STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

DEPARTMENT OF BUSINESS AND )

PROFESSIONAL REGULATION, )

DIVISION OF HOTELS AND )

RESTAURANTS, )

)

Petitioner, )

)

vs. ) Case No. 98-5002

) JOSEPH P. McCLASH, d/b/a 317-359 ) EAST 61st AVENUE APARTMENTS, )

)

Respondent. )

)

RECOMMENDED ORDER

Pursuant to notice, a formal hearing was conducted in this case on October 14, 1999, in Bradenton, Florida, before

Lawrence P. Stevenson, a duly-designated Administrative Law Judge of the Division of Administrative Hearings.

APPEARANCES

For Petitioner: Gail Hoge, Esquire

Office of General Counsel Department of Business and

Professional Regulation 1940 North Monroe Street

Tallahassee, Florida 32399-2202

For Respondent: Joseph P. McClash

405 26th Avenue, West Bradenton, Florida 34205

STATEMENT OF THE ISSUE

The issue presented for decision in this case is whether Respondent’s duplexes are subject to licensure under Chapter 509, Florida Statutes.

PRELIMINARY STATEMENT

By Notice to Show Cause dated August 20, 1998, Petitioner notified Respondent that the Division alleged that Respondent was operating eight duplexes without a license, in violation of Section 509.241(2), Florida Statutes. On October 9, 1998, Respondent disputed the allegations of the Notice to Show Cause. On November 9, 1998, Petitioner forwarded the matter to the Division of Administrative Hearings for assignment of an Administrative Law Judge and the conduct of a formal administrative hearing in this matter, pursuant to Section 120.57(1), Florida Statutes. The final hearing was twice continued, then scheduled for and held on October 14, 1999.

At the final hearing, Petitioner presented the testimony of Victoria Bagley and Frank Cryan, both sanitation and safety specialists with the Division of Hotels and Restaurants.

Respondent testified on his own behalf and also presented the testimony of Bruce Branch, Respondent’s property manager; Hansel C. Hollinsworth, an appraiser with the Manatee County Property Appraiser’s Office and an expert in the field of

property appraisal; and the deposition testimony of Gary Tillman, who at the times relevant to this proceeding was acting district administrator of the Division of Hotels and Restaurants.

Petitioner’s Exhibits 1-9 were admitted into evidence.

Respondent’s Exhibits 1-6 were admitted into evidence.

A Transcript of the final hearing was filed on December 16, 1999. On January 4, 2000, the parties filed a joint Request for Extension of Time to File Proposed Recommended Orders, which was granted. Respondent filed a Proposed Recommended Order on January 26, 2000. Petitioner filed a Proposed Recommended Order on January 28, 2000.

FINDINGS OF FACT

Based on the oral and documentary evidence adduced at the final hearing, and the entire record in this proceeding, the following findings of fact are made:

1. At all times relevant to this proceeding, Respondent owned lots with the street addresses of 317, 323, 329, 335, 341, 347, 353, and 359 61st Avenue East, Bradenton, Florida. On each of these eight lots stands a one-story duplex, making a total of sixteen rental units on the lots. None of the units is licensed as a "public lodging establishment" as defined in Section 509.013(4), Florida Statutes.

2. The eight lots are situated on a plot of land recorded in Manatee County as "Pine Hollow Subdivision, Unit No. 1," in Section 13, Township 35 South, Range 17 East, Manatee County, Florida. The eight lots encircle a cul-de-sac. None of the lots are separated by a public street or highway.

3. Each of the sixteen units is leased through a written rental agreement. The lease on each unit is for a period of one

   year. Each of the sixteen rental agreements is signed by Respondent as landlord.

4. Respondent testified that, as landlord, he oversees the operation of the sixteen rental units. Respondent’s employee, Bruce Branch, has managed the properties for four years, handling the leasing of the units, collection of rents, and maintenance. All rental monies for the sixteen units are deposited into a single bank account and recorded on a single collection report.

5. Mr. Branch testified that the units are always leased as sole residences for tenants, and are never leased for periods of one month or less. Mr. Branch stated that since he began as property manager, there have never been more than four units vacant at any one time.

6. Victoria Bagley is a sanitation and safety specialist with the Division of Hotels and Restaurants. She conducts public lodging and public food service inspections, and investigates consumer complaints. She testified that her office received a complaint from a man residing at 323 61st Avenue East regarding a leaking ceiling and other possible building violations.

   Ms. Bagley visited the property to investigate the complaint.

   
   

7. Ms. Bagley testified that the complainant told her that the duplex he lived in was owned by Respondent, and that Respondent also owned the neighboring duplexes. Ms. Bagley checked the Division’s records but found no licensing information for Respondent. She checked the property appraiser’s records and

   determined that Respondent was the owner of the eight lots and duplexes described above. Ms. Bagley then contacted Respondent and met him at his office.

8. Ms. Bagley testified that she showed Respondent the results of her inspection and reviewed with him the licensing requirements of Chapter 509, Florida Statutes. She testified that they went over the statute in some detail, including the list of exclusions from the licensing requirement found at Section 509.013(4)(b), Florida Statutes.

9. Ms. Bagley testified that she had a subsequent telephone conversation with Respondent about the licensing requirements. She stated that Respondent also discussed the possibility of selling or changing ownership of some of the properties.

10. Respondent disputed whether Ms. Bagley showed him a copy of Chapter 509, Florida Statutes, at their initial meeting, though he did not contest any other aspect of Ms. Bagley’s testimony. Ms. Bagley specifically recalled that they reviewed a copy of Chapter 509 and discussed the definition of "public lodging establishment" in some detail. Ms. Bagley’s version of events is credited.

11. Frank Cryan, a sanitation and safety supervisor with the Division of Hotels and Restaurants, inspected Respondent’s properties on February 25, 1998. He testified that the purpose of this inspection was to determine whether the property required

    licensure, and concluded "obviously it did." Mr. Cryan left a copy of his written inspection report with Respondent.

12. On February 26, 1998, Respondent sent, via facsimile transmission, an inquiry to Gary Tillman, the Division’s acting district administrator, regarding the licensure requirements for the sixteen rental units. On the same date, Mr. Tillman responded as follows, in relevant part:

    If you decide to follow through with an ownership change, please supply this office with documentation to that effect.

    I am enclosing a copy of our application should you decide not to make changes in the operation of these rental units.

    
    

    If we do not receive documentation by the date noted on the inspection [March 12, 1998], we will continue with our procedures as prescribed by law.

    
    

13. Respondent testified that he understood Mr. Tillman’s response to mean that a change in ownership of the eight lots would obviate the licensing requirement. Mr. Tillman denied that his response was intended to provide advice of any kind to Respondent, but was merely a request to provide his office with documentation regarding changes in ownership status of the properties.

14. By warranty deeds dated March 31, 1998, Respondent transferred the ownership of each of the eight lots to eight separate trusts, with Respondent named as trustee of each trust. Respondent as trustee maintained "full power and authority to protect, conserve, sell, lease or encumber or otherwise manage

    and dispose of the real property" described in the warranty deeds. After execution of the warranty deeds, Respondent continued to contract with renters as "landlord" of the properties.

15. Ms. Bagley inspected the properties again on August 18, 1998. Her report of this inspection again noted that the sixteen units were being rented without the license required by Chapter 509, Florida Statutes.

    CONCLUSIONS OF LAW

    
    

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

17. Pursuant to Section 509.261, Florida Statutes, the Division of Hotels and Restaurants is empowered to regulate and discipline public food service establishments and public lodging establishments.

18. Petitioner has the burden of proof in a disciplinary proceeding and must meet that burden by providing clear and convincing evidence of the allegations made against Respondent, where Petitioner seeks to impose administrative fines for violations of statutes. Department of Banking and Finance, Division of Securities and Investor Protection v. Osborne Stern and Company, 670 So. 2d 932 (Fla. 1996). This burden includes those facts necessary to establish regulatory jurisdiction.

19. Section 509.241(1), Florida Statutes, provides in relevant part that "Each public lodging establishment and public food service establishment shall obtain a license from the division."

20. Section 509.013(4), Florida Statutes, provides, in relevant part:

    1. "Public lodging establishment" means any unit, group of units, dwelling, building, or group of buildings within a single complex of buildings, which is rented to guests more than three times in a calendar year for periods of less than 30 days or 1 calendar month, whichever is less, or which is advertised or held out to the public as a place regularly rented to guests. License classifications of public lodging establishments, and the definitions therefor, are set out in s.

       509.242 . . .

       
       

    2. The following are excluded from the definition in paragraph (a):

* * *

1. Any place renting four rental units or less, unless the rental units are advertised or held out to the public to be places regularly rented to transients.

   
   

2. Any unit or group of units in a condominium, cooperative, or timeshare plan and any individually or collectively owned one-family, two- family, three-family, or four-family dwelling house or dwelling unit that is rented for periods of at least 30 days or 1 calendar month, whichever is less, and that is not advertised or held out to the public as a place regularly rented for periods of less than 1 calendar month, provided that no more

than four rental units within a single complex of buildings are available for rent.

1. Section 509.013(7), Florida Statutes, defines "single complex of buildings" to mean "all buildings or structures that are owned, managed, controlled, or operated under one business name and are situated on the same tract of land or plot of land that is not separated by a public street or highway."

2. Much of the evidence and supporting argument in this case was directed at the two exclusions from the definition of "public lodging establishment" set forth above. Petitioner argued that the eight lots should be considered in the aggregate as a "single complex of buildings," and thus that the sixteen units exceed the "four units or less" limitation of the exclusions found at Section 509.013(4)(b)3 and 4, Florida Statutes. Respondent contended that the change in ownership effected by his trust arrangement meant that each lot should be considered separately, and thus should qualify for either of the exclusions.

3. However, prior to reaching the applicability of the exclusions, the threshold issue of whether Respondent’s properties meet the primary definition of a "public lodging establishment" must be addressed. The quoted definition sets forth three criteria: 1) any unit, group of units, dwelling, building, or group of buildings; 2) within a single complex of buildings; and 3) which is rented to guests more than three times

   in a calendar year for periods of less than 30 days or 1 calendar month, whichever is less, or which is advertised or held out to the public as a place regularly rented to guests.

4. The evidence establishes that Respondent’s properties constitute a unit, group of units, or group of buildings. The evidence establishes that Respondent’s properties constitute a "single complex of buildings." Despite the change of ownership, the properties continue to be "managed, controlled, or operated under one business name." Respondent was simply mistaken in believing that setting up eight paper trusts would suffice to remove his properties from the expansive definition of "single complex of buildings" found at Section 509.013(7), Florida Statutes.

5. Petitioner did not establish by clear and convincing evidence that Respondent’s properties met the third criterion set forth above. Respondent affirmatively established that none of the sixteen units is "rented to guests more than three times in a calendar year for periods of less than 30 days or 1 calendar month." In fact, the units are leased for periods of one year. Thus, it was incumbent on Petitioner to establish that the properties are "advertised or held out to the public as a place regularly rented to guests."

6. Petitioner produced no evidence as to how Respondent secures tenants for his units. Nothing in the record indicates that the units are "advertised or held out to the public" at all.

   Petitioner also failed to establish clearly that a one-year lease satisfies the "regularly rented" criterion, which at least arguably contemplates a regular turnover of tenants, given its proximity in the statute to the "less than 30 days or 1 calendar month" requirement.

7. In a similar case, Administrative Law Judge Stephen F. Dean noted, "Although one might presume regular rentals or a holding out from the fact that the apartments are occupied, there is no basis for such a presumption expressed in the statute. To do so would be an assumption in the absence of a statutory presumption or evidence." Department of Business and Professional Regulation, Division of Hotels and Restaurants v. Charles B. Reid and J.K. Dukes, d/b/a Dukes Apartments, DOAH Case No. 99-0126 (Recommended Order, August 31, 1999).

8. Petitioner has the burden to prove all the facts necessary to establish jurisdiction. Petitioner failed to carry that burden in clear and convincing fashion in this case, and may not here prevail. This conclusion does not bar further action by Petitioner against this Respondent, if Petitioner can marshal the evidence necessary to establish that Respondent’s units are required to be licensed pursuant to Chapter 509, Florida Statutes.

RECOMMENDATION

Upon the foregoing findings of fact and conclusions of law, it is recommended that the Department of Business and

Professional Regulation, Division of Hotels and Restaurants, enter a final order dismissing this case.

DONE AND ENTERED this 5th day of May, 2000, in Tallahassee, Leon County, Florida.

LAWRENCE P. STEVENSON

Administrative Law Judge

Division of Administrative Hearings The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399-3060

(850) 488-9675 SUNCOM 278-9675

Fax Filing (850) 921-6847 www.doah.state.fl.us

Filed with the Clerk of the Division of Administrative Hearings this 5th day of May, 2000.

COPIES FURNISHED:

Dorothy W. Joyce, Director Division of Hotels and Restaurants Department of Business and

Professional Regulation 1940 North Monroe Street

Tallahassee, Florida 32399-0792

Barbara D. Auger, General Counsel Department of Business and

Professional Regulation 1940 North Monroe Street

Tallahassee, Florida 32399-0792

Gail Hoge, Esquire Department of Business and

Professional Regulation 1940 North Monroe Street

Tallahassee, Florida 32399-0792

Joseph P. McClash

405 26th Avenue, West Bradenton, Florida 34205

NOTICE OF RIGHT TO SUBMIT EXCEPTIONS

All parties have the right to submit written exceptions within 15 days from the date of this recommended order. Any exceptions to this recommended order should be filed with the agency that will issue the final order in this case.

Docket for Case No: 98-005002

Orders for Case No: 98-005002