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

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1 STATE OF FLORIDA DEPARTMENT OF BUSINESS AND PROFESSIONAL REGULATION DIVISION OF FLORIDA CONDOMINIUMS, TIMESHARES AND MOBILE HOMES IN RE: PETITION FOR ARBITRATION HOLDEN PROPERTIES, INC., Petitioner, v. Case No LAKE TYLER CONDOMINIUM ASSOCIATION, INC., Respondent. / SUMMARY FINAL ORDER Statement of the Issues The issues presented in the petition are: 1) Whether the Lake Tyler Condominium Association, Inc. ( Association ) violated its bylaws and/or Section (2)(d)2., Florida Statutes, when it did not hold an election in February of 2015, instead, allowing all directors to serve two-year terms that ran concurrently until 2016; and 2) Whether the Association violated its bylaws by not requiring at least three (3) directors to be full-time residents of the condominium. Relevant Procedural History On April 17, 2015, Holden Properties, Inc. (Petitioner) filed a petition for mandatory non-binding arbitration alleging that the Association had violated its bylaws by not holding an election at the annual meeting in February, Petitioner claimed that the Association had allowed the sitting board members, who had held office since Page 1 of 9

2 the 2014 annual meeting and election, to continue to hold office for non-staggered twoyear terms that began at the 2014 annual meeting and election. On May 1, 2015, an Order Requiring Answer was entered. On May 21, 2015, the Association filed a motion to dismiss the petition. The motion was denied on May 28, On June 11, 2015, the Association filed an Answer. Findings of Fact 1. Petitioner is the owner of one or more units in Lake Tyler Condominium which is governed by the Association and its governing documents. 2. The Association is the entity responsible for maintaining the condominium property and implementing the governing documents. 3. Article V, Section 2, of the Association s bylaws states, in pertinent part: Directors (emphasis supplied) When the owner-developer s right to elect the majority of the Board of Directors as hereinabove provided, is terminated, or if it is earlier relinquished by the owner-developer, the number of Directors shall be increased to seven (7) persons, of which the three (3) receiving the most votes shall serve for two years, the remaining four (4) members shall serve for a period of one year. Thereafter at each regular annual meeting of the members, successors shall be respectively elected for a term of two years It is undisputed that the Developer turned over control of the Association to the unit owners long before this dispute arose. 5. Article V, Section 2, of the Association s bylaws, as amended, also provides that at least three of the directors must be full-time residents of the condominium. Page 2 of 9

3 6. The Association scheduled an election for February of 2014 to elect seven (7) board members. 7. Around the time of the 2014 annual meeting or sometime thereafter, the board decided that all of the directors who were seated in 2014 would serve for twoyear terms that would run concurrently. The precise date on which this decision was made is in dispute. 8. The 2014 election notice did not inform unit owners that the board members who were to be elected/appointed would serve for two-year terms. 9. At the 2014 annual meeting/election, there were only seven (7) candidates for seven (7) seats, so no election was held and all 7 candidates were seated. Conclusions of Law The Division has jurisdiction over the parties and the subject matter of this case pursuant to Section , Florida Statutes. Pursuant to Rule 61B , Florida Administrative Code, as there are no disputed issues of material fact, a summary disposition is appropriate. Timeliness The Association claims that Petitioner s challenge to the board s decision not to hold an election in 2015 is untimely, since it claims that the decision to seat all directors for two-year terms was made at the time of the 2014 annual meeting/election. Petitioner disputes that the decision was made in It is undisputed that the membership was not informed in the notice of the 2014 annual meeting and election that board members would be seated for two-year terms and that there would be no opportunity to run for election in Therefore, the Page 3 of 9

4 arbitrator finds that regardless of when the decision was made about anticipated term lengths, and what some board members may or may not have known about it, Petitioner s challenge to the 2015 election (or lack thereof) was timely. Term Length Section (2)(d), Florida Statutes, was amended in 2008 to limit the maximum length of a director's term of office. In 2008, the Division issued a Declaratory Statement In Re: Petition For Declaratory Statement The Decoplage Condo Ass'n, Inc.; Docket No , which addressed the intended application of the 2008 amendment: The legislature intended that the board members' terms must expire at the annual meeting, whether or not it is mentioned in the bylaws. Fla, H.R. Comm. on Saf. and Sec. Council, HB 995 (2008) Staff Analysis 8 (rev. April 14, 2008)(available at f). The legislature created one exception to the one-year term for an association that adopted or reaffirmed an existing bylaw allowing for 2-year staggered terms. Effective July 1, 2013, the statute was further amended 1 to eliminate the requirement that two-year terms must be approved by the membership and that the terms must be staggered. Therefore as of July 1, 2013, the only exception to the statute's intent that terms must expire at the annual meeting, is where an association's bylaws presently permit two year terms or are amended to so provide. Buckley v. Bayshore Diplomat Condo. Ass n, Inc., Arb. Case No , Summary Final Order (July 23, 2015). In the instant case, the Association states that it took no action to reinstate its bylaw provisions requiring staggered two-year terms in response to the The statute also was amended again in 2014, however, the amendment is not pertinent to this case. Page 4 of 9

5 amendment to Section (2)(d), Florida Statutes, and that therefore, directors continued to serve one-year terms for at least 6 years, until the 2014 annual meeting/election. The Association claims that, pursuant to the 2013 amendment to Section (2)(d), Florida Statutes, the provisions in its bylaws that require staggered two-year terms were automatically reinstated. Article V, Section 2, of the Association s bylaws clearly expresses the intent to establish staggered two-year terms, and even describes the method by which the first election after turnover was to accomplish this, which is based upon how many votes each candidate received. The Association argues that the sentence in Article V, Section 2, that states Thereafter at each regular annual meeting of the members, successors shall be respectively elected for a term of two years[.] prohibited it from seating directors for terms of any less than two years at the 2014 annual meeting/election. The Association claims that because there was the same number of candidates as vacant seats at the 2014 annual meeting/election, it could not follow the bylaws instructions for establishing term-lengths at the initial election after turnover. The Association apparently did not consider the possibility that candidates could have drawn straws to establish term-lengths, or that some candidates might have voluntarily agreed to serve one-year terms. The Association claims that in the absence of an election there was no way for it to determine which of the board members would serve which length terms. Therefore, the Association claims, it has no choice but to wait until there is a bona fide election to reinstitute the staggering. Somewhat incongruously, the Association also claims that it has a plan for Page 5 of 9

6 reinstituting staggered terms that it will implement at the 2016 annual meeting/election. The Association does not explain how it plans to accomplish this if there is again the same number of candidates as vacant seats in Where an Association s governing documents are ambiguous, there are legal rules of construction to aid in its interpretation. In Hennessee v. Eden Owners Ass n, Inc., Arb. Case No , Summary Final Order (September 20, 1994), the arbitrator found that: A bylaw is interpreted using the same rules of construction that apply to interpretation of contracts and statutes. When an ambiguity exists, the interpretation that renders a valid reading is preferred over one that renders an invalid reading. 18A Am. Jur. 2d Corporations 323 (1955). Ambiguous clauses are read in conjunction with the governing documents and statutes as a whole. Id. The interpretation that is most reasonable and gives the greatest benefit to the corporation is favored. Id. In the instant case, the bylaws clearly and unequivocally express the intention that board members shall serve staggered two-year terms. The sentence in Article V, Section 2, of the Association s bylaws that states, Thereafter at each regular annual meeting of the members, successors shall be respectively elected for a term of two years[.] is found in the same paragraph that requires some of the initial board to serve one-year terms as a means to achieve staggered terms in all subsequent elections. The statement that directors will thereafter serve two-year terms is a clear instruction on how the staggered two-year terms are to be maintained. The Association s argument that it could not implement the bylaws requirement of staggered terms in 2014 is illogical and contrary to the clear intent of the bylaws. The undersigned Page 6 of 9

7 arbitrator concludes that the Association failed to comply with its bylaws by seating all directors for non-staggered two-year terms. Requirement that board members be full-time residents Chapter 718 presently contains no facial qualifications on the right of an owner to run for the board other than the restrictions contained in Section (2)(d)2., Florida Statutes, that addresses delinquency in payments and convicted felons. Accordingly, any owner not subject to the statutorily-identified restrictions may run for the board. See, e.g., Kassel v. Ocean Villas at St. Augustine Beach Condo. Ass n, Inc., Arb. Case No , Summary Final Order (May 6, 2014); Ludwig v. Tudor Cay Condo. Ass'n, Inc., Arb. Case No , Summary Final Order (December 12, 2003). It follows that in the instant case, the provision in the bylaws that requires some members of the board to be full-time residents is unenforceable. Based upon the foregoing, it is ORDERED: 1. The relief requested by Petitioner, an Order requiring a new election to establish staggered terms for board members, is GRANTED. 2. Within seventy (70) days from the date of this Summary Final Order, the Association shall hold a special election at which four (4) director s seats shall be filled for an initial term that shall end at the February 2016 annual meeting and election and three (3) seats shall be filled for an initial term that shall end at the February 2017 annual meeting and election. 3. If no vote is required, the Association shall determine, either by drawing straws or by agreement, or by another method of its choosing, which of the director s seats shall be filled at the special election for an initial term that shall end at the Page 7 of 9

8 February 2016 annual meeting/election and which shall be filled for an initial term that shall end at the February 2017 annual meeting/election. 4. At each annual meeting thereafter, all vacant seats shall be filled pursuant to Section (2)(d)2., Florida Statutes, and Article V, Section 2., of the Association s bylaws. DONE AND ORDERED this 14 th day of October, 2015, at Tallahassee, Leon County, Florida. Leslie O. Anderson-Adams, Arbitrator Department of Business and Professional Regulation Arbitration Section 1940 North Monroe Street Tallahassee, Florida Telephone (850) Facsimile (850) Trial de novo and Attorney s Fees This decision shall be binding on the parties unless a complaint for trial de novo is filed in accordance with section , Florida Statutes. As provided by section , Florida Statutes, the prevailing party in this proceeding is entitled to have the other party pay reasonable costs and attorney s fees. Any such request must be filed in accordance with Rule 61B , Florida Administrative Code. Certificate of Service appears on the following page. Page 8 of 9

9 Certificate of Service I hereby certify that a true and correct copy of the foregoing final order has been sent by U.S. Mail to the following persons on this 14 th day of October, 2015: Rania A. Soliman, Esq. SOLIMAN LAW 37 N. Orange Ave., Ste. 500 Orlando, FL Attorney for Petitioner James E. Olsen, Esq. Wean & Malchow, P.A. 646 E. Colonial Dr. Orlando, FL Attorney for Respondent Leslie O. Anderson-Adams, Arbitrator Page 9 of 9