Judges: WILLIAM R. DORSEY, JR.
Agency: Department of Business and Professional Regulation
Latest Update: May 22, 1987
Summary: The issue is whether Granada Lakes Development Corporation should be fined for alleged violations of the Florida Condominium Act, Chapter 718, Florida Statutes?Respondent to pay $5000 civil penalty for failure to provide financial reports, meeting notices and proposed annual budget. Respondent also fined $8276.65 representing his liability for reserves.
85-4267.PDFSTATE OF FLORIDA
DIVISION OF ADMINSTRATIVE HEARINGS
DEPARTMENT OF BUSINESS REGULATION, ) FLORIDA LAND SALES, CONDOMINIUMS ) AND MOBILE HOMES, )
)
Petitioner, )
)
vs. ) Case No. 85-4267
)
GRANADA LAKES DEVELOPMENT ) CORPORATION. d/b/a GRANADA LAKES ) ADULT RV RESORT CONDOMINIUM, )
)
Respondent. )
)
RECOMMENDED ORDER
This matter was heard by William R. Dorsey, Jr. the Hearing Officer designated by the Division of Administrative Hearings on February 24, 1987 in Fort Myers, Florida.
APPEARANCES
For Petitioner: Robin H. Conner, Esquire
Department of Business Regulation 725 South Bronough Street Tallahassee, Florida
For Respondent: James L. Goetz, Esquire
Norman A. Hartman, Jr., Esquire Goetz & Hartman
Post Office Box 6844 Fort Myers, Florida
The parties submitted proposed Recommended Orders. No transcript of the proceeding was filed. The Respondent accepted the proposed Findings of Fact of the Department of Business Regulation, with certain limited exceptions. Rulings on the Proposed Findings of Fact made in the Proposed Recommended Orders of both parties are found in the Appendix to this Recommended Order.
ISSUES
The issue is whether Granada Lakes Development Corporation
should be fined for alleged violations of the Florida Condominium Act, Chapter 718, Florida Statutes?
FINDINGS OF FACT
General Findings Pertaining to the Condominium
Granada Lakes Adult RV Resort Condominium is located in Fort Myers, Florida. It consists of 151 units; about 70 have been sold. It was to be developed in three phases. Each Unit is a parcel upon which the purchaser may place a dwelling unit.
Granada Lakes Development Corporation is the developer of the condominium.
The declaration of condominium for Granada Lakes Adult RV Resort Condominium was recorded in the public records of Lee County on March 11, 1982.
The Respondents did not include in the original declaration of condominium which submitted Phase I to condominium ownership the time period within which Phases II and III would be completed.
The developer owned all condominium units during 1982. Sale contracts for the first units were executed in 1982. The first sales did not close until early 1983.
No units have been offered for sale at the Granada Lakes Adult RV Resort Condominium for approximately eighteen months preceding the day of the hearing.
Respondents ceased to be the developer of Granada Lakes RV Resort Condominium at the end of July 1985.
Granada Lakes Development Corporation was involuntarily dissolved by the Department of State on about November 1, 1985.
Distribution of Statements of
Receipts and Expenses for 1983 and 1984
Morgan Lloyd closed the purchase of his unit in February 1983. He served as treasurer for the condominium association from February 1983 until approximately February 1984. Mr. Lloyd prepared a financial statement showing receipts and expenditures for the calendar year 1983. Although this statement is for calendar year 1983, the association's fiscal year for 1983 ended October 31, 1983. The statement of income and expenses for the year 1983 was prepared more than 60 days after the close of the fiscal year. The account balance was determined as of December 31, 1983, so the statement had to have been prepared after that date. It was distributed to unit owners at the first annual
meeting of the unit owners, which occurred on February 23, 1984. (This disregards, for the moment, the unit owners meeting held by the developer when it was the sole owner of the units, see Finding of Fact 15, post.)
The annual financial report of the association for, fiscal year 1984 was not distributed earlier than March 1985.
Proposed Budgets for 1982 through 1984
Proposed annual budgets for the years 1982 and 1983 had been prepared by the developer and were distributed with the prospects for the condominium units.
The proposed budget for 1982 (which was included in the prospectus) contained as line item 13 for operating expenses a reserve account for roof replacement, equipment replacement, building painting and pavement resurfacing. It called for an annual reserve funded by all 151 units of $3,415.
Copies of the 1985 proposed annual budget of common expenses were mailed to unit owners 13 days prior to the meeting at which the 1985 budget was to be considered.
Reserves
After the developer began conveying out units in 1983, there was never a meeting of the condominium association at which the membership voted to waive or reduce the funding of reserves shown in the estimated budget in the prospectus of $1.88 per condominium unit per month. These reserve monies were placed in the reserve account quarterly as they were paid by unit owners.
The developer did not pay any reserves in 1983 or 1984 for units owned by the developer because, in the developers view, those payments were not due under the resolution passed during the January 5, 1983 membership meeting of Granada Lakes Adult RV Resort Condominium Association, Inc. That meeting had been held at a time when the developer owned all of the units that made up the association. The meeting occurred after distribution of the prospectus, which disclosed the reserve account and showed all units contributing to the payment of common operating expenses, including reserves. That resolution states:
the President of the Association then brought up for consideration the proposal by the developer, Granada Lakes Development Corporation, that it guarantee the maintenance fee during the two-year period commencing January 5, 1983. Upon a motion
duly made and adopted, the Association agreed that in lieu of the developer paying its maintenance assessments on unsold units that the developer could and did agree to guarantee that for the two-year period stated above the maintenance fee charge to unit owners other than the developer would not exceed the [sic] $31.61 per month and that any shortage that might be incurred in the maintenance of the Association during such period shall be covered by the developer.
Such agreement was accepted by all concerned, including the Development Corporation, which is as of the time of this meeting the sole unit owner in the Condominium.
The matter of the reserves was also discussed and the Development Corporation, as sole unit owner, agreed with the association to the waiver of the funding of reserves for the same two year period.
Based on the payment of $1.88 per unit per month the amount of money which should be in the reserve account from the date of recording of the declaration of condominium until the date the respondent was no longer the developer is $11,554. As of July 1985 the reserve account contained $3,227.35, having a deficit of $8,326.65. Since units began to be sold, there have been no withdrawals made from the reserve account.
Mr. Sharp, the president of the developer, testified that he spent approximately the $2,400 for reserve-type expenses but had sought no reimbursement from the reserve account because he wanted the reserve account going. No receipts verifying such expenditures were introduced into evidence. This attempt to offset developer expenses against amounts the developer should have paid into the reserve account of the Association is rejected as unpersuasive.
Association Records
While he served as Association treasurer, Morgan Lloyd asked on several occasions to see the bills for Association expenses. Mr. Sharp would only tell him the amount of the association's bills, and refused to let Mr. Lloyd see the original bills.
CONCLUSIONS OF LAW
The Division of Administrative Hearings has
jurisdiction over this matter. Section 120.57(1), Florida Statutes.
Under Section 718.111(13), Florida Statutes (1983):
Within 60 days following the end of the fiscal or calendar year or annually on such date as is otherwise provided in the bylaws of the association, the board of administration of the association shall mail or furnish by personal delivery to each unit owner a complete financial report of actual receipts and expenditures for the previous 12 months. The report shall show the amounts of receipts by accounts and receipt classifications and shall show the amounts of expenses by accounts and expense classifications
The developer failed to furnish reports for 1983 and 1984 within
60 days of the end of the fiscal year and has twice violated this provision.
Section 718.112(2)(d), Florida Statutes(1983), provides:
There shall be an annual meeting of the unit owners. The bylaws shall provide the method of calling meetings of unit owners, including annual meetings. Written notice shall be given to each unit owner and shall be posted in a conspicuous place on the condominium property at least 14 days prior to the annual meeting. Unless a unit owner waives, in writing, the right to receive notice of the annual meeting by mail, the notice of the annual meeting shall be sent by mail to each unit owner, and the post-office certificate of mailing shall be retained as proof of such mailing.
An Association meeting was held January 5, 1983, when the developer owned all condominium units. The February 23, 1984, annual meeting was the first annual meeting attended by unit owners other than the developer. There has been no violation of Section 718.112(2)(d), Florida Statutes (1983), for years 1982 and 1983.
Section 718.112(2)(e),Florida Statutes (Supp. 1984), provides:
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 14 days prior to the meeting at which the budget will be considered. . . .
Respondent stipulated that copies of the 1985 proposed annual budget were mailed 13 days prior to that meeting, which violates Section 718.112(2)(e), Florida Statutes (1984 Supp.).
The Respondent stipulated that it did not include in the original declaration which submitted Phase I to condominium ownership the time periods within Phases II and III would be completed. This violates Section 718.403(1), Florida Statutes (1981), which states:
A developer may develop a condominium in phases, if the original declaration of condominiums submitting the initial phase to condominium ownership provides for and describes in detail . . . the time period within which each phase must be completed.
The developer is liable for funding reserves for all units that it held, notwithstanding the attempt to waive its duty to make monthly maintenance payments by the resolution of January 5, 1983. Under section 718.116(8)(b), Florida Statutes (1983):
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 the majority of the unit owners other than the developer, that the assessment for common expenses 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. (Emphasis supplied.)
The prospectus indicated all unit owners would contribute to the operating expenses of the association by paying monthly assessments. The evidence from the developer was that a guarantee was made by resolution adopted at the membership meeting of the association held on January 5, 1983. Under the statute the agreement to guarantee expenses may be made by the developer and a majority of unit owners other than the developers, but at the time the resolution was passed the vote of the unit owners was nothing other than the vote of the developer. That resolution itself shows that the development corporation was the sole unit owner. It was therefore ineffective to absolve the developer from the duty of making monthly assessment payments, including contributions to the reserves which are part of the association's monthly operating expenses. Those who had entered into contracts for the purchase of units before the date of the meeting the developer had with itself as the owner of all units had been lead to believe that reserves would have been building up during the period when the property was submitted to condominium ownership by assessment payment by all unit owners, including the developer.
The waiver of reserves is also improper under Section 718.112(2)(k), Florida Statutes (1983), which provides in part:
This subsection [requiring budgeting for reserve accounts for capital expenditures and deferred maintenance] shall not apply to budgets in which the level of assessments has been guaranteed pursuant to Section 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 the 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 provided by this subsection.
The developer cannot be permitted to play fast and loose with the requirement to budget for reserves by including them in the estimated operating budget disseminated in the prospectus, attracting purchasers based on the prospectus, and then waive the reserves at the membership meeting called shortly before the first units are conveyed to purchasers while the developer is still the sole owner of all units. Even if such a misleading strategy could be countenanced, the attempt fails here for
failure to comply with the language of Section 718.116(2)(k) because the developer's agreement with itself to waive reserves was for the two year period, January 5, 1983 to January 4, 1985, but the statute only permits waivers on a fiscal year basis. The waiver attempt is fatally flawed because no motion to waive reserves for any fiscal year was made or adopted. Given the actual collection of reserves from unit owners, it appears the developer's intent was to waive reserve payments on units it owned, but to require other unit owners to make those payments.
There is no statutory authority for such a plan. Consequently, the developer is fully liable for the underfunding of reserves in the amount of $8,326.65.
According to Section 718.111(7), Florida Statutes (1983) association records shall be open to inspection by unit owners or the their authorized representatives at reasonable times. Mr. Sharp's failure to make available to Mr. Lloyd original copies of bills which Mr. Lloyd was to pay as treasurer of the association was a denial of the inspection right provided by the statute.
RECOMMENDATION
A civil penalty for each violation the condominium act, not to exceed $5,000.00 per offense may be imposed under section 718.501(1)(d)4., Florida Statutes (1983). The Division of Florida Land Sales, Condominiums and Mobile Homes may also take affirmative action to carry out the purposes of Chapter 718.
Section 718.501(1)(3)2., Florida Statutes (1983). Based on the foregoing, it is
RECOMMENDED THAT:
For its multiple violations of the condominium act, Granada Lakes Development Corporation shall pay to the Division of Florida Land Sales, Condominiums and Mobile Homes within thirty (30) days of the entry of a final order civil penalty in the total amount of $5,000.00 by certified check payable to the director of the Division.
Within thirty (30) days of the issuance of a final order the developer shall pay to the Granada Lakes Adult RV Resort Condominium Association the sum of $8,276.65 representing its liability for reserves from the recording of the date of a. declaration of condominium through July 1985.
DONE AND ORDERED this 22nd day of May, 1987, in Tallahassee, Florida.
WILLIAM R. DORSEY,JR., Hearing Officer Division of Administrative Hearings The Oakland Building
2009 Apalachee Parkway
Tallahassee, Florida 32399
(904) 488-9675
Filed with the Clerk of the Division of Administrative Hearings this 22nd day of May, 1987.
COPIES FURNISHED:
Robin H. Conner, Esquire Department of Business Regulation 725 South Bronough Street Tallahassee, Florida 32301-1927
Norman A. Hartman, Esquire
GOETZ & HARTMAN
Post office Box 6844
Fort Myers, Florida 33911-6844
Granada Lakes Development Corporation C/O All America RV Sales
U.S. 41 South
Box 806S, Route 13
Fort Myers, Florida 33908
James Kearney, Secretary Department of Business Regulation The Johns Building
725 South Bronough Street Tallahassee, Florida 32399-100
Thomas A. Bell, General Counsel Department of Business Regulation The Johns Building
725 South Bronough Street Tallahassee, Florida 32399-1000
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). Covered in Finding of Fact 2. l(b). Covered in Finding of Fact 13. l(c). Covered in Finding of Fact 4. 2(a). Covered in Finding of Fact 8. 3(a). Covered in Finding of Fact 1.
3(b). Sentence 1, covered in Finding of Fact 3. Sentence 2, covered in Finding of Fact 7.
3(c). Covered in Finding of Fact 6.
3(d). Rejected as a recitation of testimony, not a finding of fact.
3(e). Covered in Finding of Fact 9. 3(f). Covered in Finding of Fact 9. 3(g). Covered in Finding of Fact 10.
3(h). To the extent relevant, covered in Finding of Fact 5. The date on which witnesses moved into the condominium prior to the date they closed the purchases of their unit is irrelevant.
3(i). Rejected as recitations of testimony, not proposed findings of fact, also irrelevant.
3(j). Rejected as inconsistent with the evidence I find more credible, i.e., that an owners meeting was held by the developer on January 5, 1983.
3(k). Sentence 1, covered in Finding of Fact 11. Sentences 2 and 3, rejected as irrelevant.
3(1). Covered in Finding of Fact 18.
3(m). Generally rejected as a recitation of testimony, not a finding of fact. Covered, however, in Finding of Fact 14.
3(n). Covered in Finding of Fact 12. 3(o). Covered in Finding of Fact 15. 3(p). Covered in Finding of Fact 16. 3(q). Covered in Finding of Fact 17.
Rulings on Proposed Finding of Fact Submitted by Respondent
1. No ruling necessary.
2(A). Evidence that meetings of unit owners were held in 1982 and 1983 have been accepted in Findings of Fact 9 and 15.
2(B). Rejected because there is no evidence that for fiscal or calendar year 1982 the reserve requirement had been waived. The only evidence of any meeting of the condominium association in 1982, joint exhibit 5(a) does not show any waiver of reserve requirements for that year. It is inconceivable that the developer, at a meeting where it is the sole owner of all units, may waive reserve requirements when the budget distributed with the prospectus to potential purchasers shows reserves in the estimated operating budget it distributed. See joint exhibit 1. The resolution recorded in the minutes of the meeting of the Condominium Association of January 5, 1983, which purports to waive funding of reserves for two years is ineffective for the reasons discussed in Conclusions of Law 7.
================================================================= AGENCY FINAL 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,
DBR DOCKET NO. 85224MVC
DOAH CASE NO. 85-4267
GRANADA LAKES DEVELOPMENT CORP., d/b/a GRANADA LAKES
ADULT RV RESORT CONDOMINIUM,
Respondent.
/
FINAL ORDER
Pursuant to notice, the Division of Administrative Hearings, by its duly designated Hearing officer, William R. Dorsey, Jr., held a public hearing in the above-styled matter on February 24, 1987 in Fort Myers, Florida. The issues for determination were whether Respondent Granada Lakes Development Corporation, d/b/a Granada Lakes Adult RV Resort Condominium (hereinafter Respondent) had violated certain provisions of, Chapter 718, Florida Statutes, the Condominium Act, by failure to mail or furnish by personal delivery to each unit owner a complete financial report of the actual receipts and expenditures within sixty (60) days following the end of the calendar years 1982, 1983 and 1984; by failure to call and hold annual meetings of unit owners for the years 1982 and 1983; by failure to promulgate and mail to unit owners proposed annual, budgets of common expenses for the year 1983; by failure to mail copies of the 1985 proposed annual budget of common expenses to unit owners no less than fourteen (14) days prior to the meeting at which the budget would be considered; by failure to include in the original declaration of condominium submitting Phase I to condominium ownership the time period within which Phases II and III must be completed; by failure to fully fund or waive or reduce reserve accounts for the years 1982, 1983, 1984 and 1985; and by denial
of access to unit owner Morgan Lloyd of the accounting records of the association on December 24, 1984.
APPEARANCES
For Petitioner: Robin H. Conner, Esquire
Staff Attorney
Department of Business Regulation 725 South Bronough Street Tallahassee, Florida 32399-1007
For Respondent: James L. Goetz, Esquire
Goetz & Hartman
Post Office Box 6844
Fort Myers, Florida 33911-6844
The parties read into the record several stipulated facts which were received by the Hearing Officer. Petitioner, the Department of Business Regulation, Division of Florida Land Sales, Condominiums and Mobile Homes (hereinafter the Division) called four witnesses to testify. Respondent called one witness to testify. Seven joint exhibits were introduced into evidence.
The parties submitted post-hearing proposed Findings of Fact and Conclusions of Law. In a Recommended Order dated May 22, 1987, the Hearing Officer made certain Findings of Fact and Conclusions of Law, and recommended certain sanctions and penalties be imposed.
Having reviewed the Recommended Order fully and being fully apprised in this regard, the Division hereby adopts and incorporates herein the Findings of Fact and Conclusions of Law contained in the above-referenced Recommended Order, a copy of which is attached hereto and incorporated herein by reference as Exhibit 1. The Division would note that pursuant to Paragraph 16 of the Findings of Fact and Paragraph 7 of the Conclusions of Law, the amount of money which should be payable by Respondent to the Granada Lakes Adult RV Resort Condominium Association should be Eight Thousand Three Hundred Twenty-six, Dollars and Sixty- five Cents ($8,326.65), as opposed to Eight Thousand Two Hundred Seventy-six Dollars and Sixty-five Cents, ($8,276.65) as is provided in Paragraph 2 of the Hearing Officer's Recommended Sanctions.
RELIEF ORDER AND REMEDY
Based upon the above-referenced Findings of Fact and Conclusions of Law and in accord with the sanctions recommended by the Hearing Officer for the Division of Administrative Hearings, it is hereby ORDERED:
Respondent shall pay to the Division a civil penalty in the amount of Five Thousand Dollars ($5,000) by certified check
payable to the Director of the Division of Florida Land Sales, Condominiums and Mobile Homes within thirty (30) days of issuance of this Final Order.
Within thirty (30) days of issuance of this Final Order, Respondent shall pay to the Granada Lakes Adult RV Resort Condominium Association the sum of Eight Thousand Three Hundred Twenty-six Dollars and Sixty-five Cents ($8,326.65); representing Respondent's liability for reserves from the recording of the date of the declation of condominium through July, 1985.
This Final Order may be appealed pursuant to Section 120.68, Florida Statutes, by filing a notice of appeal conforming to the requirements of Rule 9.110(d), Florida Rules of Appellate Procedure, with the appropriate District Court of Appeal accompanied by the appropriate filing fees, and with this agency, within thirty (30) days of rendition of this Order.
DONE AND ORDERED this 1st day of July, in Tallahassee, Leon County, Florida.
RICHARD E. COATES, DIRECTOR
Division of Florida Land Sales, Condominiums and Mobile Homes
Department of Business Regulation State of Florida
CERTIFICATE OF SERVICE
I HEREBY CERTIFY that a true and correct copy of the foregoing has been furnished by U. S. Mail to NORMAN A. HARTMAN, ESQUIRE, Goetz & Hartman, Post Office Box 6844, Fort Myers, Florida 33911-6844; and WILLIAM R. DORSEY, JR., Hearing Officer, Division of Administrative Hearings, The Oakland Building, 2009 Apalachee Parkway, Tallahassee, Florida 32301, this 1st day of July, 1987.
SARAH MARTIN, CLERK
COPIES FURNISHED:
Robin H. Conner, Esquire
Alex M. Knight, Bureau Chief, Condominiums
Docket for Case No: 85-004267
Orders for Case No: 85-004267
| Issue Date |
Document |
Summary |
|
Jul. 01, 1987 |
Agency Final Order
|
|
|
May 22, 1987 |
Recommended Order
|
Respondent to pay $5000 civil penalty for failure to provide financial reports, meeting notices and proposed annual budget. Respondent also fined $8276.65 representing his liability for reserves.
|
