statute which is to prevent an increase of greater than
115 percent in the costs assessed to the unit owners as a body, regardless of their number, for the maintenance of the same physical facilities from one year to the next. A basic principle of statutory construction dictates that "if a statute is fairly susceptible of two constructions, one of which will give
effect to it, and the other which will defeat it, the former construction is preferred." 30 Fla. Jur, "Statutes" Section 117
Historically, it should be pointed out that what is now Section 718.111(2)(f) first appeared as Section 711.11(f), Florida Statutes (1975) , and had the same wording that it does now. The thrust of then Section 711.11(f) was directed at proposed annual budgets of common maintenance expenses of condominiums. Since no phased construction and sale of condominiums was authorized at that time, the total budget was assessed against the unit owners of the condominium and the total assessment against the owners of the condominium for one year would be coextensive with the total of the budget. It would then be the total of the budget for a year that would be compared with the total budget for the previous year to determine whether there had been on increase in excess of 115 percent. The Legislature then authorized phased condominiums by Chapter 76-222, effective January 1, 1977, also reenacting Section 711.11(2)(f) and changing its numbering to Section 718.111(2)(f). The Legislature, however, changed none of the language in the re-numbering process. Thus, since no changes were made to provide a different mode of comparison of budgets in a phased condominium development situation, the total budgetary amount from one year to the next must still be used for comparison purposes since this was obviously the intent of the Legislature in initially enacting that provision and in identically reenacting it in 1977. Therefore, in view of the authority and discussion delineated, the Respondent, a developer-controlled condominium association, may not impose any total assessment in one year greater than 115 percent of the total assessment in the prior year.
The parties did not dispute that on its face the total budget assessment for 1980 appears greater than 115 percent of the total budget assessment for all members for 1979.
The Respondent argues that such items as water, electricity and sewer expenses are items over which it has no control and that, therefore, they should be excluded from computation in determining whether there has been a 115 percent increase in the budget. These are, however, items of common expense for the condominium and must be included in the budget. The Respondent's supposed lack of control over the amounts of these items due to inflation is a consideration which could apply equally to any item of the budget. There has been shown to be no basis in law to exclude these items from consideration in comparing the budgets for the two subject years. There has been shown to be no legal provision requiring a comparison of budgeted expenses in the two years with actual, experienced expenses. All assessments are based upon proposed budgets for a coming year. Budget items are then adjusted during the year as actual expenses are paid. As with any business, a condominium association can reallocate funds between budget categories. Thus, the only logical and workable figures of significance for comparison, as envisioned by the above statutory section, are the proposed budgets for each of the too years from which the assessments are determined. The ultimate budget assessment figure is pivotal, not the separate categorical budget items.
Respondents have also argued that reasonable reserves for repairs, replacement and anticipated expenses which are not expected to be incurred on a regular, annual basis should be excluded from computation of the percentage increase in the 1980 Master Association budget over that of 1979. This argument, however, overlooks the dichotomy between the provisions of Section 718.111(2)(f) and its prescription for determining the appropriateness of budgets prepared by owner-controlled boards (where such reserves are excluded) , as compared with the provision dealing with budgets prepared by developer-
controlled boards where they are not excluded, as in the instant case. For the reasons discussed above the statutory provision excluding reasonable reserves from the 115 percent limitation simply does not apply to developer-controlled associations. To rule otherwise would not give effect to the clear, express language of the last sentence of the above section relating to developer- control led associations and would have the effect of negating the plain meaning of the word "however" which set's up a different standard for developer- controlled condominium associations from that of unit owner-controlled associations.
Further, despite the Respondent's argument that the Intervenor is estopped to complain about the improper increase because it failed to follow "good accounting practices," it should be noted that Chapter 718 places the legal duty for preparation of the Master Association budget and assessment each year upon the Master Association itself. The fact that the Master Association allowed the Intervenor to prepare a proposed budget and assessment for 1979 does not relieve the Master Association of the ultimate statutory responsibility and authority to in sure that the budget and assessment conformed to the requirements of law. Regardless of the records and practices utilized by Number One regarding recreation area expenses, the ultimate responsibility for these records and practices was the Master Association's. The Master Association reviewed all the actions of the Number One Association in preparing the recreation area budget and if it did not approve of the accounting practices it should have so notified the Number One Association, and at that time resumed all actual accounting responsibilities. Furthermore, as previously noted, any such effect the accounting practices of the Number One Association may have had on the Master Association's conduct regarding its oversight of budgetary matters does not estop the Division itself from bringing this action against the Master Association.
It should be finally pointed out that the Number One Association is not the only group of unit owners subject to the Master Association budget and assessment, since Unit Two Condominium Association is also involved. Thus, the Number One Association is not entitled to recover for the full amount of the Master Association assessment in excess of 115 percent of the 1979 assessment. Rather, Number One is entitled to recover the percentage share that it is required to pay for the year 1980 which exceeds its percentage share of an appropriate assessment. Thus, in the instant situation, Number One (as the parties have agreed) has a 59 percent share due it of any total assessment found to be excessive.
In summary it is concluded in accordance with the reason and authority discussed above, that the 1980 budget assessment imposed by the Respondent exceeds by an amount greater than 115 percent the 1979 budget assessment by the Respondent and that, therefore, an appropriate refund should be made to the Intervenor. Further, the Respondent should comply with Section 718.111(7), Florida Statutes, and permit the unit owners of the Intervenor or their authorized representatives to inspect the accounting records of the Master Association at reasonable times and locations.
Having considered the foregoing findings of fact and conclusions of law, the evidence in the record, the candor and demeanor of the witnesses and the arguments of counsel it is, therefore:
RECOMMENDED THIS 20th day of August, 1981, in Tallahassee, Leon County, Florida.
P. MICHAEL RUFF, Hearing Officer Division of Administrative Hearings The Oakland Building
Filed with the Clerk of the Division of Administrative Hearings this 20th day of August, 1981.
Helen C. Ellis, Esquire Dept. of Business
725 S. Bronough St. Tallahassee, Florida 32301
David St. John, Esquire
319 Clematis St. Comeau Bldg. Arcade 17
