STATE OF FLORIDA DEPARTMENT OF BUSINESS AND PROFESSIONAL REGULATION DIVISION OF FLORIDA CONDOMINIUMS, TIMESHARES AND MOBILE HOMES IN RE: PETITION FOR ARBITRATION Noel Levine, et al., Petitioner, v. Case No. 2009-00-1101 Brazilian Court Condominium Association, Inc., Respondent. / SUMMARY FINAL ORDER On January 5, 2009, Novel Levin, Robert Krasnow, Faith Krasnow, Lewis B. Cullman, Morgan Wheelock, Philip Craft, James Bardwil, Eric. M. Rottier, Nora Rottier, William B. Astrop, David Popovich, Karen DeMelio, Alvin S. Trenk, Bennet Model, Michael De Vivo, Ginger De Vivo, CDS International Realty, LLC, GM Properties, LLC, Springfield LLC, Dinosaur Partners BC, LLC, David Guggenheim, Sherri Guggenheim, Fairfax & Sammons Enterprises and L. Thomas Applegate filed a petition for mandatory non-binding arbitration naming Brazilian Court Condominium, Inc. as the respondent. Petitioners allege that the association has failed to permit them access to its official records. The association filed an answer to the petition on March 3, 2009. On March 29, 2009, a case management conference was held in this matter at which time the parties agreed to file a joint stipulation of facts. By order dated June 1, 2009, the parties were directed to file a joint stipulation of facts, a complete set of the condominium s governing documents and legal memoranda in support of their positions. The parties filed a joint 1
stipulation of facts and legal memoranda on June 5, 2009. The association filed a response to the petitioners arguments on June 23, 2009. On June 23, 2009, the petitioners filed an objection to the association s response and requested that it be stricken. The parties were directed to file legal memoranda in support of their positions. They were not given leave to file responses to the legal memoranda. Therefore, the association s response was improper and is hereby stricken. Findings of Fact 1. Petitioners are owners of residential units in the Brazilian Court Hotel and Condominium (the Condominium ) located in the Palm Beach, Florida. 2. The Condominium contains seventy-nine residential units, two commercial units, and one hotel unit. 1 3. The hotel unit owner and operator (the Hotel Operator ) owns and maintains the shared components, which are shared by the unit owners and the Hotel Operator. All unit owners pay the Hotel Operator their share of the expenses incurred by the Hotel Operator in connection with the maintenance and improvement of the shared components. 4. An owner of a residential unit may, through a separate contractual agreement with the Hotel Operator, place his or her unit in the hotel rental program. 5. The Hotel Operator acts as the sole and exclusive rental agent of the units in the rental program. 6. The Association does not act as an agent for the rental of condominium units. 1 The hotel unit consists of multiple hotel rooms. 2
7. Respondent, the Association, is the entity responsible for the operation of the common elements of the Condominium. The common elements include the portions of the condominium property not included within the residential units, commercial units, and the hotel unit. 8. The Association is controlled by CSC Brazilian, L.P, ( Developer ), a Delaware limited partnership. Mr. Adam Schlesinger is the President of the Association. 9. The Developer owns twenty-seven residential units in the Condominium. 10. The Developer is the owner of the hotel unit in the Condominium. Mr. Schlesinger is the President of CSC Brazilian GP Corp., the general partner of the Developer. 11. On or about May 8, 2008, Noel Levine sent a written request to inspect official records of the Association purportedly pursuant to the provisions of the Florida Condominium Act. Mr. Levine designated Mr. William Michaelson to act has his authorized representative for the inspection of the Association s official records. 12. On or about June 16, 2008, Mr. Michaelson inspected the Association s official records. After an inspection of the records, Mr. Michaelson requested to review additional records regarding the Hotel Operator s rental records and the accounting records that document the shared component expenses of the hotel unit. Mr. Schlesinger advised Mr. Michaelson that the additional records sought would not be made available as they were records of the Hotel Operator and not the Association. 13. On or about August 18, 2008, Petitioners delivered a notice and demand letter ( Demand Letter ) to inspect the rental records and the accounting records that document the shared component expenses of the hotel unit. 3
14. On or about August 27, 2008, counsel for the Developer responded to the Demand Letter. Developer s counsel informed Petitioners that they had already received access to all of the Association s official records regarding the Association s financial matters and stated that the Petitioners were impermissibly seeking access to financial records of the Hotel Operator, rather than the Association. Conclusions of Law Petitioners seek access to the review records regarding the Hotel Operator s rental records and the accounting records that document the shared component expenses of the Hotel Operator. A condominium association must make its official records available to its members in accordance with 718.111(12)(b), Fla. Stat. Section 718.111(12)(a), Fla. Stat., states the types of records that shall constitute official records: From the inception of the association, the association shall maintain each of the following items, when applicable, which shall constitute the official records of the association: 1. A copy of the plans, permits, warranties, and other items provided by the developer pursuant to 718.301(4), Fla. Stat. 2. A photocopy of the recorded declaration of condominium of each condominium operated by the association and of each amendment to each declaration. 3. A photocopy of the recorded bylaws of the association and of each amendment to the bylaws. 4. A certified copy of the articles of incorporation of the association, or other documents creating the association, and of each amendment thereto. 5. A copy of the current rules of the association. 6. A book or books which contain the minutes of all meetings of the association, of the board of administration, and of unit owners, which minutes shall be retained for a period of not less than 7 years. 7. A current roster of all unit owners and their mailing addresses, unit identifications, voting certifications, and, if known, telephone numbers. The association shall also maintain the electronic mailing addresses and the numbers designated by unit owners for receiving notice sent by electronic transmission of those unit owners consenting to receive notice by 4
electronic transmission. The electronic mailing addresses and numbers provided by unit owners to receive notice by electronic transmission shall be removed from association records when consent to receive notice by electronic transmission is revoked. However, the association is not liable for an erroneous disclosure of the electronic mail address or the number for receiving electronic transmission of notices. 8. All current insurance policies of the association and condominiums operated by the association. 9. A current copy of any management agreement, lease, or other contract to which the association is a party or under which the association or the unit owners have an obligation or responsibility. 10. Bills of sale or transfer for all property owned by the association. 11. Accounting records for the association and separate accounting records for each condominium which the association operates. All accounting records shall be maintained for a period of not less than 7 years. Any person who knowingly or intentionally defaces or destroys accounting records required to be maintained by this chapter, or who knowingly or intentionally fails to create or maintain accounting records required to be maintained by this chapter, is personally subject to a civil penalty pursuant to 718.501(1)(d), Fla. Stat. The accounting records shall include, but are not limited to: a. Accurate, itemized, and detailed records of all receipts and expenditures. b. A current account and a monthly, bimonthly, or quarterly statement of the account for each unit designating the name of the unit owner, the due date and amount of each assessment, the amount paid upon the account, and the balance due. c. All audits, reviews, accounting statements, and financial reports of the association or condominium. d. All contracts for work to be performed. Bids for work to be performed shall also be considered official records and shall be maintained by the association. 12. Ballots, sign-in sheets, voting proxies, and all other papers relating to voting by unit owners, which shall be maintained for a period of 1 year from the date of the election, vote, or meeting to which the document relates, notwithstanding paragraph (b). 13. All rental records, when the association is acting as agent for the rental of condominium units. 14. A copy of the current question and answer sheet as described by 718.504, Fla. Stat. 15. All other records of the association not specifically included in the foregoing which are related to the operation of the association. 16. A copy of the inspection report as provided for in 718.301(4)(p), Fla. Stat. 5
Subsection 13. requires an association to maintain all rental records when the Association is acting as agent for the rental of the condominium units. In the instant case, the Association is not acting as the rental agent. Therefore, the Association is not required to maintain rental records. The Hotel Operator is the rental agent. The Hotel Operator s rental records are not official records that the Association is required to maintain and do not constitute official records of the association. Therefore, Petitioners are not entitled to access the records. Petitioners also seek access to records that document the shared component expenses of the hotel unit. Article 2.45 of the declaration defines shared components. The definition contains an extensive list that includes what one would typically expect to be the structural and physical common elements of a condominium. The definition also provides that the shared components are part of the hotel unit. Article 3.2 describes the three types of units contained in the condominium, residential units, commercial units and the hotel unit. The residential and commercial units are described in terms of upper, lower and perimetrical boundaries. The hotel unit is described as consisting of all of the condominium property less and except only the residential units, commercial units, common elements and association property (if any). Article 7.3 of the declaration obligates the Hotel Operator to maintain the hotel unit, including the shared components. The article also requires the residential and commercial unit owners to pay a share of the expenses incurred by the Hotel Operator in connection with the maintenance, repair, replacement, improvement, management, operation and insurance of the shared components. 6
The residential and commercial units are required to pay 80% of the shared component costs pursuant to article 12.1 of the declaration. This article also authorizes the Hotel Operator to charge the individual the residential and commercial unit owners for the cost. Article 12.4 of the declaration provides that the Hotel Operator has lien on each condominium parcel to secure payment of charges. Article 9.1(h) of the declaration authorizes the Association to collect, on behalf of and at the request of the Hotel Operator, from each residential unit owner and/or commercial unit owner the share of the shared costs allocated to such unit. Petitioners argue that the declaration attempts to create a condominium without common elements. This conclusion defeats Petitioners argument that they are entitled to access the documents under chapter 718, Fla. Stat., as it would result in the conclusion that Brazilian Court Condominium is not a condominium under chapter 718, Fla. Stat. Moreover, article 2.16 of the declaration at least creates a common element consisting of an easement of support in every portion of a unit which contributes to the support of the building. Petitioners argue that regardless of their designation in the declaration, some of the shared components are common elements pursuant to 718.108(1), Fla. Stat. Therefore, the related shared component costs are actually common expenses under 718.115(1)(a), Fla. Stat. As such the association would be required to maintain related accounting records pursuant to 718.111(12)(a)11., Fla. Stat. Petitioners further argue that the declaration s structure of shared component costs that are not considered common expenses of the association, constitutes an attempted waiver by the developer of a provision of the Condominium Act that adversely affects 7
the rights of unit owners and the purpose of 718.111(12), Fla. Stat., which is prohibited by 718.303(2), Fla. Stat. Petitioners note that the declaration s concept of shared components conflicts with 718.112(2)(f), Fla. Stat., which requires the association s budget, in addition to other items, to include reserve accounts for roof replacement. Petitioners contend that the association s budget cannot comply with this requirement because the condominium roof is not part of the common elements. In order to rule upon whether the financial records requested by Petitioners are official records that the Association must maintain and permit members to access, the undersigned must determine the nature and propriety of the shared components costs system created by the declaration. To grant Petitioners their requested relief, the undersigned would have to declare the shared components to be common elements and that any attempt to declare them otherwise would not be permitted by chapter 718, Fla. Stat. 2 This would necessarily affect the appurtenances to the units and would affect the interests of all unit owners. Such a dispute would undoubtedly involve unit owners on each side of the dispute (certainly the Hotel Operator would be a necessary and interested party opposed to declaring the shared components common elements). The undersigned does not have jurisdiction over such disputes. Because the undersigned cannot rule upon all the arguments presented by the petitioner regarding the financial records dispute, the undersigned declines jurisdiction over this dispute. Based upon the foregoing, it is ORDERED: 1. The petitioner s request for relief regarding access to unit rental records is denied. 2 This is the gravamen of the petitioners complaint. 8
2. The dispute involving access to the financial records for the shared components is dismissed due to lack of jurisdiction. The petitioner may file the claim in a court of competent jurisdiction. DONE AND ORDERED this 20 th day of August, 2009, at Tallahassee, Leon County, Florida. James W. Earl, Arbitrator Department of Business and Professional Regulation Arbitration Section 1940 North Monroe Street Tallahassee, Florida 32399-1029 Telephone: 850.414.6867 Facsimile: 850.487.0870 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 day 20 th of August, 2009: David A. Core, Esq. St. John, Core & Lemme, P.A. 1601 Forum Place, Suite 701 West Palm Beach, FL 33401 Mark F. Bideau, Esq. Greenberg Traurig, P.A. 777 South Flagler Drive Suite 300 East West Palm Beach, FL 33401 James W. Earl, Arbitrator 9