STATE OF FLORIDA
DIVISION OF ADMINISTRATIVE HEARINGS
DEPARTMENT OF BUSINESS ) REGULATION, DIVISION OF FLORIDA ) LAND SALES AND CONDOMINIUMS, AND ) MOBILE HOMES, )
)
Petitioner, )
)
vs. ) CASE NO. 84-0437
) TANWIN CORPORATION and the VISTA ) DEL LAGO CONDOMINIUM ASSOCIATION, )
)
Respondents. )
)
RECOMMENDED ORDER
Pursuant to Notice, this cause was heard by Linda M. Rigot, the assigned Hearing Officer of the Division of Administrative Hearings on February 6-8, 1985; in Miami, Florida.
Petitioner Department of Business Regulation, Division of Florida Land Sales and Condominiums was represented by Karl M. Scheuerman, Esquire, and Thomas A. Bell, Esquire, Tallahassee, Florida; and Respondents Tanwin Corporation and the Vista Del Lago Condominium Association were represented by Joseph S. Paglino, Esquire, Miami, Florida.
Petitioner filed an Amended Notice to Show Cause against Respondents containing eight separate counts alleging violations of Florida's Condominium Act and the rules promulgated thereunder. Respondents having timely requested a formal hearing on the allegations contained in that Amended Notice to Show Caused the issues to be determined herein are whether Respondents are guilty of the allegations contained in the Amended Notice to Show Cause and, if so; whether a cease and desist order should be entered and/or a civil penalty should be assessed against either or both Respondents or whether an order should be entered requiring either or both Respondents to take affirmative action.
Petitioner presented the testimony of Herbert Tannenbaum, Sherry Tracey Roby, Martin Perry, Bret Barwick, Phillip May, Judith Tannenbaum, Bernard Keough, Sharon Frumkin, Ronald DiCrescenzo and Richard E. Coates. Additionally, Petitioner's Exhibits numbered 1-7; 10, 12-13, and 16-18 were admitted in evidence.
Respondents presented the testimony of Herbert Tannenbaum, Karl M. Scheuerman, Richard E. Coates, and Thomas A. Bell. Additionally, Respondents' Exhibits numbered 1 and 2 were admitted in evidence.
Proposed recommended orders containing findings of fact have been submitted by the parties and considered in the preparation of this Recommended Order.
When the parties' findings of fact were consistent with the weight of the credible evidence introduced at final hearing, they were adopted and are
reflected in this Recommended Order. To the extent that the findings were not consistent with the weight of the credible evidence, they have been either rejected or; when possible, modified to conform to the evidence. Additionally proposed findings which were subordinate, cumulative immaterial or unnecessary have not been adopted.
FINDINGS OF FACT
Petitioner herein is the State of Florida, Department of Business Regulation, Division of Florida Land Sales Condominiums and Mobile Homes.
One Respondent in this matter is Tanwin Corporation (hereinafter "Tanwin") the developer of two residential condominiums known as Vista Del Lago Condominium I and Vista Del Lago Condominium II, located in West Palm Beach, Florida.
The other Respondent is Vista Del Lago Condominium Association, Inc. (hereinafter "Association"), the condominium association for Vista Del Lago Condominiums I and II. Transition from developer control of the Association has not occurred, and at all times pertinent hereto, Respondent Tanwin has in fact controlled the operation of the Respondent Association.
The Declaration of Condominium for Vista Del Lago Condominium I (hereinafter "Condo I") was recorded in the public records on December 12, 1980. The Declaration of Condominium for Vista Del Lago Condominium II (hereinafter "Condo II") was recorded in the public records on March 11, 1982.
Condo I contains 16 units; and Condo II contains 18 units.
Herbert and Judith Tannenbaum are the President and Secretary, respectively, of both Tanwin and the Association and are members of the Association's Board of Directors.
The developer-controlled Association failed to provide a proposed budget of common expenses for Condo I for the fiscal year 1982.
The developer-controlled Association failed to provide a proposed budget of common expenses for Condo I and Condo II for 1983 until the unit owner meeting in March or April of 1983. The budget provided at that time contained no provision for reserves. Although the document alleged to be the 1983 proposed budget admitted in evidence as Petitioner's Exhibit numbered 17 does contain an allocation for reserves, Petitioner's Exhibits numbered 17 is not the 1983 budget disseminated to unit owners at the annual meeting in 1983. In addition, the 1983 budget was received by the unit owners at the meeting at which the proposed budget was to be considered and not prior to the budget meeting.
Statutory reserves were not waived during the period December, 1980 through December, 1983. The "start-up" budgets contained as exhibits to the Declarations of Condominium indicate that reserves were to be collected from unit owners at the rate of $15 per month per unit at least during the first year commencing December of 1980 with the first closing. Hence, reserves were not waived December, 1980 through December, 1981. From November, 1981 through December, 1983, no vote to waive reserves was taken by the unit owners.
Although reserves were discussed at the 1983 meeting, no vote was taken during the period in question including 1983, to waive reserves.
The developer as owner of unsold units; has failed to pay to the Association monthly maintenance for common expenses during the period December, 1980 through December, 1983.
The developer Tanwin has, in the nature of an affirmative defense, alleged the existence of a guarantee of common expenses pursuant to Section 718.116(8), Florida Statutes, which purportedly ran from the inception of the condominiums to date. Accordingly, the initial issue for resolution is whether the developer pursuant to statute guaranteed common expenses. Section 718.116(8)(b) provides that a developer may be excused from payment of common expenses pertaining to developer-owned units for that period of time during which he has guaranteed to each purchaser in the declaration of condominium, purchase contract or prospectus, or by an agreement between the developer and a majority of unit owners other than the developer, that their assessments for common expenses would not increase over a stated dollar amount during the guarantee period and the developer agrees to pay any amount necessary for common expenses not produced by the assessments at the guaranteed level receivable from other unit owners, or "shortfall".
Actual purchase agreements were admitted in evidence. Respondents seek to label certain unambiguous language in the purchase contracts as a guarantee. This language, uniform throughout all those contracts as well as the form purchase contract filed with Petitioner except that of Phillip May, provides as follows:
9. UNIT ASSESSMENTS. The Budget included in the Offering Circular sets forth Seller's best estimation of the contemplated expenses for operating and maintaining the Condominium during its initial year. Purchaser's monthly assessment under the aforementioned Budget is in the amount of
$109.00. Until Closing of Title, Seller has the right (without affecting Purchaser's obligation to purchase in accordance with the provisions hereof, to modify the estimated Budget and assessments periodically if then current cost figures indicate that an updating of estimates is appropriate). [Emphasis added].
That portion of the purchase agreement set forth above does not constitute a guarantee. Instead, the purchase agreement simply includes a best estimation of expenses for the initial year. It does not govern assessments after the expiration of one year, and even as to the initial year, the language in the contract sets forth only a "best estimation" and not a guarantee that the assessments would not increase during the "guarantee period."
Phillip May's purchase agreement reflects that he purchased his unit in August of 1983; after condominium complaints had been filed by the unit owners with the Florida Division of Land Sales Condominiums and Mobile Homes. His purchase agreement has been altered from the purchase agreement of earlier purchasers in that his purchase agreement expressly, by footnote contains a one- year guarantee running from closing. The guarantee contained in his purchase
agreement was presented by the developer without any request from Mr. May for the inclusion of a guarantee in his purchase agreement. The guarantee language in this purchase agreement is useful for the purpose of comparing the language with those portions of the pre-complaint contracts which Respondents assert contain or constitute a guarantee.
Similarly it is determined that no guarantee of common expenses exists in the Declarations of Condominium for Condo I and II or in the prospectus for Condo II. While Respondents seek to assert the existence of a guarantee in those documents, the portions of those unambiguous documents which according to Respondents contain a guarantee, have no relation to a guarantee or do not guarantee that the assessments for common expenses would not increase.
Respondent Tanwin also seeks to prove the existence of an oral guarantee which was allegedly communicated to purchasers at the closing of their particular condominium units. However, purchasers were told by Herbert or Judith Tannenbaum only that assessments should remain in the amount of $109 per month per unit unless there existed insufficient funds in the Association to pay bills. This is the antithesis of a guarantee. During a guarantee period the developer in exchange for an exemption from payment of assessments on developer- owned units agrees to pay any deficits incurred by the condominium association. Accordingly, no guarantee was conveyed at the closing of condominium units.
Further Respondent Tanwin's additional contention that an oral guarantee arose when the condominiums came into existence is plainly contradicted by the express language throughout the condominium documents and purchase agreements that there exist no oral representations and that no reliance can be placed on any oral representations outside the written agreements.
Further, prior to December, 1983, no reference was ever made by the developer either inside or outside of unit owner meetings as to the existence of the alleged guarantee. Moreover, a comparison between on the one hand, the 1981 and 1982 financial statements prepared in March of 1983, and on the other hand, the 1983 financial statements, clearly reveals that even the accountant for Tanwin was unaware of the existence of a guarantee during the period in question. While the 1983 statements, prepared in 1984 after unit owners filed complaints with Petitioner contain references to a developer guarantee, the 1981 and 1982 statements fail to mention a guarantee. Instead, included in the 1981 and 1982 statements of the Association are references under the current liabilities portion of the balance sheets for those years, to a "Due to Tanwin Corporation" liability in the amounts of $2,138 for 1981 and $2,006 for 1982. Petitioner through Ronald DiCrescenzo, the C.P.A. for Tanwin, established that at a minimum, the $2,006 figure reflected in the 1982 balance sheet was in fact reimbursed to Tanwin.
Section 7D-18.05(1),(c), Florida Administrative Code, entitled "Budgets" and effective on July 22, 1980, was officially recognized prior to the final hearing in this cause. That section requires each condominium filing to include an estimated operating budget which contains "[a] statement of any guarantee of assessments or other election and obligation of the developer pursuant to Section 718.116(8); Florida Statutes." The estimated operating budgets for Condo I and Condo II do not include a statement of any guarantee of assessments or other election or obligation of the developer.
The testimony of Herbert Tannenbaum with regard to an oral (or written) guarantee is not credible. He first testified that an oral guarantee was communicated to purchasers at the closing of each unit. In contrast, Tannenbaum also testified that the first discussion he had regarding a guarantee occurred with his attorney after the filing of the Notice to Show Cause in this action. Tannenbaum further testified that he did not understand what a guarantee was until after this case had begun and was unaware of the existence of any guarantee prior to consulting with his attorney in regard to this case. Moreover, Ronald DiCrescenzo, the C.P.A. for Tanwin testified that it was Tannenbaum who informed DiCrescenzo of the existence of a guarantee but DiCrescenzo was unable or unwilling to specify the date on which this communication occurred.
Respondent Tanwin also seeks to establish the existence of a guarantee through Petitioner's Exhibit numbered 5 which is a document signed by less than the majority of unit owners even including Tannenbaum and his son, and signed on an unknown date during 1984. The document provides:
The undersigned Unit Owners at the Vista Del Lago Condominium do not wish to give up the benefits of the developer's continuing guarantee which has been in effect since the inception of the condominium and agreed to by a majority of unit owners and whereby the developer has continuously guaranteed a maintenance level of no more than $109.00 per month per unit, until control of the condominium affairs is turned over to the unit owners in accordance with Florida's Condominium law.
According to Respondent Tanwin, Petitioner's Exhibit numbered 5 constitutes a memorandum signed by unit owners evidencing their belief that a continuous guarantee of the developer has been in effect. First, however, this document was never admitted into evidence for that purpose; rather the document was admitted only to establish the fact that a unit owner had signed the document. Second, this document, unlike the purchase agreements or other condominium documents is ambiguous and is not probative of the existence of a guarantee.
Instead, the evidence is overwhelming that the document was prepared by the developer in the course of this litigation for use in this litigation.
Moreover, unit owner testimony is clear regarding what Mr. and Mrs. Tannenbaum disclosed to unit owners as the purpose for the document when soliciting their signatures, to- wit: that the document was a petition evidencing the unit owners' desire that their monthly maintenance payments not be increased and that prior confusion as to whether reserves had been waived needed resolution.
Respondent Tanwin did pay assessments on some developer-owned units during the period December, 1980 through December, 1983, a fact which is inconsistent with its position that a guarantee existed. Noteworthy is the statement by Ronald DiCrescenzo, the C.P.A. for Tanwin, in his August 16, 1983, letter to Herbert Tannenbaum wherein it is stated: "It is my understanding that you are doing the following: . . .[Playing maintenance assessments on units completed but not sold." It is inconceivable that a developer during a "guarantee period" would pay assessments on some developer units as the purpose of the statutory guarantee is to exempt the developer from such assessments.
The assessments for common expenses of unit owners other than the developer have increased during the purported guarantee period. At least some, if not all, unit owners paid monthly assessments of $128 - $130 for at least half of 1984. This fact is probative of the issue of whether a guarantee existed because unit owner assessments must remain constant during a guarantee period. At the Spring 1984 meeting chaired by Mr. Tannenbaum a vote was taken for the first time as to whether reserves should be waived. Although only 21 owners were present in person or by proxy; the vote was tabulated as 12 in favor and 12 opposed. Mr. Tannenbaum, therefore, announced an increase in monthly maintenance payments to fund reserves. Thereafter owners began paying an increased assessment. The fact that the developer-controlled Association collected increased assessments from unit owners during 1984, and had up to the time of the final hearing in this cause made no effort to redistribute those funds suggests that the developer-controlled Association and the developer considered themselves to be under no obligation to keep maintenance assessments at a constant level.
There was no guarantee of assessments for common expenses by Tanwin from December, 1980, through at least December, 1983.
Since there was no guarantee during the time period in question, Respondent Tanwin is liable to the Respondent Association for the amount of monthly assessments for common expenses on all developer-owned units for which monthly assessments have not been paid.
In conjunction with the determination that Tanwin owes money to the Association (and not vice versa), Respondent Tanwin attempted to obtain an offset by claiming the benefit of a management contract between either Tannenbaum or Tanwin and the Association. No such management contract exists, either written or oral. Although a management contract is mentioned in one of the condominium documents there is no indication that one ever came into being, and no written contract was even offered in evidence. Likewise, no evidence was offered to show the terms of any oral contract; rather, Tannenbaum admitted that he may never have told any of the unit owners that there was a management contract. Tannenbaum's testimony is consistent with the fact that no budget or financial statement reflects any expense to the Association for a management contract with anyone. Likewise, the "budget" contained within Condo II's documents recorded on March 11, 1982, specifically states that any management fee expense was not applicable. Lastly, Tannenbaum's testimony regarding the existence of a management contract is contrary to the statement signed by him on February 10, 1981, which specifically advised Petitioner that the Association did not employ professional management.
To the extent that Respondent Tanwin attempted to establish some quantum meruit basis for its claim of an offset, it is specifically found that no basis for any payment has been proven for the following reasons: Tannenbaum had no prior experience in managing a condominium, which is buttressed by the number of violations of the condominium laws determined herein; Tannenbaum does not know what condominium managers earn; no delineation was made as to specific duties performed by Tannenbaum on behalf of the Association as opposed to those duties performed by Tannenbaum on behalf of Respondent Tanwin; since there was no testimony as to duties performed for the Association, there was necessarily no testimony as to what duties were performed on behalf of the Association in Tannenbaum's capacity as President of the Association and member of the Association's Board of Directors as opposed to duties allegedly performed as a "manager." Tannenbaum's testimony as to the value of his "services" ranged from
$10,000 to $15,000 a year to a lump sum of $60,000; it is interesting to note
that the value of his services alone some years exceeded the Association's annual budget. Respondent Tanwin has failed to prove entitlement to an offset amount, either pursuant to contract or based upon quantum meruit.
The financial statements of the Association--including balance sheets, statements of position, and statements of receipts and expenditures--for 1980-81 and for 1982 reveal consolidation of the records for Condo I and Condo II in these statements. Additionally, DiCrescenzo admitted that separate accounting records were not maintained for each condominium and Herbert Tannenbaum also admitted to maintaining consolidated records. Accordingly, the developer- controlled Association failed to maintain separate accounting records for each condominium it manages.
The By-Laws of the Association provide:
SECTION. 7. Annual Audit. An audit of the accounts of the Corporation shall be made annually by a Certified Public Accountant - and a copy of the Report shall be furnished to each member not later than April 1st of the year following the year in which the Report was made.
The financial statement for 1981 bears the completion date of February 9, 1983. The 1982 financial statement contains a completion date of March 1, 1983. Both the 1981 and the 1982 statements were delivered to the unit owners in March or April, 1983. Accordingly, Respondents failed to provide the 1981 financial report of actual receipts and expenditures in compliance with the Association's By-Laws.
As set forth hereinabove, statutory reserves were not waived during the period of December, 1980 through December, 1983. Being a common expense, reserves must be fully funded unless waived annually. In the instant case, Respondents, rather than arguing that reserves had in fact been fully funded, sought to prove that reserves had been waived during the years in question. The fact that reserves were not fully funded is established by reviewing the financial statements. In accordance with the start-up budgets, reserves were initially established at the level of $15.00 per unit per month. Therefore, during 1981, for Condo I containing sixteen units, the Association's reserve account should contain 16 multiplied by $15.00 per month multiplied by 12 months, or $2,880. Since the Declaration of Condominium for Condo II was not recorded until March 11, 1982, assessments for common expenses including allocations to reserves, were not collected from Condo II during 1981. Therefore, the balance in the reserve account as reflected in the balance sheet for the year 1981 should be no less than $2,880. The actual balance reflected in this account is $2,445. Both Tannenbaum and DiCrescenzo testified that most of the balance in that account was composed of purchaser contributions from the closing of each condominium unit "equivalent to 2 months maintenance to be placed in a special reserve fund" as called for in the purchase contracts. Tannenbaum further admitted that instead of collecting $15.00 per month per unit for reserves, the money that would have gone into the reserve account was used "to run the condominium."
Similarly, for the year ending 1982, the balance in the reserve account also reflects that reserves were not being funded. First, the amount of reserves which should have been set aside in 1981 of $2,880 is added to the total amount of reserves which should have been collected for 1982 for Condo I
($2880), giving a total figure of $5,760. To this figure should be added the reserves which should have been collected from units in Condo II during 1982. This figure is derived by multiplying the total number of units in Condo II, 18 units, by $15.00 per unit multiplied by 8 months (since Condo II was recorded in March of 1982) to yield a figure for Condo II of $2,160. Adding total reserve assessments for Condo I and II, $2,160 plus $5,760 equals $7,920 the correct reserve balance at the close of 1982. The actual balance for the period ended December 31, 1982, is reflected to be $4,138.
Similarly, the amount of reserves required for Condos I and II as of December 31, 1983, can be calculated using the same formula. Although the 1983 financial statement prepared in 1984 reflects the existence of a funded reserve account, both DiCrescenzo and Tannenbaum admitted there was no separate reserves account set up during the time period involved herein.
Statutory reserves were not waived and were not fully funded for the period of December, 1980 through December, 1983.
All parties hereto presented much evidence, unsupported by the books and records of the corporations, for the determination herein of the amounts of money owed by Respondent Tanwin to the Association to bring current the total amount which Tanwin should have been paying to the Association from the inception of each condominium for monthly maintenance on condominium units not yet sold by the developer, together with the amount owed by Tanwin to the Association so that a separate reserve account can be established and fully funded for all years in which the majority of unit owners including the developer have not waived reserves. No findings of fact determining the exact amount Tanwin owes to the Association will be made for several reasons: first, the determination of that amount requires an accounting between the two Respondents herein which is a matter that can only be litigated, if litigation is necessary, in the circuit courts of this state; second, the determination of the amount due between the private parties hereto is not necessary for the determination by Petitioner of the statutory violations charged in the Amended Notice to Show Cause; and third, where books and records exist; one witness on each side testifying as to conclusions reached from review of those records, even though the witnesses be expert, does not present either the quantity or the quality of evidence necessary to trace the income and outgo of specific moneys through different corporate accounts over a period of time, especially where each expert opinion is based upon questionable assumptions. It is, however, clear from the record in this cause that Respondent Tanwin owes money to the Respondent Association and further owes to the Respondent Association an accounting of all moneys on a specific item by item basis.
CONCLUSIONS OF LAW
The Division of Administrative Hearings has jurisdiction over the parties hereto and the subject matter hereof. Section 120.57(1), Florida Statutes. On numerous occasions prior to the final hearing and at the final hearing as well, Respondents have questioned that jurisdiction, citing Peck Plaza Condominiums et al. v. Division of Florida Land Sales and Condominiums,
371 So.2d 152 (Fla. 1st DCA 1979) and Point Management, Inc. v. Division of Florida Land Sales and Condominiums, 449 So.2d 306 (Fla. 4th DCA 1984). Respondents' argument is, first, that the condominium documents in this case are ambiguous, and, second, because of that ambiguity, the Division may not interpret and enforce its interpretation of the documents.
However, it is specifically determined in the Findings of Fact section of this Recommended Order that the condominium documents herein are not ambiguous. Therefore, no interpretation by the Circuit Court is required. The only ambiguous document herein is the petition circulated by the developer which references a guarantee, i.e., Petitioner's Exhibit numbered 5. This document was admittedly prepared by Mr. Tannenbaum and was circulated by Mrs. Tannenbaum in the course of this litigation for use in this litigation. The testimony of unit owners is overwhelmingly that the Tannenbaums misrepresented the document's meaning and purpose, which likely explains why the document is ambiguous. Neither Peck Plaza, supra, nor Point Management, supra, support Respondents' curious position that a party may divest Petitioner and the Division of Administrative Hearings of jurisdiction through the simple expedient of the unilateral creation in the course of litigation of an ambiguous document. To rule otherwise would invite wholesale abuse and defy logic. The Division of Administrative Hearings and Petitioner in this case are merely determining the applicability and interpretation to be placed on certain sections of the Condominium Act, jurisdiction for which has been clearly conferred by the legislature. The determination of the existence and timeliness of certain documents required by the legislature to exist at a certain time does not invade the authority of the Circuit Court to interpret ambiguous documents.
Count 1 of the Amended Notice to Show Cause charges the developer- controlled Association with a violation of Section 718.112(2)(f), Florida Statutes; and Section 7D-18.05(5), Florida Administrative Code, by failing to provide a proposed budget of common expenses for Condo I for the fiscal year 1982. Section 718.112(2)(f), Florida Statutes (1983), provides, in pertinent part, 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. . . .
Further Section 7D-18.05(5), Florida Administrative Code, effective July 22, 1980; provides that: "Each condominium shall have a budget, whether or not operated by an association operating more than one condominium . . . ." Because the facts establish that the developer-controlled Association failed to provide a proposed budget for Condo I for the year 1982, Petitioner has proven the allegations in Count I.
Count 2 charges that the developer-controlled Association provided a proposed budget of common expenses for 1983 which did not comply with Sections 718.112(2)(f) and (k), Florida Statutes. The 1983 proposed budget received by unit owners contained no provision for reserves. Additionally, it was received at, and not before, the 1983 meeting at which the budget would be considered. Section 718.112(2)(k) provides, in pertinent part:
The proposed annual budget of common expenses shall be detailed and shall show the amounts budgeted by accounts and expense classifications, including, if applicable, but not limited to those expenses listed in
s. 718.504(20). In addition to annual operating expenses, the budget shall include reserve accounts for capital expenditures
and deferred maintenance. These accounts shall include, but not be limited to, roof replacement, building painting, and pavement resurfacing. . . . This subsection shall not apply to budgets in which the level of assessments has been guaranteed pursuant to s. 718.116(8) prior to October 1, 1979, provided that the absence of reserves is disclosed to purchasers, or to budgets in which the members of an association have, by a vote of a majority of the members present at a duly called meeting of the association; determined for a fiscal year to provide no reserves or reserves less adequate than required by this subsection.
First, a violation of Section 718.112(2)(f) has been established in that the 1983 budget was not mailed to all unit owners not less than 30 days prior to the budget meeting. Second, the 1983 budget which was distributed at the 1983 budget meeting did not include reserve accounts. An exemption to the requirements of Subsection (k) exists where prior to October 1, 1979, the level of assessments has been guaranteed. An exemption is also provided in the case where a majority of unit owners on an annual basis determines to waive or reduce reserves. Neither exemption applies to this case.
Count 2 of the Amended Notice to Show Cause also alleges a violation of Section 718.115(2). Because Petitioner was unsuccessful in introducing into evidence a copy of the actual budget received by the unit owners, no violation of Section 718.115(2) is established. However, Petitioner has met its burden of proving the remainder of Count 2.
Count 3 of the Amended Notice to Show Cause charges that the
developer-controlled Association failed to budget for reserves for the year 1983 in violation of Section 718.112(2)(k), Florida Statutes, and Section 7D- 18.05(6), Florida Administrative Code, which provides that all budgets adopted on or after October 1, 1979, shall include reserves unless reserves have been waived for that year. To a certain extent, an overlap exists between Counts 2 and 3 of the Amended Notice to Show Cause. Considered in totality, only two violations of the statutes and rules have been established by Counts 2 and 3: the 1983 budget given to unit owners did not contain reserves, and the budget was not timely distributed to unit owners.
Count 4 charges that reserves have not been fully funded or waived for the period December, 1980 through at least December, 1983, in violation of Section 718.112(2)(k), Florida Statutes. It was determined in the Findings of Fact that reserves have not been fully funded or waived during this period. Section 718.112(2)(k) provides that unless reserves are waived in accordance with the procedure set forth in that subsection, reserves must be annually budgeted and fully funded. Accordingly, an additional violation of Section 718.112(2)(k) has been established.
Count 5 charges that the developer, as owner of unsold units, has failed to pay to the Association monthly maintenance for common expenses during the period December, 1980 through at least December, 1983; in violation of Section 718.116(8), Florida Statutes. Section 718.116(8)(b), Florida Statutes, provides:
(8) No unit owner may be excused from the payment of his share of the common expense of a condominium unless all unit owners are likewise proportionately excused from payment, except as provided in subsection
(6) and in the following cases:
* * *
(b) A developer or other person owning condominium units or having an obligation to pay condominium expenses may be excused from the payment of his share of the common expense which would have been assessed against those units during the period of time that he shall have guaranteed to each purchaser in the purchase contract, declaration or prospectus; or by agreement between the developer and a majority of the unit owners other than the developer, that the assessment for common expenses of the condominium imposed upon the unit owners would not increase over a stated dollar amount and shall have obligated himself to pay any amount of common expenses incurred during that period and not produced by the assessments at the guaranteed level receivable from other unit owners.
The Findings of Fact in this Recommended Order establish that Tanwin did not guarantee to each purchaser in the purchase agreement, declaration of condominium, prospectus, or by agreement with a majority of unit owners other than the developer that their level of assessments would remain constant. The facts also establish and Tannenbaum and DiCrescenzo admit that Tanwin only paid monthly maintenance on some of its units some of the time. Therefore the developers as owner of unsold units, has failed to pay his share of the common expenses of the condominium, in violation of Section 718.116(8), Florida Statutes.
A developer in a non-guarantee situation is required like any other unit owner to pay assessments on units it owns. See, the Declaratory Statement in Tahitian Gardens Condominium, Inc. rendered by Petitioner on July 2, 1982; which was officially recognized in this cause. The developer as unit owner is liable for assessments coming due while the developer holds title to unsold units; which extends from the period of time after recordation of the condominium through the closing of title of a particular unit to another unit owner, regardless of whether during the period of developer ownership, a certificate of occupancy has been issued with regard to that particular unit. Petitioner has proven the allegations of this Count.
Count 6 of the Amended Notice to Show Cause charges that the developer-controlled Association failed to maintain separate accounting records for each condominium it manages in violation of Section 718.111(7), Florida Statutes, which provides:
The association shall maintain accounting records for each condominium it manages in the county where the condominium is located, according to good accounting practices.
Both Tannenbaum and DiCrescenzo admitted that separate accounting records were not kept for Condo I and II, and the Exhibits do not separate those records until the 1983 financial statement prepared in 1984.
Count 7 of the Amended Notice to Show Cause charges that the developer-controlled Association failed to provide to the unit owners financial reports of actual receipts and expenditures for each condominium, which comply
with Sections 718.111(7) and (13), Florida Statutes, on such date as is provided in the By-Laws, i.e., April 1. Both the 1981 and 1982 financial statements are in consolidated form in violation of Section 718.111(7). Moreover the 1981 financial statement was provided to unit owners in an untimely fashion approximately one year late. Hence a violation of Section 718.111(13) is established.
Count 8 of the Amended Notice to Show Cause charges that Respondent Tanwin, if a guarantee is determined to exist, has failed to fund a deficit, or shortfall, in the amount of $20,150.77. Since Petitioner has proven that no guarantee exists, it has failed to prove Count B of the Amended Notice to Show Cause.
Section 718.501, Florida Statutes, sets forth the powers and duties of Petitioner and provides, in pertinent part, as follows:
The Division of Florida Land Sales and Condominiums of the Department of Business Regulation, referred to as the "division" in this part, in addition to other powers and duties prescribed by chapter 498, has the power to enforce and ensure compliance with the provisions of this chapter and rules promulgated pursuant hereto relating to the development, construction, sale lease, ownership, operation, and management of residential condominium units. In performing its duties, the division shall have the following powers and duties:
***
(d) 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 rule promulgated pursuant hereto has occurred, the division may institute enforcement proceedings in its own name against any developer or association or its assignees or agents, as follows:
***
2. The division may issue an order requiring the developer or association, or its assignees or agents, to cease and desist from the unlawful practice and take such affirmative action as in the judgment of the division will carry out the purposes of this chapter.
***
4. The division may impose a civil penalty
against a developer or association, or its assignee or agent, for any violation of this chapter or a rule promulgated pursuant hereto. A penalty may be imposed on the basis of each day of continuing violation, but in no event shall the penalty for any offense exceed $5,000. All amounts collected shall be deposited with the Treasurer to the credit of the Florida Condominiums Trust Fund.
In the case sub judice it is clear that the imposition of civil penalties is appropriate due to Tanwin's repeated offenses and due to the severity of some of the violations. Additionally, it is appropriate that Tanwin be ordered to comply with the provisions of the Condominium Act since no voluntary compliance appears likely.
Count 1 involves the failure to provide a proposed budget for 1982 for Condo I only. This was the first offense, affected only one of the two condominiums, and could not be cured once the violation occurred. An appropriate fine for Count 1 is $500. Counts 2 and 3 are related and involve the untimely provision of the proposed budget for 1983 which budget failed to provide for reserves. Since 1983 was the second year that Tanwin failed to provide a budget to the unit owners in a timely manner and since the budget that was provided to the unit owners (as opposed to the one admitted in evidence at this hearing) failed to contain provision for reserves, the penalty should be more severe. An appropriate fine is $3,000. Count 4 involves the failure to fully fund or waive reserves for the period of December, 1980 through December, 1983. The is a severe offense, covers a period of three continuous years, and seriously jeopardizes the investment of all unit owners. Accordingly, the maximum fine of $5,000 is appropriate. Count 5 involves the developer's failure to pay its share of common expenses during the period of December, 1980 through December, 1983, together with Tanwin's "guarantee defense." This is a serious offense covering a period of three years and was totally unjustified. Tanwin should be fined $5,000 for this Count. Count 6 involves the failure to maintain separate accounting records, an offense which continued over several years. The fine for Count 6 should be $1500. Count 7 involves the failure to timely provide financial statements. Since the 1981 financial statement was not provided to unit owners until 1983 and was provided at that time in consolidated form for both Condo I and Condo II; Tanwin should be fined $2,000 due to the severe lateness of that financial statement. All penalties should be paid by Respondent Tanwin and not by the Respondent Association for the reason that the offenses were committed by Tanwin in its role as developer or Tanwin in its capacity of having control over the Respondent Association. Further, Tanwin benefited by each of the violations, and no benefit was derived by the Association or the individual unit owners.
Lastly, Tanwin should be required to pay for an accounting by an independent certified public accountant to determine the amount of money which Tanwin is obligated to pay to the Association to bring current its liability for monthly assessments on all units in Condos I and II during the entire time period any of them were owned by the developer and the amount of money required to be paid by Tanwin in order that the reserve account be fully funded. A copy of that certified accounting should be filed with Petitioner so that Petitioner can determine if the violations for which Tanwin has been found guilty herein have ceased or are continuing.
Based upon the foregoing Findings of Fact and Conclusions of Law it is, therefore,
RECOMMENDED that a Final Order be entered:
Finding Respondent Tanwin Corporation guilty of the allegations contained in Counts 1-7 of the Amended Notice to Show Cause;
Dismissing with prejudice Count 8 of the Amended Notice to Show Cause;
Assessing against Respondent Tanwin Corporation a civil penalty in the amount of $17,000 to be paid by certified check made payable to the Division of Florida Land Sales, Condominiums and Mobile Homes within 45 days from entry of the Final Order herein;
Ordering Respondents to forthwith comply with all provisions of the Condominium Act and the rules promulgated thereunder;
And requiring Tanwin Corporation to provide and pay for an accounting by an independent certified public accountant of all funds owed by the developer as its share of common expenses on unsold units and the amount for which Tanwin is liable in order that the reserve account be fully funded, with a copy of that accounting to be filed with Petitioner within 90 days of the date of the Final Order.
DONE and RECOMMENDED this 9th day of August, 1985, at Tallahassee, Florida.
LINDA M. RIGOT, 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 August, 1985.
COPIES FURNISHED:
Karl M. Scheuerman, Esquire Thomas A. Bell, Esquire Department of Business Regulation 725 South Bronough Street Tallahassee, Florida 32301
Joseph S. Paglino, Esquire
88 Northeast 79th Street Miami, Florida 33138
E. James Kearney, Director Department of Business Regulation Division of Florida Land Sales Condominiums and Mobile Homes
725 South Bronough Street Tallahassee, Florida 32301
Richard B. Burroughs, Jr., Secretary Department of Business Regulation 725 South Bronough Street Tallahassee, Florida 32301
=================================================================
AGENCY FINAL CONSENT ORDER
=================================================================
STATE OF FLORIDA DEPARTMENT OF BUSINESS REGULATION
DIVISION OF FLORIDA LAND SALES, CONDOMINIUMS AND MOBILE HOMES
DEPARTMENT OF BUSINESS REGULATION, DIVISION OF FLORIDA LAND SALES, CONDOMINIUMS AND MOBILE HOMES,
Petitioner,
CASE NO. 84-0437
DOCKET NO. 84001MVC
TANWIN CORPORATION and VISTA
DEL LAGO CONDOMINIUM ASSOCIATION, INC.
Respondents.
/
FINAL CONSENT ORDER
The Division of Florida Land Sales, Condominiums and Mobile Homes, (hereinafter the Division), Vista Del Lago Condominium Inc., (hereinafter the Association), and Tanwin Corporation, (hereinafter Tanwin), hereby stipulate and agree to the terms and issuance of this Final Consent Order as follows:
WHEREAS, the Division issued a Notice to Show Cause directed to Respondents
and,
WHEREAS, after issuance of the Recommended Order in this cause, the parties
amicably conferred for the purpose of achieving a settlement of the case, and
WHEREAS, Tanwin is desirous of resolving the matters alleged in the Notice to Show Cause without engaging in further administrative proceedings or judicial review thereof,
NOW, THEREFORE, it is stipulated and agreed as follows:
FINDINGS OF FACT
The Petitioner is the Division of Florida Land Sales, Condominiums and Mobile Homes, that state agency responsible for enforcement of the Condominium Act, Chapter 718, Florida Statutes.
Respondents are Tanwin Corporation and Vista Del Lago Condominium Association, Inc. Tanwin is the developer of the Vista Del Lago Condominiums I and II located in West Palm Beach, Florida. Respondent Vista Del Lago Condominium Association, Inc., the multi-condominium association responsible for the operation of the Vista Del Lago Condominiums I and II.
On or about January 10, 1984, the Division issued and duly served a Notice to Show Cause in Docket No. 84001MVC directed to Tanwin Corporation and the Vista Del Lago Condominium Association, alleging that the developer Tanwin Corporation and the developer-controlled condominium association had violated certain provisions of Chapter 718, Florida Statutes and the rules promulgated thereunder. The Notice to Show Cause was subsequently amended in the course of the administrative proceeding to include an additional count.
The final hearing in this cause occurred on February 6 through 8, 1985, in Miami, Florida, and a Recommended Order dated August 9, 1985, was entered by the Hearing Officer Linda M. Rigot. The Hearing Officer recommended that the Division enter a Final Order finding Tanwin Corporation guilty of the allegations contained in Counts 1-7 in the Amended Notice to Show Cause, dismissing Count 8 of the amended Notice, and assessing against Tanwin Corporation a civil penalty in the amount of $17,000.00. Additionally, it was recommended that a Final Order be entered requiring both Respondents to comply with all provisions of the Condominium Act and the rules promulgated thereunder, and requiring Tanwin Corporation to provide and pay for an accounting performed by an independent Certified Public Accountant, which accounting would determine Tanwin's common expense liability and reserve account liability.
The declaration of condominium for Condominium I was recorded in the public records on December 12, 1980. The declaration for Condominium II was recorded on March 11, 1982. Transition from developer control of the association has not occurred, and at all times pertinent hereto, Respondent Tanwin controlled the operation of the Respondent Association.
Statutory reserves were not waived curing the period December, 1980 through December of 1983. Additionally, reserves were not fully funded for the period December, 1980 through December of 1983.
Tanwin Corporation failed to pay to the association monthly maintenance for common expenses on all developer-owned units during the period December 1980 through December of 1983.
Tanwin Corporation offered no guarantee of common expenses from the period December, 1980 through December of 1983, either orally, in writing, by vote of a majority of the unit owners, or otherwise.
No management contract existed, either orally or in writing, between Tanwin Corporation or Herbert Tannenbaum and the condominium association during the period December, 1980 through December of 1983. Additionally, there is no basis, quantum meruit basis or otherwise for a management fee. 1/
CONCLUSIONS OF LAW
The Division has jurisdiction over this matter pursuant to Section 718.501, Florida Statutes.
The rendition of this Consent Order is authorized pursuant to Section 718.501(1)(d)1, Florida Statutes.
This Consent Order constitutes final agency action and is the final order of the Division respecting the matters set forth both in this Consent Order and in the Notice to Show Cause, as amended. Further, this Consent Order is a settlement agreement regarding the issues set forth both in this Consent Order and in the Notice to Show Cause as amended.
Vista Del Lago, while under control by Tanwin, violated Section 718.112(2)(k), Florida Statutes (1983) by failing to ensure the full funding of reserves. Tanwin, pursuant to Section 718.301(5), Florida Statutes (Supp. 1984) is responsible for all violations of Chapter 718 by the association during the period of time that Tanwin controlled a majority of the Board of the association.
Tanwin Corporation, by failing to pay to the condominium association monthly assessments for common expenses on all developer-owned units during the period December, 1980 through December of 1983, violated Section 718.116(8), Florida Statutes (1983).
RELIEF, ORDER AND REMEDY
Respondent Tanwin Corporation shall remit to the Division of Florida Land Sales, Condominiums and Mobile Homes, upon its execution of this Consent Order, a certified check in the amount of Seven Thousand Dollars ($7,000), which sum represents a civil penalty for its violations of the Condominium Act and rules promulgated thereunder, receipt of which is acknowledged by the Division through its execution of this Consent Order.
Both Respondents hereby knowingly and voluntarily waive further formal proceedings, informal proceedings, and judicial review of the matters set forth in this Consent Order and in the Notice to Show Cause, as amended.
Turnover of the condominium association from control by Tanwin to control by unit owners other than the developer shall occur on November 30, 1986. Within 60 days after November 30, 1986, the developer-controlled association shall call, and give not less than 30 days nor more than 40 days notice of a meeting of the unit owners to elect the members of the board of administration. Tanwin Corporation and the developer-controlled association shall fully comply with all provisions of Section 718.301(2),(4), Florida Statutes.
Respondent Tanwin Corporation agrees to remit in cash or its equivalent to Greenspoon, Marder & Freeman, P.A., (hereinafter Marder) in trust for the condominium association, the sum of $25,000.00, which sum represents unpaid developer assessments. 2/ Respondent Tanwin Corporation, its agents, employees, officers, directors, or accountants shall not have access to these funds, shall not utilize these funds in any way whatsoever, and agrees that said funds shall be permanently irrevocably transferred to Marder in trust for the association. Marder agrees to hold these funds in its trust account in
accordance with the provisions set forth herein. Tanwin Corporation shall, by June 16, 1986, remit an initial payment of $10,000.00, to be deposited with Marder on behalf of the association. The remainder of the $25,000.00 ($15,000.00), shall be remitted by Tanwin Corporation to Marder by February 1, 1987. Marder agrees to provide to the division upon receipt or non receipt of the payment set forth in this Consent Order, notice of compliance or noncompliance within 10 days at June 16, 1966 and within 10 days of February 1,
1987. During the period June 16, 1986 to February 1, 1987, the association may obtain access to the funds held by Marder in trust for the association, so long as the Division is given 10 days advance notice of the intended disbursement, so long as the intended disbursement is for the reserve purposes of roof replacement, building painting, and pavement resurfacing, exclusively, and so long as the disbursement request is accompanied by an affidavit signed by the president of Vista Del Lago, which affidavit shall itemize the payee for each requested reserve disbursement. Any other disbursements from the trust account are prohibited, and no disbursements shall be made to Tanwin Corporation.
Within 30 days of February 1, 1987, all residual funds in the trust account shall be transferred to the non-developer controlled association, and shall represent a reserve fund of the association. Marder shall have no liability for actions of the Respondents after proper disbursement affidavit and shall have no responsibility to ensure that the disbursements are in fact expended for the purpose set forth in the disbursement affidavit.
The parties further agree and stipulate that if Tanwin Corporation, for any reason whatsoever, fails to pay in whole or in part any amounts provided for in this Consent Order in a timely fashion, the Association, immediately upon such default, shall file a Notice of Lien on a developer-owned unit and shall prosecute the lien as provided in Section 718.116, Florida Statutes
Tanwin, its agents, employees directors, attorneys and accountants shall have no recourse against the Association, its officers or directors, or any unit owners, for any payment in this Consent Order.
Tanwin Corporation and Vista Del Lago Condominium Association, Inc., shall cause to be filed, by June 16, 1986, a voluntary dismissal with prejudice in the case of Tanwin Corporation and Vista Del Lago Condominium Association, Inc. v. E. James Kearney, as Director of the Division of Florida Land Condominiums and Mobile Homes, Case No. 84-8017, presently pending in the United States District Court for the Southern District of Florida.
Respondents both understand and agree that in the event of any violation or violations of the provisions of this Consent Order by Respondents, the Division shall become entitled, upon establishing such violation pursuant to
(9) below, to an additional civil penalty in the amount of $5,000.00 per violation.
Respondents understand and agree that enforcement of, and a determination of any violations of, the provisions of this Consent Order, may, in the sole discretion of the Division, proceed in the Division's own name either in accordance with the procedures set forth in Section 120.69, Florida Statutes, in which case Tanwin consents to the placement of a lis pendens on all real property owned by Tanwin located within the condominium, or in accordance with the procedures set forth in Sections 718.501(1)(d)2 and 120.57, Florida Statutes.
DONE AND ORDERED this 1st day of July, 1986.
RICHARD E. COATES, DIRECTOR
Division of Florida Land Sales, Condominiums and Mobile Homes
Department of Business Regulation State of Florida
Tanwin Corporation, by its duly authorized representative Herbert Tannenbaum, as President of the Respondent hereby agrees and consents to the terms and issuance of the foregoing Consent Order, this 20th day of June, 1986.
Tanwin Corporation
Vista Del Lago Condominium Association, Inc., by its duly authorized representative Herbert Tannenbaum as President of the Respondent hereby agrees and consents to the terms and issuance of the foregoing Consent Order, this 20th day of June, 1986.
Vista Del Lago Condominium Association, Inc.
Greenspoon, Marder & Freeman, P.A., hereby submits itself to the jurisdiction of the Division for the purposes and to the extent set forth in this Consent Order.
Michael Marder, Esquire For the firm.
ENDNOTES
1/ Tanwin has supplied financial records to the Division, which records have been relied upon by the Division, and pursuant to such records, the Division has determined that the Developer's total liabilities for maintenance fees and assessments is approximately Twenty Five Thousand Dollars ($25,000.00) from the date of formation of the Condominium through September 30, 1985.
2/ through September 30, 1985.
| Issue Date | Proceedings |
|---|---|
| Aug. 09, 1985 | Recommended Order (hearing held , 2013). CASE CLOSED. |
| Issue Date | Document | Summary |
|---|---|---|
| Jul. 01, 1986 | Agency Final Order | |
| Aug. 09, 1985 | Recommended Order | Administrative fine levied against condominium developer for failure to provide timely proposed budgets and financial statements and establish reserves. |
