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 Tracy Beck, Petitioner, v. Case No Mallard s Cove Condominium Association, Inc., Respondent. / SUMMARY FINAL ORDER Statement of the Issue The issue in this case is whether Mallard s Cove Condominium Association, Inc. (the Association) properly conducted the September 24, 2014 election for the board of directors (board) of the Association. Procedural History On November 20, 2014, Tracy Beck (Petitioner) filed a petition for mandatory non-binding arbitration of an election dispute. By Order entered on December 1, 2014, Petitioner was required to file an Amended Petition, and Petitioner complied on December 12, Accompanying the Amended Petition was a Notice of Appearance by counsel for Petitioner. An Order Requiring Answer was entered on December 19, 2014, and the Association filed an Answer on January 9, Two telephonic case management conferences (CMC) were held, one on February 27, 2015 and one on April 14, Page 1 of 13

2 Counsel for the parties attended the CMCs. Counsel timely responded to the March 2, 2015 Order Following First Case Management Conference, by making the required filings on March 25 and 26, On April 29, 2015, Petitioner filed supplemental authority. On May 1, 2015, the Association filed a response to Petitioner s supplemental authority. Findings of Fact 1. Petitioner is the owner of Unit D within Building 24 of the condominium. 2. The Association is the corporate entity responsible for the operation of Mallard s Cove Apartments, a Condominium. 3. The Declaration of Condominium (Declaration) was recorded on October 11, The condominium consists of 240 units. 5. On March 8, 2013, the conveyance of the condominium property by Special Warranty Deed by the original developer, Meadows of Jupiter Florida LLC (Meadows), 1 which was the Debtor in bankruptcy, to JWC Jupiter, LLC (JWC), pursuant to the Order Confirming Joint Plan of Liquidation, was recorded in the official records of the Clerk of Court for Palm Beach County, Florida. 2 One hundred seventy-three (173) condominium units were conveyed to JWC by Meadows. a. Preston Giuliano Capital Partners, LLC, in Providence, Rhode Island, is the managing member of JWC. b. Accompanying the Special Warranty Deed was an Assignment of Developer Rights (Assignment). 1 See Section 2.19 of the Declaration of Condominium. 2 The conveyance and assignment were dated December 19, Page 2 of 13

3 Declaration. 6. October 11, 2013, is seven (7) years after the date of the recording of the 7. The Association mailed a First Notice of Date of Annual Meeting and Election (AM&E) dated 2/27/14 with the meeting to occur on The annual meeting and election did not occur on April 30, 2014, because by letter dated April 24, 2014, counsel for the Association wrote to counsel for Petitioner: After a careful review of the facts, the Association has determined that turn-over of control of the Association is due. As such, the Association is cancelling the currently scheduled Annual Meeting of the Members so that a turn-over meeting can be scheduled in conjunction with the Annual Meeting. The Board of Directors currently consists of three (3) Directors. All three seats on the Board will be up for election at the Annual Meeting (which will be conducted post-turnover). 9. On July 9, 2014, a meeting of the board of directors was held. The board meeting agenda included, among other things, scheduling of a turnover meeting and the annual meeting and election. 10. On July 24, 2014, a First Notice of the Date of the Annual Meeting and Election (AM&E) was sent to the membership. The AM&E was set for September 24, 2014, at 6:00 p.m. The agenda for the meeting included the election of a board of three directors and turnover of the Association to the members. 11. On August 14, 2014, JWC sold by warranty deed to Mallard Cove Development, LLC (MC Development), Unit C, Building 21. The deed was recorded on August 18, Thomas Lance is the manager of MC Development. Page 3 of 13

4 13. In the notice of candidacy form each candidate submitted to the Association, ownership of a unit was indicated as follows: - Tracy L. Beck owns Unit 24D. - Michael Guiliano owns Unit 01A. [Above the name on the candidacy form is the notation JWC Jupiter LLC. ] - Thomas Lance owns Unit 21C [21C was actually owned by MC Development] - A.R. Pavsner owns Unit 16A - H. LeBaron Preston of JWC Jupiter LLC owns Unit 3G - Beth Ann Wampler owns Unit 17C The candidacy form stated that it had to be received by the Association by August 15, The ballot accompanying the Second Notice 3 for the September 24, 2014 AM&E included six candidates: Beck, Tracy L Guiliano, Michael Lance, Thomas Pavsner, A.R. Preston, H. LeBaron Wampler, Beth Ann The ballot gives no direction to a unit owner regarding for whom a member of the Association may vote. 15. On September 19, 2014, JWC sold 19 units to MC Development by warranty deed, as follows: Building Unit(s) 1 A & G 3 D,G, H 6 C & H 7 A & F 9 E & G 10 A & B 20 C & G 21 B, F & H 22 H 3 The Second Notice is dated September 2, Page 4 of 13

5 The deed was recorded at 15:45:34 (3:45 p.m.) on September 24, 2014, the day of the AM&E. 16. The units owned by the candidates at the time of notice of candidacy and at the time of election were as follows: Candidate Unit Stated Owned on Notice of Candidate Form Tracy L. Beck 24D 24D Michael Guiliano 1A (Above the name on the candidacy form is the notation JWC Jupiter LLC ) Unit Owned at Time of Annual Meeting and Election 1 JWC no longer owned unit, unit conveyed to MC Development on Thomas Lance 21C [21C owned by MC Development] 21C [21C owned by MC Development] A. R. Pavsner 16A 16A H. LaBaron Preston 3G [3G owned by JWC] JWC no longer owned 3G, unit conveyed to MC Development on Beth Ann Wampler 17C 17C 1 As shown on the website of the Palm Beach County Property Appraiser and the Clerk of Court for Palm Beach County at the date and time of the election 17. The parties agree that at the time of the election on September 24, 2014, the units within the condominium were owned as follows: Owner # of Units Owned JWC 178 MC Development 20 The Association 4 Units owned by other than the above 38 TOTAL A separate, different colored ballot was prepared for JWC to vote its 178 voting interests. H. LaBaron Preston voted this ballot. 19. Thomas Lance voted the voting interests of MC Development. The Association permitted MC Development to vote its voting interests like any of the 38 remaining unit owners. 20. The results of the election on September 24, 2014, were as follows: Page 5 of 13

6 Candidate # of Votes Tracy L. Beck 10 Michael Guiliano 1 Thomas Lance 26 A. R. Pavsner 1 H. LaBaron Preston 199 Beth Ann Wampler The Association declared H. LaBaron Preston, Thomas Lance and Beth Ann Wampler the winners of the September 24, 2014 election. 22. The parties agree that at the time of the election, JWC and MC Development were not selling any of their units in the ordinary course of business, but each was leasing its units in the ordinary course of business. The parties do not allege that the leases are in excess of five years. Conclusions of Law The Association is an association within the meaning of Section , Florida Statutes. Pursuant to Section , Florida Statutes, the undersigned has jurisdiction over the parties to, and the subject matter of, this dispute. If no disputed issues of material fact exist, the arbitrator may enter a summary final order. Fla. Admin. Code R. 61B Applicability of Distressed Condominium Relief Act (DCRA) The Association argues that pursuant to the provisions of the DCRA, Sections , Florida Statutes, which became law in 2010, JWC is a bulk assignee and MC Development is a bulk buyer and that as such, the amendments in the same law to the definition of the term developer found in Section , Florida Statutes, apply Page 6 of 13

7 to those two entities. 4 In pertinent part, the Declaration of Condominium (Declaration) provides as follows: 1. Introduction and Submission Submission Statement. Except as set forth in this Subsection, Developer hereby submits the Land and all improvements erected or to be erected thereon, and all other property... to the Condominium Form of Ownership and use in the manner provided for in the Florida Condominium Act as it exists on the date hereof and as it may be hereafter renumbered. 2. Definitions. The following terms when used in this Declaration and in its exhibits, and as it and they may hereafter be amended, shall have the respective meanings ascribed to them in this Section, except where the context clearly indicates a different meaning: 2.1 Act means the Florida Condominium Act (Chapter 718 of the Florida Statutes) as it exists on the date hereof and as it may be hereafter renumbered Operation of the Condominium by the Association; Powers and Duties Powers and Duties. The Association shall be the entity responsible for the operation of the Condominium and the Association Property.... In addition, the Association shall have all the powers and duties set forth 4 The DCRA statutes were first enacted and became law in s. 18, Ch , Laws of Fla. The definition of developer in Section , Florida Statutes was amended by the same chapter law to add the following pertinent underlined language: Section 7. Subsection (16) of section , Florida Statutes, is amended to read: Definitions. As used in this chapter, the term: (16) Developer means a person who creates a condominium or offers condominium parcels for sale or lease in the ordinary course of business, but does not include: (a) An owner or lessee of a condominium or cooperative unit who has acquired the unit for his or her own occupancy; (b) A cooperative association that which creates a condominium by conversion of an existing residential cooperative after control of the association has been transferred to the unit owners if, following the conversion, the unit owners are will be the same persons who were unit owners of the cooperative and no units are offered for sale or lease to the public as part of the plan of conversion;. (c) A bulk assignee or bulk buyer as defined in s ; or Page 7 of 13

8 in the Act, as well as all powers and duties granted to or imposed upon it by this Declaration, including, without limitation: (e)... The Association and its officers shall, however, retain at all times the powers and duties granted in the Condominium documents and the Condominium Act (k) All of the powers which a corporation not for profit in the State of Florida may exercise pursuant to this Declaration, the Articles of incorporation, the Bylaws, Chapters 607 and 617, Florida Statutes, and the Act, in all cases except as expressly limited or restricted in the Act.... Notwithstanding anything in this Declaration or its exhibits to the contrary, the Association shall at all times be the entity having ultimate control over the Condominium, consistent with the Act. It is clear from the provisions of the Declaration set out above that the Declaration does not incorporate amendments to the Florida Condominium Act, Chapter 718, occurring after the date the Declaration was recorded in Therefore, the Association s argument that JWC and MC Development are not developers as defined in Section (16), Florida Statutes, in 2010 must fail; rather, they are subject to the definition of that term as it existed in See Three Eighty Nine Corp. v. Cohn, No. 9:14-CV , 2015 WL (S.D. Fla. April 2, 2015)(citing Kaufman v. Shere, 347 So. 2d 627, cert. denied 355 So. 2d 517 (Fla. 1978)); see also Polo Glen Condo. Ass n, Inc. v. Unit Owners Voting for Recall, Arb. Case No , Summary Final Order (April 10, 2015) (citing Cohn v. The Grand Condo. Ass n, Inc., 62 So. 3d 1120 (Fla. 2011)). Further, the Association argues that the arbitrator does not have authority to determine the constitutionality DCRA s applicability. It is clear from the cases cited immediately above that by applying the version of Chapter 718, Florida Statutes, adopted by the Declaration itself, the arbitrator, under the circumstances of the instant case, is not making a constitutional determination regarding the applicability of DCRA Page 8 of 13

9 and the other amendments to Chapter 718 enacted after the Declaration was recorded in Turnover In pertinent part, Section , Florida Statutes (2006): (1)... Unit owners other than the developer are entitled to elect at least a majority of the members of the board of administration of an association:... (e) Seven years after recordation of the declaration of condominium; or, in the case of an association which may ultimately operate more than one condominium, 7 years after recordation of the declaration for the first condominium it operates; or, in the case of an association operating a phase condominium created pursuant to s , 7 years after recordation of the declaration creating the initial phase, whichever occurs first. The developer is entitled to elect at least one member of the board of administration of an association as long as the developer holds for sale in the ordinary course of business at least 5 percent, in condominiums with fewer than 500 units, and 2 percent, in condominiums with more than 500 units, of the units in a condominium operated by the association. Following the time 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. (2) Within 75 days after the unit owners other than the developer are entitled to elect a member or members of the board of administration of an association, the association shall call, and give not less than 60 days notice of an election for the members of the board of administration. The election shall proceed as provided in s (2)(d). The notice may be given by any unit owner if the association fails to do so. Upon election of the first unit owner other than the developer to the board of administration, the developer shall forward to the division the name and mailing address of the unit owner board member.... (4) At the time that unit owners other than the developer elect a majority of the members of the board of administration of an association, the developer shall relinquish control of the association, and the unit owners shall accept control. Simultaneously, or for the purposes of paragraph (c) not more than 90 days thereafter, the developer shall deliver to the association, at the developer s expense, all property of the unit owners and of the association which is held or controlled by the developer, Page 9 of 13

10 including, but not limited to, the following items, if applicable, as to each condominium operated by the association:.... Pursuant to Subsection (1)(e) of the statute, the unit owners, other than the developer, were entitled to elect, on October 11, 2013, at least a majority of the seats on the board, i.e., at least two seats on the three member board, because seven years had elapsed since the recording of the Declaration. Pursuant to Subsection (2) of the statute, the Association was required to call an election not later than December 26, 2013, by publishing a First Notice of Election. Also pursuant to Subsection (2) of the statute, because the Association failed to call an election within the stated time frame, the unit owners could have noticed the election; that did not happen. However, counsel for the Association, on April 24, 2014, acknowledged to counsel for Petitioner that turnover and an election were required. It was not until July 24, 2014, that the Association sent the First Notice of Election scheduling turnover and the AM&E for September 24, In any event, it is clear under the statute that as of October 11, 2013, when seven years after the recording of the Declaration had elapsed, the Association was no longer in transition from developer control to unit owner control, rather control shifted to the unit owners. See Allen v. Harbourtowne at Country Woods Condo. Ass n, Inc., Arb. Case No (Feb. 23, 2009); Fla. Admin. Code R. 61B (9). JWC and MC Development Are Developers In 2006, Section (16), Florida Statutes, defined a developer as follows: (16) Developer means a person who creates a condominium or offers condominium parcels for sale or lease in the ordinary course of business, but does not include an owner or lessee of a condominium or cooperative unit who has acquired the unit for his or her own occupancy, nor does it include a cooperative association which creates a condominium by conversion of an existing residential cooperative after control of the association has been transferred to the unit owners if, following the Page 10 of 13

11 conversion, the unit owners will be the same persons who were unit owners of the cooperative and no units are offered for sale or lease to the public as part of the plan of conversion. A state, county, or municipal entity is not a developer for any purposes under this act when it is acting as a lessor and not otherwise named as a developer in the association. The parties agree that both JWC and MC Development lease their units in the ordinary course of business, therefore JWC and MC Development fall within the definition of a developer as it existed in As noted above, turnover of control has occurred within the Association pursuant to Section (1)(e). Also pursuant to Section (1), because neither JWC nor MC Development is selling any units in the ordinary course of business, they are not entitled to elect at least one member of the board. However, pursuant to Section (1), they 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. Given the foregoing, a new election will be ordered because turnover had occurred but two developer representatives were elected to the three-member board at the September 24, 2014 election and developers cannot reacquire control of the Association. See Belkin v. Bishop Associates Ltd. P ship, 521 So. 2d 158 (Fla. 1 st DCA 1988)(where several limited partnerships purchased units from original developer and leased units for short terms, limited partnerships were developers and had to turn over control of association to non-developer unit owners); Allen v. Harbourtowne at Country Woods Condo. Ass n, Inc., Arb. Case No. 5 In pertinent part, Section 1.01, Florida Statutes, provides: 1.01 Definitions. In construing these statutes and each and every word, phrase, or part hereof, where the context will permit: (1) The singular includes the plural and vice versa. Page 11 of 13

12 (Feb. 23, 2009); DRB Dev. v. The Palms of Destin Resort and Conference Condo. Ass n, Inc., Arb. Case No , Summary Final Order (Aug. 12, 2013). Accordingly, it is directors. ORDERED: 1. The Association shall hold a new election for all three seats on the board of 2. The First Notice of Election shall be sent to the unit owners no later than 5:00 p.m. on May 18, The First Notice of Election shall include the following statement in 12 point font, all capital letters: IN ORDER TO COMPLY WITH THE MAY 4, 2015, SUMMARY FINAL ORDER ENTERED BY THE ARBITRATION SECTION OF THE DIVISION CONDOMINIUMS, TIMESHARES AND MOBILE HOMES, FLORIDA DEPARTMENT OF BUSINESS AND PROFESSIONAL REGULATION, A NEW ELECTION MUST BE HELD TO REMEDY DEFECTS IN THE SEPTEMBER 24, 2014 ELECTION. A COPY OF THE SUMMARY FINAL ORDER IS AVAILABLE FROM THE ASSOCIATION OR BY CALLING THE ARBITRATION SECTION AT Non-developer unit owners shall elect two members of the three member board of directors; developers, i.e., JWC and MC Development, may elect only one member of the board. Florida. DONE and ORDERED this 4 th day of May, 2015, at Tallahassee, Leon County, Glenn Lang, Arbitrator Department of Business and Professional Regulation Arbitration Section 1940 North Monroe Street Tallahassee, Florida Phone: ; FAX: Page 12 of 13

13 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 I hereby certify that a true and correct copy of the foregoing final order has been sent by facsimile and by U.S. Mail, postage prepaid, to the following persons on this 4 th day of May, 2015: Donald Fradley, Esq. Fradley Law Firm 27 N. Pennock Lane Suite 104 Jupiter, FL Facsimile: Attorney for Petitioner Bradley W. Butcher, Esq. Butcher & Associates, PL 6830 Porto Fino Cir Suite 2 Fort Myers, FL Facsimile: Attorney for Respondent Glenn Lang, Arbitrator Page 13 of 13