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 The Ridges Maintenance Association, Inc., Petitioner, v. Case No Homeowners Voting For Recall, Respondent. / SUMMARY FINAL ORDER Statement of Issue The issue in this case is whether homeowners can directly recall members of the board of directors if the governing documents provide that the directors are chosen by representatives of the homeowners neighborhoods, and not directly by the homeowners. Procedural History On June 15, 2007, The Ridges Maintenance Association, Inc. (the Association) filed a petition for recall arbitration. On June 28, 2007, the arbitrator entered an Order Allowing Answer that also required Respondent to file a sequentially numbered set of recall ballots, with Petitioner to file an Amended Petition with reference to the numbered ballots. On July 19, 2007, a telephone case management conference confirmed the need for the sequentially numbered and acknowledged the issue of whether homeowners can cast valid recall ballots for directors when the governing documents 1

2 provide for election of directors by voting representatives chosen for several different neighborhoods. An Order of July 20, 2007, directed the parties to submit legal memoranda addressing the voting representative issue. This Summary Final Order is prepared after receipt of the numbered ballots, of Petitioner s Memorandum, of Petitioner s Second Amended Petition, of Respondent s Memorandum and of Respondent s Answer with attachments, the last of which were filed on August 20, Findings of Fact 1. The total number of membership parcels in the association is 1,498. A total of 885 ballots were submitted for recall on June 4, The Board of Directors of the Association held a meeting on June 9, 2007, at which it did not certify the recall. 3. The Association rejected all of the ballots because the Articles of Incorporation of the Ridges Maintenance Association provides for classes of members who are required to cast their votes via voting members and, therefore, only the voting members may sign written agreements to recall. 4. The Association rejected individual ballots for the following reasons: a.) 28 homeowners revoked their ballots; b.) 35 duplicate ballots were discounted; c.) 17 ballots were signed by non-owners; d.) 28 ballots listed more replacements than recalled directors; e.) 5 ballots listed more recalled directors than replacements; f.) 17 ballots were signed by persons with no vote certificate; 2

3 g.) 1 ballot selected no directors to be recalled h.) 2 ballots selected no replacements; i.) 1 ballot listed an address that does not exist; j.) 4 ballots had signatures that did not match signatures on file; k.) 2 ballots had improper dates; l.) 3 ballots were from owners delinquent in assessments; m.) All but 8 ballots list for recall a former director who is no longer on the board. 5. Article III of the Articles of Incorporation of The Ridges Maintenance Association, Inc., as amended in 2004, addresses the membership and voting rights in the Association. MEMBERS Section 1. Membership. Every person or entity who or which is a record owner of a fee or undivided fee interest in any Lot which is subject to the Declaration shall be a Member of the Association, provided that any such person or entity who merely holds record ownership merely as security for the performance of an obligation shall not be a Member of the Association. Section 2. Voting Rights. The votes of the Members of the Association shall be cast by their respective classes of Voting Members as follows: Class A. Class A Members shall be all those owners, as defined in Section 1, with the exception of the Developer (as long as the Class B Membership shall exist, and thereafter, the Developer shall be a Class A Member to the extent it would otherwise qualify). As provided for in the By-Laws, Class A Members shall be entitled to elect one (1) Voting Member from each of the thirteen (13) Neighborhoods: Cypress Ridge, Falcon Ridge, Mahogany Ridge, Fern Ridge, Oak Ridge, Fox Ridge, Pine Ridge, Heron Ridge, Sabal Ridge, Lake Ridge, Willow Ridge, Laurel Ridge and Magnolia Ridge. The Voting Members shall elect the Board of Directors as provided for in the By-Laws. 3

4 Voting Members elected by Class A Members shall serve one (1) year terms (but may succeed themselves), unless such terms are terminated or terminate in accordance with the By-Laws. 6. Article VI of the By-Laws, amended 2004, addresses election of the Voting Members, and includes the following: Section 4. Authority of the Board of Directors to Appoint Voting Members. If a Voting Member: (a) has regular annual assessments that are delinquent in excess of ninety (90) days; or (b) resigns relocates, is incapacitated or is otherwise unable or unwilling to serve, the Voting Member s current term may be terminated by the Board of Directors. Under such circumstances, a majority of the Board of Directors at a Special Meeting, may, in its discretion, choose to appoint a Voting Member for such Neighborhood, and such Voting Member is not required to reside in the Neighborhood for which he/she/it is appointed. 7. At least three Voting Member positions have been filled by the directors. Respondent characterizes these as open Voting Members. 8. Article VII of the By-Laws, amended 2004, addresses the meetings of the voting members and election of directors, and includes the following: Section 4. Voting Members Cast Total Allocated Votes to Elect Directors. Each of the thirteen (13) Voting Members shall cast his/her/its total allocated number of votes for as many nominees as there are directorships open for election that year. Voting Members shall vote their total allocated number of voted in blocks for each available directorship and cannot split their votes. The following is a list of the allocated number of votes for each respective Voting Member: Cypress 92 votes Magnolia 133 votes Falcon 108 votes Mahogany 155 votes Fern 94 votes Oak 85 votes Fox 105 votes Pine 151 votes Heron 162 votes Sabal 89 votes Lake 99 votes Willow 123 votes Laurel 102 votes TOTAL 1,498 votes At the present time, there are seven (7) directorships. Commencing in the year 2004 and continuing thereafter, the Board shall serve staggered two-year terms (but may succeed 4

5 themselves). In even numbered calendar years, commencing in the year 2004 and continuing thereafter, the three (3) even numbered directorships (numbers 2,4 and 6) shall be open for election. In odd-numbered calendar years, commencing in 2005 and continuing thereafter, the four (4) odd-numbered directorships (numbers 1,3,5, and 7) shall be open for election. The candidates for election to the Board who receive the highest number of total Voting Member votes shall fill the directorships open for election that year and shall serve on the Board of Directors. Section 5. Authority and Term of Voting Members. Voting Members shall have no authority except to elect directors to the Board of Directors and to amend the By-Laws. Each Voting Member shall serve a one (1) year term (but may succeed themselves). A Voting Member s terms term shall terminate: (1) as provided in Article VI, Section 4 of these By-Laws; (2) if a Voting Member fails to attend two (2) consecutive Voting Member Meetings, which failure shall automatically be deemed a resignation; or (3) if a new Voting Member is elected by the Neighborhood. Voting Members cannot vote by proxy at any Voting Member meeting. 9. The Articles of Incorporation of the Association, as amended in 2004, provide that the Articles may be amended by a majority of the Board of Directors. Conclusions of Law 1. The arbitrator has jurisdiction of the parties and the subject matter of this dispute pursuant to Sections (10) and , Florida Statutes. 2. A Summary Final Order is appropriate in this case pursuant to Rule 61B , Florida Rules of Administrative Procedure, because no disputed issues of material fact exist. 3. The Florida Legislature has provided for recall of members of the board of directors of a homeowners association in the Chapter 720, Florida Statutes, the Homeowners Association Law. Subsection (10), F.S., mandates the powers and duties of such associations and provides the following with respect to the recall of 5

6 directors: (10) RECALL OF DIRECTORS. (a)1. Regardless of any provision to the contrary in the governing documents, subject to the provisions of s regarding transition of Association control, any member of the board of directors may be recalled and removed from office with or without cause by a majority of the voting interests. 2. When the governing documents, including the declaration, articles of incorporation, or bylaws, provide that only a specific class of members is entitled to elect a board director or directors, only that class of members may vote to recall those board directors so elected. (b) 1. Board directors may be recalled by an agreement in writing or by written ballot without a membership meeting. 4. Section (13), F.S. provides: Voting Interest means the voting rights distributed to the members of the homeowners association, pursuant to the governing documents. 5. The Homeowners Law provides for the election of officers in subsection , titled, Meetings of members; voting and election procedures; amendments. Wide latitude is allowed to the method of electing directors: (9) ELECTIONS. Elections of directors must be conducted in accordance with the procedures set forth in the governing documents of the association. All members of the association shall be eligible to serve on the board of directors, and a member may nominate himself or herself as a candidate for the board at a meeting where the election is to be held. Except as otherwise provided in the governing documents, boards of directors must be elected by a plurality of the votes cast by eligible voters. Any election dispute between a member and an association must be submitted to mandatory binding arbitration with the division. Such proceedings shall be conducted in the manner provided by s and the procedural rules adopted by the division. 6. The starting point for legal analysis must be the intent of the Florida Legislature to provide a right to recall to homeowners regardless of any provision to the 6

7 contrary in the governing documents. The association documents must be interpreted and found to provide such a right exercisable by each owner. 7. Legal analysis must also provide a method in which each owner may participate by written ballot without a membership meeting, as provided in subsection (10)(b). The recall subsection also allows a recall at a meeting, if the declaration, articles of incorporation, or bylaws specifically provide. Because no similar proviso applies to the written recall, it must be concluded the right to use a recall ballot overrides any conflicting association documents. Cf., Palm Greens at Villa Del Ray Recreation Association v. Schlossberg, Arb. Case No (August 13, 2003)(Condominium documents provided the only members of the master association were six voting members, three elected to represent each of two sub-associations. Arbitrator rejected assertion that only voting members could recall board members, in part, because it did not provide unit owners their right to a written recall). Cf., Sea Ranch Club Condominium Association, Inc. v. Patti, Arb. Case No (November 25, 1997)(Rejecting by-laws requiring two-thirds vote of members and prior notice for recall) Basic corporation law, applicable to homeowners associations, provides that if a director is elected by a voting group of shareholders, only the shareholders of that voting group may participate in the vote to remove him. Section , Florida Statutes. Precedents addressing condominium recalls recognize the validity of class voting and restriction of a right to recall within a class. Cf., Villa Dorada Condominium Association, Inc. v. Unit Owners voting for Recall, Arb. Case No (December 7

8 10, 1993) (provision that unit owners from a particular building may elect one director from that building, held to provide those unit owners, but only those unit owners, with right to recall that building s director). Cf., In re: Kingsley at Century Village Condominium III Association, Inc., No. 89L-211 (March 1, 1990), Declaratory Statement (Department of Business Regulation, Division of Land Sales, Condominium and Mobile Homes)(directors of master association elected by class, with separate buildings each constituting separate class to elect one director). 9. On the other hand, if application of the governing documents with respect to class voting has the effect of disenfranchising the individual homeowners, the arbitrator will enforce the right of direct recall of directors. Cf., Palm Greens at Villa Del Ray Recreation Association, Inc. v. Schlossberg, supra. 10. The governing documents of The Ridges Maintenance Association are not straightforward. The Association simplified and streamlined the Voting Member procedure set forth in the original articles of incorporation. The By-laws now give the Board the authority to appoint Voting Members who do not represent particular neighborhoods. Although perhaps unintentional and unanticipated, when that authority was exercised, a logically necessary consequence is that a neighborhood is without a Voting Member. In that event individual homeowners are disenfranchised in contravention of the original Articles of Incorporation. 11. In addition the amended Articles now give the Board the authority to amend the Articles and By-laws by simple majority vote of the Board. 12. It must be concluded that the current governing documents have done 1 This Order uses the introductory signal, Cf. for cases decided by the Division that address similar 8

9 away with distinctions of Voting Member representatives and representative government for all neighborhoods in the association. In fact, the Board has assumed to itself such authority that it must be recognized as an at-large governing body. 13. Because the Board now sits as an at-large authority, the individual homeowners must be able to exercise direct written recall of all directors. 14. From the 885 ballots submitted, it is appropriate based on the pleadings, without other evidence, to subtract out the 28 ballots that were revoked for whatever reason, 35 of the ballots that represented duplicates and 17 ballots that were signed by non-owners. Assuming the numbers alleged by Petitioner for those categories, that leaves the recall with Recall ballots will not be rejected because they list more replacement candidates than recalled directors. The recall of board members and election of replacement candidates are independent and severable matters. Cf., Three Lakes Village Condo. Ass n, Inc. v. Unit Owners Voting for Recall, Arb. Case No , Summary Final Order (April 7, 2004). Therefore, any deficiencies in the election of replacement candidates will be dealt with independent of the recall and will not invalidate the recall of the board members. 16. Recall ballots will not be rejected because they list more directors for recall than replacement candidates. 17. Petitioner s governing documents do not contain a provision requiring a voting certificate for the vote of a parcel owned by a corporation, trust or multiple individuals, so no recall ballots can be rejected for lack of a voting certificate. issues in the context of condominium associations. The legal precedents in these cases are considered 9

10 18. The ballots for 4233 Mahogany Ridge (Bates No. 153) and 3856 Falcon Ridge (Bates No. 646) did not check off any recall boxes, so they must be subtracted from the total, leaving Recall ballots will not be rejected because no replacement candidates are selected. 20. Although the incorrect address on the ballot is not explained, the recall ballot for 4234 Greenbriar Lane, (instead of Mahogany Ridge) (Bates No. 154) will be accepted because the homeowner is entitled to vote, and her vote will not be rejected for a mistake that does not affect the substance of the recall. 21. General allegations that a signature does not match a document on file will not justify rejection of a recall ballot. 22. Ballots will not be rejected for stale dates unless it is clear they were signed outside 120 days before service of the recall. Generally, a total lack of a date will not invalidate a recall ballot. Cf., Barwood Condo III Assoc., Inc. v. Unit Owners Voting for Recall, Arb. Case No (April 11, 2002). 23. Based on the governing documents three ballots will be rejected because the owners were more than 90 days delinquent in assessments, leaving The fact that a list of directors on a recall ballot form includes the name of a person who is no longer a director is not reason to reject the ballot as to the other directors. 25. After reviewing the retain/recall boxes on the remaining ballots, the number of votes to recall the board members are: analogous although they address different statutes. 10

11 a. Jeffrey Wertman 798 ballots b. Steve Bucchiere 795 ballots c. Elliott Starman 795 ballots d. Raphael Buitrago 794 ballots e. Steve Clein 792 ballots Based upon the foregoing, it is ORDERED: 1. The recall of board members Jeffrey Wertman, Steve Bucchiere, Elliott Starman, Ralph Buitrago and Steve Clein is CERTIFIED. 2. Michael Smith, Deborah Parmenter, Jose Navarro and Jacqueline Wagy shall take seats on the Board, effective immediately. Because of a tie between Raymond Orsi and Mark Scanlon, the newly constituted Board shall choose one of them to serve as the additional replacement Director. 3. Within five (5) days of this Order, each of the recalled board members shall hand over all association property and documents in his or her possession to one of the members of the new board. DONE AND ORDERED this 27th day of August, 2007, at Tallahassee, Leon County, Florida. Bruce A. Campbell, Arbitrator Dept. of Bus. and Prof. Reg. Arbitration Section 1940 North Monroe Street Tallahassee, Florida

12 Certificate of Service I hereby certify that a true and correct copy of the foregoing summary final order has been sent by U.S. to the following persons on this 27th day of August, 2007, as indicated below: Steven M. Davis, Esq. Becker & Poliakoff 121 Alhambra Plaza, 10th Floor Coral Gables, FL Rob Hyman, Esq. Tripp Scott 110 SE 6th Street Ft. Lauderdale, FL Bruce A. Campbell, Arbitrator 12