z STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

DIVISION OF FLORIDA LAND SALES ) AND CONDOMINIUMS, )

)

Petitioner, )

)

vs. ) CASE NO. 79-440

)

EDEN ISLES CONDOMINIUM )

ASSOCIATION, INC., )

)

Respondent. )

)

RECOMMENDED ORDER

Pursuant to notice, the Division of Administrative Hearings, by its duly designated Hearing Officer, K. N. Ayers, held a public hearing in the above styled case on 6 June, 1979, at Miami, Florida.

APPEARANCES

For Petitioner: Mary Jo M. Gallay, Esquire

Staff Attorney

Department of Business Regulation 725 South Bronough Street Tallahassee, Florida 32301

For Respondent: Martin L. Carlin, Esquire

Suite 402, 3000 Executive Building

3000 Biscayne Boulevard

Miami, Florida 33137

By Notice to Show Cause dated 23 June, 1978, the Division of Land Sales and Condominiums, Petitioner, seeks a Cease and Desist Order precluding Eden Isles Condominium Association, Inc., Respondent, (or Association) from keeping a consolidated budget for the seven condominiums collectively known as Eden Isles Condominiums. As grounds therefor it is alleged that each of the seven condominium buildings is, pursuant to the Declaration of Condominium, a separate condominium and, that pooling the expenses of all seven condominiums and thereafter dividing them equally to the seven condominiums has the effect of requiring owners to pay common expenses not associated with his condominium in violation of Section 718.115(2), Florida Statutes.

At the hearing the parties stipulated to the following facts and 5 exhibits were admitted into evidence.

FINDINGS OF FACT

1. Eden Isles Condominiums are residential condominiums consisting of 7 identical buildings with 52 units in each building.

2. Each building has a separate Declaration of Condominium which declaration is identical with the other 6 Declarations of Condominiums except as to the identification of the condominium.

   
   

3. There are 4 swimming pools, parking areas, etc., the expenses for which are shared by the 7 condominiums.

   
   

4. The Declarations of Condominiums provide for the percentage of the common ownership and expense associated with each unit in the condominium.

   
   

5. The Declarations provide that the affairs of each condominium will be managed by the Eden Isles Condominium Association, Inc., Respondent. Duties of the Association include the preparation of budgets, collection of assessments for expense of maintaining common elements from each unit owner, maintenance of all common elements and generally conducting all of the business dealings associated with the common elements.

   
   

6. From the inception of the Association in 1972 a common budget has been prepared for the 7 condominiums which is assessed against unit owners by taking total expenses for the common elements of the 7 buildings, dividing this by 7 and then allocating to each of the 52 unit owners in each building his pro rata share of those expenses. This has the effect of requiring the unit owners housed in Building D to share the cost for the replacement of an elevator in Building P or the replacement of a roof on Building C.

   
   

7. The net result of the consolidated budget is to treat the 7 condominiums as one for the purpose of maintaining the common elements. When built and the Declarations of Condominiums recorded, Eden Isles was not a phased development.

   
   

   CONCLUSIONS OF LAW

   
   

8. The Division of Administrative Hearings has jurisdiction over the parties and subject matter of these proceedings.

   
   

9. Section 718.501, Florida Statutes, generally authorizes the Petitioner herein to enforce the provisions of the Condominium Act, Chapter 718, Florida Statutes. This section authorizes the division to issue cease and desist orders if reasonable cause exists to believe that a violation of the Condominium Act has occurred.

   
   

10. The position of the Petitioner is that Respondent is in violation of two provisions of the Condominium Act, viz. that requiring separate budgets and accounting for each condominium and that common expenses charged to unit owners can be only for the condominium of which they are a unit. Section 718.111(7), Florida Statutes, provides in part:

    
    

    The Association shall maintain accounting records for each condominium it manages in the county where the condominium is located . . . . The records shall include, but are not limited to:

    1. A record of all receipts and expenditures.

    2. An account for each unit . . . .

11. Section 718.115(2), Florida Statutes, provides:

    
    

    Funds for the payment of common expenses shall be collected by assessment against unit owners in the proportions or percentages provided in the declaration. In a residential condominium, unit owners' shares of common expenses shall be the same as their ownership interest in the common elements.

    
    

12. At the time Respondent commenced using a consolidated budget for all condominiums, the duties of the Condominium Association were prescribed by Section 711.012 (Florida Statutes 1973). Those duties respecting accounting stated in subsection (7):

    
    

    The Association shall maintain accounting records according to good accounting practices which shall be open to inspection by unit owners at reasonable times and written summaries of which shall be sup- plied at least annually to unit owners. Such records shall include:

    1. A record of all receipts and expenditures.

    2. An account for each unit . . . .

       
       

13. The significant difference in the accounting at the beginning of Respondent's activities and as required by present law is that presently the Association must maintain accounting records for each condominium it manages, while in 1972 it was required to maintain accounting records according to good accounting practices.

    
    

14. Unless the Declaration of Condominium requires the Association to maintain separate accounting records for each condominium it manages, the law in 1972 did not specifically so require.

    
    

15. The development plan in the Declarations (Exhibit 1) clearly provides each building submitted to condominium shall constitute a separate condominium property, but all of the condominiums shall be operated and governed by the same association.

    
    

16. The Declaration for each of the 7 buildings provides the condominium property is declared to contain 52 units, each of which, together with its appurtenances, constitute a condominium parcel. Each parcel is comprised of a condominium unit plus undivided share in common elements and right to use the same.

    
    

17. Throughout the Declaration, the condominium is defined to be one building containing 52 units. If the building is destroyed or severely damaged, the unit owners are authorized to decide if it is to be rebuilt. If not rebuilt, the proceeds of insurance coverage would presumably be divided between the unit owners and their mortgagees in the building destroyed. Unit owners in the other condominiums managed by Respondent would not appear to have any interest in those insurance proceeds. If this is so, it follows that they should not be called upon to replace a roof on a building not part of the condominium they occupy.

    
    

18. The case of Pepe v. Whispering Sands Condominium Association, Inc.,

    351 So.2d 755 (Fla 4th DCA 1977) is cited by both petitioner and Respondent to

    support their position. That factual situation is remarkably similar to this case. Pepe was a unit owner in a 7-condominium complex where each building was a different condominium, all managed by one Association. The issue was the right of the Association to consolidate under one budget the budgets of separate condominium sections within a multiple section complex.

    
    

19. The Declaration of Condominium for Whispering Sands contained a specific provision, to wit: "The creation of additional sections will not merge the common elements of this condominium with the common elements of such additional section", that is not present here. However, no words are here used to indicate that a merger was intended and Eden Isles was not developed as a phase condominium which would have allowed a consolidated budget; and the whole tenor of the Declaration of Condominium for Respondent is that each condominium is a separate entity and will remain separate even though operated by the same Association.

    
    

20. In Pepe, supra, one additional factor offered to support the Association's point was that the unit owners had been polled and a resolution passed by a large margin favoring a common budget. The Court's comment in this regard in Pepe, supra, is particularly apt to the situation here where it stated on p. 757:

    
    

    It may well be that the purposes of the Association in its resolution aforesaid are desirable, sensible and expedient. The fact remains, however, that the net result of its implementation is to charge without his consent a unit owner's share of the common expenses he has assumed and

    agreed to in his declaration of condominium. Under the resolution he would bear a share of the expenses of the elements common respectively to each of the other six sections in contravention of the express prohibition in the aforequoted Article I against merger of the common elements.

    
    

21. The decision in Pepe is controlling here. Despite the logic and apparent desirability of operating the 7 condominiums in the Eden Isles complex as one condominium with a consolidated budget, this is not the contract executed between the unit owners and the developer when the units were purchased.

From the foregoing it is concluded that until and unless the unit owners change the Declaration of Condominium as provided for in these declarations, separate budgets must be maintained and costs for common elements unrelated to Building A may not be charged to the unit owners in Building A condominium. It is therefore

RECOMMENDED that a cease and desist order issue to Eden Isles Condominium Association, Inc. to cease and desist from consolidating the expenses for all 7 condominiums in one budget and to prepare separate budgets for each of the 7 condominiums.

Entered this 17th day of July, 1979.

K. N. AYERS, Hearing Officer Division of Administrative Hearings Room 101, Collins Building Tallahassee, Florida 32301

(904) 488-9675

COPIES FURNISHED:

Mary Jo M. Gallay, Esquire Staff Attorney

Division of Business Regulation 725 South Bronough Street Tallahassee, Florida 32301

Martin L. Carlin, Esquire

Suite 402, 3000 Executive Building

3000 Biscayne Boulevard

Miami, Florida 33137

Docket for Case No: 79-000440

Orders for Case No: 79-000440