STATE OF FLORIDA DEPARTMENT OF BUSINESS AND PROFESSIONAL REGULATION DIVISION OF FLORIDA CONDOMINIUMS, TIMESHARES AND MOBILE HOMES IN RE: PETITION FOR ARBITRATION DRB DEVELOPMENT, LLC, Petitioner, v. Case No. 2012-05-2555 THE PALMS OF DESTIN RESORT AND CONFERENCE CONDOMINIUM ASSOCIATION, INC., Respondent. / SUMMARY FINAL ORDER Procedural History On December 26, 2012, DRB Development, LLC (Petitioner), filed a petition for mandatory non-binding arbitration naming The Palms of Destin Resort And Conference Condominium Association, Inc. (the Association) as the respondent. On March 18, 2013, the Association filed an answer to which Petitioners filed a reply on April 3, 2013. By order dated May 26, 2013, the parties were directed to file legal memoranda as to whether Petitioner is permitted to vote for a majority of the board. The order further stated that if the undersigned determines that Petitioner s ballot was properly rejected because it attempted to vote for a majority of the board, such decision would be determinative and a summary final order will be issued. The parties have filed legal memoranda. 1
Findings of Fact 1. The Palms of Destin Resort and Conference Condominium Association, Inc. is the corporate entity responsible for The Palms of Destin Resort and Conference, A Condominium (the Condominium) located in Destin, Florida. 2. Petitioner owns 109 units at the Condominium. 3. The Condominium contains 416 units. 4. The Association s board of directors contains five seats. 5. At all times relevant to this dispute, Petitioner was the post-turnover developer of the Condominium having relinquished control of the Association to the non-developer members. The non-developer members are entitled to elect a majority of the Association s board of directors. 6. At the Association s annual election held on November 3, 2012, Petitioner cast a single ballot constituting votes on behalf of all 109 units owned by Petitioner. 7. Petitioner s ballot cast votes for three candidates, a majority of the board. 8. The Association rejected Petitioner s ballot, claiming that Petitioner was not permitted to select a majority of the board. Conclusions of Law The undersigned has jurisdiction of the parties and this dispute pursuant section 718.1255, Florida Statutes. At the Association s annual election, Petitioner cast a single ballot representing all of its 109 voting interests, voting for three candidates. The Association argues, that this was improper because Petitioner, as the post-turnover developer, is prohibited from voting for a majority of the board. 2
The post-turnover voting rights of a developer are governed by section 718.301(1), Florida Statutes and Rule 61B-23.003(8), Florida Administrative Code. Section 718.301(1)(g), Florida Statutes provides, in pertinent part: After the developer relinquishes control of the association, the developer may exercise the right to vote any developer-owned units in the same manner as any other unit owner except for purposes of reacquiring control of the association or selecting the majority members of the board of administration. Rule 61B-23.003(8), Florida Administrative Code, provides, in pertinent part: In accordance with Section 718.301(1)(d), Florida Statutes, after turnover of control of an association, the developer who relinquishes control may vote in the same manner as any other unit owner. However, the relinquishing developer may not vote for a majority of the board of administration; nor shall the developer vote on matters for which a vote of unit owners other than the developer is allowed or required by Chapter 718, Florida Statutes, or by division rules. For example, the developer may not vote its interests in determining whether to cancel an association agreement under Section 718.302, Florida Statutes. Petitioner contends that the statute and rule do not prohibit it from casting votes for a majority of the board. Petitioner argues that because it holds less than a majority of the voting interests making it impossible for it to unilaterally select a majority of the Association s board of directors, it should not be prohibited from voting for a majority of the board. The intent of section 718.301(1)(g), Florida Statutes, is to prevent a developer who has relinquished control of an association s board from voting in such a manner as to reacquire control of the board or to select a majority of the members of the board. The statute contemplates that there are situations where the developer will be able to regain control of the board even where the developer does not have the independent ability to select a majority of the board members. 3
Relying upon Merriam-Webster, Petitioner distinguishes between the terms vote and select concluding that the act of voting is merely a manifestation of a preference, whereas the act of selecting is an ultimate choice, synonymous with the word appoint. The undersigned agrees with the Petitioner s conclusion that vote and elect have distinct meanings. Rule 61B-23.003(8), Florida Administrative Code, prohibits voting for a majority of the board. This is a broader restriction than selecting or electing the majority of the board and ensures that the developer will not be able to use its voting interests to regain control of the board. In the arbitration case of Orear v. Parkview Point Condo., Inc., Arb. Case No. 92-0168, Final Order (December 16, 1992), the arbitrator addressed the voting rights of a developer that had relinquished control of the board to non-developer owners pursuant to section 718.301, Florida Statutes. Relying upon section 718.301, 1 Florida Statutes, the Declaratory Statement in Bar Yacht Club Condominium Association, Inc. v. Division of Florida Land Sales and Condominiums, 2 and Rule 7D-23.003(10) 3, Florida Administrative Code, the arbitrator concluded that, even where the developer holds less than a majority of the voting interests and cannot control the results of the election, but can merely influence the results, the developer is prohibited from voting for a majority of board and would only be permitted to cast ballots for a minority of the members of the board. By prohibiting a post-turnover developer from voting for the majority of a board, Rule 61B-23.003(8), Florida Administrative Code, recognizes that there are means by which a developer might reacquire control of a board other than being able to 1 The relevant provisions of the statute have remained unchanged. 2 Issued by the Division on February 4, 1983. 3 Rule 61B-23.003, Florida Administrative Code, was formerly Rule 7D-23.003, Florida Administrative Code. Subsection (10) of Rule 7D-23.003, provided that once a developer relinquishes control of the board, the developer may not vote for a majority of the board. 4
unilaterally select a majority of the board because the developer holds a majority of the voting interests. One such scenario was described by the arbitrator in Parkview Pointe Condominium: Moreover, under the current Section 718.112 (2)(d)3, Florida Statutes, no quorum is required for an election, so it is quite conceivable that this developer may in fact control the results of the election depending on how many other unit owners vote or fail to vote. This construction of the statute is not warranted. Petitioner argues that its attempt to vote for a majority of the board should be permitted because it was not attempting to elect any of its representatives or agents to the board. This argument is rejected because the voting restriction of Rule 61B- 23.003(8), Florida Administrative Code, is not limited in such manner. Conclusion Petitioner is prohibited from voting for a majority of the Association s board. Therefore, the Association properly rejected the ballot cast by Petitioner at the Association s annual election held on November 3, 2012. As this is determinative of this matter, the other allegations raised in the petition will not be addressed. Based upon the foregoing, it is ORDERED: Petitioner s requested relief is denied. DONE AND ORDERED this 12 th day of August, 2013, at Tallahassee, Leon County, Florida James W. Earl, Arbitrator Department of Business and Professional Regulation Arbitration Section 1940 North Monroe Street Tallahassee, Florida 32399-1029 Telephone: (850) 414-6867 Facsimile: (850) 487-0870 5
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 Rule 61B-45.048, Florida Administrative Cod. 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 12 th day of August 2013: S. Thomas Peavey Hoffer, Esq. MATTHEWS & JONES, LLP 4475 Legendary Drive Destin, FL 32541 Attorney for Petitioner Andrew A. Wood, Esq. WOOD & ASSOCIATES, P.A. 980-A Airport Road Destin, FL 32541 Attorney for Respondent James W. Earl, Arbitrator 6