STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

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

)

Petitioner, )

)

vs. ) Case No. 85-3573

) RIVERWOOD CONDOMINIUM ASSOCIATION, ) INC., d/b/a RIVERWOOD CONDOMINIUM )

)

Respondent. )

)

RECOMMENDED ORDER

This matter was heard on February 24, 1986 in Ft.

Lauderdale, Florida by William R. Dorsey, Jr., the hearing officer assigned by the Division of Administrative Hearings.

Both parties have submitted proposed recommended orders. Rulings on each party's proposed findings of fact are contained in the Appendix to this Recommended Order.

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APPEARANCES

For Petitioner: Robin H. Conner, Esquire

Department of Business Regulation, The Johns Building

725 South Bronough Street Tallahassee, Florida 32301

For Respondent: Richard C. Entin, Esquire

8358 W. Oakland Park Boulevard Sunrise, Florida 33321

ISSUE

The issue is whether Riverwood Condominium Association, Inc., ("the Association") violated Section 718.112(2)(i), Florida Statutes (1984 Supp.) by collecting $18,625 as common element security deposits from October 1, 1984 through March 31, 1985 in connection with leases of condominium units. There is little dispute as to the facts; this matter turns on the meaning of the terms "charge" and "fee" in Section 718.112(2)(i), Florida Statutes (1984 Supp.). The refundable security deposit of $1,000

which tenants of condominium unit owners post at the beginning of a tenancy, and which is returned to the tenant on the termination of the tenancy, (less any amounts assessed as fines or for damage done to common property by the tenant), does not constitute a "charge" or a "fee" which is forbidden by Florida Condominium Act. The Notice to Show Cause should be dismissed.

FINDINGS OF FACT

1. The Respondent is an association, as that term is defined in Section 718.103(2), Florida Statutes (1984 SUPP.) which is responsible for the operation of the 128-unit Riverwood Condominium.

   
   

2. The condominium has undergone a substantial demographic change from the time it first began operation. Originally it was occupied by unit owners. Now about 43% of the units are rented out by their owners.

   
   

3. The Directors of the Association found it useful to institute the security deposit program because as the character of the residents of the condominium changed from owners to tenants, damage was caused to common elements by tenants and their children, including but not limited to the following:

   
   

   1. backing into fences with automobiles, causing damage;

      
      

   2. knocking down light posts with automobiles;

      
      

   3. maliciously attempting to set fires to the clubhouse;

      
      

   4. knocking over concrete stanchions in entrance ways appurtenant to the Condominium;

      
      

   5. causing damage to electrical connections servicing the common elements by performing unauthorized repairs to the common elements adjacent to units;

      
      

   6. malicious damage to items of personally belonging to the Association;

   7. clogging swimming pool filters;

      
      

   8. defecation in swimming pool;

      
      

   9. damaging grassy areas with automobiles, necessitating the replacement of sod; and

   10. discharging of B-B guns through windows of the clubhouse. Tenants have also violated Association rules, for which fines are prescribed in the rules. The Association found, however, that it paid $3,000 in legal fees to collect a $345 fine from a tenant. Owners and those for whom they are responsible also have damaged common elements.

       
       

4. The Declaration of Condominium for the Riverwood Condominium provides that "[u]nits shall not be leased without the prior written approval of the Board of Directors. Notwithstanding the lease of his unit, the liability of the unit owner shall continue" (See Respondent's response to request for admissions, filed January 30, 1986.) The Association does take applications to screen prospective tenants, but it has never charged an administrative fee in connection with the processing of those applications (id.) A resolution enacted by the Board of Director of the Riverwood Condominium Association and adopted as a rule or regulation permits the Association to collect a $1,000 refundable security deposit from each new tenant who leases a unit at the Riverwood Condominium (id.). The Declaration of Condominium, Articles of Incorporation and By-Laws of the Association do not themselves provide for the collection of security deposits. Under the authority of the resolution, the Association has collected a $1,000 refundable security deposit for each new tenant who leases a unit at the Riverwood Condominium (id.). At the conclusion of a tenancy, the security deposit is refunded in full unless the tenant was found to have damaged common property or violated Association-rules (id.). During the period October 1984 through March 1985 the Association collected security deposits in the amount to $18,625.00 (id.) 1/.

5. The $1,000 refundable security deposit is invested at interest, but the interest is maintained by the Association, in part to defray the cost of administering the security deposit program.

   
   

6. In the event officers or employees of the Association believe that damage has been caused to a common element by a tenant or the tenant has violated a rule, the Association gives the tenant a written notice to appear before the Board of Directors of the Association. In the event the tenant does not appear at the meeting, a second notice is provided to appearing at the following Board meeting. When the tenant appears, the tenant is given the opportunity to answer the allegation. The Board determines upon the evidence presented at the Board meeting

   whether damage was caused by the tenant or a rule has been violated, the amount of any damage is determined, and that amount, or the prescribed fine, is deducted from the security deposit. No evidence was presented that a security deposit has been reduced without the tenant having the opportunity to be heard on whether he is responsible for damage or has violated a rule.

   
   

7. As of the time of the hearing, the Association maintained over $50,000 in the interest-bearing security deposit account.

   
   

8. While the $1,000 security deposit is not collected from unit owners at the condominium, it is collected from all tenants regardless of the length of tenancy, number of persons occupying the unit or the age of those occupants.

   
   

9. The problems of finding a way to deal with misbehavior of tenants encountered by the Association is similar to problems experienced by other condominium associations in its geographical area.

   
   

   CONCLUSIONS OF LAW

   
   

10. Section 718.112(2)(i), Florida Statutes (1984 Supp.) provides:

    
    

    "Transfer fees. No charge shall be made by the association or any body thereof in connection with the sale, mortgage, lease, sublease, or other transfer of a unit unless the association is required to approve such transfer and a fee for such approval is provided for in the declaration, articles, or bylaws. Any such fee may be preset, but in no event may such fee exceed $50. However, if the lease or sublease is a renewal of a lease or sublease with the same lessee or sublessee, no charge shall be made."

    
    

11. "Charge" is defined as "the price asked for goods or services." Oxford American Dictionary (Oxford University Press 1980) at 140. A "fee" is "a sum payable to an official or professional person for advice or services," or "a sum payable for membership in a society, use of a laboratory or other facility, etc. (id. at 317). These terms indicate an irrevocable payment in exchange for some right or privilege. A deposit has a different characteristic: it is paid as a guaranty, and is returned to the payor or is subject to forfeiture only for specific reasons; it does not represent a

    price paid as part of a perfected transaction which is thereafter beyond the reach of the payor.

    
    

12. The Department argues that Section 718.112(2)(i), Florida Statutes (1984 Supp.) only permits the collection of funds when the Association is required to approve transfers, and then the fee may not exceed $50.00. This is an excessively broad reading of the statute. While there is a statutory limitation as to charges or fees, there is no prohibition on the collection of security deposits.

    
    

13. The Department maintains that under Natelson v. Department of Insurance, 454 So. 2d 31, 32 (Fla. 1st DCA 1984) a "reviewing court will defer to any interpretation [of an agency] within the range of possible interpretation . . ." (emphasis by the Court). The Department contends that deference should be paid to its interpretation of Section 718.112(2)(i), Florida Statutes (1984 Supp.) that the security deposits of the type required by the Association are prohibited. The Department's reliance on Natelson is misplaced. Courts defer to an agency head's interpretation of a statute made in a rule, or in a final order entered after the agency head has had the benefit of fact finding and briefing on appropriate issues of law. That does not mean that the interpretation of a statute proffered by counsel for an agency in the course of a Section 120.57(1) proceeding is entitled to similar deference.

    
    

14. The Department has also stated in its proposed recommended order that a rule of the Division of Florida Land Sales, Condominiums and Mobile Homes which became effective October 1, 1985 (well after the October 1, 1984 through March 31, 1985 period at issue here) supports its interpretation of Section 718.112(2)(i), Florida Statutes (1984 Supp.). Rule 7D-23.05(1), F.A.C., effective October 1, 1985 states:

    
    

    "The maximum permissible amount of charges which may be levied by an association, or any body thereof, in connection with the transfer of a condominium unit, shall include any fees charged as a security deposit or damage fee or identified by words of similar import."

    
    

15. The subsequent enactment of this rule has no effect on the decision in this case. The allegations in the Notice to Show Cause allege a statutory violation occurring "from October 1, 1984 through March 31, 1985" (Notice to Show Cause, paragraph 1). Assuming without deciding that the new rule is within the range of authority available to the Department, the rule was not in effect during the time at issue, and the Notice to Show Cause alleges a violation of the statute, not of a rule.

16. There is no evidence that common element security deposits have been required of new tenants since October 1, 1985, or evidence whether common element security deposits received before the effective date of the new rule have been maintained since the effective date of the rule. Under the allegations of the Notice to Show Cause, of course, such evidence would have been irrelevant. During the span of time at issue here, the Association did not violate Section 718.112(2)(i), Florida Statutes (1984 Supp.).

RECOMMENDATION

The Notice to Show Cause should be dismissed.

DONE AND ORDERED this 24th day of April 1986 in Tallahassee, Leon County, Florida.

WILLIAM R. DORSEY, 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 24th day of April 1986.

ENDNOTE

1/ Why this is not a round $1,000 amount does not appear in the evidence.

APPENDIX

The following constitute my specific rulings pursuant to Section 120.59(2), Florida Statutes (1985) on the proposed findings of fact submitted by the parties.

Rulings on Proposed Findings of Fact Submitted by Petitioner

l(a) Accepted in Finding of Fact 1.

l(j) Sentence 1 is not adopted as unnecessary; Sentence 2 is accepted in Finding of Fact 9; Sentence 3 is rejected as irrelevant.

l(k) Rejected as a conclusion of law rather than a finding of fact.

1(1) While a correct statement of the testimony,

this proposed finding is not adopted because it is a conclusion of law.

COPIES FURNISHED:

Mr. James Kearney, Secretary Department of Business Regulation The Johns Building

725 South Bronough Street Tallahassee, Florida 32301

Thomas Bell, General Counsel Department of Business Regulation The Johns Building

725 South Bronough Street Tallahassee, Florida 32301

Robin H. Conner, Esquire Department of Business Regulation The Johns Building

725 South Bronough Street Tallahassee, Florida 32301

Richard C. Entin, Esquire 8358 W. Oakland Park Blvd. Suite 100

Sunrise, Florida 33321

Docket for Case No: 85-003573

Orders for Case No: 85-003573