STATE OF FLORIDA DEPARTMENT OF BUSINESS AND PROFESSIONAL REGULATION DIVISION OF FLORIDA CONDOMINIUMS, TIMESHARES AND MOBILE HOMES IN RE: PETITION FOR ARBITRATION DANIEL P. MORGAN, Petitioner, v. Case No. 2013-04-6600 CRYSTAL SANDS OWNERS ASSOCIATION, INC., Respondent. / FINAL ORDER OF DISMISSAL On March 3, 2014, Crystal Sands Owner Association, Inc. (the Association) filed a motion to dismiss Petitioner s amended petition. The Association alleges that the amended petition fails to state a cause of action. As of the date of this Order, Petitioner has not filed a response to the motion to dismiss. Relevant Procedural History On November 12, 2013, Daniel P. Morgan filed a petition for non-binding arbitration naming the Association as Respondent. On January 7, 2014, the Association filed an answer. On January 30, 2014, Petitioner filed a reply. On February 6, 2014, a case management conference was held. On February 21, 2014, Petitioner filed an amended petition. The amended petition alleges that the Association is attempting to pass a new declaration without following proper procedures and is arbitrarily and capriciously enforcing rental restrictions against Petitioner. 1
Factual Allegations in the Amended Petition 1 1. Crystal Sands Owners Association, Inc. is the corporate entity responsible for the operation of Crystal Sands Section One (Section One), a condominium and Crystal Sands Section Two (Section Two), a condominium. Each condominium has its own Declaration of Condominium, but shares Articles of Incorporation and Bylaws. 2. Petitioner is the owner of several units within both Section One and Section Two condominiums. 3. Article 11, of the Declarations of Condominium of both Section One and Section Two states in pertinent part: In recognition of the close proximity of the units and the compact living conditions which will exist in this condominium, the mutual utilization and sharing of the common elements and common recreational facilities, and the compatibility and congeniality which must exist between the unit owners and occupants in order to make an undertaking of this nature satisfactory and enjoyable for all parties in interest, it shall be necessary for the board of directors of the Association, or its duly authorized officers, agent or committee, to approve in writing all sales, transfers, leases or occupation of a unit before such sale, transfer, lease or occupation shall be valid and effective. Written application for such approval shall contain such information as may be required by application forms promulgated by the board and shall be accompanied by a transfer fee as required by regulation of the board. When considering such application, consideration shall be given to good moral character, social compatibility, personal habits and financial responsibility of the proposed purchaser, transferee, lessee or occupant. A waiver of this provision or the failure to enforce it in any particular instance shall not constitute a waiver or stop the Association from enforcing this provision in any other instance. (Emphasis supplied.) 4. Article 11.1 of the Declaration of Condominium for Section One states: 11.1 LEASE. A lease is defined as the occupancy of the unit in the absence of the owner for consideration, whether monetary, or for the exchange of goods/services, or otherwise. The terms lease and rental 1 In considering a motion to dismiss, facts alleged in the petition must be accepted as true. See Cortez v. Palace Resorts, Inc., 123 So. 3d 1085 (Fla. 2013). 2
and the terms tenant and lessee shall be used interchangeably. The Association is authorized to act as rental agent for the owners electing to participate in the Crystal Sands Office Rental Program. In such event, the owner(s) will execute such agreements and rent or lease the units in accordance with this Declaration within the parameters of the program. All owners not renting or leasing through the Association s Rental Program shall use a uniform form of lease or lease addendum promulgated by the Board and shall provide the Association with a copy of the annual occupational license/permit and such other information evidencing that the lease or rental complies with all laws and ordinances of governmental bodies having jurisdiction. In the event a lease or occupation of a unit is disapproved, the unit shalt not be leased or so occupied. Any lease made in violation of this Declaration shall be voidable and the Association may institute suit to evict the tenant. To prevent overtaxing the facilities, a Unit Owner whose Unit is leased may not use the recreation or parking facilities, or common elements during the lease term, except as a guest. All leases shall have a minimum term of fourteen (14) days for the months of October through May and a minimum term of seven (7) days, at the Unit Owner s discretion, during the months of June through September, effective June 1, 2004. If a previously levied fine remains unpaid, the Board may reject a lease or condition approval upon payment thereof. The unit owners shall have a duty to bring his or her tenant s conduct into compliance with the Condominium Documents. If the unit owner fails to bring the conduct of the tenant into compliance with the Condominium Documents, the Association shall have the right to withhold lease approval at the expiration of the tenancy/occupancy for a period of one (1) month, in addition to any other remedies provided herein. The Association shall have a right to recover any costs or fees, including attorney s fees, from the unit owner which shall be secured by assessment and lien in the same manner as common expense charges. (Emphasis supplied.) 5. Article 11.1 of the Declaration of Condominium for Section Two states: 11.1 LEASE. A lease is defined as the occupancy of the unit in the absence of the owner for consideration, whether monetary, or for the exchange of goods/services, or otherwise. The terms lease and rental and the terms tenant and lessee shall be used interchangeably. The Association is authorized to act as rental agent for the owners electing to participate in the Crystal Sands Office Rental Program. In such event, the owner(s) will execute such agreements and rent or lease the units in accordance with this Declaration within the parameters of the program. All owners not renting or leasing through the Association s Rental Program shall use a uniform form of lease or lease addendum promulgated by the Board and shall provide the Association with a copy of the annual 3
occupational license/permit and such other information evidencing that the lease or rental complies with all laws and ordinances of governmental bodies having jurisdiction. In the event a lease or occupation of a unit is disapproved, the unit shalt not be leased or so occupied. Any lease made in violation of this Declaration shall be voidable and the Association may institute suit to evict the tenant. To prevent overtaxing the facilities, a Unit Owner whose Unit is leased may not use the recreation or parking facilities, or common elements during the lease term, except as a guest. All leases shall have a minimum term of fourteen (14) days. If a previously levied fine remains unpaid, the Board may reject a lease or condition approval upon payment thereof. Subleasing, renting a portion of the unit, sharing the unit or assignment of leases are prohibited. The unit owners shall have a duty to bring his or her tenant s conduct into compliance with the Condominium Documents. If the unit owner fails to bring the conduct of the tenant into compliance with the Condominium Documents, the Association shall have the right to withhold lease approval at the expiration of the tenancy/occupancy for a period of one (1) month, in addition to any other remedies provided herein. The Association shall have a right to recover any costs or fees, including attorney s fees, from the unit owner which shall be secured by assessment and lien in the same manner as common expense charges. (Emphasis supplied.) states: 6. Section 15.2 of the Declarations of both Section One and Section Two Waiver of Rights. The failure of the Association to enforce any right, provision, covenant or condition which may be granted by the condominium documents shall not constitute a waiver of the right of the Association to enforce such right, provision, covenant or condition in the future. A provision of the Condominium Act may not be waived if the waiver would adversely affect the rights of the owner or defeat the purpose of the provision, except that unit owners or Directors may waive notice of specific meetings as provided in the Bylaws. 7. Since purchasing his units, Petitioner has rented all of his units except his residence. From approximately 2005 to 2009, Petitioner utilized the Association s internal rental program, paying the program a fifteen percent (15%) commission on all rental income. 4
8. The Association s rental program allowed for one week rentals if the next week was blocked off, which means the unit could not be rented that week. 9. From the time of Petitioner s first purchase until recently, the Association has not been enforcing a minimum lease of 14 days, and the lease review provisions of the Declarations of both Section One and Section Two. 10. On October 8, 2013, the Association adopted a Resolution which states in pertinent part: NOW, THEREFORE, it is hereby resolved as follows: 1. The above recitations are true and correct and are hereby incorporated into this Resolution. 2. The Board hereby resolves to consistently and uniformly enforce the 14-Day Leasing Restriction contained within Section 11.1 of the Section One Declaration, as amended and applicable, and the Section Two Declaration, as amended, subject to the terms of this Resolution. Any violations of the 14-Day Leasing Restriction reported on or after the date of the execution of this Resolution shall be dealt with in a timely, uniform and even-handed manner. 3. The terms and authority of this Resolution shall not impact the authority and ability of the unit owners subject to the Section One Declaration to lease their units for a minimum term of seven (7) days, at the unit owner s discretion, during the months of June through September, pursuant to the amendment to the Section One Declaration. 4. The Board of Directors understands that many unit owners will have confirmed future rental reservations of their unit(s) prior to the effective date of this Resolution (i.e. rental reservations of their unit(s) for dates falling after the date this Resolution is executed). The Board of Directors further understands that many of these future rental reservations have incorporated the Block Off Policy previously authorized by the Board of Directors. In order to promote the fair and uniform enforcement of this Resolution, the Board of Directors will grandfather all rental reservations with a seven (7) day minimum term from the terms and authority of this Resolution which were booked and confirmed prior to the adoption of this Resolution, subject to the conditions referenced herein, including those rental reservations incorporating the Block Off Policy. To qualify for grandfather status under this Resolution, a requesting unit owner must provide written notice to the Association, confirming these previously booked rental reservations, within forty-five (45) days of the date of the execution of this Resolution. The Association, through its Board of Directors and other authorized representatives, may require additional 5
information and documentation from the unit owners confirming the applicable rental reservations. Unit owners are required to provide the Association with all requested information and documentation as a prerequisite to qualifying for grandfather status under this Resolution. The Association will provide written confirmation to all unit owners who request and successfully qualify for grandfather status for their respective leases under this Resolution. Finally, the only leases which qualify for grandfather status under this Resolution are those which commence within one (1) year of the date of the execution of this Resolution. No lease, which commences more than one (1) year after the date of the execution of this Resolution, shall be eligible to qualify for grandfather status. 5. No leases with a term of less than seven (7) days will be allowed, or be allowed to qualify for grandfather status, per the authority of the Section One Declaration and the Section Two Declaration. 6. The Association, through its Board of Directors (as may be delegated to management), retains any and all rights to enforce the restrictions it may have pursuant to the Governing Documents of the Association, including but not limited to levying fines (if applicable) against the offending unit owner as a result of the violations and/or seeking relief through an action at law or in equity in a court of competent jurisdiction. The Association will seek reimbursement for all attorney fees or costs associated with such action as authorized by the Declaration and the Florida Statutes. Unit owners are responsible to ensure that all guests, tenants and other occupants of their units remain in compliance with the restrictions contained in the Declaration, including the 14-Day Leasing Restriction. 11. On October 28, 2013, the Association sent Petitioner a package that included the following: a. Cover letter b. October 8, 2013 Meeting Agenda c. Lease Agreements for Crystal Sands Condominium Owners d. Crystal Sands Tenant House Rules and Information e. Lease Addendum and Board Resolutions f. Lease Application for Owners and Registered Agent Rentals g. Board Resolution Formally Readopting the Minimum Rental Terms h. Guidelines and Application to Grandfather a Future Lease 12. The Association has declared it will begin enforcing the minimum rental provisions and requiring all owners who are not in its internal rental program to submit lease applications and proposed leases to the Association for approval. 6
13. Petitioner spent millions of dollars in the purchase of his units in reliance of the Association s non-enforcement of the rental provisions. Petitioner also has income from managing other unit owners rentals. The Association s enforcement of the rental restrictions will affect his income. Additionally, requiring Petitioner to submit an application and proposed leases, allows the Association access to Petitioner s client listings and other proprietary information. Grounds for the Motion To Dismiss The Division has jurisdiction over this matter pursuant to Section 718.1255, Florida Statutes. Rule 61B-45.019(2), Florida Administrative Code, states in pertinent part: The following defenses shall be made by motion in opposition to the petition: (a) Lack of jurisdiction over the subject matter, (b) Lack of jurisdiction over the person, (c) Insufficiency of process, (d) Insufficiency of service of process, (e) Failure to state a cause of action, and (f) Failure to join indispensable parties. A motion making any of these defenses shall be made before the filing of the answer. The grounds on which any of the enumerated defenses are based and the substantial matters of law intended to be argued shall be stated specifically and with particularity in the responsive pleading or motion. Any ground not stated in the motion shall be deemed to be waived except any ground showing that the division lacks jurisdiction of the subject matter may be made at any time. The Association alleges in its motion that the amended petition fails to state a cause of action. Petitioner s claims are based on the Association s October 8, 2013 Resolution that was mailed to Petitioner on October 28, 2013. Petitioner alleges that by this action, the Association is attempting to pass a new declaration without following 7
proper procedures and is arbitrarily and capriciously enforcing rental restrictions against Petitioner. New Declaration Petitioner alleges that in order to enforce the rental restrictions, the Association is required under Article 7.2 of the Declarations of both Section One and Section Two, to obtain approval by vote of two-thirds (2/3) of the unit owners. He alleges that the October 8, 2013 Resolution creates unauthorized amendments to the Declarations of Section One and Section Two. The recorded Declarations of both Section One and Section Two and the October 8, 2013 Resolution are attached as exhibits to the amended petition. Any exhibit attached to a pleading is part of the pleading for all purposes, and if an attached document negates a pleader's cause of action, the plain language of the document will control and may be the basis for a motion to dismiss. Striton Properties, Inc. v. City of Jacksonville Beach, 533 So. 2d 1174 (Fla. 1st DCA 1988). The October 8, 2013 Resolution is not an amendment or new declaration for either Section One or Section Two. The resolution is merely an acknowledgment of the Association s previous failure to enforce the rental restrictions in the Declarations recorded in the public records of Miami-Dade County, and notice that it will begin enforcing the restrictions anew. Arbitrary and Capricious Enforcement of Rental Restrictions Whether the Association may now enforce the rental restrictions after a period of non-enforcement is controlled by the precedent of Chattel Shipping and Investment, Inc. v. Brickell Place Condominium Assoc., Inc., 481 So. 2d 29 (Fla. 3rd DCA 1986). Under Chattel Shipping, the Association may begin to enforce a previously-unenforced 8
restriction if it provides notice of prospective enforcement. Camelot Two Condominium Association, Inc. v. Dirse, Arb. Case No. 2000-00-0951, Final Order (May 10, 2001). The October 8, 2013 Resolution and the October 28, 2013 packet mailed to Petitioner is notice of prospective enforcement. Petitioner alleges that he spent millions of dollars in the purchase of his units in reliance in the Association s non-enforcement of the rental provisions of the recorded Declarations, therefore the Association is estopped from enforcing the rental restrictions for as long he owns the units. The essential elements of estoppel are: (1) a representation as to a material fact that is contrary to a later-asserted position, (2) reasonable reliance on that representation, and (3) a change in position detrimental to the party claiming estoppel, caused by the representation and reliance thereon. State v. Harris, 881 So. 2d 1079, 1084 (Fla. 2004). See also WSG W. Palm Beach Dev., LLC v. Blank, 990 So. 2d 708, 715 (Fla. 4th DCA 2008). Petitioner knew he was buying units within Section One and Section Two that would be governed by declarations of condominium. The declaration of condominium, which is the condominium's constitution, creates the condominium and strictly governs the relationships among the condominium unit owners and the condominium association. Woodside Vill. Condo. Ass'n, Inc. v. Jahren, 806 So. 2d 452, 455-56 (Fla.2002). A declaration of condominium must be strictly construed. Palm Beach Hotel Condo. Ass'n, Inc. v. Rogers, 605 So. 2d 143, 145 (Fla. 4th DCA 1992). Pursuant to Articles 11 and 15.2 of the Declarations of Section One and Section Two, the mere lack of enforcement in the past does not prohibit the Association from enforcement of the declaration in the future. As Petitioner was on notice by the Declarations themselves, 9
he could not reasonably rely on just mere lack of enforcement for estoppel to apply. Petitioner has not alleged any other facts to establish a claim of estoppel. Additionally, under Petitioner s argument, the Declarations of both Section One and Section Two would be de facto changed as it would provide a way to eliminate provisions of the governing documents without going through the amendment process. Chattel Shipping provided that an association could prospectively enforce declaration provisions without being arbitrary and capricious if it provided notice and enforced the provision against every unit owner evenhandedly. On the face of the October 9, 2013 Resolution and the October 28, 2013 mail packet, the Association is providing proper notice under Chattel Shipping and including evidence that all unit owners are being treated the same. Petitioner has alleged no additional facts to establish an arbitrary and capricious enforcement claim. In fact, Petitioner has not alleged any enforcement against him whatsoever, e.g. rejection of a lease for grandfathering purposes. Therefore, Petitioner has failed to state a claim of action. Based upon the foregoing, it is ORDERED: 1. The Association s Motion to Dismiss is GRANTED. 2. Arbitration Case No. 2014-00-6909 is dismissed with prejudice. DONE AND ORDERED this 2nd day of April, 2014, at Tallahassee, Leon 10
County, Florida. Terri Leigh Jones, Arbitrator Department of Business and Professional Regulation Arbitration Section 1940 North Monroe Street Tallahassee, Florida 32399-1030 Telephone (850) 414-6867 Facsimile (850) 487-0870 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 718.1255, Florida Statutes. As provided by section 718.1255, 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 Fla. Admin. Code R. 61B-45.048. 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 facsimile to the following persons on this 2nd day of April, 2014: Ashley Gray McLeod, Esq. Carpenter & McLeod, P.L. 511 West Bay Street, Suite 350 Tampa, FL 33606 Fax: 813-321-1882 Attorney for Petitioner Scott H. Jackman, Esq. Cole, Scott & Kissane, P.A. 4301 West Boy Scout Blvd., Suite 400 Tampa, FL 33607 Fax: 813-286-2900 Attorney for Respondent Terri Leigh Jones, Arbitrator 11