STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

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

)

Petitioner, )

)

vs. ) CASE NO. 91-3652

)

SARASOTA SANDS OWNERS )

ASSOCIATION, INC., )

)

Respondent. )

)

RECOMMENDED ORDER

A hearing was held in this case in Sarasota, Florida on August 29, 1991 before Arnold H. Pollock, a Hearing Officer with the Division of Administrative Hearings.

APPEARANCES

For the Petitioner: Mark Henderson, Esquire

Department of Business Regulation 725 South Bronough Street Tallahassee, Florida 32399-1007

For the Respondent: Daniel E. Scott, Esquire

2710 Main Street

Sarasota, Florida 34237 STATEMENT OF THE ISSUES

The issue for consideration herein is whether the Respondent should be disciplined in some fashion because of the violations alleged by the Petitioner in the Notice to Show Cause filed herein on March 20, 1991.

PRELIMINARY STATEMENT

On March 20, 1991, Matthew M. Carter, II, Director of the Department's Division of Land Sales, Condominiums, and Mobile Homes, (Division), filed a Notice to Show Cause in this caseagainst the Respondent, Sarasota Sands Homeowners Association, Inc., (Association), alleging various violations of Section 721.07, Florida Statutes, by the Respondent including that it failed to file a public offering statement offering the time share plan with the Division for approval and thereafter entered into 18 contracts for the sale of time share periods in the complex; used a sales contract which failed to meet the requirements of the statute; failed to establish an escrow account pursuant to the Department's rules; failed to refund the deposit made by a purchaser within

20 days of written demand for refund; and failed to establish an ad valorem tax escrow account and secure a tax escrow bond for ad valorem taxes and special

assessments. Thereafter, on April 4, 1991, through counsel, Respondent filed its response to the Notice to Show Cause in which it denied the allegations contained therein. By letter dated June 10, 1991, the file was forwarded to the Division of Administrative Hearings for appointment of a Hearing Officer and after the parties' Joint Response to the Initial Order, received on June 28, 1991, the undersigned, by Notice of Hearing dated July 2, 1991, set the case for hearing in Sarasota on August 29, 1991 at which time it was heard as scheduled.

At the Hearing, Petitioner presented the testimony of Joseph T. Aube, the President of the Association, and introduced Petitioner's Exhibits 1 through 8 and 10 through 13. Petitioner's Exhibit 9 for Identification was not admitted. Respondent presented the testimony of Wendy S. Holcomb, manager of the Association's office; Ann Marie Shenko, the real estate broker whohandles Respondent's sales; and Mr. Aube who testified for the Petitioner. Respondent also introduced Respondent's Exhibit A.

A transcript was provided and both parties submitted proposed Findings of Fact which have been ruled upon in the Appendix to this Recommended Order.

The parties entered into an oral stipulation at the hearing, prior to the taking of testimony, in which they agreed that Sarasota Sands is a time-share resort; that Chapter 721 and the Department and Division have jurisdiction over Respondent's operation; that the original developer filed a time-share plan; that the original creating developer turned over control to an owner's association board but the association is engaged in litigation with the developer because of an alleged failure to turn over all documentation required by statute as well as certain funds; and that the sale of 18 time-share periods, as identified in the Administrative Complaint, were time-share periods at the resort. At the request of the parties, the undersigned officially recognized Chapter 721, Florida Statutes, 1989, and the 1990 Supplement thereto, and Rules 7D-37 and 7D-38, F.A.C., the Department's rules regarding time share-plans and solicitors.

FINDINGS OF FACT

1. At all times pertinent to the allegations contained herein, the Petitioner, Department, was the state agency responsible for the regulation of the sale and operation of time-share condominiums in Florida. The Respondent, Association, is a successor owner organization made up of owners of time- shareperiods in the complex, Sarasota Sands, located in Sarasota, Florida.

   
   

2. Joseph T. Aube is President of the Association and has held that office since 1986. He has been an owner at Sarasota Sands since 1981. At that time, the complex was controlled by the initial developer. The complex was sold out prior to 1982, but the initial developers still maintained control of the Association Board with the individual owners being a minority representation.

   In 1982, however, the initial developer turned over to the period owners control of the Association. When Mr. Aube became President of the Association, he asked the management company then holding the contract with the Association for the records developed by the initial developer which pertained to the Association, but the manager was able to come up with nothing. He was told at the time that the Board was not to be bothered with management but to satisfy itself with being mere figureheads, leaving management up to the initial developers and the management company they had hired.

   
   

3. Notwithstanding, when Mr. Aube took over as President, he was under the impression that the initial developers owned only their own units as individuals

   and that the balance of the units had been sold out to investors. There was, then, no sales force on the premises. Though turnover was to have taken place at the June, 1982 meeting of the Board, the management company hired by the original developers continued to manage the Association's business until it was discharged by Mr. Aube when hetook over as President in 1986. After the first management company was dismissed, the Association became the management entity and remains so to this date, operating through a manager hired by and responsible to it.

   
   

4. The 18 units in issue came into the possession of the Association as a result of foreclosure. On foreclosure, the units belong to the Association as a whole, and when they are resold, the Association gets the proceeds of the sale. Most of the units in issue had been owned by the initial developer which held mortgages on them. When Mr. Aube signed the contracts and deeds for resale, he signed as President of the Association as seller. The By-Laws of the Association call for the President to sign any documents which pertain to the business of the Association. The deeds in question refer to units which were sold by a licensed broker with whom the Association contracted to procure buyers and to whom a commission for each sale was paid by the Association. No escrow agreement was filed with the Division because the Association did not receive any of the deposit or other money pending closing. The deposits were held by the independent broker who handled the sale. The Association has never taken title to any units other than by foreclosure and it has never solicited or sold time-share units other than those which came into its possession through foreclosure.

   
   

5. In addition, the Association did not file any documents with the Bureau of Time-Share that are required by developers prior to offering and selling time-share periods, nordid it provide a public offering statement, approved by the Division, to any of the 18 purchasers who contracted to purchase these 18 units through the independent broker. The contract forms used by Ms. Shenko for these sales did not include the language required for inclusion in time-share sales contracts by Section 721.06, Florida Statutes. Further, with respect to these sales, the Association failed to establish an escrow account for the deposit of any funds received from the purchasers of those periods sold through the broker. Since no escrow agreement was established, none was furnished to the Division for approval.

   
   

6. On or about January 17, 1989, Wendy S. Holcomb, the Association's manager for the complex, prepared a check drawn on the Association's account with the First Florida Bank, in the amount of $126,719.95, payable to Barbara Ford-Coates, Tax Collector of Sarasota County. The check, which was signed by Mr. Aube and Ms. Holcomb, was payment in full of the entire amount due for ad valorem real estate taxes for 1988 on the Sarasota Sands Complex. This fund did not come from a tax escrow account. The Association does not maintain such an account, agreement or bond. It was paid from the operating account of the Association since there was sufficient funds therein to pay the taxes without first receiving the tax payments due from individual owners.

   
   

7. Tax notices were sent to the owners in January, 1989 for the 1988 taxes, and the money was due from the owners by January 31. When it came in, the money was not placed into an escrow account but was used to reimburse the operating accountsince that account had advanced the funds to pay the taxes prior to the date they were due. This practice is still followed. In essence, Ms. Holcomb admittedly never holds any money which she received from the individual owners for taxes in escrow.

8. Deposit money received from purchasers is held by the broker, not by the Association. Proceeds from sales are received only after closing and are used to reimburse the Association for money spent. No money utilized by the Association comes from any deposit money. The Association never even sees any deposit money except that which is forfeited by prospective purchasers and which is then released to it as liquidated damages under the terms of the purchase contract. Therefore, the Association did not have an independent escrow agent and received no funds from time share purchasers which had to go into an escrow account.

   
   

9. So long as Ms. Holcomb has been an employee of the Association, since 1985, the Association has never solicited units for sale and has sold only those it has received through foreclosure.

   
   

10. With regard to the current allegations, as manager of the Association, Ms. Holcomb claims she was contacted by the Department by mail in either March or April, 1991 and was furnished the Notice to Show Cause. Prior to receiving that document, however, she had had no contact from the Department regarding any allegations of misconduct. There was a prior visit by a Ms. Clark from the Department who asked for books and records but she claimed she was there only to review the operation. She made no referenceto specifics of the allegations involved here, and Ms. Holcomb interpreted her visit as a routine inspection and asked no questions.

    
    

11. Ann Marie Shenko, a licensed real estate broker, who maintains her office in one of the units in the complex, arranged the sale of the 18 units in issue here. She drew up the contracts and prepared a few of the deeds. Most deeds, however, were prepared by a title company as is routine in the conveyance of residential real estate. Ms. Shenko did no outside advertising for Sarasota Sands. She makes all sales by referral from others. When she gets a deposit on a unit, she places it into her trust account with the Southeast Bank. The Association is not a party to that account. Any proceeds received from a consummated sale are ultimately disbursed by the title company which handles the closing.

    
    

12. In March, 1989, Ms. Shenko received a letter from Mr. and Mrs Terry Estepp in which they requested the refund of the $560.00 deposit they had placed with her for the purchase of a time unit at Sarasota Sands. Ms. Shenko had determined to forfeit the deposit and sought the advice of the Real Estate Commission because the Estepps had failed to respond timely to several pieces of correspondence she had sent them about the property. When they finally decided not to go through with the sale and requested a refund of their deposit, she refused to return it until, after advice from the Real Estate Commission, she agreed to do so and wrote a check for the sum in question on her own business account. At no time was the Association involved in this transaction.

    
    

13. Of the 18 contracts and deeds in issue, no one other than the Estepps requested a refund of their deposit. She claims never to have been contacted by the Department regarding how she conducts her business and feels the operation is routine.

    
    

14. Of the 18 units in issue, all were acquired by foreclosure and none goes back unsold to initial construction. Eleven of the 18 purchasers were already owners at Sarasota Sands; 6 were RCI exchanges, (owners at other similar and related resorts); and 1 was the renter of an existing unit, (the Estepps). All had had some contact with time-shares and so far as she knows, the Estepps are still interested in purchasing a time-share period at Sarasota Sands.

15. Ms. Shenko has a trust account as a part of her real estate business. It is not an escrow account. She has never sent an escrow agreement, reflecting she had such an account, to the Department. When she gets a time-share customer, she takes a deposit which goes into that trust account. The contract for purchase is then forwarded to a title company for closing. Upon payment in full at closing, the seller is paid and she gets her commission. The buyer gets title to the unit purchased. She is not instructed by the Association regarding the disbursement of sales proceeds and gets no compensation from the Association except a commission on the sales of units owned by it - only the 18 in issue here.

    
    

16. Though Ms. Shenko maintains her primary businessoffice in the Sarasota Sands complex, she pays no rent or utility cost - only phone. She receives no salary or guarantee from the Association and has been compensated by the Association solely through the commissions she receives on those few sales for it. She does receive commissions from unit owners when she sells their units to someone else, just as any real estate agent would. The majority of her

    business is in transfers of units within the Sarasota Sands complex.

    
    

17. As to the two previous Consent Orders involving the Association, involved neither the sale nor resale of units by the Association. In one case the Association paid a small fine for alleged irregularities relating to the dismissal of the former management company. In a ratification vote take subsequent to the discharge, 90% of the owners approved the Association's action of dismissal.

    
    

18. The other prior action relates to an ad valorem tax account and again, while the Association was chastised and fined for failure to maintain an escrow account, there was no indication the taxes were not paid when due. In neither case were the actions the result of intentional disobedience of statutes or the Department's rules. In fact, in the Spring of 1989, after reading an article about successive developers, Mr. Aube had the Association's representative contact the Department for clarification and got no answer. Though counsel contacted the Department by letter, at no time, either directly or through counsel, did the Association receive any guidance from the Department. As a result it acted on advice of counsel.

    
    

    CONCLUSIONS OF LAW

    
    

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

    
    

20. Petitioner has alleged in the Administrative Complaint that Respondent has, in several particulars, violated the provisions of Chapter 721, Florida Statutes. Strict procedural protections apply in disciplinary cases and the burden is on the prosecuting agency to prove its case. Specifically, Petitioner claims the Association is a successor developer and is, therefore, required to file a public offering statement prior to offering time share plans for sale, in violation of Section 721.07, Florida Statutes. This allegation relates to the

    18 units which were owned by the Association as a result of foreclosure action taken by it because of the failure of owners to pay maintenance or other fees. Each sale is considered a separate violation.

21. Section 721.07, Florida Statutes, provides in pertinent part:

    
    

    Prior to offering any time-share plan, the developer must file a public offering statement with the division for approval. The developer shall furnish each purchaser with a copy of the approved public offering statement.

    
    

22. Under the provisions of Section 721.05(9), a "developer" includes:

    
    

    1. A "creating developer" which means any person who creates the time-share plan;

    2. A "successor developer" which means any person who succeeds to the interest of persons in this subsection by sale, lease, assignment, mortgage, or other transfer, but the term includes only those persons who offer time-share periods for sale or lease in the ordinary course of business and does not include an owner of a time-share period who has acquired his unit for his own occupancy; or

    3. A "concurrent developer" which means any person acting concurrently with the persons in this subsection with the purpose of creating, selling, or leasing time-share periods in the ordinary course of business, but the term does not include a person who has acquired a unit for his own occupancy.

       
       

23. At subsection 721.05 (21), an "owners association" is defined as the association made up of all purchasers of a time-share plan who have purchased time-share estates. Evaluation of the evidence of record clearly demonstrates that the owners association here, the Respondent, was an organization made up of estate owners, by far the majority of whom acquired the units for their own occupancy. The Department has failed to present any evidence that these owners, in the ordinary course of business are engaged in the development, sale, exchange, or leasing of time share periods. To the contrary, the uncontroverted evidence indicates that the only units sold by the association consisted of 18 separate periods covering a total of 20 weeks in different units sold to different individuals. It would be unreasonable to consider the association, made up of such individual owners, as a successor developer since it is clearly not engaged in unit transfers in the ordinary course of business. In fact, the evidence indicates that in the five or so years since theassociation took over from the creating developers, those 18 sales, all arising out of properties foreclosed for unpaid assessments, were the only sales made by the association, as opposed to individual owners. While it is true the foreclosure on properties for that purpose and their subsequent resale is an appropriate part of the normal duties of the association, it is certainly not the prime purpose of the association and can be seen to have been done only on a limited basis.

    
    

24. Since, therefore, the association was not a successor developer, and since the requirement for a public offering statement pertains to a "developer", it cannot reasonably be said that the association is in violation of that requirement.

25. Petitioner also alleges that the Respondent sold the 18 time-share periods using a sales contract which failed to meet the requirements of Section 721.06, Florida Statutes. That provision requires a seller of a time-share plan to provide the purchaser with a contract pertaining to the sale which contained the requirements outlined in subsections (a) through (l), including such information as the date the contract is executed by each party, the names and addresses of the developer; any owner of the underlying fee, and the time-share plan; the total financial obligation of the purchaser; estimated completion date; a description of the nature and duration of the period and the total number of years in the plan; cancellation requirements; tax consideration; means of and time for cancellation, and related matters.

    
    

26. A review of the contracts utilized by the broker representing the Association here clearly reveals it is not consistent with the statutory requirements. It appears to be no more than an adaptation of a normal contract for sale utilized in any residential property transfer. Therefore, were the cited requirements applicable to the Association it would clearly be in violation of the statute, but again, the Association is not a developer subject to the requirements of this provision.

    
    

27. Petitioner also claims Respondent is in violation of Section 721.08(1), Florida Statutes, because it failed to establish an escrow account pursuant to Rule 7D-20.003(1)(c), F.A.C.. The statute requires that, prior to the filing of the public offering statement with the Division, the developer shall establish an escrow account with an escrow agent for the purpose of protecting the deposits of purchasers. All escrow accounts shall be independent of the developer and seller.

    
    

28. Rule 7D-20.003(1)(c), F.A.C. deals with and requires an escrow agent, identified in the escrow agreement filed with the Division, be independent of a condominium developer. However, the Rule provides:

    
    

    (1) ... when the division has reason to question the independence of the escrow agent, the division shall require a statement from the escrow agent attesting to the agent's independence and affirming that there is no conflict between the agent's duties as escrow agent and in any other capacity in which the agent serves. One who is otherwise qualified to serve as an escrow agent, however, will not be precluded from serving in such capacity solely because:

    * * *

    (c) The escrow agent provides brokerage services on behalf of the developer, except that such escrow agent is not independent of the developer with regard to any deposit or payments received by the escrow agent pursuant to any sales ... agreements for which the escrow agent has also served as the developer's sales, rental, or leasing agent.

    
    

29. Here again, the requirements of the statute only become pertinent if it is concluded that the Association is a successor developer. Here it clearly is not. In any case, however, assuming, arguendo it were, the Association did not receive any of the deposits placed by the purchasers of the 18 units in

    question here. The evidence clearly demonstrates that the deposits were received by Ms. Shenko, an independent registered real estate broker, who placed them in her properly constituted trust account and relinquished them only consistent with the requirements of real estate law. The evidence is equally clear that while Ms. Shenko maintains her office in a unit of the complex, and pays no rent to the Association, she is totally independent of that body and is compensated solely by commissions she receives from the independent owners for who she arranges sales of their time-share periods and the few foreclosed properties held briefly, at one time, by the association.

    
    

30. The Division also claims that the Association closed the 18 sales in issue here prior to the expiration of the 10 days contract cancellation period set out in Section 721.10 and failed to refund a deposit within 20 days, in the case of the Estepp contract, from the purchaser's written demand.

    
    

31. The pertinent statute gives a purchaser the right to cancel the contract up to 10 days after it is executed or he receives the last of the mandatory documentation involved. This right of cancellation cannot be waived and no closing may occur until the cancellation period has expired.

    
    

32. Again, this statutory provision applies to developers and escrow agents for developers and it has been determined that in this case, the Association is neither a creating developer nor a successor developer. The Association had a right to require maintenance fees from each owner to support its activities in managing the complex and protecting the interests of the individual owners who make up the Association. When 18 individual owners failed to make their required maintenance payments, the Association, consistent with its By-Laws subscribed to by the individual owners, foreclosed on those delinquent owners and secured title, by foreclosure, to the periods represented in those interests.

    
    

33. The Association is not in the business ofoperating rental periods, and to protect its financial interest in the property upon which it had forclosed and owned, it contracted with an independent broker to arrange a resale of these foreclosed periods, just as any other individual owner could and would do. It was not required to conform to the rules governing the developers of time-share condominiums and its sale of these 18 units prior to the 10 day cancellation period was not improper.

    
    

34. By the same token, the failure of Ms. Shenko to returnthe Estepp's deposit within 20 days after receipt of their written demand is also not a violation, since the rules and laws regarding the operation of condominium time- shares do not apply in this situation. Once the property was turned over to Ms. Shenko for sale, she acted toward the parties as any proper broker would act in a similar disputed situation. Under the rules of the Florida Real Estate Commission, since there was a dispute as to the ownership of a deposit claimed to be forfeited, she requested guidance from the Commission. That body is not required to conform to the time constraints imposed by the statute in issue here. When the Commission spoke, however, Ms. Shenko complied, and no more can be expected or required in such a situation.

    
    

35. In the last two allegations, Petitioner claims a violation of Section 192.037(6)(a) & (b), Florida Statutes, in the Association's failure to establish an ad valorem tax escrow account for ad valorem taxes and special assessments, its failure to secure an escrow agreement, and its failure to secure an escrow bond.

36. Here, as opposed to the previously discussed provision, the onus of responsibility is upon the management, the Association, and clearly, the Association failed to establish the escrow account with an independent escrow agent under proper agreement and with proper bond. However, the question is whether it was needed or not. Mr. Aube and Ms. Holcomb both testified, uncontradicted, that all ad valorem taxes were paid to the appropriate authority out of the Association's operating funds before due and before they were received from the individual owners. All subsequent paymentsfrom the owners of their proportionate share of the ad valorem tax due by the Association were, therefore a reimbursement of an advance made by the Association.

    
    

37. The evidence of record shows that the taxes were paid on time to the appropriate authority in the proper amount. No individual owner was placed in any jeopardy as a result of the Association's actions and in light of the fact that the tax was paid in advance, there is substantial question as to whether the requirement exists at all to create the escrow here in issue.

    
    

38. Whichever standard of proof is applied, that of clear and convincing evidence or that of a mere preponderance, it is clear that the Department's evidence of violation is insufficient to support disciplinary action.

RECOMMENDATION

Based on the foregoing Findings of Fact and Conclusions of Law, it is, therefore recommended that the Notice to Show Cause in this case be dismissed.

RECOMMENDED in Tallahassee, Florida this 15th day of October, 1991.

ARNOLD H. POLLOCK

Hearing Officer

Division of Administrative Hearings The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399-1550

(904) 488-9675

Filed with the Clerk of the Division of Administrative Hearings this 15th day of October, 1991.

APPENDIX TO RECOMMENDED ORDER, CASE NO. 91-3652

The following constitute my specific rulings pursuant to Section 120.59(2), Florida Statutes, on all of the Proposed Findings of Fact submitted by the parties to this case.

FOR THE PETITIONER:

1. Accepted and incorporated herein.

2. & 3. Accepted and incorporated herein.

   1. Accepted and incorporated herein.

   2. - 7. Accepted and incorporated herein.

      1. Accepted to the extent that Respondent did not file any documents with the Bureau of Time-share. Rejected that the requirement for filing pertained to Respondent.

      2. - 12. Accepted and incorporated herein.

         1. Accepted and incorporated herein.

         2. Accepted and incorporated herein.

         3. Accepted and incorporated herein.

         4. Accepted and incorporated herein.

FOR THE RESPONDENT:

1. & 2. Accepted and incorporated herein.

1. - 6. Accepted and incorporated herein.

   1. Accepted.

   2. Not a Finding of Fact but a Conclusion of Law.

   3. Accepted and incorporated herein.

COPIES FURNISHED:

Mark Henderson, Esquire Department of Business Regulation 725 South Bronough Street Tallahassee, Florida 32399-1007

Daniel E. Scott, Esquire 2710 Main Street

Sarasota, Florida 34237

Janet E. Ferris Secretary

Department of Business Regulation 725 South Bronough Street Tallahassee, Florida 32399-1000

Henry M. Solares Director

Division of Florida Land Sales, Condominiums, and Mobile Homes

725 South Bronough Street Tallahassee, Florida 32399-1007

Donald D. Conn General Counsel

Department of Business Regulation 725 South Bronough Street Tallahassee, Florida 32399-1007

NOTICE OF RIGHT TO SUBMIT EXCEPTIONS

All parties have the right to submit written exceptions to this Recommended Order. All agencies allow each party at least 10 days in which to submit written exceptions. Some agencies allow a larger period within which to submit written exceptions. You should consult with the agency which will issue the Final Order in this case concerning its rules on the deadline for filing

exceptions to this Recommended Order. Any exceptions to this Recommended Order should be filed with the agency which will issue the Final Order in this case.

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AGENCY FINAL ORDER

=================================================================

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

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

Petitioner,

vs. CASE NO. 91-3652

DOCKET NO. TS925

SARASOTA SANDS OWNERS ASSOCIATION, INC.,

Respondent.

/

FINAL ORDER

Pursuant to notice, a formal administrative hearing was held in this case on August 29, 1991, before the Division of Administrative Hearings, by its duly designated Hearing Officer, Arnold H. Pollock. The Hearing Officer entered a Recommended Order dated October 15, 1991. Respondent has not filed exceptions to the Recommended Order. The issues for resolution and procedural history of these proceedings as stated in the Recommended Order are incorporated herein.

After examining the Recommended Order and reviewing the record, it is HEREBY ORDERED, as follows:

FINDINGS OF FACT

The Findings of Fact made by the Hearing Officer in the Recommended Order are adopted and incorporated herein as the Findings of Fact by the Division.

CONCLUSIONS OF LAW

1. The DIVISION is the State agency responsible for the enforcement of Chapter 721, Florida Statutes, The Florida Time-Share Act.

   
   

2. The Division of Administrative Hearings has jurisdiction over the subject matter and parties in the action pursuant to section 120.57(1), Florida Statutes.

3. The Respondent, pursuant to section 721.056, Florida Statutes, has the duty and obligation to supervise, manage, and control all aspects of the offering of a time-share plan, including but not limited to promotion, advertising, contracting and closing.

   
   

4. The Division rejects the recommended Conclusion of Law that the Respondent is not a "successor developer" as that term is defined by section 721.05(9)(b), Florida Statutes.

   
   

5. The Division also rejects each recommended Conclusion of Law which finds that Respondent as a matter of law is not a developer and that therefore sections 721.07, 721.06, 721.10 and 721.08, Florida Statutes, do not apply to the sale of the eighteen (18) time-share periods by Respondent. The Division also rejects the recommended Conclusion of Law that the provisions of section 721.06, Florida Statutes, do not apply to the contract used in the sale of the eighteen (18) time-share periods by Respondent.

   
   

6. The Division also rejects the recommended Conclusion of Law which held that although section 192.037(6)(a) and (b), Florida Statutes, require the establishment of an ad valorem tax escrow account with an escrow agreement and escrow bond that Respondents did not "need" an escrow account as a matter of law and therefore did not have to comply with the statutory requirement.

   
   

7. These recommended conclusions of law are incorrect and contradict the plain-meaning of the statute. Section 721.05(9), Florida Statutes, reads in part:

   
   

   (9) "Developer" includes:

   1. A "creating developer," which means any person who creates the time-share plan.

   2. A "successor developer," which means any person who succeeds to the interest of the persons in this subsection by sale, lease, assignment, mortgage, or other transfer, but the term includes only those persons who offer

   time-share periods for sale or lease in the ordinary course of business and does not include an owner of a time-share period who has acquired his unit for his own occupancy; or

   Section 721.05(9)(a) and (b), Florida Statutes (1987)

   
   

   The record reflects that Respondent is the successor to the creating developer and clearly offered time-share periods for sale in the ordinary course of its management activities. All those persons or entities which the legislature decided should not be included in the definition of "successor developer" are exempted out of the statutory coverage. It is clear that the legislature did not intend to include the owner of a time-share period who is selling his own period in the definition of "Developer". This exception is completely distinguishable from the facts in this case which show that Respondent was offering time-share periods for sale after they had taken title to those time- share periods through foreclosure as is its duty pursuant to sections 721.16 and 721,13(2) and (3), Florida Statutes. The Hearing Officer correctly concludes in the recommended Conclusions of Law that the foreclosure and subsequent resale time-share periods to collect unpaid assessments is an appropriate part of the normal duties of Respondent. The Hearing Officer then finds that this foreclosure and resale of time-share periods is not the "prime" purpose of

   Respondent, and therefore Respondent is not a successor developer. The Hearing Officer has clearly replaced the correct statutory standard of "in the ordinary course of business" with a higher standard which requires that the sale of time- share periods must be the prime purpose of Respondent before it can be considered a successor developer. A correct application of Section 72l.05(9)(b), Florida Statutes, finds that the Respondent, Sarasota Sands Owners Association, Inc. is a successor developer as that term is defined by section 72l.05(9)(b), which offered eighteen (18) time-share periods for sale in the ordinary course of its business duties. Accordingly, Respondent is required to comply with the requirements of Chapter 721, Florida Statutes, relating to the offer and sale or time-share periods. These provisions were enacted primarily for the benefit and protection of time-share purchasers. Section 721.02, Florida Statutes, states:

   
   

   721.02 Purposes. - The purposes of this chapter are to:

   1. Give statutory recognition to real property time-sharing in the state.

   2. Establish procedures for the creation, sale, exchange, promotion, and operation of time-share plans.

   3. Provide full and fair disclosure to the purchasers and prospective purchasers of time-share plans.

   4. Require every time-share plan offered for sale or created and existing in this state to be subjected to the provisions of this chapter. Section 721.02, Florida Statutes (1987)

   
   

   It is a common and ordinary practice in the time-share industry for associations such as Respondent to take back and resell time-share periods. There is no minimum numerical threshold written into section 721.05(9)(b), which exempts Respondent because it only offered eighteen (18) time-share periods for sale.

   The legislature intended to protect purchasers whether there were one hundred

   (100) time-share periods for sale or eighteen (18). The sales which Chapter 721, Florida Statutes, is not intended to regulate are expressly exempted from the statute.

   
   

8. The Respondent is the managing entity as that term is defined by section 721.05(17), Florida Statutes.

   
   

9. The Respondent as a successor developer was required to comply with section 721.07, Florida Statutes by filing a

   The public offering statement with the Division for approval prior to offering any time-share periods for sale. Based on the foregoing Conclusions of Law, the Respondent committed eighteen (18) separate violations of section 721.07, Florida Statutes, by failing to file a Public Offering statement with the Division for approval prior to offering eighteen (18) time-share periods (listed in Exhibit A to this Final Order) for sale and failing to provide a copy of a Public Offering statement to each prospective purchaser prior to closing.

   
   

10. Based on the foregoing Conclusions of Law, the Respondent as a successor developer is required to comply with Section 721.10, Florida Statutes. The Respondent committed seventeen (17) separate violations of section 721.10, Florida Statutes, by closing on seventeen (17) contracts for the sale of time- share periods prior to the expiration of the ten (10) day cancellation period.

11. Based on the foregoing Conclusions of Law, the Respondent as a successor developer violated section 721.08(1), Florida Statutes, by failing to establish an escrow account for the purpose of escrowing the deposits of the eighteen (18) time-share period purchasers (listed in Exhibit A to this Final Order) and by its failure to file a copy of the escrow agreement with the Division.

    
    

12. Based on the foregoing Conclusions of Law, the Respondent as a successor developer violated section 721.10(3), Florida Statutes, by failing to provide a refund of a purchaser's deposit within twenty (20) days of receiving the request for refund as provided for in section 721.10(3), Florida Statutes.

    
    

13. The Division rejects the recommended Conclusion of Law which holds that Respondent is not subject to the requirements of section 721.06, Florida Statutes because Respondent is not a successor developer. For reasons discussed above, it is clear that Respondent is a successor developer as that term is defined by section 721.05(9)(b), Florida Statutes. It is not necessary, however, that Respondent be a successor developer in order for the requirements of section 721.06, Florida Statutes, to apply to the sales made by Respondent. Section 721.06, Florida Statutes, reads in part:

    
    

    721.06 Contracts for purchase of time-share periods - (1) No seller of a time-share plan shall fail to utilize and furnish each purchaser of such plan a fully completed copy of a contract pertaining to the sale, which contract shall include the following information.

    Section 721.06, Florida Statutes (1987).

    
    

    This section requires any `seller" of a time period to utilize a contract which includes the requirements set forth in section 721.06, Florida Statutes. The Respondent is the "seller" as that term is defined in section 721.05(23), Florida Statutes. Section 721.05(23), Florida Statutes, reads in part:

    
    

    (23) "Seller" means any developer or any other person, or agent or employee thereof, who is offering time-share periods for sale to the public in the ordinary course of business, except a person who has acquired a time-share period for his own occupancy and later offers it for resale. Section 721.05(23), Florida Statutes (1987).

    
    

    The Respondent is both a successor developer and the seller of the eighteen (18) time-share periods at issue in this case. Based on the foregoing Conclusions of Law, the Respondent committed eighteen (18) separate violations of section 721.06, Florida Statutes by failing to utilize a contract in the sale of the eighteen (18) time-share periods (listed in Exhibit A to this Final Order) which conformed to the requirements of section 721.06, Florida Statutes.

    
    

14. The Division rejects the recommended Conclusion of Law which holds that although Respondent failed to establish an ad valorem tax escrow account and failed to have an independent escrow agent pursuant to sections 192.037(6)(b) and (a), Florida Statutes, there was no violation of the cited sections, because the escrow account was "not needed". Section 192.037(6)(a), Florida Statutes, requires that funds received by a managing entity for ad valorem taxes or special assessments be placed in an escrow account. The

purpose of this section is to provide protection for time-share period owners from improper assessments and the mishandling of funds received from purchasers. This purpose is accomplished by requiring the establishment of an escrow account with an independent escrow agent to record all assessments and disbursements.

Based on the foregoing Conclusions of Law, the Respondent violated sections 192.037(6)(a) and 192.037(6)(b), Florida Statutes, by its failure to establish an ad valorem tax escrow account with an independent escrow agent.

ORDER

Based on the adopted Findings of Fact, Conclusions of Law as modified, and after review of the record,

IT IS HEREBY ORDERED, as follows:

1. For the violations of section 721.08(1), Florida Statutes, the Respondent, Sarasota Sands Owners Association, Inc. shall pay to the Division within twenty-one (21) days from the date of this Final Order, a civil penalty in the amount of Ten Thousand Dollars ($10,000.00).

   
   

2. For the eighteen (18) violations of section 721.07, Florida Statutes, the Respondent shall pay to the Division within twenty-one (21) days from the date of this Final Order, a civil penalty in the amount of Two Thousand Five Hundred Dollars ($2,500.00).

   
   

3. For the eighteen (18) violations of section 72l.06, Florida Statutes, the Respondent shall pay to the Division within twenty-one (21) days from the date of this Final Order, a civil penalty in the amount of Two Thousand Five Hundred Dollars ($2,500.00).

   
   

4. For the seventeen (17) violations of section 721.10, Florida Statutes, the Respondent shall pay to the Division within twenty-one (21) days from the date of this Final Order, a civil penalty in the amount of Five Hundred Dollars ($500.00)

   
   

5. For the violation of sections 721.10(2) and 721.10(3), Florida Statutes, the Respondent shall pay to the Division within twenty-one (21) days from the date of this Final Order, a civil penalty in the amount of Five Hundred Dollars ($500.00).

   
   

6. For the violation of sections 192.037(6)(a) and 192.037(6)(b), Florida Statutes, the Respondent shall pay to the Division within twenty-One (21) days from the date of this Final Order, a civil penalty in the amount of Five Hundred Dollars ($500.00).

   
   

7. For the violation of sections 192.037(6)(a) and 192.037(6)(b), Florida Statutes, the Respondent shall pay to the Division within twenty-One

   (21) days from the date of this Final Order, a civil penalty in the amount of Five Hundred Dollars ($500.00).

   
   

8. The Respondent shall offer rescission of the purchase contract by letter to the seventeen (17) purchasers of time-share periods which are listed in Exhibit A to this Final Order. The letter offering rescission to time-share purchasers shall be approved by the Division, and Respondent shall provide a mailing receipt to the Division certifying that an offer of rescission has been delivered. The Respondent shall provide to the Division a copy of each response received from a time-share purchaser. The Respondent shall, within thirty (30)

days of receipt of a request for rescission and refund from a purchaser of a time-share period listed in Exhibit A to this Final Order, provide evidence to the Division that rescission of the contract and a refund of all monies paid by the time-share purchaser minus benefits received under the plan has been completed.

DONE AND ORDERED this 13 day of January , 1992.

HENRY M. SOLARES, DIRECTOR

Division of Florida Land Sales Condominiums, and Mobile Homes Department of Business Regulation 725 South Bronough Street Tallahassee, Florida 32399-1030

(904) 488-1631

RIGHT TO APPEAL

THIS FINAL ORDER. WHICH CONSTITUTES FINAL AGENCY ACTION, MAY BE APPEALED PURSUANT TO SECTION 120.68 FLORIDA STATUTES AND RULE 9.110, FLORIDA RULES OF APPELLATE PROCEDURE, BY FILING A NOTICE OF APPEAL CONFORMING TO THE REQUIREMENTS OF RULE 9.110(d). FLORIDA RULES OF APPELLATE PROCEDURE, BOTH WITH THE APPROPRIATE DISTRICT COURT OF APPEAL. ACCOMPANIED BY THE APPROPRIATE FILING FEES AND WITH THIS AGENCY WITHIN 30 DAYS OFF RENDITION OF THIS ORDER.

CERTIFICATE OF SERVICE

I HEREBY CERTIFY that a true and correct copy of the foregoing has been furnished by U. S. Mail to Daniel E. Scott, P.A., 210 Main Street, Sarasota, Florida, this 13 day 1992.

CAROLYN CANNON, DOCKET CLERK

* Sale is cancelled, no recission.

Docket for Case No: 91-003652

Orders for Case No: 91-003652