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

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1 STATE OF FLORIDA DEPARTMENT OF BUSINESS AND PROFESSIONAL REGULATION DIVISION OF FLORIDA LAND SALES, CONDOMINIUMS, AND MOBILE HOMES IN RE: PETITION FOR ARBITRATION PAULA I. KATZ and HAROLD L. KATZ, Petitioners, v. Case No THE THIRTY-THREE SIXTY CONDOMINIUM ASSOCIATION, INC., Respondent. / SUMMARY FINAL ORDER On March 21, 2002, unit owners Paula I. Katz and Harold L. Katz (petitioners) filed a petition for arbitration naming The Thirty-Three Sixty Condominium Association, Inc. as respondent. The petition alleges that two of the seven board members, Arnold Alexander and Allen Kurtis, have served more than three terms consecutively without the required one year of non-service, in violation of Article IV, Section 13(b)(4), of the bylaws as amended on September 20, The petition also alleges that the respondent s governing documents are silent as to the method and/or manner by which the number of board members is to be determined; therefore, the board should be composed of five members pursuant to section (2)(a)1., Florida Statutes. As relief, the petitioner requests an order requiring the respondent to remove the two board members who have allegedly served more than three consecutive terms and that until such time as the 1

2 governing documents are amended to provide for a method by which to select the number of board members, that the number be set at five. On April 18, 2002, the respondent filed an answer to the petition and moved to dismiss and/or strike the petition for arbitration. The respondent admits that Mr. Alexander and Mr. Kurtis have served as board members for more than three years consecutively. However, the respondent denies that Mr. Alexander and Mr. Kurtis service as board members for more than three consecutive years violates the provision that prohibits service for more than three consecutive terms. The respondent also asserts that the rule is invalid because the one-year-of-non-service requirement violates section (2)(d), Florida Statutes, and rule 61B , Florida Administrative Code. The respondent further asserts that the rule is invalid because it is contained within the Nominating Committee section of the bylaws, in that such a committee is prohibited by rule 61B , Florida Administrative Code. Finally, the respondent argues that this claim should be dismissed because the notice of the violation was not sent to the association until one month after the questioned election was concluded, permitting the association no time to comply. On June 18, 2002, the respondent filed a suggestion of death of Allen Kurtis, stating that Mr. Kurtis died on May 30, The dispute is, therefore, moot with regard to him. As to the claim involving the number of board members, the respondent moved to dismiss and or to strike this claim, asserting that the association was not 2

3 provided advance written notice of this dispute. On June 24, 2002, in their reply to the answer, the petitioners admit that they did not provide advance written notice of the claim involving the number of board members. Thus, this claim is dismissed without prejudice for failure to comply with section (4)(b), Florida Statutes. The next issue to be decided is whether Article IV, Section 13(b)(4), of the bylaws which requires unit owners to spend one year off of the board after serving three consecutive terms as a board member violates section (2), Florida Statutes, and rule 61B , Florida Administrative Code. Article IV, Section 13(b)(4), of the bylaws provides: (b) The responsibilities of the Nominating Committee shall be: * * * No Director may serve more than three (3) consecutive terms. The individual will then be eligible to serve on the Board only after a lapse of one (1) year of non-service. In reliance on rule 61B (1), Florida Administrative Code, the respondent argues that Article IV, Section 13(b)(4), of the bylaws creates an impermissible limitation on running for the board of directors beyond those outlined in Florida Statutes and Florida Administrative Code and that any such additional limitations are invalid unless a majority of the voting interests voted affirmatively to maintain and/or create such a provision after June 14, Rule 61B (1)(c), Florida Administrative Code, provides as follows: (c) In order to adopt different voting and election procedures in its bylaws pursuant to Section (2)(d)7., Florida Statutes, an association must obtain the affirmative vote of a majority of the total 3

4 voting interests even if different amendatory procedures are contained in an association s bylaws. Such vote must be taken on or after June 14, The phrase different voting and election procedures as used in this rule and as used in Section (2)(d), Florida Statutes, refers to procedures used only for the election of board members. (Emphasis Added) Article IV, Section 13(b)(4), of the bylaws does not amend the procedures used for electing board members; instead, it establishes a limitation on an individual s ability to serve on the board. Therefore, a majority of the voting interests was not required to vote to reaffirm this bylaw provision after June 14, In addition, term limits were held to be valid in Visoly v. Buckley Towers Condominium Association, Inc., Arb. Case No , Summary Final Order (November 2, 1994). The respondent further argues that Article IV, Section 13(b)(4), of the bylaws violates rule 61B (3), Florida Administrative Code, because it is contained within the Nominating Committee section of the bylaws. Rule 61B (3), Florida Administrative Code, provides: (3) A board of administration shall not create or appoint any committee for the purpose of nominating a candidate or candidates for election to the board. A board may create or appoint a search committee which shall not have the authority to nominate any candidate, but may encourage qualified persons to become candidates for the board. Article IV, Section 13, of the bylaws provides, in part: Section 13. Nominating Committee (a) The Nominating Committee shall be appointed by the President of the Board of Directors. The Committee 4

5 shall consist of five (5) members each of whom shall have a voting right. Two (2) members of the Nominating Committee shall be present Board members. Three (3) members of the Nominating Committee shall not be members of the Board then in office and shall not be spouses of the incumbent Board members. The Committee shall elect its own chairperson. (b) The responsibilities of the Nominating Committee shall be: (1) To recommend and evaluate individuals to serve on the new Board. (Emphasis Added) * * * Although rule 61B , Florida Administrative Code, prohibits a committee whose purpose is to nominate candidates and Article IV, Section 13 of the bylaws provides for the creation of such a committee, the language of Article IV, Section 13(b)(4), is not inextricably linked to the existence of any such committee. The fact that an otherwise valid provision is located within or near a section of the bylaws that contains some invalid provisions does not in and of itself invalidate the valid provision. Furthermore, Article XIX(N) of the declaration of condominium provides that: If any term, covenant, provision, phrase or other element of the Condominium documents is held invalid or unenforceable for any reason whatsoever, such holding shall not be deemed to affect, alter, modify or impair in any manner whatsoever, any other term, provisions, covenant or element of the Condominium documents. Based on the foregoing, Article IV, Section 13(b)(4), of the bylaws is a valid provision. 5

6 The respondent admits that Mr. Alexander and Mr. Kurtis have served as board members for more than three years consecutively. However, the respondent denies that Mr. Alexander and Mr. Kurtis have served on the board for more than three consecutive terms. In essence, the respondent is arguing that a year of service as a board member does not necessary constitutes a term in office. Article IV, Section 1 of the bylaws provides guidance on this point and provides, in part, as follows: The term of each Director s service shall extend until the next annual meeting of the members, and thereafter, until his successor is duly elected and qualified, or until he is removed in the manner provided in Section 3, below. The above provision provides that a board member s term ends at the next annual meeting. The fact that the two board members had been in office for three years at the time of the January 8, 2002, annual meeting supports a finding that the two board members had been in office for three terms. The two board members first term ended at the 2000 annual meeting, their second term ended at the 2001 annual meeting and their third term ended at the 2002 annual meeting. Regardless of how the board members came to be in office for these three years, be it having been unopposed at elections or as holdovers, by operation of Article IV, Section 1 of the bylaws they have served three terms. The time served after the January 2002 election constitutes service as a board member after having served for three consecutive terms in office without spending one year off of the board, in violation of Article IV, Section 13 of the bylaws. 6

7 Finally, the respondent argues that this claim should be dismissed because the unit owners failed to give pre-arbitration notice of the violation since notice was not sent to the association until one month after the questioned election was concluded, permitting the association no time to comply. This argument is rejected because the dispute was not ultimately ripe prior to the board members taking office beyond having served for three consecutive terms. The petitioners could not have given notice of the violation prior to the January 2002 election because at that point no violation had actually occurred. WHEREFORE, it is found that the association failed to conduct its election in accordance with its governing documents when it permitted Arnold Alexander and Allen Kurtis to seek and then take office as board members after Mr. Alexander and Mr. Kurtis had served three consecutive terms in office without having spent one year of non-service on the board. Based on the foregoing, it is ORDERED: 1. Mr. Arnold Alexander is hereby removed from the board. 2. The dispute is moot as to Mr. Allen Kurtis. 3. In the future, the association shall comply with the term-limit requirement contained within Article IV, Section 13(b)(4), of the bylaws. 4. The unit owners request that the number of board members be set at five is dismissed for failure to provide advance written notice as required by section (4)(b), Florida Statutes. 7

8 DONE AND ORDERED this 11th day of September 2002, at Tallahassee, Leon County, Florida. RIGHT TO TRIAL DE NOVO Cassandra Pasley, Arbitrator Arbitration Section Department of Business and Professional Regulation 1940 North Monroe Street Tallahassee, Florida Pursuant to section , Florida Statutes, this decision shall be binding on the parties unless a complaint for trial de novo is filed by an adversely affected party in a court of competent jurisdiction in the circuit in which the condominium is located within 30 days of the date of mailing of this order. This final order does not constitute final agency action and is not appealable to the district courts of appeal. ATTORNEY S FEES As provided by s , F.S., the prevailing party in this proceeding is entitled to have the other party pay its reasonable costs and attorney s fees. Rule 61B , F.A.C., requires that a party seeking an award of costs and attorney s fees must file a motion seeking the award not later than 45 days after rendition of this final order. The motion must be actually received by the Division within this 45-day period and must conform to the requirements of rule 61B , F.A.C. The filing of an appeal of this order does not toll the time for the filing of a motion seeking prevailing party costs and attorney s fees. CERTIFICATE OF MAILING I hereby certify that a true and correct copy of the foregoing was mailed by U.S. mail, postage prepaid, to: Edward Dicker, Esquire, Dicker, Krivok & Stoloff, P.A., 1818 Australian Avenue South, Commerce Pointe, Suite 400, West Palm Beach, FL and Kenneth W. Lipman, Esquire, Siegel, Lipman, Dunay & Shepard, LLP, The Plaza, Suite 801, 5355 Town Center Road, Boca Raton, FL 33486, this 11th day of September Cassandra Pasley, Arbitrator 8

9 EDWARD DICKER ESQUIRE DICKER KRIVOK & STOLOFF PA 1818 AUSTRALIAN AVENUE SOUTH COMMERCE POINTE SUITE 400 WEST PALM BEACH FL KENNETH W LIPMAN ESQUIRE SIEGEL LIPMAN DUNAY & SHEPARD LLP THE PLAZA SUITE TOWN CENTER ROAD BOCA RATON FL