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 Raymond Long, David Betts and Joanne McGregor, Petitioners, v. Case No Ocean Harbour of Islamorada Condominium Association, Inc., Respondent. / FINAL ORDER Comes now, the undersigned arbitrator, and issues this final order as follows: On May 17, 2004, Raymond Long, David Betts 1 and Joanne McGregor (petitioners/unit owners) filed a petition for mandatory non-binding arbitration, naming Ocean Harbour of Islamorada Condominium Association, Inc. as the respondent/association. The petitioners allege that the association impermissibly converted an area of the clubhouse to an exercise facility and conducted an improper unit owner vote purporting to authorize the creation of the exercise facility. 2 In its answer, the association alleges that the exercise facility is not a material alteration because the board simply reinstated the area to its prior use. The association further alleges that it obtained a 51% unit owner vote authorizing the exercise facility. In a partial summary final order, 1 As indicated at the final hearing in this matter, as of February 2005, Mr. Betts has sold his unit and is no longer a unit owner at the condominium. 2 The allegation of the door leading to the exercise area being an unauthorized material alteration is not subject to this proceeding as it was not included in the initial petition. Furthermore, counsel for the association stipulated at the final hearing that the door is a material alteration that was not appropriately approved by the unit owners. 1

2 entered on February 1, 2005, the arbitrator ruled that: The language contained in section (2)(a), Florida Statutes, is clear and unambiguous in requiring 75% approval of unit owners where an association s declaration is silent on voting procedures for approving material alterations or additions. Any conflicting voting provisions contained in the association s articles of incorporation or by-laws are not enforceable. Thus, in the case at hand, the alleged 51% vote obtained by the association does not, on its face, result in the exercise facility being permitted, if such is found to be a material alteration or substantial addition. Accordingly, the matter was scheduled for a final hearing to determine whether the current exercise facility constitutes a material alteration or substantial addition to the common elements, as compared to the exercise facility removed in 2002, thereby requiring approval from 75% of the voting interests pursuant to section (2)(a), Florida Statutes. The hearing was conducted on April 1, 2005, at the clubhouse located on the property of Ocean Harbour of Islamorada. The arbitrator appeared for the hearing in-person and the petitioners were represented by David G. Hutchison, Esquire, and the association was represented by David H. Rogel, Esquire. Both parties presented witness testimony and tendered documents into evidence. Subsequent to the final hearing, the parties were permitted to submit proposed final orders and findings of fact. The parties submitted closing arguments on April 22, 1005 (with a correction submitted on April 29, 2005) and April 21, 2005 (corrected version), respectively. This order is entered after consideration of the complete record in the matter. FINDINGS OF FACT Each party called several individuals to testify at the final hearing and relevant 2

3 portions of such testimony are as follows: Raymond Long, unit owner for twelve years, testified that the clubhouse where the exercise equipment is located was originally a private residence and around 1992 it became the social hall/clubhouse. When it was originally converted, Mr. Long indicated that exercise equipment was not initially installed. According to his testimony, prior to 1998, no gym equipment existed in the clubhouse. While Mr. Long is not necessarily opposed to an exercise facility, he does not want it in the clubhouse as it interferes with the use of the clubhouse. With the addition of the exercise equipment (which is located on the second floor of the clubhouse), it is impossible to host large parties and social gatherings. Mr. Long testified that is it his understanding that discarded exercise equipment was placed in the clubhouse around 1998, but he does not have direct knowledge of this. Kevin Bates, unit owner, resides out-of-state and vacations at the condominium property for up to three months per year (not consecutively). Mr. Bates testified that when he purchased his condominium unit in 1991, there was not an exercise facility on the property and he was never informed that exercise equipment would be installed in the clubhouse. He also indicated that around 1991, the upper portion of the clubhouse was utilized as an office. According to Mr. Bates, the clubhouse is utilized for parties, social gatherings and other similar functions. He further testified that the exercise equipment interferes with certain gatherings, including poker games, due to the noise of the equipment and the location thereof. Mr. Bates has seen bar bells and a rowing machine in the exercise area, around 1996 or 1997, but such were discarded at some point. He also does not necessarily oppose an exercise facility, but does not wish for it to be located in the clubhouse. About 3-4 years ago Mr. Bates young daughter was in the area wherein the exercise equipment is located and turned a piece of equipment on and injured her chin. 3

4 While Mr. Bates is at the condominium property, he has not seen many people use the exercise equipment. Apparently, in 2002, the exercise equipment was removed and different equipment was replaced in Eric Johnson has lived at the condominium property full-time since 1991 and is a real estate broker. According to Mr. Johnson, he placed discarded exercise equipment, a rowing machine, in the clubhouse in 1995 (approximately) and about six months later, either he or his son, added weight equipment. While Mr. Johnson is not opposed to the exercise equipment, he feels its location in the clubhouse is annoying during poker games and at other times. He further indicated that as a real estate broker he never promoted the exercise facility. Stanley Bryan has owned his condominium unit continuously since 1994 and spends his summers out-of-state and his winters in Florida at the condominium. Mr. Bryan is currently the vice president of the board. In 1993, when he first saw the property, there was no exercise equipment in the clubhouse. He recalls Mr. Johnson placing some equipment in the clubhouse 1998 and more in In 2002, the clubhouse was remodeled and all exercise equipment was removed. According to Mr. Bryan, the exercise equipment interferes with the use of the clubhouse in that large gatherings are hindered and poker and bridge games are affected. He also indicated that a book club has dissolved. Mr. Bryan stated that the condominium s rules describe the building as a social hall and are silent on gym equipment. He further testified that while no owner has been involuntarily assessed for the exercise equipment, the maintenance of the equipment would most likely become a common expense. At a meeting in January 2004, the board obtained a majority vote (not 75%) and reinstalled the equipment in May/June As the other witnesses have indicated, Mr. Bryan is not opposed to an exercise facility, but he 4

5 does not want it housed in the clubhouse. David Betts purchased his unit in 1991 and spends summers out-of-state and winters in Florida (he is no longer a unit owner). He noticed discarded exercise equipment in the clubhouse as of At one point, Mr. Betts added a bicycle to the exercise area. He feels that the exercise equipment interferes with the function of the clubhouse as it interferes with poker games and other functions. He also feels the exercise equipment should be located elsewhere. Mark Majeske, who resides at his condominium about four months of the year, has been a unit owner since March/April Mr. Majeske testified that before purchasing his unit, fellow unit owner Eric Johnson (realtor) showed him the condominium property and, at that time, the upstairs portion of the clubhouse contained some exercise equipment. In 2000/2001 Mr. Majeske spent more time using the exercise equipment and purchased equipment himself and placed it in the clubhouse along with the other equipment. According to Mr. Majeske s testimony, some of the equipment in the exercise facility consisted of a stepper, rowing machine, bar bells/bench and a sit-up machine. Mr. Majeske further indicated that some of the equipment he placed in the clubhouse is gone and much of the equipment is new, but was not purchased by the association. Chuck Polly, who resides at the condominium property six months of the year, purchased his unit in Mr. Polly testified that in 1991 the upstairs portion of the clubhouse was used as an office and he first noticed exercise equipment in Some of the equipment observed by Mr. Polly consisted of a chin bar, weights, mat and stepper. Mr. Polly stated that more owners use the equipment now because the equipment is nicer and because the board did not object to the equipment for a long time. Rose Capps, unit owner since 1998, usually resides out-of-state and testified, by 5

6 telephone, that gym equipment was located in the clubhouse in She had desired to purchase a condominium unit that had a gym facility. Her realtor did not assure her of a gym facility, but since she saw the equipment she assumed it would remain there for her and other owners usage. She used the equipment until it was removed in To the best of Ms. Capps knowledge, the equipment in the clubhouse consisted of a treadmill, bench, weights, stairmaster, mats and Nordic machine. Bill Curran purchased his unit in June 1996 and spends about two or three months per year at the condominium property. Mr. Curran testified that realtor/unit owner Eric Johnson showed him the condominium property and indicated the gym equipment in the clubhouse was for use of the residents. He further testified that from at least 1996 through 2002, the board did not attempt to remove the exercise equipment. Mr. Curran was not sure if the board ever approved the gym equipment, he merely assumed the equipment was authorized. According to Mr. Curran, the gym equipment originally placed in the clubhouse no more interferes with the use of the clubhouse as the equipment that is currently there. Mr. Curran testified as to the equipment consisting of a Nordic machine, bike, bench, mats, bar bells, treadmill, abdominal machine and possibly a bicycle. The association manager, Kris Gustinger, also testified to photographs taken of the clubhouse during a hurricane when outdoor furniture was moved indoors. CONCLUSIONS OF LAW Based on the testimony at the final hearing, there are conflicting opinions at to the date the first exercise equipment appeared in the association clubhouse. As much of the testimony indicated, many owners are seasonal residents and due to varied living arrangements, seasonal residents may not have had the opportunity to observe the equipment when it was first placed in the clubhouse. Because testimony indicated that Eric 6

7 Johnson is the unit owner who first began placing old exercise equipment in the upper portion of the clubhouse, he is the individual with the most knowledge of the situation and in the best position to provide reliable testimony as to the date the equipment was first placed in the clubhouse. Mr. Johnson testified that he placed discarded exercise equipment, specifically a rowing machine, in the clubhouse in 1995 and about six months later he, or his son, added weight equipment, without authorization from the board of directors. The equipment was placed in the second floor of the clubhouse, which over looks the first floor as a loft. From the inception of Mr. Johnson s rowing machine and weights placed in the clubhouse in 1995, testimony indicates that more equipment was added to the area, such as a treadmill, exercise bicycle, Nordic machine, work-out bench, bar bells and mats, through It is apparent that the exercise equipment was permitted to remain in the clubhouse from 1995 through 2002, without the association attempting to remove it. It was not until 2002 that the equipment was totally removed from the clubhouse. Further, it appears that the equipment was not removed in 2002 on the basis that it was unauthorized, but rather, because the clubhouse was undergoing refurbishment by installing new carpet and re-upholstering the furniture. 3 In 2004, the exercise equipment was replaced in the clubhouse according to a majority vote by the unit owners. 4 The equipment replaced in the clubhouse in 2004 is not necessarily the same equipment that was removed in 2002 as much appears to be new equipment purchased by unit owners. In the petitioners closing argument, counsel alleges that the exercise equipment replaced in the clubhouse in 2004, consisting of about eight pieces of equipment, is 3 See letter written by Stanley Bryan, board member, dated May 15, 2002, and introduced as respondent s exhibit A. 4 There are arguments that the vote was conducted improperly, but even if the vote was valid, it did not 7

8 substantially different than what was previously removed and interferes with the intended function and use of the clubhouse. Previously, with less equipment, the interference was not at a high level and was more tolerable. Thus, the petitioners argue that the exercise equipment constitutes a material change or substantial alteration requiring approval of at least 75% of the membership, in accordance with section (2)(a), Florida Statutes. The association argues that the 2004 exercise facility is the same as it had been prior to its removal in 2002 and is not a material alteration requiring approval of 75% of the unit owners. Pursuant to section (2)(a), Florida Statutes: Except as otherwise provided in this section, there shall be no material alteration or substantial additions to the common elements or to real property which is association property, except in the manner provided in the declaration as originally recorded or as amended under the procedures provided therein. If the declaration as originally recorded or as amended under the procedures provided therein does not specify the procedure for approval of material alterations or substantial additions, 75 percent of the total voting interests of the association must approve the alterations or additions. In addressing the issue of material alterations, the court in Sterling Village Condominium, Inc. v. Breitenbach, 251 So 2d 685, 687 (Fla. 4th DCA 1971), defined material alterations to buildings as: We hold that as applied to buildings, the term material alteration or addition means to palpably or perceptively vary or change the form, shape, elements or specifications of a building from its original design or plan, or existing condition, in such a manner as to appreciably affect or influence its function, use, or appearance. There is an exception to the statutory requirements where the material change or alteration implicates the association s duty to maintain and repair the condominium property or obtain 75% affirmative votes. See arbitrator s partial summary final order, dated February 1,

9 improvements thereon. See Tiffany Plaza Condominium Association, Inc. v. Spencer, 416 So. 2d 823 (Fla. 2d DCA 1982). It is clear that the exercise equipment replaced in the clubhouse in 2004 is not the same equipment that was removed in 2002, thus, prompting an evaluation as to whether the newly furnished exercise facility is a material alteration requiring an affirmative vote of 75% of the unit owners. Under the definition provided by Sterling Village above, the question is whether the 2004 equipment has appreciably changed or affected the function, use or appearance of the clubhouse. Certainly the 2004 equipment changes the appearance, in a literal sense, of the second level of the clubhouse, however, a simple change in appearance is not necessarily sufficient to trigger the approval requirement from section (2)(a), Florida Statutes. In Kemmesat v. Holiday Travel Park Co-Op, Inc., Arb. Case No , Final Order (April 17, 2003), an owner challenged the remodeling of the manager s office. The arbitrator stated the following: the arbitrator finds that the remodeling did not appreciably change the use and function of the association s office implemented by the board. The area in question is still an office and contains a lobby area, with tables and chairs, available for use by the co-op residents. The board of directors continues to use the area as an office, although in a more efficient manner than before. The essential character of the property has not changed in a material sense. Some change in appearance is inevitable where a building s details are altered, but this does not compel the conclusion that all changes are material. Thus, the concern lies in whether the 2004 equipment has appreciably affected the function and use of the clubhouse, not the fact that simply new and different equipment occupies the exercise area. The petitioners contend that the function and use of the clubhouse has been affected in that certain activities may no longer be conducted in the clubhouse due to the imposition of the new exercise equipment. For instance, some witnesses testified that 9

10 large parties cannot be held in the clubhouse because the 2004 equipment takes up more space than the 2002 equipment, thus, preventing the area s use for large gatherings, and other witnesses testified that a book club has dissolved due to interference from the use of the exercise equipment. Other witnesses testified that poker and bridge games are substantially affected and interrupted by the noise generated by the exercise facility. 5 Still other testimony indicated that the use and function of the clubhouse had not been appreciably affected. Notwithstanding the testimony that the replacement exercise equipment has affected and changed the use of the clubhouse, the arbitrator finds that the placement of the exercise equipment in the clubhouse in 2004 does not operate as a material alteration requiring an affirmative vote of 75% of the unit owners. As indicated in the petitioners closing argument, there are currently eight pieces of exercise equipment in the second level of the clubhouse, along with other non-exercise items. The size and quantity of the current equipment does not substantially differ from the equipment removed from the clubhouse in While the exercise equipment today may be different in appearance, it does not substantially affect the use of the clubhouse. The clubhouse can still be utilized in the same manner as it was in 2002 before the equipment s removal. Although certain unit owners testified that poker and bridge games cannot be conducted due to the noise generated by the exercise area, the arbitrator is not persuaded by this argument due to the fact that at any time other owners may be utilizing the clubhouse for social functions and this use would also generate noise that would interfere with poker or bridge games or a book club meeting. The gym facility is not utilized at all times and poker, bridge games and 5 The arbitrator had the opportunity to witness the noise generated by a treadmill in the upper level of the clubhouse while conducting the hearing in the lower level. Only one treadmill was in use and some noise generated from the treadmill could be heard on the lower level of the clubhouse. 10

11 other functions could be scheduled when the gym is vacant or closed. 6 As the exercise area is substantially the same as it was prior to its removal in 2002 and the equipment added in 2004 has not appreciably affected the function or use of the clubhouse, the board was not required to obtain a 75% vote of the membership to replace the equipment and the facility may remain in its current condition in the second level of the clubhouse. Based on the foregoing, it is ORDERED: The relief requested by the petitioners is hereby denied and the exercise area shall be permitted to remain in its current location until and unless a vote of 75% of the unit owners authorizes its removal and/or relocation. Florida. DONE AND ORDERED this 16 th day of August 2005, at Tallahassee, Leon County, Melissa Mnookin, Arbitrator Department of Business and Professional Regulation Arbitration Section Northwood Centre 1940 North Monroe Street Tallahassee, Florida 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 by facsimile to the following persons on this 16 th day of August 2005: David G. Hutchison, Esq. P.O. Box 1262 Key Largo, Florida Fax (305) Certainly, reasonable rules regulating the operating hours of the exercise facility may be adopted and the exercise facility may temporarily close for special occasions and other social gatherings. Rules regarding children in the exercise area may also be implemented. Proper notice of such rules shall be provided to all unit owners. See MacMillan v. Greenway Village South Management, Inc., Arb. Case No , Summary Final Order (June 1, 2001). 11

12 David H. Rogel, Esq. Becker & Poliakoff, P.A. Alhambra Towers 121 Alhambra Plaza 10 th Floor Coral Gables, Florida Fax (305) Melissa Mnookin, Arbitrator Right to Appeal As provided by section , F.S., a party which is adversely affected by this final order may appeal by filing a petition for trial de novo with a court of competent jurisdiction in the circuit in which the condominium is located, within 30 days of the entry and mailing of this final order. This order does not constitute final agency action and is not appealable to the district courts of appeal. Attorney s Fees As provided by s , F.S., the prevailing party in this proceeding is entitled to have the other party pay its reasonable costs and attorney s fees. Rule 61B , F.A.C. requires that a party seeking an award of costs and attorney s fees must file a motion seeking the award not later than 45 days after rendition of this final order. The motion must be actually received by the Division within this 45 day period and must conform to the requirements of rule 61B , F.A.C. The filing of an appeal by trial de novo of this final order tolls the time for the filing of a motion seeking prevailing party costs and attorney s fees until 45 days following the conclusion of the de novo appeal proceeding and any subsequent appeal. 12