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 LAS BRISAS HOMEOWNERS ASSOCIATION OF NEW SMYRNA BEACH, INC., f/k/a THE CLUB OCEANIA HOMEOWNERS ASSOCIATION, INC., Petitioner, v. Case No KELLY J. FIDLER, DAVID AULD and GAIL PAYNE AULD, his wife, Respondents. / SUMMARY FINAL ORDER Statement of the Issue This issue in this case is whether the Association can prohibit Respondents from renting their units for periods of less than thirty (30) days at a time. Relevant Procedural History On August 22, 2012, Las Brisas Homeowners Association of New Smyrna Beach, Inc. (Association) filed a petition for arbitration naming Kelly J. Fidler, David Auld and Gail Payne Auld as Respondents. Respondents filed answers to the petition on September 20, An Order Requiring Supplement to Petition was entered on September 25, Petitioner filed supplementary materials on October 5,

2 An Order Striking Counterclaims and Requiring Amended Answers pleading facts to support affirmative defenses was entered on September 26, Respondents filed amended Answers on October 5, This Summary Final Order is entered pursuant to Rule 61B , Florida Administrative Code, which requires the arbitrator to summarily enter a final order if no disputed issues of material fact exist. Findings of Fact 1. The Association is the entity responsible for maintenance and operation of Las Brisas of New Smyrna Beach, a Condominium (hereinafter Las Brisas ). 2. Respondents own Units in Las Brisas Condominium, are members of its Association, and are subject to its Declaration, Articles of Incorporation, By-Laws, and Rules and Regulations. 3. The Declaration of Condominium for Las Brisas (hereinafter Declaration ), states, in pertinent parts: 11.4 Lawful Use: No immoral, improper, offensive, or unlawful use shall be made of the condominium property nor any parts of it, and all valid laws, zoning ordinances and regulations of the governmental authorities having jurisdiction shall be obeyed. 12.1(b) Lease. No apartment owner may lease an apartment without approval of the Association, except with the express written consent of the board of directors of the association or of the Developer, and such consent when once given and relied upon in connection with the purchase and acquisition of a Condominium Apartment may not thereafter be revoked or terminated without the consent of the apartment owner. 12.2(a)(2) Lease. An apartment owner intending to make a bona fide lease of his apartment or any interest in it shall give to the Association notice of such intention, together with the name and address of the intended lessee, such other information concerning the intended lessee as the Association may reasonably require, and a copy of the proposed lease signed by the proposed lessee. 2

3 12.2(b)(2) Lease. If the proposed transaction is a lease, then within thirty (30) days after receipt of such notice and information the Association must either approve or disapprove the proposed transaction. If approved, the approval shall be stated in a certificate executed by the officer of the Association, in a non-recordable form. 12.3(b) Lease. If the proposed transaction is a lease, the apartment owner shall be advised of the disapproval in writing and the lease shall not be made Rules and Regulations. Rules and regulations concerning use of the Condominium Property shall be made by and may be amended from time to time by the board of directors of the Association in the manner provided by its Articles of Incorporation and By-Laws. 4. The Association asserts that the City of New Smyrna Beach s Zoning Ordinances prohibit rentals of condominium units for any period of time less than thirty (30) days. Respondents do not dispute this. 5. Respondents have neither made assertions that they have obtained transient occupancy licenses for their units, nor that rental of their units for periods of less than thirty (30) days would be a lawful use of the units. 6. Minutes of Association board meetings dating back to August 4, 1990, document the Association s adoption of a rule restriction on rentals of less than thirty (30) days effective January 1, The minutes indicate that the rule restriction came up for discussion at numerous board meetings up to and including a meeting held in August of 2009, and that each time the rule restriction came before the board for consideration, the board decided to continue to enforce it. Among the reasons articulated in the minutes for retaining and enforcing the rule restriction were the existence of a city ordinance prohibiting short-term rentals, the increased wear and tear on the pool, spa, and other common elements and the increased maintenance 3

4 expenses caused by short-term rentals, the need for appropriate licenses, and the requirement of payment of bed-taxes for short-term rentals. Counterclaims and Affirmative Defenses Respondents Amended Answers contain a counterclaim that states: Respondent denies that the Board of Directors of the Condominium Association initially promulgated a rental rule on August 4, 1990, restricting the minimum rental period to be less than (1) month. This is a slightly different phrasing of the counterclaim that was stricken in the Order Striking Counterclaims and Affirmative Defenses entered on September 26, The rephrased version is, again, an impermissible counterclaim and is stricken pursuant to Rule 61B , Florida Administrative Code, which provides, in pertinent part: The answer shall not include a request for relief (counterclaim) against the petitioner. Any claim or request for relief must be filed as new petition following the procedure provided in Rule 61B , F.A.C. Respondents have also re-introduced in their Amended Answers the selective enforcement affirmative defense that was stricken in the Order Striking Counterclaims and Affirmative Defenses entered on September 26, Since Respondents have not pled any facts to support the allegation that the rule has not been consistently enforced, there is no basis on which to resurrect this defense. Conclusions of Law The arbitrator has jurisdiction over this matter pursuant to Section , Florida Statutes, to determine the authority of the board of directors to require the owner to take action involving the owner's unit or the appurtenances thereto. Respondents claim that the Association s prohibition on rentals of less than thirty (30) days contravenes an express provision of the Declaration or a right that is 4

5 reasonably inferable from the Declaration. That is simply not the case. The Declaration, as quoted above: prohibits leasing without the express consent of the Board of Directors or the Developer; requires owners to seek permission from the Board prior to leasing their units; allows the Board thirty (30) days to review leasing requests and make a determination to approve or disapprove the lease; and prohibits any unlawful use of the units. Respondents do not dispute the Association s claim that rental of the units for periods of less than thirty (30) days would be unlawful under local ordinances. Section 11.4 of the Declaration prohibits unlawful use from being made of any parts of the condominium property and requires that all valid laws, zoning ordinances, and regulations of governmental authorities having jurisdiction be obeyed. Under these circumstances, Respondents cannot claim that a right to use their units for short-term rental purposes is reasonably inferable from the Declaration. Respondents claim that Section (13), Florida Statutes, which was enacted in 2004, precludes any rental restrictions that are not contained in the Declaration. Respondents place great reliance on Palermo v. The Tower Residences Condominium Association, Inc., Arb. Case No , Summary Final Order (June 30, 2005) in their argument that the regulation of unit rentals can only be accomplished via the Declaration. However, Respondents are incorrect on this point, and the instant case is distinguishable from Palermo for reasons that will be discussed below. Section (13), Florida Statutes, was enacted by the Legislature for the purpose of ensuring that purchasers of condominium units could rely on the continued existence of whatever rental restrictions (or lack thereof) existed at the time they 5

6 purchased the unit, unless they consented to a change in the restrictions. This statutory amendment was not intended to invalidate existing rental restrictions that had already been adopted into governing documents other than the Declaration. Section (13), Florida Statutes, has been construed to prohibit not only amendments to the declaration, but also rules from containing additional substantive restrictions on the right to rent. See Palermo v. The Tower Residences Condominium Association, Inc., Arb. Case No , Summary Final Order (June 30, 2005). The challenged rule restrictions on rentals in Palermo were adopted after the enactment of Section (13), Florida Statutes. In the instant case, the challenged rule restriction was enacted many years before the effective date of Section (13), Florida Statutes. From October 1, 2004, onward, the Association became obligated to comply prospectively with the statutory amendment, and may not pass further substantive restrictions on the right to rent either by amending its rules, or by amending its declaration, except in the manner prescribed by the statute. Garofalo v. Maya Marca Condominium Apartments, Inc., Arb Case No , Summary Final Order (April 19, 2006). While the Association s rule restriction on rentals for periods of less than thirty (30) days appears on its face to be valid, the rule restriction is arguably not necessary for the Association to prohibit rentals of less than thirty (30) days under the circumstances brought forward in the instant case. The Declaration itself prohibits unlawful use of the units, requires unit owners to obtain Association approval before leasing their units, and authorizes (indeed requires) the Association to disapprove leases that are premised upon activities that would violate a law or ordinance. 6

7 In the case at hand, the Association has filed a petition against Respondents seeking to prohibit rentals for periods of less than thirty (30) days. Respondents have admitted to renting their units for varying periods of time. Furthermore, Respondents have raised no valid legal defenses to the petition. Accordingly, it is ORDERED: Respondents shall immediately cease the leasing of their units without approval of the Association. Respondents shall comply with the above-quoted provisions of the Declaration governing leasing of their units and shall abide by the Association s decision to approve or disapprove the lease. DONE AND ORDERED this 25 th day of October, 2012, 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 , F.A.C. 7

8 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 25 th day of October, 2012: Sidney C. Peterson, Jr., Esq. P.O. Box 428 New Smyrna Beach, FL Attorney for Petitioner Mitchel B. Krause, Esq Commerce Park Dr., Suite 103 Longwood, FL Attorney for Respondents Leslie O. Anderson-Adams, Arbitrator 8