STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

DEPARTMENT OF BUSINESS REGULATION, ) DIVISION OF FLORIDA LAND SALES, ) CONDOMINIUMS AND MOBILE HOMES, )

)

Petitioner, )

)

vs. ) DOAH CASE NO. 87-3121

) FALLONE CONSTRUCTION, INC., d/b/a/ ) INDIGO WOODS EAST, A CONDOMINIUM, )

)

Respondent. )

)

RECOMMENDED ORDER

Pursuant to notice this cause came on for formal hearing before P. Michael Ruff, duly designated Hearing Officer, on August 25, 1988, in Daytona Beach, Florida. The appearances were as follows:

APPEARANCES

For Petitioner: Reynold Meyer

Assistant General Counsel Department of Business Regulation Division of Florida Land Sales

Condominiums and Mobile Homes 725 South Bronough Street Tallahassee, Florida 32399-1007

For Respondent: No Appearance

This case involves the Amended Notice to Show Cause dated August 2, 1988, filed by the above-named Petitioner (Division) against the Respondent (Fallone), alleging certain violations of Chapter 718, Florida Statutes. Pursuant to an order of the Hearing Officer dated August 11, 1988, the Division issued the Amended Notice to Show Cause alleging the following violations, to-wit:

1. That Fallone failed to mail copies of a proposed annual budget of common expenses to unit owners in violation of Section 718.112(2)(e);

   
   

2. That Fallone failed to furnish to unit owners a financial report in violation of Section 718.111(13), Florida Statutes;

   
   

3. That Fallone failed to insure full funding of reserve accounts from March 25, 1985, through October 12, 1987, in violation of Section 718.112(2)(f)(2) and Rule 7D-23.004(2) Florida Administrative Code;

   
   

4. That Fallone expended working capital contributions in violation of 718.116(8)(b), Florida Statutes;

5. That Fallone entered into two Purchase Contracts for condo units prior to filing the Condominium Registration Documents in violation of 718.502(2)(a), Florida Statutes, failed to deliver all property of unit owners and of the association, controlled by Fallone, within sixty (60) days following "turnover" on October 12, 1988, in alleged violation of Section 718.301, Florida Statutes. Finally, it is alleged that Fallone is jointly and severally liable for all unpaid assessments on condo units transferred from Howard P. Logue to Fallone in accordance with Section 718.116(1)(8)(a), Florida Statutes.

The final hearing was held on the above date at which the Division presented two witnesses, Robert Clearwater and John Benton. The Division's Exhibits 1 and 2 were proffered and admitted into evidence. Fallone failed to appear and no one appeared on his behalf. Subsequent to the hearing, the Division timely filed Proposed Findings of Fact and Conclusions of Law. Fallone did not file any Proposed Findings of Fact or Conclusions of Law nor any Motion or any other pleading seeking to set aside its default. The Proposed Findings of Fact submitted are ruled upon in this Recommended Order and the Appendix attached hereto and incorporated by reference herein.

The issue to be resolved, concerns whether the Respondent is guilty of the violations of Chapter 718, Florida Statutes, and related rules, as pled in the Division's Amended Notice to Show Cause dated August 2, 1988, and, if so, what penalty is warranted.

FINDINGS OF FACT

1. Fallone is the developer of Indigo Woods East, Phase II, a condominium development. Indigo Woods East Condominium Association, Inc., operates the condominium. Fallone maintained the controlling interest of the Association from March 25, 1985, through October 12, 1987 (See Fallone's response to Request for Admissions and testimony of Robert Clearwater). The 1986 Annual Budget for the Association was considered and adopted at a budget meeting held on September 23, 1985. Copies of the Proposed 1986 Annual Budget for the Association were not mailed to unit owners on or before September 9, 1985. Additionally, a complete financial report of actual receipts and expenditures of the Association for the calendar year 1985 was not furnished to unit owners on or before May 1, 1986. The fiscal year for the Association is the calendar year.

   
   

2. The Association's By-Laws provide that an audit of the accounts shall be made annually and that a copy of the report shall be furnished to each member of the Association no later than May 1st of the year following the year for which the report is made. The assessments imposed against members of the Association are guaranteed at a rate of $45.00 per month by the "developer guarantee" provided for in the Declaration of Condominium. The developer guarantee remains in effect until the unit owners, other than the developer, elect a majority of the members of the Board of Administration. In this instance, that election was October 12, 1987. The developer is required to fund the common expenses of the Association which exceed the amount of assessments collected from the unit owners other than the developer.

   
   

3. The Association budgets provide for monthly funding of reserves for roof replacement, building re-painting and pavement resurfacing of $22.22,

   $50.00 and $50.00, respectively, for those three reserve accounts. From March 25, 1985, through October 12, 1987, the reserve accounts were not funded by

   Fallone. There has been no waiver or reduction in the obligation to maintain the reserves at the agreed-upon amount. The amounts not funded from March 25, 1985, through October 12, 1987, total, for Phase I, $3,737.48; for Phase II,

   $2,375.76.

   
   

4. Fallone became a "subsequent developer" of the condominium on March 25, 1985, when Howard P. Logue transferred his units to Fallone. When that transfer occurred, on March 25, 1985, the reserve accounts set forth in Paragraph 12 above had not been funded. The amount not funded from July 31, 1984, through March 25, 1985, is $950.14.

   
   

5. Fallone entered into a Purchase Agreement with Mary O'Mealy on June 12, 1985, for unit 418, Phase II, of the condominium. It entered into a Purchase Agreement with Arthur and Rita Begin on October 12, 1985, for unit 523, Phase II, of that condominium. Fallone did not make any filing or registration for Phase II of the condominium until after October 12, 1985.

   
   

6. "Turnover" to the unit owners occurred on October 12, 1987. On that date, Fallone failed to deliver to the Association, at the time association control was turned over from Fallone to the unit owners, "other than the developer, all property of the unit owners and of the Association "held or controlled by the developer," Fallone. This "turnover" was not performed within sixty (60) days following the "turnover" which occurred on October 12, 1987, when the unit owners (other than the developer) elected a majority of the Board of Administration. The property that Fallone failed to turnover to the Association consisted of the Declaration of Condominium and all amendments thereto; a certified copy of the Articles of Incorporation of the Association; a copy of the By-Laws; the Minute Books, including all minutes and other books and records of the Association; any house rules and regulations which had been promulgated; resignations of Officers and Members of the Board of Administration who are required to resign because Fallone is required to relinquish control of the Association; the financial records covering the period of time from incorporation of the Association through turnover; the "Association Fund", or control thereof; all tangible personal property of the Association which is part of the common elements and an inventory of that property. Additionally, Fallone failed to convey a copy of the plans and specifications used in construction of the condominium with related certificate of authenticity; insurance policies; all written warranties of the contractor and sub-contractors, etc., as well as a roster of unit owners and leases of the "common element" and other leases to which the Association is a party.

   
   

7. Fallone was additionally required to convey any employment or service contracts in which the Association is a contracting party or service contracts in which the Association or the unit owners have an obligation to pay fees or charges to persons performing a service, as well as all other contracts to which the Association is a party, as well as certificates of occupancy and any other permits applicable to the condominium property issued by governmental bodies. Fallone failed to deliver all this property to the Association on the "turnover date" mentioned above. Fallone additionally expended working capital contributions in the amount of $100.00, collected from a purchaser at a closing, during the period of the developers "guarantee of assessments," when they were supposed to have been guaranteed at a level of $45.00 per month.

   CONCLUSIONS OF LAW

   
   

8. The Division of Administrative Hearings has jurisdiction over the subject matter and of the parties to this proceeding. Section 120.57(1), Florida Statutes.

   
   

9. The Division of Florida Land Sales, Condominiums and Mobile Homes is a state agency charged with the duty to enforce and insure compliance with the provisions of Chapter 718, Florida Statutes and Rules promulgated thereunder. See Section 718.501, Florida Statutes. The Division has the authority to impose a civil penalty not to exceed $5,000.00 against a developer for each separate violation of Chapter 718. See Section 718.501, Florida Statutes.

   
   

10. Fallone has violated Section 718.12(2)(e), Florida Statutes, by failing, while in control of the Association, to mail copies of the proposed annual budget of common expenses to the unit owners not less than fourteen (14) days prior to the September 23, 1985, budget meeting.

    
    

11. Fallone also violated Section 718.111(13), Florida Statutes, by failing, while in control of the Association to mail or furnish to all unit owners a financial report of actual receipts and expenditures on or before May 1st of the year following the year for which the report is, made as required in the Association By Laws.

    
    

12. Fallone violated Section 718.12(2)(f)(2), Florida Statutes, as well as Rule 7D-23.004(2), Florida Administrative Code, by failing, while in control of the Association, to insure the full funding of reserve accounts from March 25, 1985, through October 12, 1987. Fallone's liability for unfunded reserves for Phase I is $3,727.48 and for Phase II is $2,375.76.

    
    

13. The unrefuted evidence of record and the above Findings of Fact establish that Fallone violated Section 718.116(8)(b), Florida Statutes, and Rule 7D-18.006(8), by expending working capital contributions, while in control of the Association, which were collected from a purchaser at a closing during the period when the developer guaranteed assessments pursuant to contract. Fallone's liability for the working capital contributions wrongfully collected and expended is thus $100.00.

    
    

14. Fallone also violated Section 718.502(2)(a), Florida Statutes, and Rule 7D-17.003(2), Florida Administrative Code, by entering into two purchase contracts for condominium units in Phase II of the development on July 12, 1985, and October 12, 1985, respectively, prior to filing the appropriate condominium registration documents with the Division.

    
    

15. Fallone, as provided in Section 718.116(1)(a)(8)(a), Florida Statutes, is jointly and severally liable for all unpaid assessments on units transferred from Howard P. Logue to Fallone on March 25, 1985. These assessments include unfunded reserves from July 31, 1984, through March 25, 1985, in the amount of

    $950.14.

    
    

16. Finally, Fallone violated Section 718.301, Florida Statutes, as shown by unrefuted evidence of record, by failing to deliver to the Association, at the turnover of the Association's control from the developer to the unit owners, all property of the unit owners and of the Association held or controlled by the developer. That property not conveyed to the Association is identified in the

Findings of Fact above. Thus, the unrebutted, competent evidence of record and the above Findings of Fact show that, as to each of the charges in the Amended Notice to Show Cause, the Respondent has been shown to be guilty.

RECOMMENDATION

Having considered the foregoing Findings of Fact and Conclusions of Law, it is, therefore, RECOMMENDED

That the Division of Florida Land Sales, Condominiums and Mobile Homes enter a Final Order finding Fallone guilty of the violations charged in the Amended Notice to Show Cause dated August 2, 1988; and

That Fallone shall therefore be required to pay the Division a total civil penalty in the amount of $10,000.00.

DONE AND ENTERED this 14th day of December, 1988, in Tallahassee, Leon County, Florida.

P. MICHAEL RUFF, Hearing Officer Division of Administrative Hearings The Oakland Building

2009 Apalachee Parkway

Tallahassee, Florida 32399-1550

(904)488-9675

Filed with the Clerk of the Division of Administrative Hearings this 14th day of December, 1988.

APPENDIX PETITIONER'S PROPOSED FINDINGS OF FACT:

Petitioner's Proposed Findings of Fact 1 - 24 are accepted.

COPIES FURNISHED:

Thomas Presnell, Jr., Esquire Staff Attorney

Department of Business Regulation Tallahassee, Florida 32399-1007

J. J. Andreano

c/o Fallone Construction, Inc.

221 North Causeway, Suite B New Smyrna Beach, Florida 32069

Docket for Case No: 87-003121

Orders for Case No: 87-003121