Judges: DIANE D. TREMOR
Agency: Department of Business and Professional Regulation
Latest Update: Dec. 02, 1988
Summary: Respondent ordered to pay civil penalties for its failure to fund the deficit during the guarantee period and pay assessments on developer owned units.
88-0547.PDFSTATE OF FLORIDA
DIVISION OF ADMINISTRATIVE HEARINGS
DEPARTMENT OF BUSINESS REGULATION, ) DIVISION OF FLORIDA LAND SALES, ) CONDOMINIUMS AND MOBILE HOMES, )
)
Petitioner, )
)
vs. ) CASE NO. 88-0547
) SHELDON WEST, INC., d/b/a SHELDON ) WEST MOBILE HOME COMMUNITY, A ) CONDOMINIUM, )
)
Respondent. )
)
RECOMMENDED ORDER
Pursuant to notice, an administrative hearing was held before Diane D. Tremor, Hearing Officer with the Division of Administrative Hearings, on October 4, 1988, in Tampa, Florida. The issue for determination in this proceeding is whether a cease and desist order, civil penalties or other action should be taken against respondent for the reasons set forth in the Notice to Show Cause dated January 4, 1988, as amended on May 24, 1988.
APPEARANCES
For Petitioner: David L. Swanson, Esquire
Sandra E. Feinzig, Esquire Assts. General Counsel
Department of Business Regulation 725 S. Bronough Street Tallahassee, Florida 32399-1007
For Respondent: Scott Charlton, Esquire
Peavyhouse, Grant, Clark Charlton, Opp & Martino 1715 N. Westshore
Post Office Box 24268 Tampa, Florida 33623
INTRODUCTION
By an Amended Notice to Show Cause dated May 24, 1988, respondent Sheldon West, Inc., d/b/a Shelson West Mobile Home Community, a Condominium, is charged with various violations of Sections 718.115 and 718.116, Florida Statutes, and Rule 70D- 23.003(3), Florida Administrative Code. More specifically, it is alleged that respondent failed to pay its share of assessments for common expenses on developer-owned units from September 27, 1983 through June 30, 1986; that it failed to pay the amount of common expenses incurred during the guarantee period (September 27, 1978, through September 26, 1983) which exceeded the amount assessed against unit owners other than the developer; and that it
utilized association common expense funds for purposes not designated as common expenses. An additional charge, contained in Paragraph 4 of the Amended Notice to Show Cause, was deleted by counsel for the petitioner at the commencement of the hearing.
In support of the charges, the petitioner presented the testimony of Kevin Pawlowski, Judy James, Ross Fleetwood, Tom Brown and Nick Miccicet.
Petitioner's Exhibits 1 through 9 and 11, which included the deposition of Ashley Lanier, were received into evidence.
Respondent presented the testimony of Kevin Pawlowski and Tom Brown, and its Exhibits 1 through 4 were received into evidence.
Subsequent to the hearing, both parties submitted proposed findings of fact and proposed conclusions of law. To the extent that the parties' proposed findings of fact are not included or summarized in this Recommended Order, they are rejected for the reasons set forth in the Appendix hereto.
FINDINGS OF FACT
Upon consideration of the oral and documentary evidence adduced at the hearing, as well as the parties' factual stipulations, the following relevant facts are found:
Respondent Sheldon West, Inc. was the developer of Sheldon West Mobile Home Community, a "condominium," as those terms are used and defined in Chapter 718, Florida Statutes. The Declaration of Condominium was recorded in the official records of Hillsborough County on September 27, 1978. The respondent transferred control of the Sheldon West Condominium Owner's Association, Inc. to the unit owners on June 30, 1986.
In the Declaration of Condominium, respondent provided a guarantee of common expenses pursuant to Section 718.116(8)(a)2, Florida Statutes. Under the guarantee, respondent was excused from the payment of common expense assessments on developer-owned units for a period of five years. During that period, respondent guaranteed to unit owners that assessments would not exceed a certain stated level, and respondent obligated itself to pay any amount of common expenses incurred during the period and not produced by the assessments at the guaranteed level receivable from other unit owners. Common expenses during the guarantee period amounted to $57,895.00. Assessments collected from unit owners during the guarantee period amounted to $49,190.00. Thus, respondent's liability for common expenses during the guarantee period was $8,705.00.
Respondent's guarantee of common expenses ended September 26, 1983. From September 27, 1983, through June 30, 1986, the date of the turnover, respondent paid no assessments on the lots it still owned. The Declaration of Condominium provides that assessments not paid within five days of the due date shall bear interest at the rate of ten percent per annum from the due date until paid. Respondent's liability for assessments from September 27, 1983, through June 30, 1986, amounted to $40,870.00, and the interest on the overdue assessments amounted to $7,032.35.
The Homeowners Association over-reimbursed respondent for expenses incurred during the guarantee period in the amount of $12,968.00. In addition, respondent received two payments from Association funds in June, 1986 of
$7,000.00 and $8, 000.00.
In January of 1986, the respondent and the Department of Business Regulation entered into a Final Consent Order, which called for a $500.00 civil penalty. The respondent paid the civil penalty, and, in March of 1986, he was reimbursed from the Association funds for payment of said penalty.
The payables due from the respondent to the Homeowners Association, amounting to almost $70,000.00, were not paid to the Association at turnover. Instead, they were applied and offset against what were represented to be advances and receivables payable to the respondent from the Association in the amount of $77,142.00. This amount represents the cost of construction by the respondent of a pool and a clubhouse on the common property, interest charged on the advance of funds from respondent to the Association, and management fees due on uncollected assessments.
Construction on the pool and clubhouse began in November of 1980 and ended in February of 1981. Neither the Prospectus nor the Declaration of Condominium mention the construction of a pool or clubhouse. No vote on construction of the pool and clubhouse was ever taken of unit owners other than the Board of Directors. No approval in writing was ever given by unit owners. The Declaration of Condominium was never amended to reflect the addition of a pool or clubhouse.
The minutes of a special meeting of the Directors of the Association held on October 21, 1980, reflect that one of the three Directors gave a report that "residents wanted a Pool and Rec. Building" located on the common property and "were willing to pay for the same from the assessments on the residents." The minutes further reflect that a motion was made and adopted that the developer construct the pool and building and that, in return, the Association agreed to repay the developer the cost of same, estimated at $60,000.00, on or before turnover to the resident unit owners. The minutes further state "copy sent to Residents and Directors." These minutes are unsigned, but typewritten are the names of Tom F. Brown, the President of Sheldon West, Inc.; Anna K. Laughridge, Mr. Brown's daughter; and Ken Lord, who apparently was a unit owner.
As reflected in a document received into evidence as petitioner's Exhibit 11, the members of the Board of Directors of the Association on January 2, 1981, consisted of Ora Katherine Brown, apparently Tom Brown's wife; and Anna
K. Laughridge. The minutes of a "special joint meeting of Board of Directors" of the Association held on January 2, 1981, reflect that the resignation of Ora Katherine Brown as an officer and director was accepted, and that Tom Fairfield Brown and Anna K. Laughridge were named as Directors.
The minutes of a "special meeting of directors" of Sheldon West, Inc., held at 10:00 A.M. on February 24, 1981, reflect the adoption of a motion that Sheldon West, Inc. would advance the funds for payment of the cost of construction of the pool and recreation building with the understanding that it would be repaid for the funds so advanced, and that it would receive credit therefore by the Association for any sums which might be due, owing or claimed by the Association. The minutes make reference to a promissory note evidencing the agreement. The promissory note, respondent's Exhibit 4, states that at a special meeting of the Association held on February 24, 1981, the Association agreed to repay and credit Sheldon West, Inc. for all sums advanced for the construction of the pool and recreation building. This promissory note is dated February 24, 1981, and is signed by Tom F. Brown as the President of the Association.
The minutes of the "special meeting of directors" of the Association held on February 24, 1981, at 4:00 P.M. reflect that Directors Tom F. Brown, Anna K. Laughridge and Ken Lord were present. The minutes further make reference to an agreement that the costs of the pool and recreation building were to be advanced by Sheldon West, Inc. with the understanding that it would receive credit for such funds and be reimbursed for any balance on the date of turnover to the unit owners. These minutes state "copy posted outside clubhouse and del. to residents."
CONCLUSIONS OF LAW
The Amended Notice to Show Cause alleges violations of Section 718.116(1)(a), (8)(a) and (8)(a)(2) and Section 718.115(1), Florida Statutes, and Rule 7D-23.003(3), Florida Administrative Code. For such alleged violations, the petitioner seeks to impose civil penalties and require the respondent to reimburse the condominium Association $75,870.00, which amount represents the overdue assessments due from the respondent after the guarantee period, plus interest; the $12,968.00 amount over- reimbursed to the respondent during the guarantee period, and the $15,000.00 inappropriately paid to the respondent in June of 1986.
In order to enforce and ensure compliance with the provisions of Chapter 718, Florida Statutes, the Division of Florida Land Sales, Condominiums, and Mobile Homes has the authority to investigate potential violations and to institute enforcement proceedings in its own name against any developer or association. Section 718.501, Florida Statutes. When instituting enforcement proceedings in its own name against any developer or association, the Division may issue an order requiring the developer or association to cease and desist from an unlawful practice "and take such affirmative action as in the judgment of the division will carry out the purposes of" Chapter 718. Section 718.501(1)(d)2. The Division may also impose a civil penalty not exceeding
$5,000.00 for any violation of Chapter 718 or rules promulgated pursuant thereto. Section 718.501(1)(d)4. In addition, the Division "may bring an action in circuit court on behalf of a class of unit owners, lessees, or purchasers for declaratory relief, injunctive relief, or restitution." Section 718.501(1)(d)3, Florida Statutes. Thus, while the Division may enter cease and desist orders, take certain affirmative actions, impose civil penalties, and bring actions in circuit court for restitution; it may not, on its own, order restitution. Only a circuit court has jurisdiction to render such an order.
See Peck Plaza Condominium v. Division of Florida Land Sales and Condominiums, 371 So.2d 152 (Fla. 1st DCA, 1979).
Florida Statutes, Section 718.116(1)(a) and (8)(a) provide that condominium unit owners are liable for all assessments which become due and that no unit owner may be excused from payment of his share of the common expenses unless all unit owners are likewise proportionately excused from payment. The evidence clearly demonstrates that respondent was obligated to pay assessments on developer-owned units as they became due between September 28, 1983, and June 30, 1986. As of June 30, 1986, past due assessments on the developer-owned units totaled $40,870.00. Each month that respondent collected assessments from resident unit owners and yet failed to pay assessments on developer-owned units, a violation of Section 718.116(1)(a) and (8)(a) occurred.
As permitted by Section 718.116(8)(a)2, Florida Statutes, the respondent excused itself from the payment of expenses between 1978 and 1983 and obligated itself to pay any amount of common expenses incurred during this period which exceeded the amount produced by the assessments from other unit
owners. The evidence demonstrates that the common expenses during the guarantee period exceeded the assessments collected from unit owners by $8,705.00.
Respondent's failure to fund that deficit constitutes a violation of Section 718.116(8)(a)2.
Respondent acknowledges that it owed the Association for the guarantee period deficit and for unpaid assessments after the guarantee period ended until transfer of control of the Association. However, respondent contends that it is entitled to offset these funds, as it attempted to do at the time of turnover, against funds due it for the construction of the pool and the clubhouse or recreation building. It is alleged that the agreement between the respondent and the homeowners Association was a valid contract for the addition of assets to the Association over and above what was called for in the Declaration of Condominium, and that the costs of construction of the pool and clubhouse constituted a valid charge by the developer against the Association.
As noted in the Findings of Fact, neither the Prospectus nor the Declaration of Condominium mention the construction of a pool or clubhouse. There is some question as to whether the developer-controlled Association, without the approval of the individual unit owners, had the authority to agree to finance the construction of the pool and clubhouse. However, whether or not the cost of those improvements was a legitimate expense of the Association is not dispositive of whether the respondent may offset his liability to the Association against the costs of the pool and clubhouse.
The Bylaws of the Association provide that capital expenditures for additional improvements that will be part of the common elements shall be common expenses. Also see Section 718.115(1), Florida Statutes. The construction expense for the pool and clubhouse was incurred and the promissory note was executed during the period (1980 and 1981) that the developer had guaranteed to pay any amount of common expenses not produced by the assessments from other unit owners. Thus, even if the construction cost was a legitimate association expense, it was a common expense incurred during the guarantee period, for which the developer/respondent was liable.
The remaining charge against the respondent is that it unlawfully utilized Association funds for the payment of a civil penalty in conjunction with a previous disciplinary action against the respondent. There is no dispute that the respondent did reimburse itself from Association funds for a prior
$500.00 civil penalty. Section 718.301(5), Florida Statutes, provides that the developer is responsible for any violation by the Association of the Condominium Act or rule promulgated thereunder committed during the period prior to the time that the developer relinquishes control of the Association. Thus pursuant to that section, the respondent, and not the association, was responsible for the prior violation and for the payment of any civil penalty to the Division as a result of it. Payment of that penalty was not a legitimate common expense of the Association under Section 718.115(1), Florida Statutes, and the utilization of association funds for that purpose was prohibited by Rule 7D-23.003(3), Florida Administrative Code. That rule provides that "association funds shall be used only for association purposes and may not be expended for the purposes of the developer . . ."
RECOMMENDATION
Based upon the Findings of Fact and Conclusions of Law recited herein, it is RECOMMENDED that:
Respondent be found guilty of violating Section 718.116(8)(a)2, Florida Statutes, for its failure to fund the deficit during the guarantee period; and that a civil penalty in the amount of $5,000.00 be imposed for this violation;
Respondent be found guilty of violating Section 718.116(1)(a) and (8)(a), Florida Statutes, for its failure to pay assessments on developer-owned units after expiration of the guarantee period; and that a civil penalty in the amount of $5,000.00 be imposed for this violation; and
Respondent be found guilty of violating Rule 7D- 23.003(3), Florida Administrative Code, for utilizing Association funds for the payment of a civil penalty; and that a civil penalty in the amount of $1,000.00 be imposed for this violation.
Respectfully submitted and entered this 2nd day of December, 1988, in Tallahassee, Florida.
DIANE D. TREMOR
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 2nd day of December, 1988.
APPENDIX
The proposed findings of fact submitted by the parties have been carefully considered and are accepted, incorporated and/or summarized in this Recommended Order, with the following exceptions:
Petitioner
24 and 25. Accepted as factually correct, but not included as irrelevant and immaterial to the issues in dispute.
Respondent
4 and 5. Partially rejected and discussed in the
Conclusions of Law.
7 and 9. Rejected as irrelevant to the issues in dispute.
10. Amount stated rejected as contrary to the greater weight of the evidence.
COPIES FURNISHED:
Scott Charlton, Esquire Peavyhouse, Grant, Clark Charlton, Opp & Martino 1715 N. Westshore
Post Office Box 24268 Tampa, Florida 33623
David L. Swanson, Esquire Sandra E. Feinzig, Esquire Assts. General Counsel Department of Business
Regulation
725 S. Bronough Street Tallahassee, Florida 32399-1007
James Kearney, Director Department of Business Regulation Division of Florida Land Sales,
Condominiums and Mobile Homes 725 South Bronough Street Tallahassee, Florida 32399-1007
=================================================================
AGENCY FINAL ORDER
=================================================================
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, )
)
vs. ) DBR DOCKET NO. CC88003
) DOAH CASE NO. 88-0547 SHELDON WEST, INC., d/b/a SHELDON )
WEST MOBILE HOME COMMUNITY, A ) CONDOMINIUMS, )
)
Respondent. )
)
FINAL ORDER
This Order is entered by the Director of the Division of Florida Land Sales, Condominiums and Mobile Homes, Department of Business Regulation, State of Florida, pursuant to section 120.59, Florida Statutes, following a review of the record. The Hearing Officer assigned by the Division of Administrative
Hearings in this cause submitted a Recommended Order to the Division of Florida Land Sales, Condominiums and Mobile Homes (the Division). A copy of that Recommended Order is attached hereto. Respondent Sheldon West, Inc. filed exceptions to the Recommended Order, a copy of which is attached hereto.
Following review of the Recommended Order, the Division remanded the cause to the Hearing Officer for additional findings of fact. The Hearing Officer submitted a Response to Order of Remand and Additional Findings of Fact, a copy of which also is attached hereto.
RULING ON RESPONDENT'S EXCEPTIONS
EXCEPTION NO. 1: Respondent first takes exception to findings of fact in paragraphs 7 - 11 "insofar as they find that the pool and clubhouse [at the Sheldon West Mobile Home Community] were not constructed in accordance with a written contract entered into by and between the developer on one hand and the homeowners association on the other hand." The challenged findings are supported by competent, substantial evidence. The exception is denied.
EXCEPTION NO. 2: Respondent second takes exception to the findings of fact in paragraphs 7 - 11 and the conclusion of law that "the cost of constructing the pool and clubhouse constituted a `common expense'. . ." Paragraphs 7 - 11 do not contain the findings of fact that Respondent suggests. The exception to the findings of fact is denied. The exception to the conclusion of law is denied.
FINDINGS OF FACT
The Division hereby adopts and incorporates by reference the findings of fact set forth in the Recommended Order and the Response to Order of Remand and Additional Findings of Fact.
CONCLUSIONS OF LAW
The Division hereby adopts and incorporates by reference the Conclusions of Law set forth in the Recommended Order except where inconsistent with legal conclusions expressed in this Final Order.
The Division rejects the Hearing Officer's conclusion of law that the Division may not, on its own, order restitution. Section 718.501(1)(d)(2), Florida Statutes grants the Division authority to "take such affirmative action as in the judgment of the Division will carry out the purposes of this chapter." This broad grant of authority includes by implication those specific powers necessary to accomplish the stated general purpose. If Respondent, contrary to law, failed to fund a common expense deficit during a guarantee period and failed to pay assessments on developer-owned units after expiration of the guarantee period, it should be ordered to rectify its error and honor its statutory obligation by paying to the association any amounts of guarantee- period expenses and assessments that were inappropriately applied against the cost of construction of a pool and clubhouse and interest on the advance of construction funds.
Payables due the association at turnover included $40,870.00 in past due assessments plus interest on those assessments of $7,032.035; the $12,968.00 amount over-reimbursed to Respondent during the guarantee period; and the
$15,000.00 inappropriately paid to Respondent in June 1986. Respondent inappropriately applied $71,849.00 in construction costs against these payables ($17,710.00 pool construction cost, $47,409.00 clubhouse construction costs,
$6,730.00 interest on advanced construction funds). Respondent's liability for restitution to the association, therefore, is $71,949.00.
Based on the foregoing, IT IS ORDERED THAT:
Within twenty days of the date of this Final Order, Respondent shall pay to the Sheldon West Condominium Owners Association, Inc. restitution in the amount of $71,849.00.
Within thirty days of the date of this Final Order, Respondent shall remit to the Division payment of a civil penalty in the amount of $5,000.00 for its failure to fund the deficit during the guarantee period; payment of an additional civil penalty of $5,000.00 for its failure to pay assessments on developer-owned units after expiration of the guarantee period; and payment of an additional civil penalty in the amount of $1,000.00 for utilizing association funds for the payment of a previous civil penalty.
DONE AND ORDERED this 5th day of May, 1989.
M. James Kearney, Director Division of Land Sales, Condominiums and Mobile Homes Department of Business Regulation
125 South Bronough Street Tallahassee, Florida 32399-1070
RIGHT OF APPEAL
THIS FINAL ORDER "MAY BE APPEALED PURSUANT TO SECTION 120.68, FLORIDA STATUTES AND RULE 9.110, FLORIDA RULES OF APPELLATE PROCEDURE, BY FILING A NOTICE OF APPEAL CONFORMING TO THE REQUIREMENTS OF RULE 9.110(d), FLORIDA RULES OF APPELLATE PROCEDURE BOTH WITH THE APPROPRIATE DISTRICT COURT OF APPEAL, ACCOMPANIED BY THE APPROPRIATE FILING FEE, AND WITH THIS AGENCY, WITHIN THIRTY DAYS OF RENDITION OF THIS ORDER.
CERTIFICATE OF SERVICE
I HEREBY CERTIFY that a true and correct Copy of the foregoing has been furnished by Certified U.S. Mail to Scott Charlton, P.O. Box 24268, Tampa, Florida 33623 this 5th day of May, 1989.
Connie Blackman, Docket Clerk
cc: David L. Swanson Assistant General Counsel
Alex Knight, Chief Bureau of Condominiums
Docket for Case No: 88-000547
Orders for Case No: 88-000547
| Issue Date |
Document |
Summary |
|
May 05, 1989 |
Agency Final Order
|
|
|
Dec. 02, 1988 |
Recommended Order
|
Respondent ordered to pay civil penalties for its failure to fund the deficit during the guarantee period and pay assessments on developer owned units.
|
