Respondent failed to investigate or negligently investigated the background of a tenant as required by a property management agreement; (b) Respondent allowed the tenant to pay her rent late for several months; (c) Respondent failed to institute timely eviction proceedings against the tenant; (d) Respondent had negative balances in her rental escrow account February through April 1998; and (e) Respondent withdrew funds from her rental escrow account and deposited the funds into her operating account without proper authorization.
On or about March 18, 2002, Respondent requested an administrative hearing. Petitioner referred this request to the Division of Administrative Hearings on July 8, 2002.
Administrative Law Judge Charles C. Adams issued A Notice of Hearing by Video Teleconference on August 20, 2002. The
notice scheduled the hearing of the instant case and a related case (DOAH Case No. 02-2721PL) for September 24, 2002.
During the hearing, Petitioner presented the testimony of two witnesses. Respondent testified on her on behalf but presented no other witnesses.
Petitioner offered Exhibit Nos. P1-P24, which were admitted into evidence. Petitioner's Exhibit Nos. P1-P18 are related primarily to the instant case and are filed herein.
Petitioner's Exhibit Nos. P19-P24 are related primarily to DOAH Case No. 02-2721PL and are filed in that case.
A Transcript of the September 24, 2002, hearing was filed on October 21, 2002. Because the instant case and DOAH Case No. 2721PL share the hearing Transcript, it is filed in the instant case.
Petitioner filed a Proposed Recommended Order in the instant case and DOAH Case No. 02-2721PL on October 31, 2002. Respondent filed a Proposed Order addressing issues in the instant case and DOAH Case No. 02-2721PL on October 24, 2002.
Petitioner is charged with regulating and enforcing the statutory provisions pertaining to persons holding real estate broker and salesperson licenses in Florida.
Respondent is and was, at all times material to this case, a licensed real estate broker, having been issued license
No. 0372849. Respondent's license is currently voluntarily inactive because she did not renew it. At all times material here, Petitioner was an agent and the broker of record for Park Avenue Properties, Inc.
In December 1995, Respondent, as agent for Park Avenue Properties, Inc., entered into an agreement with Elizabeth Field (Miss Field) to rent and manage rental property located at 1709 Hall Drive, Tallahassee, Florida (the property). Mrs. Paula Field owned the property but authorized her daughter, Miss Field, to enter into the management agreement with Respondent.
The management agreement states as follows in pertinent part:
Owner Agrees:
to give the Agent the following authority and agrees to assume all expenses connected with: to advertise the property, display a sign on it, and rent it; to investigate the references of prospective tenants; to sign leases for terms of no less than 12 months; to renew or cancel existing leases and negotiate new leases.
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to terminate tenancies and sign and serve notices Agent deems necessary and Owner approves; to sue for and recover rent; to instigate eviction procedures. Owner will pay expenses of litigation including attorney's fees, and may select the attorney to handle such litigation.
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to allow Agent to collect minimum rent of $600 and deposit it to owners
account. . . .
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to allow Agent to collect a security deposit of $600 and first month's rent in advance and deposit them in Agents escrow accounts. Escrow funds accrue no interest for Owner nor Agent and are not accounted for in Owner's monthly statements.
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7) to allow the Agent to withhold a commission of 10 percent of all rent due on leases during the management agreement period as compensation for the management services.
Pursuant to the management agreement, Respondent facilitated Donnda T. Williams' application to rent the property. The application states that, upon its acceptance, it would become a lease agreement beginning on August 22, 1997, and continuing until July 31, 1998. According to the application, rent was payable in advance on the first day of each month in installments of $595 per month.
Respondent checked Ms. Williams' references but did not otherwise investigate her credit. Respondent did not perform a public records search to determine whether Ms. Williams was the subject of prior eviction proceedings or whether she had civil
judgments against her. Respondent subsequently accepted the application, which became a lease agreement.
Ms. Williams was late in paying the rent in September through December 1997. Respondent had to "really chase"
Ms. Williams to get the rent in November 1997 because the rent check bounced when Respondent deposited it the first time.
Respondent's efforts to collect the November 1997 rent included contacting Ms. Williams' mother. At that time, Respondent learned about Ms. Williams' prior eviction in Leon County and prior civil judgments as described below.
Respondent's father became seriously ill in January 1998. Respondent flew to the State of Washington to
nurse her father and was out of the State of Florida for most of January, February, and March of 1998. During her father's illness, Respondent made several short trips back to her home in Tallahassee, Florida. After the death of Respondent's father, she returned to Tallahassee, Florida, in April 1998.
Ms. Williams did not pay her January 1998 rent until late February 1998. Respondent did not receive any additional rent payments from Ms. Williams.
On March 9, 1998, Respondent sent Ms. Williams a three-day notice demanding the payment of rent. The notice stated that Ms. Williams owed $1,190 in rent for February and
March 1998. There is no evidence that Respondent sent Ms. Williams any other such notices.
Sometime after March 9, 1998, Harper Field, Esquire, informed Respondent that he was going to try to collect the rent for his wife, Mrs. Field. Because he was unable to collect the April 1998 rent, Mr. Field sent Ms. Williams a second three-day notice demanding payment of rent.
Mr. Field insisted that Respondent begin eviction proceedings against Ms. Williams in May 1998. In fact,
Mr. Field "begged" Respondent to initiate these proceedings on his wife's behalf. Any evidence that Ms. Field requested Respondent to begin eviction proceedings in January or February 1998 is hearsay and in direct conflict with Respondent's testimony, which is credited in this regard.
Respondent initiated an eviction proceeding against Ms. Williams on May 4, 1998. In a letter dated June 2, 1998, from Respondent to the circuit judge, Respondent stated as follows: (a) Ms. Williams had not paid any rent since paying the January 1998 rent in February 1998; (b) Ms. Williams was five months behind in paying her rent; (c) Ms. Williams was still living at the property; and (d) Ms. Williams has a prior eviction in Leon County, Florida, and had a judgment against her for not paying for her furniture. Respondent sent a copy of the letter to Mr. Field, informing him for the first time about
Ms. Williams' prior eviction and about the civil judgments against her.
The record indicates that First Union Bank secured a Final Judgment and Execution against Ms. Williams in May 1995.
W.S. Badcock Corporation secured a Writ of Replevin and Possession against Ms. Williams in October 1996. In a third case, Charles Culp secured a Final Judgment for Eviction and a Writ of Possession against Ms. Williams in April 1997. There is persuasive evidence that Respondent became aware of these cases against Ms. William when Respondent contacted Ms. Williams' mother in November 1998.
Ms. Williams vacated the property owing six months of rent for the months of February through July 1998 before Respondent's eviction proceeding against Ms. Williams was concluded. Ms. Williams "trashed" the property before she vacated it causing Mrs. Fields to incur out-of-pocket expenses for damages not covered by insurance.
The record is not clear how Respondent's eviction case against Ms. Williams was finally resolved. However, the Administrative Complaint does not allege that Respondent was negligent in prosecuting the case.
Mr. Fields subsequently filed a complaint with Petitioner alleging that Respondent had mismanaged the property. During the investigation of the complaint, Respondent furnished
Petitioner with requested documentation regarding the entire Williams/Field transaction for the months of February through April 1998. The documentation included monthly statement reconciliations for Respondent's rental escrow account and her operating account, bank statements for these accounts, and copies of supporting checks, deposits slips, and transfers.
Respondent's monthly statement reconciliations for her rental escrow account from February through April 1998 revealed negative balances. The monthly statement reconciliations are a more accurate reflection of the transactions that occurred in the account than a corresponding bank statement.
Respondent transferred $1,000 from her rental escrow account to her operating account on February 10, 1998. Respondent's February and April bank statements for her rental escrow account and her operating account did not reflect negative balances.
Respondent's March 1998 bank statement for the rental escrow account had two overdrafts, one on March 19 and another one on March 20. She transferred $1,000 on March 2, 1998, and
$8,000 on March 16, 1998, from her rental escrow account to her operating account. The $8,000 transfer resulted in a negative balance on Respondent's monthly statement reconciliation for her rental escrow account.
Respondent made the transfers referenced above because she was in the State of Washington nursing her father when she was required to make disbursements from the rental escrow account. She claims that she went to see her father after receiving an emergency call that her father was gravely ill and that she grabbed her operating account checkbook to take with her. She did not have the rental escrow account checkbook with her so she transferred the money to her operating account and wrote the necessary disbursement checks from her operating account.
Respondent flew home to Florida from the State of Washington for a few days in January 1998, and at the end of February and March 1998, before making her final trip home to Florida in April 1998. She did not explain why she did not pick up her rental escrow account checkbook on one of these trips so that she would not have to continue to disburse money from her operating account that should have been disbursed from her rental escrow account. More importantly, Respondent did not explain why her monthly statement reconciliations had negative balances.
Respondent did not inform her clients that she was paying them from her operating account. The clients never noticed that Respondent paid them from the wrong account. All of the clients received the correct disbursements. Even so,
Respondent knew she was not allowed to commingle funds in the two accounts and that she was required to keep all rental escrow funds in a separate account until disbursement was properly authorized.
The instant case is not the only time that Respondent has been the subject of a disciplinary proceeding. She admitted during the hearing that Petitioner previously had cited her and "smacked her on the wrist" for not disbursing funds in a timely fashion.
CONCLUSIONS OF LAW
The Division of Administrative Hearings has jurisdiction over the parties and the subject matter of this proceeding. Sections 120.569 and 120.57(1), Florida Statutes.
Petitioner has the burden of proving by clear and convincing evidence that Respondent violated Sections 475.25(1)(b) and 475.25(1)(k), Florida Statutes. Ferris v. Turlington, 510 So. 2d 292 (Fla. 1987); Florida Department of Transportation v. J.W.C. Company, Inc., 396 So. 2d 778 (Fla. 1st DCA 1981); Balino v. Department of Health and Rehabilitative Services, 348 So. 2d 349 (Fla. 1st DCA 1997).
Section 475.25(1)(b), Florida Statutes, authorizes Petitioner to discipline a licensee that is guilty of culpable negligence or breach of trust in any business transaction. It is immaterial to the licensee's guilt whether the victim, or
intended victim, has sustained no damage or loss. Section 475.25(1)(b), Florida Statutes.
Section 475.25(1)(k), Florida Statutes, authorizes Petitioner to discipline a licensee that fails to place funds entrusted to such licensee as a broker in escrow and to keep such funds therein until disbursement is properly authorized.
In this case, the evidence is not clear and convincing that Respondent failed to properly investigate the background of Ms. Williams before allowing her to enter into a lease agreement for the property. The management agreement required Respondent to check the tenant's references. Respondent complied with this requirement. The management agreement did not require Respondent to perform a background check of the tenant's credit history.
However, Ms. Williams was late paying the rent almost from the beginning. By November 1997, Respondent knew about Ms. Williams' prior eviction and unfavorable credit history but failed to inform Mrs. Field about Ms. Williams' background. Clear and convincing evidence indicates that Respondent allowed Ms. Williams to continue to pay her rent late through January 1998, without sending a notice demanding payment and knowing that Ms. Williams was not likely to ever pay her rent on time.
When Ms. Williams failed to pay her January 1998, rent until the end of February 1998, and then failed to pay any rent
in March 1998, Respondent was negligent in failing to initiate eviction proceedings. Instead, Respondent intentionally waited until Mr. Field begged her to do so in May 1998.
Respondent totally disregarded the harm to Mrs. Fields in not receiving any rent for six months before Ms. Williams vacated the property. As a direct result of Respondent's negligent management of the property, Mrs. Field also incurred damages when Ms. Williams trashed the property. In light of all the circumstance, Respondent's management of the property constitutes culpable negligence and/or a breach of trust in violation of Section 475.25(1)(b), Florida Statutes.
Petitioner established by clear and convincing evidence that Respondent's monthly statement reconciliations for her rental escrow account in the months of February through April 1998 reflected negative balances. For the month of March 1998, Respondent's bank statement for her rental escrow account had two overdrafts. The $8,000 transfer that she made in March 1998 resulted in a negative balance in her monthly statement reconciliation for that month.
Respondent's explanation for the negative balances and overdrafts is insufficient. Respondent's statement that her clients never knew about the disbursements being made from her operating account shows her open disregard for her clients' interests and the resulting prejudice to them.
In fact, Respondent stated during the hearing that it would have been wrong for her to use her sales escrow account to make the payments because she would have been using someone else's money. Therefore, Respondent knew or should have known that it was culpable negligence or a breach of trust to transfer funds from her rental escrow account to her operating account to make disbursements to her clients and to pay her operating or personal expenses from commingled funds. This is especially true where the transactions resulted in negative balances and unauthorized transfers in violation of Sections 475.25(1)(b) and 475.25(1)(k), Florida Statutes.
The penalties that may be imposed on Respondent include the following: (a) revocation of license;
