STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

DEPARTMENT OF BUSINESS )

REGULATION, DIVISION OF )

LAND SALES, CONDOMINIUMS )

AND MOBILE HOMES, )

)

Petitioner, )

)

vs. ) CASE NO. 87-1971

) SAND DUNES ESTATES, INC., )

d/b/a SAND DUNES )

CONDOMINIUM, )

)

Respondent. )

)

RECOMMENDED ORDER

Pursuant to written notice a formal hearing was held before Larry J. Sartin, a duly designated Hearing Officer of the Division of Administrative Hearings, on December 14, 1987, in Holly Hill, Florida.

APPEARANCES

For Petitioner: Robin H. Connor, Esquire

Staff Attorney

Department of Business Regulation 725 South Bronough Street Tallahassee, Florida 32399-1550

For Respondent: John S. Norton, Jr., Esquire

Becks, Becks & Wickersham Post Office Box 2140

Daytona Beach, Florida 32015 PROCEDURAL STATEMENT

This matter was initiated by the Department of Business Regulation, Division of Florida Land Sales, Condominiums and Mobile Homes (hereinafter referred to as the "Division"), by a Notice to Show Cause. The Notice to Show Cause was served on the Respondent, Sand Dunes Estates, Inc., d/b/a Sand Dunes Condominium, on or about May 19, 1986. The Respondent filed a letter dated June 11, 1986, with the Division requesting an administrative hearing to contest the Notice to Show Cause. The matter was referred to the Division of Administrative Hearings by a Request for Assignment of Hearing Officer and Notice of Preservation of Record dated May 4, 1987.

On August 13, 1987, the Division filed a Motion to Compel Discovery. In the Motion the Division requested, among other things, that the Division's requests for admissions be deemed admitted. On August 21, 1987, the Division's Motion was granted.

On August 26, 1987, the Division filed a Motion Requesting Relinquishment of Jurisdiction and Remand. This Motion was denied by Order dated October 5, 1987.

On August 31, 1987, the Respondent filed a Motion/Petition for Rehearing/Reconsideration requesting reconsideration and rehearing on the Order Granting Motion to Compel Discovery of August 21, 1987. The Division filed a Response to Motion/Petition for Rehearing/Reconsideration. The Respondent's Motion was denied by Order dated October 5, 1987.

At the formal hearing the parties did not offer any testimony or other evidence. The Respondent made a brief statement essentially clarifying one of the matters deemed admitted and informing the undersigned of events which allegedly occurred after the events which gave rise to this proceeding. No evidence was offered, however, to support the statements of the Respondent. The Division indicated that it would rely upon the matters which the Respondent has been deemed to have admitted.

Subsequent to the formal hearing, the Division filed a proposed recommended order containing proposed findings of fact. Those proposed findings of fact are identical to the admissions of the Respondent. The facts in this case are based entirely on the Respondent's admissions. Therefore, all of the Division's proposed findings of fact have been accepted. The Respondent has not filed any proposed findings of fact.

ISSUE

Whether the Respondent is guilty of the violations of Chapter 718, Florida Statutes, as contended in the Notice to Show Cause served on the Respondent on May 19, 1986?

FINDINGS OF FACT

The facts in this case are based upon the matters deemed admitted pursuant to Rule 1.370(a), Florida Rules of Civil Procedure:

1. Respondent was the developer, as that term is defined by Section 718.103(14), Florida Statutes (1985), of Sand Dunes Condominium.

   
   

2. Sand Dunes Condominium is a condominium located in Volusia County, Florida.

   
   

3. Sand Dunes Condominium consists of 18 units.

   
   

4. The Declaration of Condominium for Phase I of Sand Dunes Condominium was recorded in the public records of Volusia County on or about September 23, 1983.

   
   

5. Phase II of Sand Dunes Condominium was submitted to condominium ownership on or about April 29, 1985.

   
   

6. Respondent, while in control of the condominium association, failed to mail or furnish by personal delivery to each unit owner within sixty (60) days following the end of the calendar year a complete financial report of actual receipts and expenditures for the year ending December 31, 1983.

7. Respondent, while in control of the association, failed to mail or furnish by personal delivery to each unit owner within sixty (60) days following the end of the calendar year a complete financial report of actual receipts and expenditures for the year ending December 31, 1984.

   
   

8. Fifteen percent of the units in the condominium which would ultimately be operated by the association had been conveyed by October 24, 1983.

   
   

9. Respondent, while in control of the condominium association, failed to call and hold a meeting to allow unit owners other than the developer to elect no less than one-third of the members of the board of administration of Sand Dunes Condominium within sixty (60) days after October 24, 1983.

   
   

10. Respondent failed to call and hold an annual meeting of unit owners at Sand Dunes Condominium for 1984.

    
    

11. Respondent failed to promulgate an annual budget for the year 1984.

    
    

12. Respondent failed to promulgate an annual budget for the year 1985.

    
    

13. Respondent failed to mail meeting notices and copies of the proposed annual budget of common expenses to unit owners for the year 1984.

    
    

14. Respondent failed to mail meeting notices and copies of the proposed annual budget of common expenses to unit owners for the year 1985.

    
    

15. Respondent failed to hold a budget meeting for the year 1984.

    
    

16. Respondent failed to hold a budget meeting for the year 1985.

    
    

17. Respondent failed to fully fund reserves for the condominium from September 23, 1983 through at least December 31, 1985.

    
    

18. The amount of reserves which was not funded between September 23, 1983 and December 31, 1985 is at least $2,481.00.

    
    

19. Respondent used reserve funds collected from unit owners other than the developer for general operating expenses without the approval of a majority of the unit owners at a duly called meeting of the association.

    
    

20. Respondent, while in control of the condominium association, held a board of directors meeting with directors Hambley and McKay present on January 25, 1985.

    
    

21. Respondent did not post notice of the January 25, 1985 board meeting

    48 hours in advance of the meeting.

    
    

    CONCLUSIONS OF LAW

    
    

22. The Division of Administrative Hearings has jurisdiction of the parties to, and the subject matter of, this proceeding. Section 120.57(1), Florida Statutes (1987).

    
    

23. The Division has alleged that the Respondent has violated several provisions of Chapter 718, Florida Statutes. First, the Division has charged the Respondent with two violations of Section 718.111(13), Florida Statutes (1985), which provides, in pertinent part:

    (13) FINANCIAL REPORTS.-- 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 Respondent has failed to provide financial reports of actual receipts and expenditures to unit owners as required by this Section for 1983 or 1984.

    
    

24. Secondly, the Division has charged the Respondent with violating Section 718.3017 Florida Statutes (1983), which provided, in pertinent part:

    
    

    1. When unit owners other than the developer own 15 percent or more of the units in a condominium that will be operated ultimately by an association, the unit owners other than the developer shall be entitled to elect no less than one-third of the members of the board of administration of the association. . . .

       
       

    2. Within 60 days after the unit owners other than the developer are entitled to elect a member or members of the board of administration of an association, the association shall call, and give not less than 30 days' or more than 40 days' notice of, a meeting of the unit owners to elect the members of the board administration. The meeting may be called and the notice given by any unit owner if the association fails to do so. Upon election of the first unit owner other than thedeveloper to the board of administration, the developer shall forward to the division the name and mailing address of the unit owner board member.

       . . . .

       
       

       The Respondent had conveyed 15 units of the condominium by October 24, 1983. The Respondent was, therefore, required by Section 718.301 to call and hold a meeting to a allow unit owners other than the Respondent to elect no less than one-third of the members of the board of administration within sixty (60) days

       after October 24, 1983. The Respondent failed to do so in violation of Sections 718.301(1) and (2), Florida Statutes (1983)

       
       

25. Thirdly, the Division has charged the Respondent with violating Section 718.112(2)(d), Florida Statutes (1983), which provided, in pertinent part:

    (d) There shall be an annual meeting of the unit owners. . . . The bylaws

    shall provide the method of calling meetings of units 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. . . .

    
    

    The Respondent failed to hold an annual meeting of the unit owners for 1984 in violation of Section 718.112(2)(d), Florida Statutes (1983).

    
    

26. Fourthly, the Respondent has been charged with violating Section 718.112(2)(f), Florida Statutes (1983), renumbered as Section 718.112(2)(e), Florida Statutes (1985), which provided, in pertinent part:

    
    

    (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. If the bylaws or declaration provides that the budget may be adopted by the board of administration, then the unit owners shall be given written notice of the time and place of the meeting of the board of administration which will consider the budget. The meeting shall be open to unit owners. . . . At the special meeting, unit owners shall consider and enact a budget. Unless the bylaws require a larger vote, the adoption of the budget shall require a vote of not less than a majority vote of all unit owners. The board of administration may propose a budget to the unit owners at a meeting of members or in writing, and if the budget or proposed budget is approved by the unit owners at the meeting or by a majority of all unit owners in writing, the budget shall be adopted. . . .

    
    

    For 1984 and 1985 the Respondent failed to promulgate an annual budget, mail notice and a copy of a proposed annual budget to unit owners and to hold a meeting for the approval of the annual budget in violation of Section 718.112(2)(f), Florida Statutes (1983).

    
    

27. Fifthly, the Respondent has been charged with violating Section 718.112(2)(k), Florida Statutes (1983), renumbered as Section 718.112(2)(f), Florida Statutes (1985), and Rule 7D- 23.04(2)(d), Florida Administrative Code.

    
    

28. Section 718.112(2)(k), Florida Statutes (1983), provided, in pertinent part:

    (k) 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. The amount to be reserved shall be computed by means of a formula which is based upon estimated life and estimated replacement cost of each reserve item.

    . . .

    
    

29. Rule 7D-23.04(2)(d), Florida Administrative Code, provides, in pertinent part:

    
    

    (d) Reserves required by Section 718.112(2)(f), Florida Statutes, are common expenses and must be fully funded unless properly waived or reduced.

    Funds reserved pursuant to Section 718.112(2)(f), Florida Statutes, shall only be used for the purposes for which they are reserved unless their use for other purposes is approved in advance by a vote of the majority of the voting interests of the association present a duly called meeting of the association.

    . . .

    
    

30. The Respondent has failed to fully fund reserves from September 23, 1983 through at least December 31, 1985 in an amount equal to at least

    $2,481.00, in violation of Section 718.112(2)(k), Florida Statutes (1983), and Rule 7D-23.04(2)(d) Florida Administrative Code. The Respondent also used reserve funds for general operating expenses without proper approval in violation of Rule 7D-18.05(6)(e), Florida Administrative Code, renumbered effective August 31, 1983, as Rule 7D-23.04(2)(d), Florida Administrative Code.

    
    

31. Lastly, the Respondent has been charged with violating Section 718.112(2)(c), Florida Statutes (1985) and Rule 7D- 23.01(1), Florida Administrative Code. Section 718.112(2)(c), Florida Statutes (1985), requires that board of administrative meetings be open to all unit owners and that at least 48 hours notice of all meetings, except in an emergency, be posted conspicuously on the condominium property. Rule 7D-23.01(1), Florida Administrative Code, defines a "meeting of the board of administration" as:

    
    

    any gathering of a quorum of the members of the board of directors or other representative body responsible for administration of the association, for

    the purpose of conducting condominium business.

    
    

    On January 25, 1985, the Respondent held a meeting of the board of directors within the meaning of Rule 7D-23.01(1), Florida Administrative Code, with directors Hambley and McKay. In holding this meeting, the Respondent failed to comply with the requirements of Section 718.112(2)(c), Florida Statutes (1985).

    
    

32. Section 718.501(1), Florida Statutes (1985), provides, in pertinent part:

    
    

    1. The Division of Florida Land Sales, Condominiums, and Mobile Homes of the Department of Business Regulation . . . 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 has 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.

. . . .

RECOMMENDATION

Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Respondent be found guilty of the violations alleged

in the Division's Notice to Show Cause.

It is further

RECOMMENDED that the Respondent, within thirty (30) days of the final order in this case, procure the services of an independent certified public accountant to conduct a review of the financial records of the Sand Dunes Condominium Association, Inc. (hereinafter referred to as the "Association"), for the period of time during which the Respondent controlled the Association. The accounting must comply with the provisions of Section 718.301(4)(c), Florida Statutes (1985), and Rule 7D- 23.003(4) and (5), Florida Administrative Code.

No later than sixty (60) days from the date of the final order in this case, the Respondent shall furnish the completed review to the Association and a copy to the Division. The review shall note that pursuant to final order, the Respondent failed to fund reserves in an amount not less than $2,481.00 for the period of time from September 23, 1983 through December 31, 1985.

Upon receipt by the Division of the turnover review, the Division shall examine the turnover review and notify the Respondent of its findings within thirty (30) days.

It is further

RECOMMENDED that the Respondent, not later than thirty (30) after the Division provides notice of its examination of the turnover review, shall pay permanently and irretrievably to the Association any amounts which the turnover review indicates are owed by the Respondent to the Association. The Respondent shall provide proof to the Division of any payment prescribed in this paragraph to the Association no later than fifteen (15) days after payment is made.

It is further

RECOMMENDED that the Respondent pay to the Division, within thirty (30) days of the date of the final order issued in this case, a civil penalty in the amount of six thousand dollars ($6,000.00)

DONE and ORDERED this 2nd day of February, 1988, in Tallahassee, Florida.

LARRY J. SARTIN

Hearing Officer

Division of Administrative Hearings The Oakland Building

2009 Apalachee Parkway

Tallahassee, Florida 32399-1550

(904) 488-9675

Filed with the Clerk of the Division of Administrative Hearings this 2nd day of February, 1988.

COPIES FURNISHED:

Robin H. Connor, Esquire Department of Business

Regulation

725 South Bronough Street Tallahassee, Florida 32399-1050

John Norton, Esquire Becks, Becks & Wickersham Post Office Box 2140

Daytona Beach, Florida 32015

Daniel Bosanko, Director Department of Business Regulation Division of Florida Land Sales

Condominiums, and Mobile Homes The Johns Building

725 South Bronough Street Tallahassee, Florida 32399-1000

Van B. Poole, Secretary Department of Business Regulation The Johns Building

725 South Bronough Street Tallahassee, Florida 32399-1000

Docket for Case No: 87-001971

Orders for Case No: 87-001971