STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

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

)

Petitioner, )

)

vs. ) CASE NO. 83-1323

)

NAUTICO BAY CLUB, INC., )

)

Respondent. )

)

RECOMMENDED ORDER

Pursuant to notice, a formal administrative hearing was conducted in this matter on June 17, 1983, in Miami, Florida.

APPEARANCES

For Petitioner: Helen C. Ellis

Tallahassee, Florida

For Respondent: Murray B. Weil, Jr.

Miami Beach, Florida

On or about March 17, 1983, the Petitioner issued a Notice to Show Cause directed to the Respondent, Nautico Bay Club Condominium. In the notice, it is alleged that the Respondent committed several violations of the Florida Condominium Act, and that a cease and desist order and/or a civil penalty should be imposed. The Respondent denied the allegations and requested a formal administrative hearing. The matter was forwarded to the office of the Division of Administrative Hearings on May 2, 1983. The final hearing was scheduled to be conducted as set out above by notice dated May 9, 1983.

At the final hearing, the Petitioner called the following witnesses: Jeffery Batts, a land sales, condominium specialist employed by the Petitioner; and Pat Durante, a unit owner at the Nautico Bay Condominium. Samuel Weintraub, one of the developers of the Nautico Bay Club Condominium, testified on behalf of the Respondent. Petitioner's Exhibits 1 through 4 and, Respondents Exhibits 1, 2, 3 and 5 were offered into evidence and received. Respondent's Exhibit 4 was marked for identification, but was not offered into evidence and did not become a part of the record.

The parties have submitted posthearing legal memoranda which include proposed findings of fact and conclusions of law. The proposed findings and conclusions have been adopted only to the extent that they are expressly set out in the Findings of Fact and Conclusions of Law which follow. They have been otherwise rejected as not supported by the evidence, contrary to the better weight of the evidence, irrelevant to the issues, or legally erroneous.

ISSUE

The ultimate issues to be resolved in this proceeding are whether the Respondent has committed violations of the Florida Condominium Act (Chapter 718, Florida Statutes) and, if so, whether a cease and desist order and/or civil fine should be imposed. Petitioner contends that the allegations of the Notice to Show Cause have been established and that a cease and desist order and civil fine are appropriate. The Respondent contends that to the extent any violations of the Act have been established, they are only of a technical sort, and do not justify the imposition of any sanction.

FINDINGS OF FACT

1. Nautico Bay Club, Inc., is the developer of the Nautico Bay Condominium, located at 6937 Bay Drive, Miami Beach, Florida. At all times material to this proceeding, Samuel Weintraub was the president of Nautico Bay Club, Inc., and was primarily responsible for conducting its day-to-day business activities. The Nautico Bay Club Condominium includes 48 residential units.

   The first units were sold on December 1, 1980. The final closing on the 48 units occurred on December 31, 1980.

   
   

2. The Respondent failed to call an annual meeting of the unit owners at Nautico Bay Condominium during 1981. The Respondent was having some difficulty communicating with some of the unit owners because they lived outside of the country. Nonetheless, the Respondent did not give written notice to unit owners of an annual meeting during 1981, did not post notice of an annual meeting during 1981 on the condominium property, did not send a notice of an annual meeting during 1981 by mail to each unit owner, and did not retain a post office certificate of mailing as proof of mailing of notice to unit owners. No annual meeting of unit owners was conducted during 1981. As the developer who maintained control over condominium activities during 1981, the Respondent was obliged to call and conduct an annual meeting of unit owners.

   
   

3. The Respondent retained a private public accounting firm to prepare a financial statement for the Nautico Bay Club Condominium for the year ending December 31, 1981. The statement was completed on February 10, 1982. The Respondent remained in charge of the administration of the condominium association at that time. The Respondent made no effort to provide copies of the financial statement by mail or personal delivery to each unit owner. While some unit owners may have obtained copies of the financial statement within 60 days of December 31, 1981, most did not. At least one unit owner did not receive a copy of the financial statement until sometime in November, 1982.

   
   

4. On or about September 17, 1982, the Respondent turned over operation of the condominium association to the Nautico Bay Club Condominium Association.

   The Respondent's president, Mr. Weintraub, offered to have the financial records reviewed by the independent certified public accounting firm that he had utilized in the past. The unit owners protested and asked instead that he pay to have the documents reviewed by a firm of their choosing. The Respondent did not have the financial records and statements reviewed by an independent accounting firm. He offered to have them reviewed by the firm he had utilized in the past, but the unit owners declined that offer.

   
   

5. In the prospectus that the Respondent offered to potential unit purchasers, an estimated monthly operating budget and an estimated annual operating budget for the condominium, and an estimated monthly operating budget and an estimated annual operating budget per unit were set out. No other

   proposed budget was issued for 1981, nor does it appear that one was required, since the first persons who purchased units did not do so until December, 1980. No proposed annual budget of common expenses was prepared for the 1982 calendar year. Instead, the Respondent merely utilized the estimated budgets that had been set out in the prospectus. These were never, however, presented as a proposed annual budget for 1982.

   
   

6. The Respondent did not provide as a part of its budgets for 1981 or 1982 for reserve accounts for capital expenditures and deferred maintenance. Accounts were not established to reserve funds for roof replacement, building painting, pavement resurfacing, and the like. The estimated replacement costs of such items were not a part of any budget prepared by Respondent. The funds were neither established nor funded by the Respondent. Mr. Weintraub testified that the reason the accounts were not established is that he had difficulty collecting assessments from unit owners. It does not appear, however, that the Respondent made any effort to collect assessments from unit owners, nor that the accounts were established with such funds as could have been collected.

   
   

   CONCLUSIONS OF LAW

   
   

7. The Division of Administrative Hearings has jurisdiction over the parties and the subject matter of this proceeding. Section 120.57(1), Florida Statutes.

   
   

8. Section 718.112(2)(d), Florida Statutes, provides that there shall be an annual meeting of unit owners of condominiums and that the administrators of the condominium association are required to give written notice of the annual meeting to unit owners, to post notice of the annual meeting in a conspicuous place on the condominium property, to mail notice of the annual meeting to each unit owner and to retain the post office certificate of mailing as proof of mailing. While the Respondent, a the condominium developer, was in control of the administration of the condominium association during 1981, it did not provide an annual meeting of the unit owners. It provided no notice of the meeting to owners and made no effort to do so. This conduct constitutes a violation of Section 718.112(2)(d), Florida Statutes.

   
   

9. Section 718.111(13), Florida Statutes, provides that the condominium association shall furnish by mail or personal delivery to each unit owner a complete financial report for the fiscal year within 60 days following the end of the fiscal year. The Respondent, while in control of the condominium association, had a financial statement prepared for the fiscal year which ended December 31, 1981. The Respondent did not, however, furnish the financial report to each unit owner by mail or personal delivery. It appears that the financial statement was delivered to a few owners, but that no effort was made to provide it to all unit owners. The Respondent's action constitutes a violation of Section 718.111(13) Florida Statutes.

   
   

10. It is charged in the Notice to Show Cause that the Respondent failed to have the association's financial reports reviewed by a certified public accountant within 60 days of the transition of the administration of the condominium association to the unit owners. It does appear that the Respondent failed to have the reports audited, but that the failure was the result of the unit owners' refusal to accept an audit by the accounting firm chosen by the Respondent. Accordingly, no violation of Section 718.301(4)(c), Florida Statutes, has been established.

11. It is charged in the Notice to Show Cause that the Respondent violated the provisions of Section 718.112(2)(k) Florida Statutes, which require that a budget of common expenses be adopted for each fiscal year. It does appear that the Respondent adopted a budget for the 1981 fiscal year and presented it in the prospectus offered to potential unit purchasers. No budget was adopted for the 1982 fiscal year, however. The Respondent took no steps whatever to adopt such a budget, but rather simply followed the budget set out in the prospectus for the 1981 fiscal year. The Respondent's failure to adopt a budget of common expenses for 1982 constitutes a violation of Section 718.112(2)(k), Florida Statutes.

    
    

12. Section 718.112(2)(k), Florida Statutes, requires that a condominium association adopt a budget which includes reserve accounts for certain capital expenditures and deferred maintenance. The budget utilized by the Respondent for 1981 and 1982 provided for no such reserve accounts. The Respondent never established reserve accounts and never funded them. This action constitutes a violation of the provisions of Section 718.112 (2)(k), Florida Statutes.

    
    

13. Section 718.501(d), Florida Statutes, authorizes the Petitioner to issue orders requiring a developer or condominium association to cease and desist from unlawful practices and to impose civil penalties for violations of the provisions of the Condominium Act. Since the Respondent is no longer in control of the Nautico Bay Club Condominium Association, it does not appear that any useful purpose would be served by issuance of a cease and desist order. The Respondent's disregard for the requirements imposed upon it by law, however, does justify the imposition of a civil penalty. Whereupon, it is, hereby,

RECOMMENDED:

That a final order be entered by the Department of Business Regulation, Division of Florida Land Sales and Condominiums, finding the Respondent guilty of violating provisions of the Florida Condominium Act, as set out in Paragraphs 2, 3, 5 and 6 of the Conclusions of Law herein, and imposing a civil penalty against the Respondent in the amount of $5,000.

RECOMMENDED this 29th day of August, 1983, in Tallahassee, Florida.

G. STEVEN PFEIFFER Assistant Director

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 29th day of August, 1983.

COPIES FURNISHED:

Helen C. Ellis, Esquire Department of Business

Regulation

725 South Bronough Street Tallahassee, Florida 32301

Murray B. Weil, Jr., Esquire 1666 - 79th Street Causeway Suite 608

Miami Beach, Florida 33141

Mr. Gary R. 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

Department of Business Regulation

725 South Bronough Street Tallahassee, Florida 32301

Docket for Case No: 83-001323

Orders for Case No: 83-001323