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 BINDING ARBITRATION - HOA John Rhoads, Petitioner, v. Case No Eagle Pointe Subdivision Homeowners Association, Inc., Respondent. / SUMMARY FINAL ORDER On March 25, 2008, John Rhoads (the petitioner) filed a Request for Expedited Determination of Jurisdiction for Homeowners Association Disputes. The request described disputes involving assessments, access to association documents, and the composition of the association s board of directors. On April 16, 2008, Eagle Pointe Subdivision Homeowners Association, Inc. (the association) filed a response. A case management conference was held in this matter on June 4, 2008, at which time the undersigned found that the dispute involving the composition of the board was an election dispute eligible for arbitration and directed the petitioner to file a petition limited to the election dispute. The petitioner filed a Mandatory Arbitration Petition for an Election Dispute on June 16, On June 23, 2008, the association filed an answer and the petitioner filed a response to the answer on August 8, A case management conference was held on November 6, 2008, at which time the undersigned informed the parties that he would summarily rule on this matter. 1

2 FINDINGS OF FACT 1. Petitioner owns a lot in the Eagle Pointe Subdivision (the community) and is member of the Eagle Pointe Subdivision Homeowners Association. lots. 2. The community contains 37 lots. 3. Vero-Pittsburgh Partners, LLC, developed the community and owns Paragraph 9 of the Eagle Pointe Subdivision Amended and Restated Declaration of Covenants and Restrictions (the declaration), states, in pertinent part: Articles of Incorporation of (hereinafter referred to as the Association ), has [sic] been filed and accepted by the Secretary of State for the State of Florida. The Developer shall control the Association until such time as either of the following occurs, ( Turnover ): (a) The Developer is no longer the owner of any Lot or portion of the Subdivision; or (b) The Developer, in his sole discretion decides to Turnover the Association to the members. The Association shall be responsible for maintenance of all common areas, private easements, retention ponds, appurtenant structures, the posting of any governmentally required bonds for improvements (such as sidewalk bonds and street maintenance bonds during the first years of the operation of the association) and the exercise of any rights granted to it by this Declaration or by the Developer. Every owner of a Lot shall be a Member of the Association. Membership shall be appurtenant to and may not be separated from any Lot. The total number of members for the Association shall be equal to the number of Lot Owners in the subdivision. 5. Article V of the association s articles of incorporation states: Every person or entity who is a record owner of a fee interest in any Lot or Lot which is subject by covenants of record to assessment by the Association, including contract sellers, may be a Member of the Association. The foregoing is not intended to include persons or entities who hold an interest merely as security for the performance of an obligation. Membership shall be appurtenant to and may not be separated from ownership of any Lot. There shall be two (2) classes of membership as set forth in Article VI of the Declaration. 2

3 6. Article VII of the association s articles of incorporation states, in pertinent part: The Board of Directors of this Association shall consist of not Less than three (3) Directors, who need not be a Member of the Association. The number of Directors may be changed by amendment of the By-Laws of the Association but shall never be less than three (3)... At the first meeting the Members shall elect three (3) Directors to serve for a term of one (1) year each. The Developer, B. S. HOLLOWAY, may retain control of the Board of Directors until such time as ninety percent (90%) of the Lots in EAGLE POINTE are conveyed to third parties. 7. Section 5.3 of the association s bylaws states: 5.3 Elections of Directors. (a) General. After turnover of the Association to the Members, Directors shall be elected in the manner set forth below. Cumulative voting shall not be permitted. (b) Annual Meeting. Except for Directors elected at special meetings pursuant to Section 5.4, Directors to fill vacant directorships or expiring terms shall be elected at the annual meeting each year. A candidate for the position of director must be a voting member in good standing. (c) Nominations. The Board of Directors may, at its discretion, appoint a nominating committee (none of whose members shall be existing Directors) at least fourteen (14) days before the scheduled date of the meeting at which the elections are to be held. This committee may nominate one or more persons for each available directorship then existing. Other nominations for the available directorships, as well as for directorships created at the meeting, may be made from the floor at the meeting (d) Voting. Voting for Directors shall be by secret ballot with each Voting Member casting a vote (or votes if Voting Member votes with respect to more than one Lot) for each of as many nominees as there are directorships to be filled and cumulative voting being prohibited. By way of illustration, if two directorships are vacant, each Voting member as defined in the Declaration shall cast one vote (or as many votes as he is entitled to cast at meetings generally) for each of two nominees, and the nominees receiving the two highest totals of votes shall have been elected Directors. Proxies shall not be used for Director elections. Each Owner shall vote in person, or by a ballot that Owner personally casts. 3

4 Conclusions of Law The undersigned has jurisdiction over this dispute and the parties pursuant to , Fla. Stat. and. Fla. Admin. Code R. 61B , Fla. Stat., provides as follows, in pertinent part: (1) It is declared that the public policy of this state prohibits the inclusion or enforcement of certain types of clauses in homeowners' association documents, including declaration of covenants, articles of incorporation, bylaws, or any other document of the association which binds members of the association, which either have the effect of or provide that: *** (c) After the transition of homeowners' association control in a community from the developer to the nondeveloper members, as set forth in s , has occurred, a developer is entitled to cast votes in an amount that exceeds one vote per residential lot. Such clauses are declared null and void as against the public policy of this state , Fla. Stat., provides as follows: With respect to homeowners' associations: (1) Members other than the developer are entitled to elect at least a majority of the members of the board of directors of the homeowners' association when the earlier of the following events occurs: (a) Three months after 90 percent of the parcels in all phases of the community that will ultimately be operated by the homeowners' association have been conveyed to members; or (b) Such other percentage of the parcels has been conveyed to members, or such other date or event has occurred, as is set forth in the governing documents in order to comply with the requirements of any governmentally chartered entity with regard to the mortgage financing of parcels. For purposes of this section, the term "members other than the developer" shall not include builders, contractors, or others who purchase a parcel for the purpose of constructing improvements thereon for resale. (2) The developer is entitled to elect at least one member of the board of directors of the homeowners' association as long as the developer holds for sale in the ordinary course of business at least 5 percent of the parcels 4

5 in all phases of the community. After the developer relinquishes control of the homeowners' association, the developer may exercise the right to vote any developer-owned voting interests in the same manner as any other member, except for purposes of reacquiring control of the homeowners' association or selecting the majority of the members of the board of directors. It is clear that the conditions set forth , Fla. Stat., that trigger turnover of a homeowners association from developer control to owner control apply even where the governing documents provide a different set of conditions. Paragraph 9 of the declaration permits the developer to retain control of the association until it has sold all of its parcels. Paragaraph 9 conflicts with , Fla. Stat., because it allows the developer to retain control after 90 percent of the parcels have been sold, and there has been no showing that the provision is required in order to comply with the requirements of any governmentally chartered entity with regard to the mortgage financing of parcels. Therefore, in accordance with , Fla. Stat., paragraph 9 is null and void. The fact that paragraph 9 of declaration permits the developer, in its sole discretion, to turn over the association to the non-developer members at anytime prior to the developer s sale of all its parcels does not save paragraph 9. The petitioner argues that because the turnover provisions of the declaration are null and void, the developer must hold an election to turn over the association to the non-developer members with each member entitled to cast one vote per residential lot. The petitioner is not entitled to such relief. Where the turnover provisions of the governing documents are found to be null and void in accordance with , Fla. Stat., the turnover conditions of , Fla. Stat., apply. This section provides that the non-developer members are entitled to elect a majority of the members of the board of directors three months after 90 percent 5

6 of the parcels have been sold or such other percentage of the parcels has been conveyed to the members, or such other date or event has occurred, as set forth in the governing documents. The developer currently owns 35 percent of the parcels in the community. Therefore, the developer is not yet required to turnover control of the association. Based upon the foregoing, it is ORDRED: 1. Paragraph 9 of the declaration is null and void. 2. The non-developer owners shall be entitled to elect a majority of the members of the board of directors in accordance with , Fla. Stat. Florida. 3. The petitioner s request for relief is denied. DONE AND ORDERED this 5 th day of March, 2009, at Tallahassee, Leon County, James W. Earl, Arbitrator Department of Business and Professional Regulation Arbitration Section 1940 North Monroe Street Tallahassee, Florida Certificate of Service I hereby certify that a true and correct copy of the foregoing summary final order has been sent by U.S. Mail to the following persons on this 5 th day of March, 2009: Michael Faro, Esq. Michael Anthony Faro, P.A. 150 Cocoa Isles Boulevard Suite 404 Cocoa Beach, Florida Seth D. Chipman, Esq. Watson, Soileau, DeLeo, Burgett Pickles & Baughan, P.A North U.S. Highway 1 Cocoa, Florida James W. Earl, Arbitrator 6