Judges: K. N. AYERS
Agency: Department of Business and Professional Regulation
Latest Update: Aug. 12, 1983
Summary: Respondent didn't give financial statement to owners each year, didn't give budgets to owners and didn't properly fund reserve accounts.
83-1748.PDFSTATE OF FLORIDA
DIVISION OF ADMINISTRATIVE HEARINGS
STATE OF FLORIDA, DEPARTMENT OF ) BUSINESS REGULATION, DIVISION ) OF FLORIDA LAND SALES AND )
CONDOMINIUMS, )
)
Petitioner, )
)
vs. ) CASE NO. 83-1748
)
VILLAS OF ORLANDO, LTD., )
)
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 July 13, 1983, at Tampa, Florida.
APPEARANCES
For Petitioner: William A. Hatch, Esquire
Department of Business Regulation 725 South Bronough Street Tallahassee, Florida 32301
For Respondent: David G. Mulock, Esquire
Post Office Box 3239 Tampa, Florida 33601
By Notice to Show Cause dated February 4, 1983, the Division of Florida Land Sales and Condominiums, Petitioner, seeks to issue a cease and desist order or assess civil penalties against the Villas of Orlando, Respondent. As grounds there for it is alleged Respondent (1) failed to properly fund reserve accounts for the period June 19, 1980, through December 31, 1982; (2) failed to deliver financial statements to each unit owner for fiscal years ending December 31, 1980, and December 31, 1981; and (3) failed to deliver the unit owners proposed budgets for the years 1981 and 1982.
At the commencement of the hearing the parties stipulated that Charges (2) and (3) above are correct; however, a final statement was delivered to two unit owners who requested the statement. Thereafter, one witness was called by Petitioner, three witnesses were called by Respondent, and two exhibits were admitted into evidence. A document headed "Payments Made by the Villas of Orlando, Inc., Home Owner's Association Properly Chargeable Against Reserve for Replacement" was marked as Exhibit 3 for identification, but it was never offered into evidence.
The parties' proposed findings of fact, to the extent they are incorporated herein are adopted; otherwise they are rejected as unsupported by the evidence,
unnecessary to resolution of the issue, or mere recitation of testimony presented at hearing.
FINDINGS OF FACT
Respondent is a Florida limited partnership which developed a 230-unit condominium in Orlando, Florida, by conversion of existing rental apartments. The condominium was registered with Petitioner, and Respondent received written notice of approval of the condominium documents in January, 1980. Respondent recorded the Declaration of Condominium in June, 1980, and closed the first sale of a condominium unit in September, 1980.
The condominium documents prepared by Respondent and approved by Petitioner in January, 1980, included an estimated operating budget for the condominium Association for the year 1980. This budget proved sufficiently accurate that it was used for the years 1981 and 1982 without amendment or republication. This budget established a reserve for replacement of $1,500 per month.
Paragraph 20 of the Declaration of Condominium provides:
The Developer shall not be liable for the payment of ordinary common
expenses on units which it owns. Unless and until the Developer elects to pay the regular assessments for common expenses charged against all other
unit owners, the Developer guarantees that: (1) monthly assessments for common expenses shall not increase over the amounts set forth in Schedule B and
(2) it will pay all actual ordinary common operating expenses in excess of the amounts collected from unit owners other than the Developer at the amount stated above.
Pursuant to the developer's understanding of this provision, no payments were made by the developer for any unit which it owned, i.e., which remained unsold. However, as the units were sold, common expenses were charged to each new owner. No separate agreement was entered into between the developer and the unit owners regarding the former's contribution to the common expenses.
Reserves for replacement are a necessary expense for the operation of improved real estate. Here, where the building was not newly constructed but converted from an existing apartment building, the remaining life of the building is shorter than would be the life of a new building, therefore a greater need exists for immediately commencing the funding for replacement than would exist with a new building.
Respondent made no contribution to the reserve account for those units it owned before they were sold, but commenced charging the new owners for those expenses as soon as the units were purchased.
In February, 1983, Respondent turned over control of the condominium Association to the unit purchasers. At this time there was $24,228.15 in the Association's bank account.
Although the unit owners approved a proposed 1983 budget in June, 1982, no proposed budget was submitted to the unit owners in 1980 or 1981 for use in 1981 and 1982. The initial operating budget was used for 1981 and 1982, and this same budget was approved by the unit owners for use in 1983.
Respondent failed to provide an annual accounting to each unit owner within 60 days of the end of fiscal years 1980 and 1981. No unit owner requested such an accounting until May of 1982, at which time Respondent' prepared an accounting for the operations of the condominium Association from its inception and delivered it to those two unit owners.
Respondent fully accounted for all receipts and expenditures accruing to the Association from its inception until turned over to the unit owners in February, 1983. Petitioner did not audit the books and records of the Association until late in 1982 when the alleged discrepancies were noted.
CONCLUSIONS OF LAW
The Division of Administrative Hearings has jurisdiction over the parties to, and the subject matter of, these proceedings.
Section 718.112(2)(k), Florida Statutes, provides, inter alia, the proposed annual budget shall include reserve accounts for capital expenditures and deferred maintenance.
Section 718.116(8), Florida Statutes, provides in part:
No unit owner may be excused from the payment of his share of the common expense of a condominium unless all unit owners are likewise proportionately excused from payment, except as provided in subsection (6) [not here applicable] and in the following cases:
If the declaration so provides, a developer or other person owning condominium units offered for sale
may be excused from payment of the share of the common expenses and assessments related to those units for a stated period of time subsequent to the recording of the declaration of condominium. The period must terminate no later than the first day of the fourth calendar month following the month in which the closing of the purchase and
sale of the first condominium unit occurs. However, the developer must pay the portion of common
expenses incurred during that period which exceeds the amount assessed against other unit owners.
(Emphasis supplied.)
The Declaration of Condominium provided the developer shall not be liable for ordinary common expenses on units which it owns. Insofar as this does not extend beyond four months after the sale of the first unit, such a provision is valid. Here, the first unit was sold in September, 1980; therefore, at the very least, and beginning January 1, 1981, Respondent should have been paying common expenses on units it still held.
As noted in the findings above, funding a reserve is a proper expense and constitutes a proper charge to all unit owners, including the developer.
The same statutory provision allowing a developer to be excused from payment of common expenses on units it owns provides that, if so excused by the Declaration of Condominium, the developer shall pay the portion of common expenses incurred during the period which exceeds the amount assessed against other unit owners.
The budget provided the reserve account be funded at the rate of $1,500 per month. The developer's portion of this assessment cannot be computed from the evidence presented at this hearing. However, the entire $1,500 per month should be assessed against the developer from June, 1980, until September, 1980, when the first unit was closed. Thereafter, the developer should be assessed $1,500 per month, less the amount properly charged to the reserve account which was paid into this account by the unit owners pursuant to their assessments.
Section 718.111(13), Florida Statutes, provides in pertinent part:
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 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 . . .
Section 718.112(2)(f), Florida Statutes, provides in pertinent part:
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 . . .
With respect to the failure of the Respondent to deliver financial statements to each unit owner for the years ending December 31, 1980, and December 31, 1981, and its failure to deliver proposed budgets for the years 1981 and 1982, these violations were inadvertent on the part of Respondent, and, in fact, resulted in no harm to the unit owners of these condominium units.
From the foregoing it is concluded that Respondent failed to properly fund the reserve account from June 19, 1980, through December 31, 1982; that it failed to deliver financial statements to each unit owner for the fiscal years ending December 31, 1980, and December 31, 1981; and failed to deliver to unit owners proposed budgets for the years 1981 and 1982. It is
RECOMMENDED that an order be entered directing Respondent to cease and desist from failing to fund reserve accounts and to fund the Association's reserve account in the amount of $1,500 per month, less the amounts paid by each unit owner between June 19, 1980, and December 31, 1982.
ENTERED this 12th day of August, 1983, at Tallahassee, Florida.
K. N. AYERS, 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 12th day of August, 1983.
COPIES FURNISHED:
William A. Hatch, Esquire Department of Business Regulation 725 South Bronough Street Tallahassee, Florida 32301
David G. Mulock, Esquire Post Office Box 3239 Tampa, Florida 33601
E. James Kearney, Director Division of Florida Land
Sales and Condominiums Department of Business Regulation 725 South Bronough Street Tallahassee, Florida 32301
Gary R. Rutledge, Secretary Department of Business Regulation 725 South Bronough Street Tallahassee, Florida 32301
Docket for Case No: 83-001748
Orders for Case No: 83-001748
| Issue Date |
Document |
Summary |
|
Aug. 12, 1983 |
Recommended Order
|
Respondent didn't give financial statement to owners each year, didn't give budgets to owners and didn't properly fund reserve accounts.
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