STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

DEPARTMENT OF PROFESSIONAL ) REGULATION, BOARD OF REAL ESTATE, )

)

Petitioner, )

)

vs. ) CASE NO. 81-1698

) WILLIAM J. COLELLO AND CINDY ) REALTY OF HERNANDO, INC., )

)

Respondents )

)

RECOMMENDED ORDER

This case was heard pursuant to notice on October 14, 1981, in Clearwater, Florida, by Stephen F. Dean, assigned Hearing Officer of the Division of Administrative Hearings. This case arose upon an administrative complaint filed against the Respondents by the Board of Real Estate alleging that the Respondents had violated Chapter 475, Florida Statutes, by not disclosing to a client certain information in their possession which they were obligated to disclose. The Respondents made a timely request for a public hearing, and this case was forwarded to the Division of Administrative Hearings to conduct a formal hearing pursuant to Chapter 120, Florida Statutes. At the hearing the parties stipulated to extend the time for submission of their proposed findings. This has delayed the entry of the Recommended Order.

APPEARANCES

For Petitioner: Grover C. Freeman, Esquire

Metropolitan Bank Building 4600 West Cypress, Suite 410

Tampa, Florida 33607

For Respondents: Harvey V. Delzer, Esquire

Post Office Box 279

Port Richey, Florida 33568 ISSUES

Factual Issues: Did Respondents have knowledge of the service availability charge? Did Respondents have knowledge of the debt?

Legal Issues: Did the Respondents' failure to advise the purchaser of the service availability charge violate Section 475.25(1)(b), Florida Statutes? Did the Respondents' failure to advise the purchaser of the debt on the service availability charge constitute a violation of Section 475.25(1)(b), Florida Statutes? Did the Respondents make false or fraudulent statements to the purchaser in the practice of the real estate profession in violation of Section 475.117(1)(a), Florida Statutes?

FINDINGS OF FACT

1. William J. Colello is a registered real estate broker holding license number 0147272 issued by the Board of Real Estate. Colello is the only active firm member for Cindy Realty of Hernando, Inc., a registered corporate broker holding license number 0181975.

   
   

2. Sea Pines, Inc., was the developer of Sea Pines Unit Three Addition. Wet Water, Inc., is a water and sewage company regulated by the Public Service Commission of Florida.

   
   

3. Sea Pines and Wet Water agreed that the first purchaser of real property in Addition Three to Sea Pines would owe Wet Water $540. This assessment covered the cost of providing the water and sewage service to the subdivision. This was later termed a service availability charge. In addition, the property owner would have to pay water and sewer hook-up charges.

   
   

4. The purchaser could elect to pay the assessment in a lump sum or in 100 monthly installments of $5.50.

   
   

5. Lot 197 of Sea Pines, Unit Three Addition, the piece of property involved in this dispute, was initially bought in 1974 by J. R. Martinez, who elected to pay the water and sewage assessment in monthly installments. Martinez paid the monthly installments for approximately a year and then ceased making the payments.

   
   

6. Colello purchased Lot 197 on June 4, 1975, and sold it on June 16, 1975, to Dennis Garcia, who was Colello's brother-in-law at the time. Colello made no payments on the water and sewage assessment. However, Wet Water billed on the first of each month, and Colello did not own the property when the bill was due.

   
   

7. Although the Public Service Commission approved a charge by Wet Water of $5.50 per month for service availability in late 1974, there was no evidence that Colello was aware of the change in position of the Public Service Commission.

   
   

8. Wet Water sent bills to Colello from immediately after his purchase of the property in 1975 until December of 1977. Colello denied knowledge of these bills; however, there were no bills sent to Colello after December, 1977, and as a result of a letter sent by Wet Water to Colello in August of 1978, Wet Water learned that Lot 197 had been sold to Garcia.

   
   

9. Colello had no knowledge of the bill after December of 1977, and after August, 1978, Wet Water knew that Colello was not the owner of the property.

   
   

10. In 1979, although Garcia's sister and Colello had been divorced for a number of years, Garcia listed Lot 197 for sale through Cindy Realty. Pat Bramanti, a salesman for Cindy Realty, sold this property to James and Mildred Mulligan. The sales agreement provided for a warranty deed, a title search and title insurance for the Mulligans. Closing was handled through the title company, and the title search did not reveal any lien against the property.

11. Some months after the closing, the builder retained by Mulligan to construct his house sought to have the water connected and was advised by Wet Water that the water could not be connected until the arrearage of monthly payments had been paid. This amounted to $280.50. Because water was needed to complete the construction, Mulligan paid the arrearage and the hookup fees.

    
    

12. The records of Wet Water show that the $280.50 was due from Garcia.

    
    

13. It was Wet Water's policy not to file liens against the property of owners who owed Wet Water money, which is why the title search failed to reveal the debt. There was no evidence that Colello knew of this policy.

    
    

14. Colello had no personal contact with the Mulligans until after the problem arose over the arrearages.

    
    

15. Colello advised Mulligan at the time the problem arose that if the debt did not appear in the records it was not Colello's concern. Mulligan was also advised of the 1974 decision by the Public Service Commission that Wet Water could not make the assessment.

    
    

16. There is no evidence that Colello had knowledge of any change in the Public Service Commission's decision.

    
    

    CONCLUSIONS OF LAW

    
    

17. The Board of Real Estate has jurisdiction to take disciplinary action against its licensees William J. Colello and Cindy Realty of Hernando, Inc.

    
    

18. The Board charges the Respondents with violations of Sections 475.25(1)(b) and 475.117(1)(a), Florida Statutes, for failure to advise the Mulligans of the service availability assessment and for making false and fraudulent representations in the practice of real estate.

    
    

19. Considering the latter allegation first, there is no evidence that any representations were made to the Mulligans concerning the service availability charge prior to the sale. The only representations made concerning the service availability assessment were made after closing. These representations were not made within the context of a real estate transaction. Further, the representations were not false, untrue or fraudulent.

    
    

20. Considering the first allegation, the record shows that Colello had knowledge of the assessment but that he also had knowledge that the assessment had been disallowed by the Public Service Commission. There is no evidence that Colello had knowledge of the Commission's decision to permit Wet Water to make the charge as a service availability charge. The letter sent to property owners does not reflect the change in the Commission's policy. The letter sent to property owners reflects approval by the Commission of two other tariffs but not the service availability charge.

    
    

21. However, assuming that Colello did have knowledge of the charge, the amount of the charge is so small that failure to disclose it would not be a violation of the duty of a broker to a purchaser. A broker is required to deal openly and honestly with the purchaser, and therefore must disclose matters relating to the property which could potentially impact the purchaser's use and enjoyment of the property. The record does not reflect any inquiry by the Mulligans about utilities or charges for utilities. The existence of a monthly charge of $5.50 is de minimis in impact upon the sale of a lot for $15,650.

22. Conversely, the existence of a debt in the amount of nearly $300 is of such a nature that if the broker has knowledge thereof he is obligated to disclose its existence to the purchaser. The question here is whether a debt enforceable against the purchaser existed and the broker had knowledge of the facts. Although he may have received bills from Wet Water, Colello had every reason to consider the bills a vain attempt to collect a charge the Public Service Commission had disallowed. After December of 1977, Colello was no longer billed, and after August of 1978, Wet Water was advised that Garcia owned the property. The record does not reveal that Colello knew whether Wet Water billed Garcia or whether Garcia paid the debt. Therefore, at best, Colello may have had knowledge that there might be a debt that might be valid and might be enforceable against the property.

    
    

23. Florida law runs a fine line between balancing the broker's duty to the seller and to the buyer. The Florida courts have specifically held that the broker does not and cannot represent both parties to a transaction. Florida law says the broker represents his principal, generally, as in this case, the seller. However, based upon the licensed nature of the real estate profession and the state granted privilege, the courts have consistently held that the broker has the duty to deal openly and honestly with the other parties to the transaction, generally purchaser.

    
    

24. Given the circumstances, Colello had an obligation to the purchaser to resolve whether the debt existed. Knowledge by a broker that a title search was to be conducted would be sufficient action to fulfill the broker's obligation to ascertain the existence of a debt. The title search did not reveal any lien against the property in question.

    
    

25. The facts are not sufficient to show that the Respondents intentionally and maliciously withheld information from the purchasers. The facts are not sufficient to show that the Respondents were negligent in protection the interest of the purchasers. Therefore, the allegation that the Respondents violated Section 475.25(1)(b), Florida Statutes, is not proven. Cf. Wood v. Barksdale, 309 So.2d 187 (Fla. App. 1975, 1-D).

RECOMMENDATION

Based on the foregoing Findings of Fact and Conclusions of law the Hearing Officer recommends that the Board of Real Estate dismiss its complaint and take no action against the Respondents.

DONE and ORDERED this 18th day of February, 1982, in Tallahassee, Leon County, Florida.

STEPHEN F. DEAN

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 18th day of February, 1982.

COPIES FURNISHED:

Grover C. Freeman, Esquire Suite 410, Metropolitan

Bank Building 4600 West Cypress

Tampa, Florida 33607

Harvey V. Delzer, Esquire Post Office Box 279

Port Richey, Florida 33568

C. B. Stafford, Executive Director Board of Real Estate

400 West Robinson Street Post Office Box 1900 Orlando, Florida 32802

Samuel Shorstein, Secretary Department of professional

Regulation

130 North Monroe Street Tallahassee, Florida 32301

Docket for Case No: 81-001698

Orders for Case No: 81-001698