STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

STATE OF FLORIDA, DEPARTMENT OF ) BUSINESS REGULATION, DIVISION ) OF FLORIDA LAND SALES AND )

CONDOMINIUMS, )

)

Petitioner, )

)

vs. ) CASE NO. 82-2708

)

FINST DEVELOPMENT, INC., )

)

Respondent. )

)

RECOMMENDED ORDER

Pursuant to notice, a formal hearing was held in this matter before Marvin

E. Chavis, duly designated Hearing Officer, of the Division of Administrative Hearings, on January 25, 1983, at the Graham Building in Miami, Florida.

APPEARANCES

For Petitioner: Thomas A. Bell, Esquire

Staff Attorney

Department of Business Regulation 725 South Bronough Street Tallahassee, Florida 32301

For Respondent: Norman Funt, Esquire

Stabinski & Funt, P.A.

757 Northwest 27th Avenue, Third Floor Miami, Florida 33125

ISSUES AND BACKGROUND

This case concerns the issue of whether the Respondent offered condominium units for sale to the public and offered contracts for sale of those units in violation of Section 718.502(2)(a), Florida Statutes. The Respondent is charged with having offered units for sale and offered contracts prior to the time of filing the required condominium documents with the Division of Florida Land Sales and Condominiums as required by Section 718.502 and the rules promulgated thereunder.

At the formal hearing, Petitioner called as its witness Luis Stabinski, an officer and 50 percent owner of the Respondent corporation. The Petitioner also presented testimony by the deposition of Luis Stabinski, which was entered into evidence as Petitioner's Exhibit 1, and the deposition of Paul Scherman, which was admitted into evidence as petitioner's Exhibit 2. Petitioner's Exhibit 3 was a deposition of William Hirsch, an investigator for the Department of Business Regulation. There was an objection made to the admissibility of the deposition of Mr. Hirsch by the Respondent on the grounds that Mr. Hirsch had

previously investigated a prior development in which the owners and officers of Finst Development, Inc. were involved. The undersigned Hearing Officer took that objection under advisement and after having reviewed the deposition, overrules the objection and admits Petitioner's Exhibit 3, the deposition of William Hirsch. Petitioner also offered and had admitted Petitioner's Exhibits

4 - 9. Mr. Luis Stabinski was also called as a witness by the Respondent in the Respondent's case-in-chief. Respondent did not offer any exhibits into evidence.

Counsel for the Petitioner and for the Respondent submitted proposed findings of fact and conclusions of law for consideration by the Hearing Officer. To the extent that those proposed findings of fact and conclusions of law are not adopted herein, they were considered by the undersigned Hearing Officer and determined to be irrelevant to the issues in this cause or not supported by the evidence.

FINDINGS OF FACT

1. Based upon a stipulation between Petitioner and Respondent, the following facts (a) through (b) are found:

   
   

   1. The condominium development which is the subject of this action is named Indian Creek Club and Marina Condominium North.

   2. Twenty-eight (28) contracts, other than Petitioner's Exhibit 8, for the purchase of units in the Indian Creek Club and Marina Condominium North bear dates or are dated by their terms prior to September 25, 1981.

      
      

2. The Indian Creek Club and Marina Condominium North contains 52 units and was developed by the Respondent, Finst Development, Inc.

   
   

3. Finst Development, Inc., is a Florida corporation for profit and is owned in equal shares by Mr. Luis Stabinski and Mr. Richard Finvarb. Mr. Finvarb was president of the corporation and Mr. Stabinski served as vice- president and secretary.

   
   

4. On September 25, 1981, the Respondent, Finst Development, Inc., filed the following items with the Department of Business Regulation, the Division of Florida Land Sales and Condominiums:

1. Condominium documents for Indian Creek Club and Marina Condominium North.

2. Condominium filing statement.

3. Condominium filing checklist.

4. Check in the sum of $520.00, representing filing fee for the above-referenced condominium project.

   
   

5. The Declaration of Condominium was executed by Richard Finvarb and Luis Stabinski on September 30, 1980. The Articles of Incorporation of Indian Creek Club and Marina Condominium Association North, Inc., were executed by Richard Finvarb, Bell Stabinski, and Luis Stabinski on August 12, 1981. The bylaws for Indian Creek Club and Marina Condominium North were executed on August 12, 1981. Each of these three documents is part of the required filing which was filed on September 25, 1981.

6. On December 9, 1981, the Respondent was notified by Petitioner that the review of the documents filed by the Respondent in connection with Indian Creek Club and Marina Condominium North was complete. That notice also informed Respondent that the documents were considered proper for filing purposes and the developer "may close on contracts for sale or lease for a lease period of more than five years." (See Petitioner's Composite Exhibit 6.)

   
   

7. Upon the insistence of Mr. Stabinski, his law firm, Stabinski, Funt, Levine, and Vega, P.A., did all the legal work in connection with the condominium. Specifically, Mr. Paul Scherman, an associate and employee of the firm, did the legal work for the condominium. Mr. Scherman worked under the direct supervision of Mr. Stabinski.

   
   

8. Prior to the filing of the condominium documents on September 25, 1981, the fifty-two (52) units of the condominium were offered for ale to the public. Contracts for the purchase and sale of units in the condominium were also offered to the public. Prior to filing the condominium documents on September 25, 1981, the Respondent entered into 29 contracts for the purchase and sale of units in Indian Creek Club and Marina Condominium North. There were no closings held on any units prior to approval of the condominium documents by the Department.

   
   

9. During the construction and sale of units in Indian Creek Club and Marina Condominium North, Richard Finvarb was in charge of construction, sales, and supervision of the Finst Development, Inc. office and personnel. Luis Stabinski's involvement was as an investor.

   
   

10. The documents filed by Respondent with the Department were prepared by Paul Scherman, an associate in Mr. Stabinski's law firm. Mr. Scherman also attended all closings on units and received copies of contracts entered into by Respondent for the sale of units in the condominium. Mr. Scherman was aware that contracts were being entered into prior to the filing of the condominium documents described in Paragraph 2 above.

    
    

11. Luis Stabinski has been a practicing attorney for 13 years. He represents individual condominium purchasers and has been involved as an investor in three other condominium projects prior to the Indian Creek Club and Marina North Condominium.

    
    

12. Following the initial filing of the condominium documents, the Respondent promptly responded to and made the changes and corrections required by the Department in two Notices of Deficiencies. After being provided with the required documents, all but five or six of the purchasers who had entered into contracts prior to the filing of the documents closed on their units. The five or six that did not close are presently in litigation with the Respondent.

    
    

    CONCLUSIONS OF LAW

    
    

13. The Division of Administrative Hearings has jurisdiction over the parties and subject matter of this action.

    
    

14. The Division of Florida Land Sales and Condominiums of the Department of Business Regulation is empowered by Florida Statute 718.501 (1981), to enforce and ensure compliance with the provisions of Chapter 718, Florida Statutes, and the rules promulgated thereunder.

15. Florida Statute 718.504 (1979), provides in relevant part:

    
    

    Every developer of a residential condominium which contains more than twenty residential units, or which is part of a group of residential condominiums which will

    be served by property to be used in common by unit owners of more than twenty residential units, shall prepare a prospectus or offering circular

    and file it with the Division of Florida Land Sales and Condominiums prior to entering into an enforceable contract

    of purchase and sale of any unit or lease of a unit for more than 5 years, and furnish a copy of the prospectus or offering circular to each buyer.

    The prospectus or offering circular may include more than one condominium, although not all such units are being offered for sale as of the date of

    the prospectus or offering circular.

    
    

16. Florida Statute 718.503(2) (1979), provides:

    
    

    1. COPIES OF DOCUMENTS TO BE FURNISHED TO PROSPECTIVE BUYER OR LESSEE. --

       Until such time as the developer has furnished the documents listed below to a person who has entered into a contract to purchase a unit or lease it for more than 5 years, the contract

       may be voided by such person, entitling such person to a refund of any deposit together with interest thereon as

       provided in Section 718.202. The contract may be terminated by written notice

       from the proposed buyer or lessee delivered to the developer within 15 days after the buyer or lessee receives all of the documents required by this section. The documents to be delivered to the prospective buyer are the prospectus or disclosure statement with all exhibits, if the development is subject to the provisions of Section 718.504, or, if not, then copies of the following which are applicable:

       1. The declaration of condominium, or the proposed declaration if the declaration has not been recorded,

          which shall include the certificate of a surveyor approximately representing

          the locations required by Section 718.104.

       2. The documents creating the association.

       3. The bylaws.

       4. The ground lease or other underlying lease of the condominium.

       5. The management contract, maintenance contract, and other contracts for management of the association and operation of

          the condominium and facilities used by the unit owners having a service term in excess of 1 year, and any management contracts

          that are renewable.

       6. The estimated operating

          budget for the condominium and a schedule of expenses for each type of unit.

       7. The lease of recreational and other facilities that will be used only by unit owners of the subject condominium.

       8. The lease of recreational and other common facilities that will be used by unit owners in common with

          unit owners of other condominiums.

       9. The form of unit lease if the offer is of a leasehold.

       10. Any declaration of servitude of properties serving the condominium but not owned by unit owners or

           leased to them or the association.

       11. If the development is to be built in phases or if the association is to manage more than one condominium, a description of the plan of phase development or the arrangements for

           the association to manage two or more condominiums.

       12. If the condominium is a conversion of existing improvements, a statement of the condition of the improvements and of inspection for termite damage and treatment thereof.

       13. The form of agreement for sale or lease of units.

       14. A copy of the floor plan of the unit and the plot plan showing the location of the residential buildings and the recreation and other common areas.

       15. A copy of all covenants and restrictions which will affect the use of the property and which are not contained in the foregoing.

17. With regard to those documents described in Sections 718.503 and

    718.504 above, Section 718.502(1) and (2) provide in relevant part as follows:

    
    

    1. A developer of a residential condominium shall file with the division one copy of each of the documents and items required to be furnished to a buyer or lessee by Sections 718.503 and 718.504, if applicable. Until the developer has so filed, a contract for sale or lease of a unit for more than 5 years shall be voidable by the purchaser or lessee prior to the closing of his purchase or lease of

       a unit.

    2. Prior to filing as required by subsection (1), a developer shall not offer a contract for purchase or lease of a

    unit for more than 5 years but may accept deposits for reservations upon filing with the Division of Florida Land Sales and Condominiums of the Department of Business Regulation an escrow agreement and reservation agreement form.

    
    

18. The evidence in this case established that the Respondent did not file the documents required under Sections 718.503 and 718.504, Florida Statutes, until September 25, 1981. Prior to September 25, 1981, the Respondent entered into 29 contracts for the purchase and sale of condominium units. Entering into such contracts constitutes a violation of Section 718.502(2)(a), Florida Statutes. The Respondent also offered for sale the 52 units within the condominium prior to filing the documents required by Sections 718.503 and 718.504, Florida Statutes (1979). The offering of these units to the public prior to filing the required documents constitutes a violation of Rule 7D- 17.01(2), Florida Administrative Code, which provides:

    
    

    (2) Except in the case of a reservation program, a developer of a residential condominium shall file with the

    Division one copy of each document required by Sections 718.503 and 718.504, Florida Statutes. The filing shall occur at the time the condominium is created pursuant to Section 718.104, Florida Statutes, or prior to any offering of a condominium unit to the public, which ever occurs first.

    
    

19. Penalty: The violations of the condominium act in this case were clearly established by the evidence. The only defense presented by Respondent was the lack of knowledge of the violations on the part of Mr. Luis Stabinski, one of the owners of Finst Development, Inc., the Respondent. The violations charged do not have to be willful or deliberate, and, therefore, lack of knowledge is not a defense to the violations charged. The lack of knowledge, and thus an unintentional violation, however, is properly considered as mitigation in arriving at an appropriate penalty. The violations in the instant case were the result of Respondent's failure to monitor the work of its attorney

and its failure to ensure that all required filings had occurred before Respondent began to sell units. There was no evidence of an intentional and deliberate desire to circumvent the requirements of the Condominium Act. No closings occurred prior to approval of the required documents. After having an opportunity to review the approved documents, all but five or six of those purchasers who had contracted prior to the filing, closed on their units. There was then limited, if any, damage to the public. In light of these factors, a civil penalty in the amount of $7,500 is appropriate.

RECOMMENDATION

Based upon the foregoing findings of fact and conclusions of law, it is RECOMMENDED:

That the Department enter a final order imposing a civil penalty of $7,500 and ordering the Respondent to cease and desist from any further violations of Chapter 718 or the rules promulgated thereunder.

DONE and ENTERED this 8th day of June, 1983, in Tallahassee, Florida.

MARVIN E. CHAVIS, Hearing Officer Division of Administrative Hearings The Oakland Building

2009 Apalachee Parkway

Tallahassee, Florida 32301

(904) 488-9675

Filed with the Clerk of the Division of Administrative Hearings this 9th day of June, 1983.

COPIES FURNISHED:

Thomas A. Bell, Esquire Staff Attorney

Department of Business Regulation 725 South Bronough Street Tallahassee, Florida 32301

Norman Funt, Esquire Stabinski & Funt, P.A. 757 N.W. 27th Avenue Third Floor

Miami, Florida 33125

Mr. Gary Rutledge

Secretary Department of Business Regulation

725 South Bronough Street Tallahassee, Florida 32301

Mr. E. James Kearney Director

Division of Florida Land Sales and Condominiums

725 South Bronough Street Tallahassee, Florida 32301

Docket for Case No: 82-002708

Orders for Case No: 82-002708