STATE OF FLORIDA DEPARTMENT OF BUSINESS AND PROFESSIONAL REGULATION DIVISION OF FLORIDA CONDOMINIUMS, TIMESHARES AND MOBILE HOMES IN RE: PETITION FOR ARBITRATION GEORGE BAKER, Petitioner, v. Case No. 2014-01-3558 VILLAS OF CROSS CREEK II CONDOMINIUM ASSOCIATION, INC., Respondent. / SUMMARY FINAL ORDER Relevant Procedural History On March 25, 2014, George Baker (Petitioner) filed a petition for arbitration naming Villas of Cross Creek Condominium Association, Inc. (the Association) as Respondent. On April 11, 2014, Petitioner filed an amended petition. On May 30, 2014, the Association filed an Answer. On June 20, 2014, Petitioner filed a reply. On September 19, 2014, Petitioner filed a copy of an audiotape of the Association s fining committee meeting at issue. On October 30, 2014, both parties filed legal briefs. This Order is entered after the arbitrator has considered the pleadings and the documents filed by the parties. Statement of the Issues 1. Does the statute of limitations prevent Petitioner from challenging whether an amendment to the Declaration of Condominium was properly passed and recorded in 1997? 1
2. Did the Association violate Petitioner s due process rights at a joint meeting of the Association s Board of Directors and the Fining Committee held on March 27, 2014? Findings of Fact 1. The Association is the legal entity responsible for the maintenance and operation of Villas of Cross Creek II, a Condominium. 2. Petitioner, George Baker, is the owner of a unit in Villas of Cross Creek II and is a member of the condominium association. 3. The original Declaration of Condominium was recorded on December 5, 1986 in the official records of Lee County, Florida. The original Declaration did not have any restrictions on leasing units. 4. On December 31, 1986, Petitioner purchased his unit. 5. On April 4, 1997, the Association recorded the First Amended and Restated Condominium Declaration (Amended Declaration) in the official records of Lee County, Florida. 6. The Amended Declaration permitted the Association to restrict leasing of units to no less than three (3) months at a time and no more than twice in a twelve (12) month period of time and requires the Association to approve all leases. The Amended Declaration was passed by 86% of the unit owners present, in person or by proxy, on March 13, 1997. 7. Section 13 to the Association s Declaration states, in pertinent part: C. REGULAR AMENDMENTS - An amendment which does not change the configuration or size of any condominium unit in any material fashion, materially alter or modify the appurtenances to such unit, change the proportion or percentage by which the owner of the parcel shares the common expenses and owns the common surplus or materially or 2
adversely affects the property rights of owners may be enacted by a sixtysix and two-thirds percent (66-2/3%) vote. D. EXTRAORDINARY AMENDMENTS - An amendment which will have the effect of doing any of the things mentioned in C above shall require the affirmative vote of all the record owners of the affected units and all record owners of liens thereon and the affirmative vote of the owners of all other units. This section shall be deemed to include enlargement of, material alteration of or substantial additions to the common elements only if the same will have a material adverse effect on the owners property rights; which shall otherwise be treated as regular amendments. Any vote changing the percentage of ownership of the common elements or sharing the common expenses shall be conducted by secret ballot. 8. Petitioner alleges that the Board of Directors should have considered the rental restriction amendment an extraordinary amendment and not a regular amendment. Petitioner alleges the rental restriction amendment should not have been recorded in 1997, because it did not receive the approval of all the owners and lienholders. 9. Among other defenses, the Association has asserted the affirmative defense that the statute of limitations has passed on a challenge to the enactment and recording of the rental restriction amendment. 10. On March 27, 2014, the Association s Board of Directors and Fining Committee held a joint meeting for the purpose of determining whether the Association should fine Petitioner for allegedly violating the rental restriction amendment. Both parties stipulate that the notice of the hearing was proper. 11. The hearing was chaired by Board member and treasurer, Hubert Speckard. Mr. Speckard recited charges from a written statement alleging that Petitioner had violated the rental restriction amendment on certain days. Mr. Speckard did not state how these conclusions were drawn or even if he had personal knowledge of the violations. 3
12. Petitioner s attorney vigorously objected throughout the hearing regarding the validity of the rental restriction amendment, lack of any real evidence being presented, lack of the ability to cross-examine any witnesses, and the lack of the ability to present evidence at the hearing. Mr. Speckard answered only the questions he chose to answer. 13. In its brief, the Association alleges that Petitioner s counsel spoke for 18 minutes of the 28-minute hearing. 14. After finishing reciting his prepared charges and without giving Petitioner an opportunity to present any evidence, Mr. Speckard requested that the Fining Committee fine Petitioner. The Fining Committee voted 2-1 to fine Petitioner $1,000.00 for violating the rental restriction amendment. The Board of Directors then imposed the fine on Petitioner. Petitioner paid the fine under protest. Conclusions of Law Rule 61B-45.030, Florida Administrative Code, requires entry of a summary final order when no disputed issues of material fact have been raised by the pleadings. Rental Restriction Amendment Validity The Association alleges that the petition is barred because Petitioner failed to take any action to timely institute legal proceedings, as set forth in Section 95.11(2)(b), Florida Statutes. In considering the defense of the statute of limitations, the period begins to run when the action may be brought. See Sheoah Highlands, Inc. v. Daugherty, 837 So. 2d 579 (Fla. 5th DCA 2003)(Unit owner alleged condominium association failed to enforce the declaration against five unit owners who erected screen enclosures in violation of the documents. Trial court required removal of two of the five enclosures based upon the five year statute of limitations. Appellate court found either 4
one year or five year limitation period could apply, but court applied longer five year period concluding that when there is a reasonable question as to which limitation period should apply, resolution should be in favor of longer limitation period.). Therefore, the applicable limitations period is five years. However, that does not end the dispute. Petitioner alleges that the rental restriction amendment should not have been recorded in 1997, and it should not be considered effective. 1 Petitioner contends that the actions of the 1997 Board of Directors were ultra vires and void initio, and the statute of limitations does not apply. To support his contention, Petitioner cites Dahm v. Sun Island Ass n, Inc. Arb. Case No 20120-04-4307, Order Granting Petitioner s Motion to Reconsider Summary Final Order (June 22, 2011). In Dahm, the arbitrator determined that the statute of limitations did not apply in challenging an association s rule that conflicts with its declaration of condominium. There is a distinct difference between challenging a restriction because it was improperly adopted and recorded and challenging a restriction because it conflicts with a higher-ranked governing document. For instance, pursuant to Section 125.66, Florida Statutes, after five years, no cause of action shall be commenced as to the validity of a county ordinance for failure to strictly adhere to the provisions in the statute when enacting the ordinance. However, even if an ordinance has been on the books for over a hundred years, if it conflicts with the constitution, it may be challenged on that basis. In the instant case, Petitioner is challenging whether enough votes were garnered to permit the Association to enact and record the rental restriction amendment. Such a challenge is barred by the five-year statute of limitations. 1 Section 718.110(13), Florida Statutes, which places limitations on an association when it is amending rental restrictions in a declaration, only applies to amendments passed after July 1, 2004. Luckhardt v. The Shore Condo., Inc., Arb. Case No. 2010-00-5216, Summary Final Order (April 9, 2010). 5
Englehardt v. Carlton Terrace Condo. Ass n, Inc., Arb. Case No. 2013-06-3375, Summary Final Order (February 17, 2004). See also Luckhardt v. The Shore Condo., Inc., Arb. Case No. 2010-00-5216, Summary Final Order (April 9, 2010). A Declaration of Condominium is cloaked with presumed validity because it is a recorded document that runs with the land. Indeed, if the action was not time-barred, no purchaser could ever rely on any recorded amendment to be valid if Petitioner were allowed to proceed with challenging the enactment 17 years after the recording of the Amended Declaration. Every owner who bought a unit after April 4, 1997, has reasonably relied on the rental restrictions in the amendment to be valid and in force. Petitioner s request to invalidate the Amended Declaration must be denied. Violation of Due Process Petitioner alleges that the fine levied against him on March 27, 2014, violated Section 718.303(3), Florida Statutes, and his basic due process rights. Section 718.303(3) provides: (3) The association may levy reasonable fines for the failure of the owner of the unit or its occupant, licensee, or invitee to comply with any provision of the declaration, the association bylaws, or reasonable rules of the association. A fine may not become a lien against a unit. A fine may be levied on the basis of each day of a continuing violation, with a single notice and opportunity for hearing. However, the fine may not exceed $100 per violation, or $1,000 in the aggregate. (a) An association may suspend, for a reasonable period of time, the right of a unit owner, or a unit owner s tenant, guest, or invitee, to use the common elements, common facilities, or any other association property for failure to comply with any provision of the declaration, the association bylaws, or reasonable rules of the association. This paragraph does not apply to limited common elements intended to be used only by that unit, common elements needed to access the unit, utility services provided to the unit, parking spaces, or elevators. (b) A fine or suspension may not be imposed unless the association first provides at least 14 days written notice and an opportunity for a hearing 6
to the unit owner and, if applicable, its occupant, licensee, or invitee. The hearing must be held before a committee of other unit owners who are neither board members nor persons residing in a board member s household. If the committee does not agree, the fine or suspension may not be imposed. In determining what notice and opportunity for hearing is due a unit owner before a condominium association may penalize that unit owner, court cases construing the due process clause of the state and federal constitution are applicable. Kreitman v. The Decoplage Condo. Ass n, Inc., Arb Case 98-3495, Amended Final Order (September 14, 1999). Violations of due process may not be ignored simply because of the ultimate guilt of the accused. Meyers v. International Village Ass n, Inc., Arb. Case No. 2012-05- 2758, Summary Final Order (March 15, 2013). Section 718.303(3)(b), Florida Statutes, establishes that a fining committee must be independent from the board of directors. By having a joint meeting and having a member of the board of directors run the joint meeting, the Association did not have an independent fining committee meeting. Indeed, the board member at the joint meeting acted as both the prosecutor and the presiding judge at the same time. The Association did not comply with Section 718.303(3)(b). The Association alleges that the mere fact that Petitioner s counsel spoke for 18 minutes of the 28-minute hearing demonstrates that Petitioner was given due process. On the contrary, it demonstrates that Petitioner did not receive a fair hearing at all. The Association only needed ten minutes to recite charges and for the fining committee and then the board of directors to give Petitioner the maximum fine. The amount of time Petitioner s counsel took objecting to the proceedings is irrelevant. In any event, absolutely no evidence was presented to support any fine. The audio recording demonstrates that no witnesses with direct knowledge were presented, 7
no documents were introduced into evidence and no cross-examination of witnesses was allowed. Petitioner was not permitted to introduce his own witnesses and evidence. These failure of the Association violated Petitioner s right to due process. Burden of Proof in Violation of Rental Restrictions The only question remaining is: what exactly does the Association have to show in order to satisfy its burden of proof in establishing a violation of rental restrictions in a condominium and imposing a fine under Section 718.303(4), Florida Statutes? Although a formal hearing is not required, the Association must present credible evidence that demonstrates a pattern of activity that a reasonable person could determine that the rental restrictions are being violated. Petitioner must be given an opportunity to question the Association s evidence and present his own. However, contrary to Petitioner s assertions at the joint meeting, the Association is not required to prove an actual lease exists. The pattern of activity creates a rebuttable presumption that the rental restrictions have been violated. Where one party has peculiar knowledge or control of the evidence on a material matter, then the burden rests on that party to produce the evidence. See Jennings v. Dade County, 589 So.2d 1337 (Fla. 3d DCA 1991) (citing Allstate Finance Corp. v. Zimmerman, 330 F.2d 740, 744 (5th Cir.1964)). Since Petitioner is in control of whom has possession of his unit, Petitioner must rebut the presumption with his own evidence to explain how he is not in violation of the rental restrictions. Based upon the foregoing, it is ORDERED: 1. Petitioner s request for an order prohibiting the Association from enforcing the 1997 Amended and Restated Declaration is DENIED. 8
GRANTED. 2. Petitioner s request that fines imposed on March 27, 2014 be vacated is 3. No later than 5:00 p.m. on January 12, 2014, the Association shall return all fines paid by Petitioner together with the judgment rate of interest from the date of payment until return. DONE AND ORDERED this 12th day of December, 2014, at Tallahassee, Leon County, Florida. Terri Leigh Jones, Arbitrator Department of Business and Professional Regulation Arbitration Section 1940 North Monroe Street Tallahassee, Florida 32399-1030 Telephone (850) 414-6867 Fax (850) 487-0870 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 718.1255, Florida Statutes. As provided by section 718.1255, 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 Fla. Admin. Code R. 61B-45.048. 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 and facsimile to the following persons on this 12th day of December, 2014: Robert J. Bates, Esq. 1083 North Collier Blvd., Suite 357 Marco Island, FL 34145 Fax: 954-337-0417 Attorney for Petitioner Chene M. Thompson, Esq. Pavese Law Firm 1833 Hendry Street Fort Myers, FL 33901 Fax: 239-332-2243 Attorney for Respondent Terri Leigh Jones, Arbitrator 10