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 Garth Bandell and Kenneth Davis, Petitioners, v. Case No Bay Point Studio Villas III Association, Inc., Respondent. / SUMMARY FINAL ORDER Comes now, the undersigned arbitrator, and issues this final order as follows: The petition for arbitration was filed in this matter on August 8, 2005, by Garth Bandell and Kenneth Davis, unit owners in Bay Point Studio Villas III, the condominium operated by the respondent association. According to the petition, Bandell and Davis requested approval from the association to expand their living space to occupy an area of the common elements situated directly above their units that comprises an attic area of the building containing their units. This would require them to cut a hole in the common element ceiling and to convert the space above to new living space with a loft and a bathroom. The common element space is currently used for mechanical and structural components of the building. The board in 1997 had briefly adopted (but subsequently abandoned) a policy of permitting owners to adopt or annex this area, and had since 1997 permitted one owner to in fact expand his living space in this manner. 1

2 The documents were amended in 1997 to reflect this change in policy by approximately 77% of the owners. Soon after the policy was created, however, different boards have expressed concerns about the policy, and no other owners except the first, Mr. Ward, not a party here, have been permitted to expand their living space. The association declined to approve petitioners request for permission to build in the attic area, stating that all the owners must agree to this change in the common elements. This issue has previously been the subject of a declaratory statement issued by the Division in the case of In re Petition for Declaratory Statement of Bay Point Studio Villas III Association, Inc., DBPR docket no (August 11, 2005). In that case, the association had petitioned the Division for a declaratory statement pursuant to section , Florida Statutes, concerning whether the association may convey certain portions of the common elements, situated in the attic, by sale or long term lease to individual unit owners for the expansion of their units, and if so, whether a vote was needed under sections (2) or (4), Florida Statutes. The Division concluded that the association could not convey portions of the common elements by sale or long term lease to the owners for the expansion of their units without first complying with section (4), Florida Statutes, which requires the approval of all the unit owners before a material change to the appurtenances to the units can be accomplished. The declaratory statement relied upon an extensive line of court and arbitration cases in concluding that the appurtenant right to use the common elements would be appreciably affected where an owner seeks to colonize a portion of the common elements and deprive other owners of the use of a portion of the common elements. According to the declaratory statement: 2

3 While owners other than the owner constructing the loft may currently have limited day-to-day access to the common element area above the individual unit, the use of the space will change from being available for common element pipes, wiring, cables, building structural components including trusses serving all owners, to a common element dedicated to the living quarters of a single unit owner. This cannot be done without complying with section (4), Florida Statutes, and the corresponding portions of the condominium documents, whether the association leases or purports to sell the property outright to the individual owners. Petitioners argue that the association is estopped from denying approval of the application of the petitioners to absorb the common element attic space, and that the association has waived any objection by adopting the policy originally in 1997 and by permitting one owner to complete the acquisition. On August 15, 2005, the arbitrator entered an order requiring the petitioners to show cause why the petition should not be dismissed, given that the Division had already addressed the issue in the declaratory statement. 1 Petitioners replied on August 30, 2005, expressing disagreement with the declaratory statement, and arguing in effect that Article XIV of the declaration, in permitting the board to approve changes 1 In Wooley v. Ocean Inlet Yact Club, Arb. Case No , Final Order Dismissing Petition (July 25, 2002), officially noticed in the course of this proceeding, the arbitrator held that where the association was a party in a prior arbitration proceeding to determine whether all owners or only owners with assigned dock spaces were obligated to contribute to the expense of redredging the common element boat basin, owners who were not formally made parties in the earlier proceeding nonetheless could not, after the conclusion of the first proceeding, initiate another arbitration proceeding to re-determine the same issue, as the association had litigated in the earlier case in its capacity of representing (and thus binding) all owners in the condominium, whether they were formally made individual parties or not. Plainly, under Wooley, petitioners would be bound by the association s party status in the earlier related declaratory statement. Nonetheless, the arbitrator issues this final order on the merits of the dispute in the event that individual owners are not bound and in order to address any new arguments advanced here. Furthermore, the arbitrator in this proceeding required the association to contact each owner individually in writing, advise them of the pendency of the proceeding, and offer them a limited time to formally intervene as parties. No owners formally petitioned to appear, although many owners filed letters in favor of allowing them to utilize the attic space. 3

4 to the common elements even where the alteration will benefit only a single owner, permits the board to informally convey portions of the common elements to the individual owners. However, it is plain by its own terms that Article XIV addresses only that class of changes contemplated by section (2), Florida Statutes, and does not address changes that affect the appurtenances to the units, a class of changes regulated instead by section (4), Florida Statutes. Therefore, the fact that the declaration here contains its own provision corresponding to section (2), Florida Statutes, has no bearing on the application of section (4), Florida Statutes, requiring a vote of 100% of the ownership before changes to the appurtenances to the units may be materially affected. 2 Even if the board with a 75% vote of the owners had the ability to approve the material change to the common elements under this section of the declaration, Article XIV does not address or obviate compliance with the more stringent requirements contained in section (4), Florida Statutes. The association further argues that in this case, the association is not leasing or conveying the property as planned in the declaratory statement, and therefore, the declaratory statement does not apply. In the declaratory statement, the Division held that the association could not lease or sell the common elements to individual unit owners, as the act of excluding others from the use of the common elements adversely 2 In fact, as noted in the declaratory statement and in the cases cited therein, there are instances where a given change constitutes both a change to the common elements and a change to the appurtenances, thereby implicating both sections of the statute. That is to say, a change to the common elements can simultaneously change the appurtenances to the units, as where a unit owner expands his patio onto the common elements; in that instance, the appearance and function of the common elements has appreciably been altered within the bailiwick of section (2), Florida Statutes; so too has the ability of the owners to have access to and to use the common elements changed within the contemplation of section (4), Florida Statutes. Therefore, it is not true, as urged by petitioners, that these portions of the statute are redundant or render each other superfluous. The case history revealing how these sections of the statute have been interpreted and applied belies this argument and shows that these 4

5 affected the appurtenant right to use the common elements vested in the other owners. The cases cited as authority in the declaratory statement did not involve formal leases or other transfers by the board, but involved the board approving changes which impacted the appurtenances to the units. Therefore, regardless of whether the association offers to lease or sell, or approve, or permit, changes to the common elements that alter the appurtenances to the units, section (4), Florida Statutes, applies and requires the unanimous approval of the owners, unless otherwise provided in the original declaration, which this declaration does not. 3 Finally, the petitioners argue that the changes effected by the construction should not be considered material alterations to the appurtenances. The issue of materiality was thoroughly explored in the declaratory statement, attached hereto and incorporated herein for all purposes. To hold that the association may, in effect, convey the exclusive right to use or even ownership over those portions of the common elements not in general use in the community to an individual owner, a result urged by the petitioners, would be to act without any statutory guidance in the first instance, and further, would be to re-write the condominium statute to create a new hybrid species of property that is neither unit nor common element, but instead has characteristics of each. An item of property becomes a limited common element by its designation as such in the declaration, not by custom and use, adverse possession, annexation, or donation to the use of a particular unit owner. Petitioners position would place all areas of the common elements that are not readily accessible or not in general use by the general sections address distinctly different property rights. 3 The fact that this declaration, in Article XIV, contains its own language corresponding to section (2), Florida Statutes, does not of course otherwise provide vis a vis section (4), Florida 5

6 membership at a particular time in immediate jeopardy of being taken for the exclusive use of an owner, whether the airspace or common element lawn adjoining a patio, a roof top outside a penthouse unit, or the common element grassy area outside a unit s glass sliding door, windows and front door. 4 This position was rejected by the Division in its declaratory statement, and is hereby rejected again. Lastly, petitioners argue that no other owners could have a legitimate and realistic expectation of use of these common elements. 5 First, these areas are common elements, and not limited common elements, so all owners collectively have the legal right to use them for appropriate purposes whether they occupy them day to day or not. Secondly, this claim was thoroughly explained in the declaratory statement, citing the arbitration decision entered in Cascades of Falling Waters v. Refuse, Arb. Case No , Final Order (Ma y 4, 2001) where the arbitrator stated: Respondent argues that the addition of the stone patio has not materially affected the other owners' use rights in that part of the common elements. The photograph jointly submitted by the parties, attached hereto as Exhibit A, shows that the patio which comprises approximately 140 square feet, is situated immediately adjacent to the sliding glass doors forming the rear exit to the respondent's unit. One side of the patio runs alongside the screened lanai, one Statutes, as these sections of the statute address different property interests. 4 Petitioners assertion that the attic space, now used for pipes, trusses, and wires, can still be used for these common purposes yet simultaneously serve as a bedroom and loft for the petitioners, is contradictory and seems unlikely, as under petitioners scenario, petitioners would have individual ownership or the exclusive right to use their new living space. Even assuming that these competing uses may co-exist, it is inescapable that petitioners, if successful here, will be permitted to exclusive occupation and use of the attic space, to the exclusion of all other owners, thereby diminishing the common elements available to everyone else. 5 The element of realism introduced by the petitioners would add an element of absolute subjectivity and hence uncertainty into this determination. Does the general population of a condominium have a realistic expectation to use or occupy the area immediately outside the front door of a unit or the area next to a limited common element patio? If not, how far into the common elements does this line of realistic expectations extend? Also, if the space at issue in this case is currently taken up by ducts, wires, pipes, and trusses, it is plain that the collective unit owners in a realistic sense are already using this area for public purposes. 6

7 side opens onto the common elements, and the other side forms a border with the adjacent flower bed. Respondent argues that prior to the placement of the stones, other unit owners had the right to pass over the grassy area, and perhaps had the right to sit in or occupy the area by bringing their own lawn chairs, so long as they did not intrude on Mr. Rafuse's right to privacy by facing towards the glass sliding doors leading to the living room. Respondent argues that after the placement of the stones, the use rights of the other owners did not change in the least. The area, given that it is up against the building and contiguous to the respondent's unit, is not used as a thoroughfare by other owners. According to respondent, the use of the parcel by other owners has been enhanced by the improvements. Ingress and egress have become easier presumably because it is easier to traverse a stone surface than a grassy area. Respondent further argues that although the area is not a limited common element, the other owners could have no use rights or very limited use rights in the area immediately behind the unit. Respondent seeks to distinguish the other cases involving patios on the basis that this patio is not intrusive or raised as were the patios involved in the other cases, but is formed simply with a low profile by a series of pavers sitting on top of the ground. Section (4), F.S., only addresses material changes to the appurtenances to the units. Nonmaterial changes are not regulated by the statute. It is certainly true speaking in a social sense that the other residents would have less of a use expectation in the area immediately in contact with the unit belonging to another owner because the area is located in such close proximity to the unit and perhaps because it is customary for an owner to exercise control or dominion over the area outside the unit for recreation or cooking purposes, to the exclusion of the other owners. However, this diminished use does not find its basis in the statute which instead only recognizes common elements, limited common elements, units, and association property. The only areas in a condominium capable of being exclusively owned or occupied are units and limited common elements. There is no species of property recognized in the law that supports respondent's theory of diminishing use expectations. [Footnote 2] No one would argue with great appeal that the placement of a lawn chair in the grass behind a unit changes the appurtenances to the units. The chair would lead to a 7

8 temporary and inconsequential change to the ability of the other owners to use the property. Likewise, changes to limited common elements in which the other owners have no use rights would not in the ordinary case modify any appurtenances to the units. Similarly, the placement by the association of items on the roof or other area where owners have no reasonable expectation of use and are often prohibited from venturing by the documents or rules would not implicate the interests identified in s (4), F.S. This is not to say that s (2), F.S., would not find application. See, e.g., Szczepanski v. Cypress Bend Condominium II Association, Inc., Arb. Case No , Final Order (Aug. 4, 1997) concluding that a material alteration to the common elements resulted where the association permitted the placement of a cell phone tower on the roof of the condominium building. [footnote 3] Changing a grassy area of the common elements not generally used for a specific purpose into a flower bed, or the placement of a few patio stones to control erosion at the rear of the unit would seem to change no use rights. By way of contrast, the owners have the right to occupy and pass through the common elements in question here. Respondent by his actions has asserted permanent dominion and control over a 140 square foot portion of the common elements. Although the modification is more easily traversed than would be the case with a raised wooden deck with railings, and although there is no physical impediment to ingress and egress crated, the placement of the stones along with the items of personal property has made it less likely that the use rights granted to the other owners to pass through or in close proximity to the area will be exercised. Based on the foregoing, it is concluded that the addition of the patio without the requisite approval of the owners as called for in s (4), F.S., resulted in a violation of that portion of the statute. The patio shall be removed from the common elements within 30 days hereof Compare, Tower House Condominium, Inc. v. Millman, 475 So. 2d 674 (Fla. 1985) in which the Court ruled that a parking parcel adjacent to the condominium acquired ultra vires by the association (referred to as "alien property" in the opinion) became noncondominium property held in trust for all owners who participated in the purchase of the parcel. 3. Owners have no right to occupy the roof. 8

9 Accordingly, petitioners arguments are rejected. Further, petitioners arguments of estoppel and waiver, however competently advanced, are rejected. The fact that the documents were amended to reflect an invalid board policy permitting annexation of the common elements by the individual owners cannot serve as the basis for these arguments, for several reasons. First, purchasers purchase their units without any legitimate expectation that the documents will continue to provide what they currently provide; this was confirmed by the Court in Woodside Village Condominium Association v. Jahren, 806 So. 2d 452 (Fla. 2002). Thus the fact that the virtually unfollowed board policy found its way into the documents does not give rise to a vested right that this policy would continue. Secondly, where a board exceeds its authority and performs some act that is ultra vires and contrary to its authority as contained in the documents and statute, it is not reasonable to rely on the board policy, and estoppel or waiver will not lie. See, Palm Club Association v. Bocchino, Arb. Case No , Summary Final Order (January 15, 1999) (waiver and estoppel did not apply to board approval that was void ab initio). See also, Belle Isle Apartment Corporation v. Bernstein, Arb. Case No , where the board illegally approved the installation of an owner s air conditioner on the pool deck, and later sued for its removal. The arbitrator ruled that the installation could not be allowed, despite the board s approval, as it would permit an individual owner to convert a portion of the common elements for individual use. The arbitrator ordered removal of the air conditioner, with the parties equitably sharing the cost of removal and reinstallation. Petitioners claim of selective enforcement is not as easily dealt with. One owner has been permitted to take the attic area for his personal use, and the association has 9

10 not commenced enforcement proceedings against him. This is the essence of selective enforcement, and the association is required to commence an enforcement proceeding against that individual within 45 days hereof. 6 WHEREFORE, the request for relief contained in the petition is denied for the reasons set forth herein. The association is not required or permitted to approve petitioners applications, and the association shall, as stated above, commence an appropriate enforcement action within 45 days hereof. DONE AND ORDERED this 23rd day of January, 2006, at Tallahassee, Leon County, Florida. Karl M. Scheuerman, Arbitrator 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 23rd day of January, 2006: Jerry Coleman, Esquire 201 Front Street, Ste. 203 Key West, Florida Mr. Ward, the owner with the converted space, is not a party hereto and the arbitrator cannot here require him remove the structure, and the arbitrator makes no conclusion regarding whether the association will ultimately prevail in the proceeding, where Mr. Ward can raise any affirmative defenses that may be available to him. 10

11 Timothy Sloan, Esquire Harmon & Sloan, P.A. 427 McKenzie Ave. P.O. Box 2327 Panama City, 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 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. 11