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 George A. Haakenson, Petitioner, v. Case No The Nautilus Management Corporation, Inc., Respondent. / follows: SUMMARY FINAL ORDER Comes now, the undersigned arbitrator, and issues this summary final order as Mr. Haakenson filed his petition for arbitration on January 27, According to the petition, the board denied his request to rent his unit on a short- term basis, citing a portion of the declaration prohibiting practices that increase the insurance costs of the association. The board has permitted short-term rentals in the past. Petitioner requests an order permitting him to rent on a short-term basis. The association through its duly authorized representative filed its answer on February 23, The association asserts that it initially obtained a legal opinion that the right to rent under the documents was unlimited, and later discovered that this advice was flawed. The arbitrator issued a notice of intent to issue a summary final order that offered a final opportunity to the parties to file additional legal arguments by March 10, No further arguments have been filed. 1

2 The petitioner requested that the board approve the rental of unit #707 owned by the petitioner. By letter dated June 20, 2005, the board denied the request by a vote of 3-2, stating: The denial was based on Paragraph 10.3 of the Declaration Documents which forbids the use of any unit or common elements in any way that will increase the cost of insurance upon the condominium property. The petition sets forth as an exhibit a history of this dispute in the condominium as compiled by the president of the association. 1 In August of 2003, the association obtained a letter from Law Firm A stating that since article 10.5 of the declaration provides that there shall be no restrictions or limitations on the rental of units, short term rentals are allowed. It is not known to the arbitrator if this letter discussed the insurance issue, as the letter is not located in the file. In October 2003, the association received a letter from Law Firm B stating that the firm had located no laws or ordinances that would prohibit short-term rentals in the condominium. It is not known the extent to which the opinion letter discussed the insurance provision, as only one page from the letter is attached, but the president states that the letter indicates that if a conflict existed between the rental and insurance provisions of the declaration, arguments could be made supporting each position. In May 2004, this issue was revisited with Law Firm B, and the resulting letter of May 14, 2004 is contained in the file. The letter offers that if the condominium as a whole or certain individual units are considered resort condominiums under Chapter 509, Florida Statutes, the owners and the association would be required to pay additional fees under that statute and that the insurance rates 1 The arbitrator briefly recites the history of the dispute in order to provide background information and not for the purpose of passing on the correctness of the various legal opinions obtained. Certainly, this area of the law is capable of supporting different conclusions. 2

3 for the association and the owners individually will be expected to be somewhat higher. The letter continues that since the renting of units is permitted, it cannot be enjoined as a nuisance under the nuisance provisions of the declaration, and further, that the specific leasing provisions would control the issue of whether units may be leased over the general provisions prohibiting nuisance activities that increase insurance rates. The letter concludes that in order to reduce rental activities, it will be necessary for the association to amend Section 10.5 of the declaration, an amendment that would require the unanimous approvalof the owners. 2 Next, according to the historical account written by the president of the association, several board members met with a different attorney in Law Firm B who indicated verbally that it would be possible that the insurance nuisance provision could be applied as a restriction on the right to rent provision and further indicating that the firm would be willing to litigate this position. Finally, a letter from the firm dated December 23, 2004, is contained in the file that discusses the requirements for licensure under Chapter 509, Florida Statutes, as a public lodging establishment. The letter makes no definite conclusions concerning issues directly 2 This was sound advice considering the holding in the analogous arbitration case of Seychelles Condominium Management Association, Inc. v. Ehlen, Arb. Case No , Final Order (May 15, 2002), to the effect that where the declaration prohibited amendments to the leasing rights contained in the declaration except with 100% approval of the owners, the association could not use the general amendatory provisions of the declaration to delete the requirement of 100% approval for rental amendments. Also, section (13), effective on October 1, 2004, discussed later in this order, has an overall bearing on this issue as it may exist in the condominium on or after that date. 3

4 involved here. Section 10.5 of the declaration states in its entirety: 10.5 Leasing of Units. There are none nor shall there be any restrictions or limitations upon the leasing of Units, and each Unit Owner may lease his Unit upon such terms and conditions as he may desire, provided that the lease of Unit shall not discharge the Unit Owner from compliance with any of his obligations and duties as a Unit Owner. All of the terms and provisions of the Condominium Act, the Declaration, Articles of Incorporation, the By-Laws, and the rules and regulations of the Association pertaining to use and occupancy shall be applicable and enforceable against any person occupying a Unit as a tenant to the same extent as against a Unit Owner, and a covenant [exists] upon the part of each such tenant to abide by the rules and provisions of the Condominium Act, this Declaration, the Articles of Incorporation and By-Laws of the Association. [emphasis added]. Section 10.3 of the declaration provides in its entirety: 10.3 Nuisances. No nuisances shall be allowed upon the Condominium Property, nor any use or practice that is the source of annoyance to residents or which interferes with the peaceful possession and proper use of the Condominium Property by its residents. All parts of the Condominium Property shall be kept in a clean and sanitary condition, and no rubbish, refuse or garbage [shall be] allowed to accumulate nor any fire hazard allowed to exist. No Unit Owner shall permit any use of his Unit or make any use of the Common Elements that will increase the cost of insurance upon the property. [emphasis added]. It is plain from a reading of section 10.5 of the declaration that the drafter of the declaration intended the right to rent to be a paramount right of the owners. The declaration is not ambiguous but prohibits all present and future restrictions on the right 4

5 to rent. One may argue 3 that under the case of Woodside Village Condominium Association, Inc. v. Jahren, 806 So. 2d 452 (Fla. 2002), the Supreme Court determined that the right to rent a condominium unit is not a fundamental right under the statute, and further, that purchasers take title in a condominium subject to the realization that the declaration may be amended pursuant to its general amendatory provisions. These principles are both correct but do not apply here, where the declaration itself elevates the right to rent to a fundamental level and prohibits the demise or destruction of the right. 4 In effect, the declaration in this case declares that the right to rent is the equivalent to those rights situated by the Legislature under section (4), Florida Statutes, which rights were duly acknowledged by the Woodside Court as impervious to attack by ordinary amendment: Based upon this broad statutory authority and the provisions for amendment set out in the declaration of condominium, courts have recognized the authority of condominium unit owners to amend the declaration on a wide variety of issues, including restrictions on leasing. Of course, section (1)(a) itself contains some restrictions on the amendment process. For example, pursuant to subsections (4) and (8), all unit owners must consent to amendments which materially alter or modify the size, configuration or appurtenances to the unit, change the percentage by which the unit owner shares the common expenses and owns the common surplus of the condominium, or permit timeshare estates to be created in any unit of the condominium, unless otherwise provided in the declaration as originally recorded. See (4), (8), Fla. Stat. (2000). These provisions are not at issue here. [Id. at 457]. 3 While no one is actually advancing this argument, it would be remiss not to address the Woodside case and subsequent amendment to section (13), Florida Statutes. 4 Pursuant to article 13.3 of the declaration, the rental provision contained in article 10.5 may only be amended with 100% of the owners. This is consistent with the scheme of section (4), Florida Statutes, which requires 100% approval to amend the declaration unless otherwise provided in the declaration as originally recorded. 5

6 Thus the Court acknowledges above that there are certain fundamental rights as set forth in the statute that are not susceptible to ordinary amendment regardless of purchaser recognition that as a general matter, future amendments to the documents may change the playing field in the condominium. The Court further acknowledged that condominiums are creatures of statute and of their documents: Hence, because condominiums are a creature of statute courts must look to the statutory scheme as well as the condominium declaration and other documents to determine the legal rights of owners and the association. [Id. at 456]. [emphasis added]. As condominiums are creatures of both statute and of their documents, rights made paramount under the documents to the extent permitted by the statute 5 may be afforded the same status as those fundamental rights protected in the statute. This conclusion was reached some time ago in the arbitration case of Seychelles Condominium Management Association, Inc. v. Ehlen, Arb. Case No , Final Order (May 15, 2002), 6 in which the arbitrator reasoned: The court in Woodside, reaffirmed the concept that any purchaser of a condominium must, by the nature of condominium living, accept the real possibility of the amendment of the declaration of condominium. However, such a purchaser must be able to make a reasonable calculation as to the likelihood of any such amendments. 5 The condominium statute permits a condominium flexibility in identifying additional rights not enumerated in the statute that are to be afforded special treatment, in its provisions that (1) the declaration may identify other appurtenant rights in the declaration (section , Florida Statutes,) and by virtue of (2) section (4), Florida Statutes, providing that unless otherwise provided in the declaration as originally recorded, certain identified fundamental interests may not be materially diminished absent the unanimous approval of the owners; this latter provision at the very least implies that rights not enumerated in section (4), Florida Statutes, may be included in the declaration and afforded that degree of protection contained in the section. 6 The final order may be reviewed at: 639fo.pdf 6

7 Such a calculation must rest, to a large measure, on the protections provided in the declaration of condominium. In the instant case, the declaration contains two inextricably intertwined sections. Section 10.5 imposes limits on the leasing of units and section 13.3 imposes limits on the ability of the association to amend section 10.5.Read together, the clear intent of the declaration is that section 10.5 cannot be lawfully altered without the consent of all unit owners. Seychelles is important because it serves to distinguish the holding in Woodside that under the statute, the right to rent is not fundamental and can be amended away. If the right to rent is, under the language of a particular declaration, afforded the status of a protected right, then the right to rent is recognized and established as protected, and cannot be diminished except as provided in the statute or declaration. Nor can it be said that the issue of amending the declaration to diminish the voting rights contained therein is moot in view of the amendment creating section (13), Florida Statutes. Effective October 1, 2004, this amendment provides: 13) Any amendment restricting unit owners' rights relating to the rental of units applies only to unit owners who consent to the amendment and unit owners who purchase their units after the effective date of that amendment. In the instant case, the association s main argument is that the declaration (as it existed prior to October 1, 2004), prohibits short term renting if short term renting results in an increase in insurance costs to the association. Section (13), Florida Statutes, as set forth above, addresses amendments to the condominium documents 7 made on or after October 1, 2004, and does not reach those restrictions contained in the 7 While the statute on its face only addresses amendments to the declaration, the statute has been construed to likewise prohibit rules from posing additional restraints on the ability of an owner to offer his unit for rent. See, Palermo v. The Tower Residences Condominium Association, Inc., Arb. Case No , Summary Final Order (June 30, 2005). 7

8 declaration prior to October 1, Thus if a pre-october 2004 declaration prohibits leasing, the amendment to the statute does nothing to invalidate those restrictions or limit their application, as it addresses only those amendments to the documents made on or after October 1, Certainly if the association in this case, assuming for a moment that it could lawfully amend the documents to limit leasing, 8 attempted to amend the documents to further restrict leasing, such amendment would fall within the new statute, and could not be applied to any unconsenting owner by the plain language of the statute. 9 Thus, because the statute does not reach pre-october 1, 2004 declaration or amendments thereto, the statute does not apply to the instant dispute concerning the pre-existing declaration. Section (13), Florida Statutes, does, however, apply to changes to the documents made after the effective date of the statute. Thus, in summary to this point, the amendment to section (13), Florida Statutes, does not apply to the main issue presented involving the proper interpretation of the declaration, and the case of Woodside does not bar the declaration from establishing the right to rent as a protected right, but instead acknowledges that the statute or documents may afford special protection to rights as may be stated therein. The only issue remaining for determination is whether the absolute right to rent on the terms and conditions chosen by the individual owner is subject to the insurance provision of the declaration such that rental practices that increase the insurance costs 8 The association could not easily amend its documents to accomplish this--irrespective of section (13), Florida Statutes--as the declaration in this case, like the declaration in Seychelles, by its own terms is not subject to amendment in this regard except with 100% approval. In Seychelles as here, the declaration requires the approval of 100% of the owners for rental amendments, the declaration is virtually amendment-free in this regard. 8

9 for the association are barred. There is no support for such an interpretation. 10 First, it is axiomatic that in considering the provisions of a declaration, a provision that specifically addresses an issue will control over a general provision. See, Shore Colony Condominium Association, Inc. v. Griefe, Arb. Case No , Final Order (February 19, 1999) (where the declaration contained general language prohibiting changes to the common elements absent a membership vote, and contained a separate provision addressing circumstances under which a unit owner could remove the common element walls within the unit, the specific provision dealing with the removal of interior walls found application.) As the leasing provisions of the declaration specifically addresses leasing, these specific provisions must be given effect over the nuisance and insurance provision. 11 Moreover, a declaration of condominium may be interpreted using basic rules of interpretation. Koplowitz v. Imperial Towers Condominium, Inc., 478 So.2d 504, 505 (Fla. 4th DCA 1985). One of the basic principles of construction holds that the mention of one thing implies the exclusion of the other. Towerhouse Condominium, Inc. v. Millman, 475 So.2d 674, 676 (Fla. 1985). Here, the fact that the declaration expressly prohibits restrictions on leasing--present or future--implies that further restrictions on leasing are to be excluded. In addition, a declaration should be 9 It may be observed that section (13), Florida Statutes, legislatively elevates rental rights as may exist in the condominium documents on October 1, 2004, nearly to the status of those rights protected by section (4), Florida Statutes. 10 There is likewise no support for an argument that the leasing of units, expressly permitted in the declaration as to lease term or other condition, violates the single family residence requirements contained in article 10.1 of the declaration. Compare, Cammack v. Ocean Beach Association, Inc., Arb. Case No , Final Order (March 24, 1995). 11 It goes without saying that a particular tenant who is a nuisance may be removed by the association as a nuisance where he engages in nuisance behavior. Section 10.5 of the declaration requires tenants to comply with the declaration. However, a tenant is not a nuisance simply by virtue of being a tenant, any more than a child is a nuisance because he or she is a child. 9

10 interpreted 12 in a logical manner to give effect to its provisions. Interpreting the declaration to prohibit leasing where it increases insurance rates would render the rental provision essentially meaningless in its guarantee that the right to rent is not subject to present or future restriction. For example, renting to a person with a disability recognized under the state and federal fair housing law may in fact increase the insurance rates of the association, but certainly, the tenant is not a nuisance per se and may not be excluded. The declaration is correctly viewed as setting forth the general rule that no substantive restrictions on the right to rent will be engrafted onto the declaration; purchasers had the right to rely on this language. The fact that the declaration contains other provisions that may impact an actual tenant or leasing arrangement does not detract from the general rule that no substantive limitations will be tolerated. A tenant who happens to be a nuisance may be removed. The declaration elsewhere prohibits For Rent signs in the yards. These are not restrictions that go to the duration or terms of the lease but are basically housekeeping rules designed for the orderly operation of the association. WHEREFORE, the arbitrator concludes that the association may not prohibit or otherwise regulate the terms and conditions of rental agreements including provisions relating to the term of such agreements. DONE AND ORDERED this 21st day of April, 2006, at Tallahassee, Leon County, Florida. Karl M. Scheuerman, Arbitrator 12 The rules of construction only apply when the declaration is ambiguous, which is not the case here. The declaration is plain that leasing is allowed, without restriction as to term or condition. 10

11 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 to the following persons on this 21st day of April, 2006: George A. Haakenson 3580 South Oceanshore Blvd. Unit 707 Flagler Beach, Florida H. J. Forbes, Jr S. Ocean Shore Blvd. Unit #307 Flagler Beach, Florida Karl M. Scheuerman, Arbitrator Right to Appeal As provided by s , F.S., this final order may be appealed by filing a complaint 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. If this final order is not timely appealed, it will become binding on the parties and may be enforced in the courts. Attorney s Fees 11

12 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