Judges: JAMES E. BRADWELL
Agency: Department of Business and Professional Regulation
Latest Update: Jul. 19, 1990
Summary: The issues presented for decision herein are (1) whether or not Respondent failed to pay its share of common expenses, and (2) whether Respondent failed to deliver to the condominium association a financial review as required.Respondent is guilty of failing to pay share of common expense and failing to deliver financial review as required. $1000 penalty recommended.
83-2691STATE OF FLORIDA
DIVISION OF ADMINISTRATIVE HEARINGS
DEPARTMENT OF BUSINESS ) REGULATION, DIVISION OF FLORIDA ) LAND SALES, CONDOMINIUMS AND ) MOBILE HOMES, )
)
Petitioner, )
)
vs. ) CASE NO. 83-2691
)
MAPLEWOOD TOWNHOUSE )
CONDOMINIUMS, INC., )
)
Respondent. )
)
RECOMMENDED ORDER
Pursuant to notice, the Division of Administrative Hearings, by its duly designated Hearing Officer, James E. Bradwell, held a public hearing herein on August 27, 1984, in Ft. Lauderdale, Florida. The parties were afforded leave to submit post-hearing memoranda for consideration. Post-hearing memoranda was received and considered by me in preparation of this Recommended Order.
APPEARANCES
For Petitioner: Karl M. Scheuerman, Esquire
Staff attorney
Department of Business Regulation 725 South Bronough Street Tallahassee, Florida 32301
For Respondent: Lawrence M. Presser, Esquire
10201 West Sample Road
Coral Springs, Florida 33065 ISSUES
The issues presented for decision herein are (1) whether or not Respondent failed to pay its share of common expenses, and (2) whether Respondent failed to deliver to the condominium association a financial review as required.
FINDINGS OF FACT
Based upon my observation of the witnesses and their demeanor while testifying, documentary evidence received and entire record compiled herein including the pre-hearing stipulation, I hereby make the following relevant factual findings.
By its Amended Notice to Show Cause filed herein dared February 27, 1984, Petitioner seeks to impose a civil penalty against Respondent and order it
to cease and desist from engaging in certain acts and to take certain affirmative action.
As set forth in the pro-hearing stipulated facts, Petitioner herein is the State of Florida, Department of Business Regulation, Division of Florida Land Sales, Condominiums and Mobile Homes.
Respondent herein is Maplewood Townhouses, Inc., the developer as defined by Section 718.103(13), Florida Statutes, of a residential condominium known as the Maplewood Townhouses Condominium, located in Coral Springs, Florida.
On or about August 5, 1983, the Petitioner served on Respondent its original Notice to Show Cause alleging a violation of Chapter 718, the Condominium Act.
Or or about February 27, 1984, Petitioner filed a Motion to Amend its Notice to Show Cause to include two additional allegations. This motion was granted by Order of March 15, 1984.
The declaration of condominium for Maplewood Townhouses Condominium was recorded in the public records on July 18, 1980.
Maplewood Townhouses Condominium Association, Inc., the condominium association for Maplewood Townhouses Condominium, was incorporated on September 4, 1980.
Turnover from developer control of the condominium association occurred pursuant to Section 718.301 on July 7, 1983.
Phase II of Maplewood Townhouses Condominium was created after the effective date of Rule 18.05, Florida Administrative Code. 1/ A proposed budget must include reference to a guarantee if one exists pursuant to Rule 18.05, Florida Administrative Code. Certified copies of the proposed operating budgets for Phases I and II submitted by Respondent do not reference a guarantee.
It is undisputed that Respondent failed to pay common expenses on developer-owned units from the period of the inception of the condominium through the time of the turnover. This procedure is acceptable where a developer-owner offers a guarantee which complies with the terms of Section 718.116(8)(b), Florida Statutes.
The financial review introduced herein reveals that reserves were waived for the period in question by the Board of Directors, however, no claim was offered by Respondent to show that reserves were waived by the unit owners in Maplewood Townhouses Condominium. (See Petitioner's Exhibit 3, pages 6 and
7) Additionally, the putative guarantee fails to provide a stated dollar amount and provides no beginning or ending date for the guarantee. (Petitioner1s Exhibit 3 at page 7)
Evidence adduced reveals that Respondent contributed approximately
$19,000 to the operation of the condominium association for the period at issue herein. That amount would be the proper amount the developer would have been responsible for, assuming no guarantee existed, and if the calculation for assessments commence upon the date of issuance of the certificate of occupancy
for each unit. That amount would not be sufficient if the correct computation was based on the date of recordation of the declaration of condominium.
The financial review establishes that contributions to capital, which comprise the initial working capital of the condominium association, were used during the putative guarantee period to finance association expenses. (See Petitioner's Exhibit 4) In addition, the review does not mention either the inadequacy of the guarantee or point out that to the extent the guarantee fails, the reserve obligations become assessment of all unit owners.
CONCLUSIONS OF LAW
The Division of Administrative Hearings has jurisdiction over the subject matter and the parties to this action. Section 120.57(1), Florida Statutes.
The parties were duly noticed pursuant to the notice provisions of Chapter 120, Florida Statutes.
The authority of the Division is derived from Chapter 718, Florida Statutes. Pursuant to Section 718.501, the Petitioner is authorized to enforce Chapter 718.
Respondent failed to guarantee commen expenses in order to be exempted from the payment thereof pursuant to Section 718.116(8)(b), Florida Statutes. That section provides in pertinent part:
A developer . . . may be excused from the payment of his share of the common expense which would have been assessed against those units during the period of time that he shall have guaranteed to each purchaser . . . that the assessment for common expenses of the condominium imposed upon the unit owners would not increase over a stated dollar amount and shall have obligated himself to pay any amount of common expenses incurred during that period and not provided by the assessments and the guaranteed level receivable from other unit owners.
The developer herein has not guaranteed the payment of the common expenses in either the prospectus purchase agreement or by agreement between the developer and unit owners as is permitted under Section 718.116(8)(b), Florida Statutes. The Respondent's declaration reveals that it fails to comply with the statutory requisites for creation of a guarantee pursuant to Section 718.116(8)(b), Florida Statutes, inasmuch as (1) there is no guarantee that assessments would not increase and it was, in fact, free to either raise or lower assessments because the putative guarantee language did not ensure that assessments would not exceed a stated dollar amount; (2) there is no stated dollar amount, as required by statute, and (3) there is no beginning or ending date as required. Respondent, having failed to comply with the requisites for the creation of a statutory guarantee was required to pay assessments on units owned by the developer. See, Brooks v. Palm Bay Towers, 375 So. 2d 348 (Fla. 3d DCA, 1979). Accordingly, Respondent's failure to pay its assessments constitutes a violation of Section 718.115(2) and 718.116(8), Florida Statutes.
Based on the findings herein which establishes that no guarantee existed and because reserves were not waived by the method described in Section 718.112(2)(k), Florida Statutes, and based on the fact that the review assumes that reserves were properly waived, the review fails to determine that the developer was charged and paid the proper amount of assessments as is required pursuant to Section 718.301(4)(c), Florida Statutes. In this instance, the reserve requirement, to the extent that the guarantee fails, was an obligation of all unit owners during the period in question. Since the review does not point that factor out and it being based on the faulty premise of an effective waiver of reserves, it fails to determine that the developer was charged and paid the proper assessments and the review therefore contravenes the dictates of Section 718.301(4)(c), Florida Statutes.
The developer, by using unit owner contributions to the working capital of the account to finance common expenses of the association during the putative guarantee period, was in effect used to offset deficits which are the developer1s responsibility during the guarantee period. (Section 718.116(8)(b), Florida Statutes. Respondent, by utilizing the working capital account in this manner, did so in violation of Section 718.116(8)(b), Florida Statutes.
Respondent's contention that prior review of condominium documents by Petitioner forecloses it (Petitioner) from entertaining this action was considered and is rejected. Noteworthy is a letter from Petitioner to Respondent advising that notification shall not relieve the developer of any responsibility under Chapter 718, Florida Statutes, and Rule 7D- 17.05(6) , Florida Administrative Code, which provides in pertinent part that:
(6) In no event shall proper filing with the Division be construed as approval of the offering by the Division.
Finally, prior Division review of condominium documents does not bar Petitioner from maintaining this action. See Rule 7D- 17.05(3), Florida Administrative Code.
RECOMMENDATION
Based on the foregoing findings of fact and conclusions of law, it is hereby RECOMMENDED:
That the Department of Business Regulation, Division of Florida Land Sales and Condominiums, enter a Final Order finding Respondent guilty of violating Section 718.115(2), 718.116(8), and 718.301(4)(c), Florida Statutes, and impose a civil penalty in the amount of $1,000.
Further, Respondent shall immediately employ an independent certified public accountant to perform a turnover review consistent with Section 718.301(4)(c), Florida Statutes, and to pay any amount determined to be owed to the condominium association.
RECOMMENDED this 21st day of January, 1985, in Tallahassee, Florida.
JAMES E. BRADWELL
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 21st day of January, 1985.
ENDNOTE
1/ Administrative notice was taken of that Rule at the final hearing herein.
COPIES FURNISHED:
Karl M. Scheuerman, Esquire Department of Business Regulation 725 South Bronough Street Tallahassee, Florida 32301
Lawrence Presser, Esquire 10201 West Sample Road
Coral Springs, Florida 33065
Gary Rutledge Secretary
Department of Business Regulation 725 South Bronough Street Tallahassee, Florida 32301
=================================================================
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. CASE NO. 83-2691
DOCKET NO. 83158MVC
MAPLEWOOD TOWNHOUSES CONDOMINIUMS, INC.,
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 Recommended Order entered by James E. Bradwell, Hearing Officer, Division of Administrative Hearings, on January 21, 1985.
The Recommended Order is hereby adopted in toto as to both the Findings of Fact and Conclusions of Law, and is reproduced below:
RECOMMENDED ORDER
"Pursuant to notice, the Division of Administrative Hearings, by its duly designated Hearing Officer, James E. Bradwell, held a public hearing herein on August 27, 1984, in Ft. Lauderdale, Florida. The parties were afforded leave to submit post-hearing memoranda for consideration. Post-hearing memoranda were received and considered by me in preparation of this Recommended Order.
APPEARANCES
For Petitioner: Karl M. Scheuerman, Esquire
Staff Attorney
Department of Business Regulation 725 South Bronough Street Tallahassee, Florida 32301
For Respondent: Lawrence M. Presser, Esquire
10201 West Sample Road
Coral Springs, Florida 33065
ISSUES
The issues presented for decision herein are (1) whether or not Respondent failed to pay its share of common expenses, and (2) whether Respondent failed to deliver to the condominium association a financial review as required.
FINDINGS OF FACT
Based upon my observation of the witnesses and their demeanor while testifying, documentary evidence received and the entire record compiled herein including the pre-hearing stipulation, I hereby make the following relevant factual findings.
By its Amended Notice to Show Cause filed herein dated February 27, 1984, Petitioner seeks to impose a civil penalty against Respondent and order it to cease and desist from engaging in certain acts and to take certain affirmative action.
As set forth in the pre-hearing stipulated facts, Petitioner herein is the State of Florida, Department of Business Regulation, Division of Florida Land Sales, Condominiums and Mobile Homes.
Respondent herein is Maplewood Townhouses, Inc., the developer as defined by Section 718.103(13), Florida Statutes, of a residential condominium known as the Maplewood Townhouses Condominium, located in Coral Springs, Florida.
On or about August 5, 1983, the Petitioner served on Respondent its original Notice to Show Cause alleging a violation of Chapter 718, the Condominium Act.
On or about February 27, 1984, Petitioner filed a Motion to Amend its Notice to Show Cause to include two additional allegations. This motion was granted by Order of March 15, 1984.
The declaration of condominium for Maplewood Townhouses Condominium was recorded in the public records on July 19, 1980.
Maplewood Townhouses Condominium Association, Inc., the condominium association for Maplewood Townhouses Condominium, was incorporated on September 4, 1980.
Turnover from developer control of the condominium association occurred pursuant to Section 718.301 on July 7, 1983.
Phase II of Maplewood Townhouses Condominium was created after the effective date of Rule 18.05, Florida Administrative Code. 1/ A proposed budget must include reference to a guarantee if one exists pursuant to Rule 18.05, Florida Administrative Code. Certified copies of the proposed operating budgets for Phases I and II submitted by Respondent do not reference a guarantee.
It is undisputed that Respondent failed to pay common expenses on developer-owned units from the period of the inception of the condominium through the time of the turnover. This procedure is acceptable where a developer-owner offers a guarantee which complies with the terms of Section 718.116(8)(b), Florida Statutes.
The financial review introduced herein reveals that reserves were waived for the period in question by the Board of Directors, however, no claim was offered by Respondent to show that reserves were waived by the unit owners in Maplewood Townhouses Condominium. (See Petitioner's Exhibit 3, pages 6 and
7) Additionally, the putative guarantee fails to provide a stated dollar amount and provides no beginning or ending date for the guarantee. (Petitioner's Exhibit 3 at page 7)
Evidence adduced reveals that Respondent contributed approximately
$19,000 to the operation of the condominium association for the period at issue herein. That amount would be the proper amount the developer would have been responsible for, assuming no guarantee existed, and if the calculation for assessments commences upon the date of issuance of the certificate of occupancy for each unit. That amount would not be sufficient if the correct computation was based on the date of recordation of the declaration of condominium.
The financial review establishes that contributions to capital, which comprise the initial working capital of the condominium association, were used during the putative guarantee period to finance association expenses. (See Petitioner's Exhibit 4) In addition, the review does not mention either the inadequacy of the guarantee or point out that to the extent the guarantee fails, the reserve obligations become assessment of all unit owners.
CONCLUSIONS OF LAW
The Division of Administrative Hearings has jurisdiction over the subject matter and the parties to this action. Section 120.57(1), Florida Statutes.
The parties were duly noticed pursuant to the notice provisions of Chapter 120, Florida Statutes.
The authority of the Division is derived from Chapter 718, Florida Statutes. Pursuant to Section 718.501, the Petitioner is authorized to enforce Chapter 718.
Respondent failed to guarantee common expenses in order to be exempted from the payment thereof pursuant to Section 718.116(8)(b), Florida Statutes. That section provides in pertinent part:
A developer . . . may be excused from the payment of his share of the common expense which would have been assessed against those units during the period of time that he shall have guaranteed to each purchaser . . . that the assessment for common expenses of the condominium imposed upon the unit owners would not increase over a stated dollar amount and shall have obligated himself to pay any amount of common expenses incurred during that period and not produced by the assessments at the guaranteed level receivable from other unit owners.
The developer herein has not guaranteed the payment of the common expenses in either the prospectus, purchase agreement or by agreement between
the developer and unit owners as is permitted under Section 718.116(8)(b), Florida Statutes. The Respondent's declaration reveals that it fails to comply with the statutory requisites for creation of a guarantee pursuant to Section 718.116(8)(b), Florida Statutes, inasmuch as (1) there is no guarantee that assessments would not increase and it was, in fact, free to either raise or lower assessments because the putative guarantee language did not ensure that assessments would not exceed a stated dollar amount; (2) there is no stated dollar amount as required by statute, and (3) there is no beginning or ending date as required. Respondent, having failed to comply with the requisites for the creation of a statutory guarantee was required to pay assessments on units owned by the developer. See, Brooks v. Palm Bay Towers, 375 So. 2d 348 (Fla. 3d DCA, 1979). Accordingly, Respondent's failure to pay its assessments constitutes a violation of Section 718.115(2) and 718.116(8), Florida Statutes.
Based on the findings herein which establishes that no guarantee existed and because reserves were not waived by the method described in Section 718.112(2)(k), Florida Statutes, and based on the fact that the review assumes that reserves were properly waived, the review fails to determine that the developer was charged and paid the proper amount of assessments as is required pursuant to Section 718.301(4)(c), Florida Statutes. In this instance, the reserve requirement, to the extent that the guarantee fails, was an obligation of all unit owners during the period in question. Since the review does not point that factor out and it being based on the faulty premise of an effective waiver of reserves, it fails to determine that the developer was charged and paid the proper assessments and the review therefore contravenes the dictates of Section 718.301(4)(c), Florida Statutes.
The developer, by using unit owner contributions to the working capital of the account to finance common expenses of the association during the putative guarantee period, was in effect used to offset deficits which are the developer's responsibility during the guarantee period. (Section 718.116(8)(b), Florida Statutes.) Respondent, by utilizing the working capital account in this manner, did so in violation of Section 718.116(8)(b), Florida Statutes.
Respondent's contention that prior review of condominium documents by Petitioner forecloses it (Petitioner) from entertaining this action was considered and is rejected. Noteworthy is a letter from Petitioner to Respondent advising that notification shall not relieve the developer of any responsibility under Chapter 718, Florida Statutes, and Rule 7D- 17.05(6), Florida Administrative Code, which provides in pertinent part that:
(6) In no event shall proper filing with the Division be construed as approval of the offering by the Division.
Finally, prior Division review of condominium documents does not bar Petitioner from maintaining this action. See Rule 7D- 17.05(3), Florida Administrative Code."
SUPPLEMENTAL CONCLUSIONS OF LAW
The following Supplemental Conclusions of Law, although
implicit in the Recommended Order, are expressly stated herein for the sake of clarity. A developer in a non-guarantee situation is required like any other unit owner to pay assessments on units it owns. Review the rationale of the Declaratory Statement issued by the Division in Tahitian Gardens Condominium, Inc., rendered the Division on July 2, 1982, and judicially noticed in the
course of the proceeding. Review also, Brooks v. Palm Bay Towers Condominium Association, Inc., 375 So. 2d 348 (Fla. 3d DCA 1979); Palm Bay Towers Corporation et al. v. Brooks, on motion for rehearing En Bank, 10 F.L.W. 514 (Fla. 3d DCA Feb. 26, 1985). According to these authorities, a condominium is created through recordation of the declaration of condominium in the public records. Section 718.104(2), Florida Statutes. Upon the submission of a parcel to condominium ownership by recordation, the property is, as a matter of law, divided into condominium parcels, each of which consists of a unit and an appurtenant undivided share in the common elements. The title to unsold condominium units, as identified and described by the declaration of condominium, is in the developer who is the unit owner for those units. Review, Section 718.103(16), (17), (10). The developer as unit owner is liable for assessments coming due while the developer holds title to those units, which extends from the period of time from recordation of the declaration of condominium through the closing of title of a particular unit to another unit owner. As unit owner, the developer is properly held responsible for assessments coming due. Review, Sections 718.116(8) and 718.115(2), Florida Statutes (1983).
An exemption from common expenses pursuant to Section 718.116(8)(a), Florida Statutes (1983), existed for the period beginning with the incorporation of the condominium association and terminating on the first day of the fourth month following the month in which the closing of the purchase and sale of the first condominium unit occurred.
IT IS THEREFORE, ORDERED that:
Respondent shall cease and desist from further violations of Sections 718.115(2), 718.116(8), and 718.301(4)(c), Florida Statutes (1983)
Respondent shall pay to the Division of Florida Land Sales, Condominiums and Mobile Homes, within 20 days of the date of this Final Order, a civil penalty in the amount of $1,000, as proposed by the hearing officer. Said civil penalty shall be tendered in the form of a certified check made payable to the Florida Condominium Trust Fund.
Respondent shall immediately employ an independent certified public accountant to perform a turnover review consistent with Section 718.301(4)(c), Florida Statutes (1983) and consistent with this Order, 2/ to wit:
No guarantee of common expenses pursuant to Section 718.116(8)(b), Florida Statutes (1983) existed for the period from the incorporation of the condominium association through and including turnover from developer control on July 7, 1983;
The exemption from common expenses pursuant to Section 718.116(8)(a), Florida Statutes (1983), existed for the period beginning with the incorporation of the condominium association and terminated on the first day of the fourth month following the month in which the closing of the purchase and sale of the first condominium unit occurred. Pursuant to Section 718.116(8)(a), Florida Statutes (1983) , Respondent for this period of exemption is not resonsible for assessments on developer owned units. Instead, the developer obligation during this period only, as set forth in Section 718.116(8)(a), Florida Statutes, is to pay the portion of common expenses incurred during that period, including reserves, which exceed the amount assessed against other unit owners, viz., the developer is responsible for funding the deficit curing this exemption period. Since reserves were not waived in accordance with the procedure outlined in
Section 718.112(2)(k), Florida Statutes, reserves shall be included in the computation of common expenses for this period;
Because reserves were also not waived after the exemption period had expired in accordance with the statutory waiver mechanism provided by Section 718.112(2)(k), Florida Statutes (1983), reserves after the period of exemption, being a common expense, were an obligation of all unit owners during the period beginning with the expiration of the exemption period to and including turnover. Consistent with this obligation, the review shall calculate the appropriate pro rata portion of reserves which should have been paid by the developer as owner of condominium;
The developer/Respondent is responsible for its pro rata share of assessments from the date of expiration of the exemption through and including the date of turnover.
Respondent shall use its best efforts to ensure that the turnover review referenced above is completed as soon as practicable, but in no event shall the review be completed later than by May 10, 1985.
Within 5 days after the completion of the turnover review, Respondent shall deliver a copy of the review both to the Condominium association and to the Division of Florida Land Sales, Condominiums and Mobile Homes, and shall immediately, irrevocably, irretrievably, and permanently remit any amount determined to be owed in accordance with the review to the condominium association within 15 days of completion of the review.
This Final Order may be appealed within 30 days of its rendition pursuant to Section 120.68, Florida Statutes, and the Florida Rules of Appellate Procedure.
DONE AND ORDERED this 3rd day of April, 1985.
E. JAMES HEARNEY, DIRECTOR Division of Florid Land Sales,
Condominiums and Mobile Homes Department of Business Regulation State of Florida
ENDNOTES
1/ Administrative notice was taken of that Rule at the final hearing herein.
2/ Within 7 days from rendition of this order, Respondent shall furnish to the Division evidence, satisfactory to the Division, that an independent CPA has been employed for the purposes set forth herein.
CERTIFICATE OF SERVICE
I HEREBY CERTIFY that a true and correct copy of the foregoing has been furnished by U.S. Mail to James B. Bradwell, Hearing Officer, Division of Administrative Hearings, The Oakland Building, 2009 Apalachee Parkway,
Tallahassee, Florida 32301, and Lawrence Presser, Esquire, 10201 West Sample Road, Coral Springs, Florida 33065, this day of 3rd of April, 1985.
By: Connie D. Blackman, Clerk
Docket for Case No: 83-002691
Orders for Case No: 83-002691
| Issue Date |
Document |
Summary |
|
Apr. 03, 1985 |
Agency Final Order
|
|
|
Jan. 21, 1985 |
Recommended Order
|
Respondent is guilty of failing to pay share of common expense and failing to deliver financial review as required. $1000 penalty recommended.
|
