STATE OF FLORIDA DEPARTMENT OF BUSINESS AND PROFESSIONAL REGULATION DIVISION OF FLORIDA LAND SALES, CONDOMINIUMS, AND MOBILE HOMES

STATE OF FLORIDA DEPARTMENT OF BUSINESS AND PROFESSIONAL REGULATION DIVISION OF FLORIDA LAND SALES, CONDOMINIUMS, AND MOBILE HOMES IN RE: PETITION FOR ARBITRATION Carriage House Condominium Association, Inc., Petitioner, v. Case No. 95-0475 Stephen J. Bacon and Zebbia F. Bacon Respondents. / Carriage House Condominium Association, Inc., Petitioner, v. Case No. 95-0477 Isaac S. Gamel, Respondent / AMENDED FINAL ORDER follows: Comes now, the undersigned arbitrator, and enters this amended 1 final order as 1 A final order in these consolidated cases was entered on November 24, 1997. However, the final order through error failed to require the association to pay damages to Gamel which were proved at the final hearing. The final order is accordingly supplemented with this relief.

Procedural Statement The association on November 16, 1995, filed its petition in this matter against respondent Gamel, in which the association asserted that certain improvements or alternations to the respondent's balcony or terrace had caused or worsened a leak on the roof. Also in November of 1995, the association filed a similar petition for arbitration against respondents Stephen and Zebbia Bacon, alleging that the balcony or terrace used by the respondents contained certain improvements which have caused leaks in the roof. In both cases, the association sought entry of a final order requiring respondents to remove the improvements and declaring that replacement of such alterations was prohibited, and seeking an award of damages for the replacement or removal of the improvements. The Bacons filed a counterclaim against the association alleging that as a result of the inactivity of the association for a period of years to fix a leaky roof or to pursue Gamel, who the Bacons consider the source of the leaks, the Bacons unit has sustained considerable damage for which the Bacons demanded compensation. After the filing of counterclaims and the conduct of extensive discovery, the Bacon case was set for final hearing to commence on November 4, 1996. However, the Bacons moved to continue the final hearing in order to conduct additional discovery. The association did not oppose the motion, and the final hearing was reset to January 10, 1997. Also after extensive discovery, the Gamel case was originally set for final hearing to commence on September 10, 1996. However, the association on September 5, 1996, filed its motion to continue the final hearing due to scheduling difficulty with an inspection of the Gamel unit and the deposition of Gamel. The arbitrator reset the final hearing for 2

November 15, 1996. On November 8, 1996, the association filed an additional request for continuance in order to depose an additional architect witness of Gamel. The final hearing was again continued. Gamel filed a counterclaim and a motion to consolidate case no. 95-0477 with the Bacon case, case no. 95-0475. An order consolidating the two cases was entered on December 24, 1996. On March 4, 1997, an order was entered setting the consolidated cases for final hearing on May 12 and 13, 1997. The final hearing in fact occurred on these dates in May, 1997. At the commencement of the final hearing, which was conducted at the condominium, the arbitrator examined both the Gamel and the Bacon units. The Bacon unit featured extensive peeling paint throughout, several holes in the ceiling, various buckets and collectors for rain water, wall paper coming off the walls, cracks in the kitchen wall, and mildews and molds in the clothes, walls, floors, and ceilings. The Gamel unit also showed extensive and similar water damage, and while the tour was being conducted, in response to a passing shower, the windows obligingly produced a torrent of water which entered, ran down the walls and curtains, and collected in pools on the floor. The vaulted ceilings painted with frescos also displayed profuse water intrusion at the time. The association and the Bacons settled the association's claim against the Bacons during the initial phase of the final hearing, although the Bacons declined to dismiss their counterclaim against the association at that time. After the final hearing was concluded, Gamel on June 10, 1997, filed a motion for extension of time in which to submit his proposed order. Carriage House filed its proposed order with reference to the counterclaims on June 27, 1997. The Bacons filed their proposed order on June 18, 1997. 3

Gamel filed his proposed final order on June 26, 1997. The association, through inadvertence, did not file its proposed order on its petition against Gamel until August 22, 1997. The disputed issues in the association's case against Gamel were whether the association consented to or approved the improvements situated on the Gamel balcony; who is responsible for the water intrusion beneath the roof which forms the surface of the Gamel balcony; and who is responsible for removal and replacement of the alterations and for the repair and replacement of the roof. Disputed issues in the Bacons' claim against the association are whether the association negligently failed to fix the water intrusion, and the extent of damages, if any, that the association is responsible to pay to the Bacons. The Facts Gamel owns penthouse units 6 and 7 at the Carriage House Condominium. Adjoining these units is a limited common element balcony or terrace which Gamel has altered by placing a jacuzzi, a wet bar, planters, tile, raised wood decks, and other improvements. The original survey on file with the association does not show the improvements on the Gamel balcony. Gamel takes the position that the improvements were installed pursuant to an agreement between respondent Gamel, the association, and the original developer of the condominium. The agreement entered into by the association and various developer entities only grants permission to install the jacuzzi, however. Prior to the commencement of this proceeding, the association did not have a copy of the agreement in its files. The association conceded that approval had been obtained to install the jacuzzi. Mr. Ben Gamel, son of the respondent Isaac Gamel, testified that he was a vice-president of the 4

developer corporation and was responsible for overseeing construction of the building. He also stated that he was in charge of the association and authorized to permit alterations. He testified that he had authorized the plans and alterations appearing on the Gamel terrace, including the tiles, the jacuzzi, the wet bar, and the planters. He inspected the addition of each improvement and approved the same. On cross-examination, however, Mr. Gamel admitted that he had never been on the board or an officer of the association. However, testimony was also presented to the effect that the plans were approved by the then-association president, Mr. Methias, presumably upon appropriate consultation with the board of administration. Ike Gamel testified that pursuant to his contract to purchase the unit, the changes to the common elements were permitted. He also testified that Sunny and Ben Kahn, the other principals in the developing entity, gave permission to install the improvements. A reading of the purchase contract does not support this contention, however. The association relied on the testimony of Mr. Hershall Gill, an engineer but not a water intrusion expert, who testified that the roof membrane had failed, resulting in water intrusion through the membrane area. In order to fix the membrane, it is necessary to remove the improvements on the roof and to remove the old roof. He recommended against replacing the planters after the re-roofing was done. Mr. Gill testified that the leakage was caused by workmanship problems, the addition of tile and other improvements on the Gamel balcony, and by the association's large air conditioner also located on the Gamel balcony. He also testified that there is no way to ameliorate the Bacon flooding without stopping the water intrusion from the Gamel balcony, as the Bacon unit is situated below a portion of the Gamel balcony. Mr. Gill testified that possibly, the 5

large planters placed on the roof by Gamel were a source of water intrusion, but he had never inspected the liners of the planters to determine if they were watertight. He also identified the exterior walls of the building as a source of water intrusion into the Bacon unit. Finally, he testified to an additional possible source of intrusion into the Bacon unit in the cantilevered roof which forms an eyebrow adjacent to the Bacon unit and which is not properly roofed. This witness was unable to estimate the proportion of the leaks being caused by each possible source of leakage, although he indicated that the improvements placed on the Gamel terrace may be a significant factor. He did not inspect the exterior vertical wall (grille block wall) adjacent to the Bacon unit as a possible source of water intrusion into the Bacon unit. Gill also did not measure the moisture content in the Bacon unit walls, and did no tests attempting to trace water from the source of intrusion to its ultimate destination. He ventured an opinion that the walls were not a significant source of water intrusion into the Bacon unit. He also stated that if the AC room was fixed, if a waterproofing agent was applied to the walls, and if the pipes in the AC room, which run down through the slab, were removed, the Bacon unit would still experience water intrusion due to the damaged roof forming the Gamel terrace. According to Gill, it is necessary to re-roof the area occupied by the Gamel terrace after removing all improvements. The specifications of the new roof would be dictated by whether the improvements on the Gamel balcony were re-installed after a new roof was added, and whether the new roof was to sustain pedestrian traffic. The association has obtained no bids to replace the roof, it asserts, partly because of the unknown answer to the question of whether the improvements would be re-installed on the new roof. The association manager testified that no bids had been obtained because it was unknown 6

what work needed to be done until the existing roof is removed, but this lacks plausibility as the association currently knows that the entire roof membrane needs to be replaced, which should be a cost capable of supporting a tangible estimate. The association has not hired an expert in water intrusion to trace the source of leaks throughout the building, including the Gamel and Bacon units, and has not implemented the Gill recommendations. The association has further not requested Gamel to remove the improvements in the terrace area so that re-roofing may be accomplished. The association has also not filled in the block wall which collects rainwater and flushes it through the wall interior into the Bacon unit. The association has further failed to caulk the Gamel windows which are abundant sources of leaks into the Gamel unit. The Gamel roof, an additional source of water intrusion whenever it rains, has also not been fixed. The association's air conditioner situated on the Gamel terrace, adjacent to the Gamel improvements, is housed in a separate free-standing room with its own roof. The room and its contents are common elements within the maintenance responsibility of the association. The association recognizes that part of the water intrusion problem is caused by this mechanical unit and housing. The flooring in the AC room is the structural roof concrete slab and tile, and lacks any roof membrane. In the past, there has been no raised threshold which would have prevented rainwater from flowing across the balcony into the room. The association has recently raised the threshold into the room. Water entering the AC room due to a rainstorm, according to Gill, could have seeped into the exterior roof area, particularly since the room occupies a lower elevation than the surrounding roof. Water pipes which form a part of the AC unit exit the unit and run down into the concrete slab; this according to Gill may be an additional contributing factor to the 7

leaks. Although the association has taken some very preliminary action to repair the AC unit problem, it has failed to follow through with implementation of a plan which would stop the flow of water from that area. It has not waterproofed the room from the inside-out, as recommended by Gill. There is no drip pan under the huge AC unit, and the condensed water has been dripping on the floor since the building was constructed. This water saturates the block floor and enters the roof structure. There is, in addition, no drain installed in the air conditioner room. The association began some work on the exterior of the perimeter of the AC room at the flashing but stopped work on the repair project which itself now sits in a state of disrepair. The association, at a cost of approximately $290,000.00 applied a waterproofing agent to the exterior vertical surfaces of the building in 1992 or 1993. This coating was not applied to the roof area, but only to the vertical surfaces of the building. The work was not done properly, and the building is not waterproof. The manufacturer of the product used is planning to inspect the site. The association became aware of the problems in the application of the product in 1995 or earlier, but has not applied additional waterproof coating to the building since the original application in 1992 or 1993. The association has collected a full settlement from its insurance company for damage incurred in connection with the waterproofing operation. Mr. Gamel testified concerning the history of the Bacon leak problems. When the Bacons came to him and suggested that his improvements may be causing a leak, Mr. Gamel removed the tile surrounding the roof jacuzzi and examined the unit only to discover the absence of leaks. Subsequently, when the Bacons considered that a fountain installed by Gamel was the source of leaks, Gamel removed the fountain but the leaks 8

continued. Afterward, the planters were identified as a potential source of the problem, and Mr. Gamel had the planters tested and resealed. The Bacons submitted the testimony of water intrusion expert William Smith who was hired in April of 1997 to assist in identifying the origin of the water leaks into the Bacon unit. Mr. Smith conducted a series of site inspections using a moisture meter to probe the walls in order to determine the moisture content in the walls. The walls, in virtually all locations of the Bacon unit, showed evidence of high moisture content indicating that a high level of water was present in the walls. Mr. Smith conducted a series of tests designed to measure the volume of water absorption through the exterior walls of the Bacon unit into the unit's interior. He concluded that the exterior walls were not properly waterproofed, as evidenced by the large amounts of water able to pass directly through the exterior surface of the walls. This failure of the waterproofing membrane has resulted in large amounts of water intruding into the Bacon unit. A defective frame of the sliding glass door has also contributed to the water intrusion. The cracks evident in the exterior walls of the building around the Bacon unit also permit vast amounts of water to enter the walls, for example, in the vertical wall above the cantilevered roof. The water, once inside the wall, continues to flow downward and inward, in accordance with gravity and pressure gradients, where it enters the interior of the Bacon unit and permits the profusion of molds, mildews, and other unhealthful growths to prosper and multiply within the unit. The east facing side of the building, which is most likely to bear the brunt of storms, also proved quite porous, and the interior walls adjacent to the doors and windows on this exposure were laden with moisture. The south facing walls have similar damage caused by the failure of the waterproofing system. This 9

pattern of inspection yielded consistent results throughout the exterior of the building. This witness concluded that the exterior walls have virtually no integrity, and that the door and window systems are not watertight. Mr. Smith also concluded that a percentage of the water intrusion into the Bacon unit also came from above the unit where the Gamel unit is situated, as evidenced by intrusion and damage of certain of the interior walls. He inspected a series of core sites in the Gamel balcony and discovered that at least one had not been sealed, which may have permitted water to intrude into the Bacon unit interior. Mr. Waters, an expert witness called by respondent Gamel, testified that water was intruding into the Bacon unit in 1990-91, prior to the time that Gamel placed the improvements on the roof area. At that time, there was standing water in the air conditioner room, there was no threshold in the room, and the door to the room was rotted. He also testified that when the building was last waterproofed, the extensive cracking in the exterior walls was not repaired prior to the application of the waterproofing agent. In addition, the exterior of the building was not pressure cleaned prior to the application of the product, which permitted the elastomeric paint to delaminate from the building. Samples of the paint peeling away from the building were introduced into evidence. Masonry walls unprotected by a properly applied waterproofing eagerly absorb water. Mr. Waters offered the opinion that 99% of the leaks into the Bacon unit were caused by the AC problem, the perimeter walls, the defective hats on the core samples taken, resulting in an ineffective seal, and the electric lines in the AC room floor. He did not think it necessary to remove the Gamel improvements in order to address the intrusion problem because of the central role of the AC room in the intrusion process; he did not think it likely that the improvements were a significant source of water intrusion. He examined the area under the jacuzzi but 10

did not perform water testing on the remaining improvements. Mr. Waters recommended that the exterior walls of both units be water blasted in order to remove the paint, followed by caulking with hydraulic cement, followed by a primer coat which was not furnished with the last application. The air conditioner room needs to be waterproofed inside after removal of the tile flooring. The Bacons called an expert valuation witness, Mr. Pendelton, in order to establish the amount of damage caused to the Bacon unit. He examined the unit on three occasions, and concluded that the unit is currently unmarketable. If no water damage was present in the unit, and if the causes of the intrusion were remedied, the value of the penthouse unit would be between $850,000.00 and $900,000.00. If there were no leaks in the unit, it has a rental value of $6,000.00 to $8,000.00 per month. The Bacons have claimed a loss of use damages, but they have not vacated the unit. The Bacons purchased the unit for $600,000.00 in 1992, and have added improvements and enhancements since that time which cost them $215,000.00. The Bacons' current basis in the unit is approximately $800,000.00. The improvements added include new appliances in the kitchen, a sauna, new flooring which cost $40,000.00, and ceiling molding. Mr. Bacon testified that the Bacons moved into the unit in the summer of 1992, and that by 1993, and perhaps related to Hurricane Andrew in August of 1992, the condition of the unit had steadily worsened. Initially, he had discovered three holes in the slab/ceiling under Gamel's shower and jacuzzi. Conditions in the unit as a whole worsened, and each time it rains, water flushes out of the baseboards and other locations about the unit. He estimates that he has incurred $40,000.00 in the loss of personal property including shoes, clothes, and furniture. He has also paid to repair and replace floors and wallpaper in the 11

amount of $60,000.00. He has been reimbursed $50,000.00 from an insurance company. Mr. Gamel is seeking $133,000.00 in damages to his unit, including having the fountain removed for $14,000.00, removing the inside jacuzzi twice for a total of $4,000.00; various re-painting which cost approximately 10,000.00, new cabinets in the bedroom which costs $8,000.00, $7,000.00 to redo the ceiling frescos, repairs to the dining room chandelier which cost $14,000.00, new drapes for $17,000.00, new shades for $9,000.00, art object damage of $5,000.00, replacing 12 pillows for $1,800.00, re-tiling for $4,500.00, and replacement of a moldy rug for $7,000.00. He, like the Bacons, has contacted the association on many occasions to complain of the water entering the unit through the windows, and the association has done nothing to remedy the window leaks. The Ultimate Facts and Conclusions The association has negligently failed in its duty to maintain the common elements pursuant to section 718.113(1), Florida Statutes. The association has failed to replace the roof as recommended by its own expert; has failed to address the problem of water leaks through the exterior walls; has failed to make needed repairs to the air conditioner room on the roof; has failed to waterproof the door and window systems in both the Gamel and the Bacon units; has failed to be responsive to the constant complaints and pleas of the respondents to perform its statutory functions; has failed to seek the advice of water intrusion experts or otherwise conduct a comprehensive study of the intrusion problem; has failed to implement any plan which would alleviate the problem areas; and continues to this day to fail to perform as required by the statute. The uppermost portion of the building is in deplorable condition. The roof is in need of replacement; the exterior vertical walls are like sponges in their ability to attract and 12

absorb moisture. The exterior vertical walls and the parapet walls all need to be repaired by removing the paint which was improperly applied; by applying caulking; by installing a primer prior to the waterproofing being applied to the building. The walls which are honeycombed with hollow openings, are a probable design defect which need to be sealed and repaired. The air conditioner room is a major source of water intrusion followed by the failure of the waterproofing system on the vertical walls. In this respect, the deposition of Mr. Edwin Faerman is discounted. He performed no tests, but only performed a limited visual examination, is not a water intrusion expert, relied upon the results of Gill, and more importantly, his accounting of the intrusion problem fails to properly account for the pattern of obvious water intrusion in the exterior walls not contiguous to the leaking roof. The fact that the vertical sides of the building not within the roof system showed peeling and cracking strongly supports the finding that the walls themselves are porous and a source of considerable intrusion. Therefore, despite his credentials, Mr. Faerman's testimony is not based upon a sufficient factual predicate necessary to support the conclusions urged by the association. There is not sufficient evidence to warrant the finding that the planters are the source of any leaks. Even if they leak and spill onto the roof on occasion, if the roof membrane does not repel the water as it escapes, then the problem is with the roof which does not function within its design specifications and for its intended purpose which is to repel water. There is an absence of competent evidence that any of the improvements installed by Gamel are either a source or a contributing factor in the water intruding on the roof. The sources of the water are the air conditioning room which has no roof membrane 13

and has permitted water to intrude under the membrane and throughout the slab, and the parapet and vertical exterior walls of the building, followed by the core sample sites removed by Gill and improperly capped and maintained, and the faulty window and door systems servicing the two units. Respondent Gamel received adequate permission from the developer and the association to install the improvements on the terrace. If the association now contests the authority of Gamel to have installed the improvements in 1992, it waited an unreasonably long time to commence an action to seek their removal, and it has waived the objection. Mr. and Mrs. Bacon presented competent substantial evidence that they have incurred personal property losses in the approximate amount of $36,000.00, as a result of the association's failure to fulfill its statutory duty to maintain the common elements. This amount is probably understated as the Bacons did not appear to have inventoried each and every personal loss which occurred over the past several years. The association in its post-hearing offerings pointed to the fact that Gamel failed to present evidence of the origin of leaks into the Gamel unit. However, upon inspection during the rainstorm, when leaks appeared quite spontaneously, it was obvious that the windows, walls, and ceiling all constituted sources of water into the unit, and all these items are common elements within the maintenance responsibility of the association. Gamel has obviously been complaining to the association for a term of years of the water intrusion, and it is disingenuous for the association now to argue that its own failure to investigate the complaints should shield it from liability in this regard. Gamel presented adequate evidence of his personal losses caused by the failure of the association to investigate and fix the leakages. An individual is competent to testify as to expenditures 14

he made without the necessity for maintaining records in audit-like fashion. Whether he presented adequate evidence is a question for the trier of fact, and the lack of a profusion of receipts is more an issue in determining the credibility of the claims. It is likely that Gamel, like the Bacons, under-reported his losses due to the fact that cost estimates were prepared shortly in advance of the final hearing, and no standing account was maintained over the years. As the improvements constructed by Gamel were not improvements originally constructed by the developer, and as no evidence was introduced whereby the association agreed to remove and replace the improvements at its own expense when necessary to repair or replace the roof, and in the absence of a provision in the documents making the association responsible for these expenses, the improvements must be removed at Gamel's expense. If they are to be replaced after the roof work is complete, they must be replaced at Gamel's expense. See, the analysis in Carriage House Condominium, Inc. v. Haya, Inc., Arb. Case No. 95-0476, Partial Summary Final Order (January 6, 1997). Relief, Order, and Remedy Based on the foregoing findings and conclusions, the association is ordered to reimburse the Bacons the sum of $35,369.00 as damages to personal property in the Bacon unit not reimbursed by insurance proceeds, within 30 days of the date of this order. The Bacons are not awarded loss of use damages because they did not move out of the unit. The association is further required to reimburse the Bacons for the amount of damages required to repair the interior of the unit after the new roof is added, the air conditioner room is waterproofed, and after the building has been waterproofed. The 15

Bacons are entitled to the amount required to bring their unit up to the condition of the unit in 1992 when water first began entering the unit, plus damages to betterments later added by the Bacons, and are entitled to the cost necessary to fix the unit's interior. This shall be paid by the association within 90 days after the association has completed the action required by this order. The Bacons are not awarded the $900,000.00 calculated as the difference between the value of the unit without damage and its current value. The unit does have a value, and will have its normal market value after the association repairs the sources of water intrusion and the repairs to the interior of the unit are undertaken. Gamel is hereby awarded the sum of $133,000.00 in damages to personal property within his unit. This sum shall be paid by the association to Gamel within 30 days of the date of this order. The association is ordered, within 30 days of this order, to initiate a study of all sources of water intrusion undertaken by competent professionals, and shall implement the recommendations of its experts. The association shall construct a new roof, shall undertake to properly prepare and waterproof all exterior vertical walls and parapet walls, and shall correct the air conditioner room. In addition, the association shall remedy all other probable sources of water intrusion identified by its experts, and shall perform all work normally incidental to such projects, including appropriate caulking, a study of the window and door systems of the Gamel and Bacon unit, and all other work required in order to locate and remedy the sources of the water intrusion. The work shall be completed as soon as practicable and shall proceed without undue delay. Gamel shall cooperate to the extent necessary to permit the association to 16

undertake and complete the operations required by this order. Gamel shall remove, at his expense, the improvements which he placed on the terrace, and shall be entitled to replace the improvements upon completion of the work required to be performed by the association, at his own expense, unless the association's expert advises that the addition of a particular improvement, such as the planters, will endanger the integrity of the roof. Gamel shall be required to reimburse the association for any additional sums necessary to re-roof the area in such a manner which is required to accommodate the improvements. For example, if Gamel elects to replace the improvements, and if additional expenses are incurred by the association in order to ensure that the new roof structure will accommodate the additional weight of the improvements, Gamel shall reimburse the association these sums. Wherefore, the parties shall comply with the provisions of this final order. DONE AND ORDERED this 13th day of January, 1998, at Tallahassee, Leon County, Florida. Karl M. Scheuerman, Arbitrator Department of Business and Professional Regulation Northwood Centre 1940 North Monroe Street Tallahassee, Florida 32399-1030 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 David H. Rogel, Esquire, 5201 Blue Lagoon Drive, Suite 100, Miami, 17

Florida 33126; to David Goldstein, Esquire, 100 S.E. 2nd Street, Miami, Florida 33131; to Christopher M. Cannon, Esquire, P.O. Box 14519, Ft. Lauderdale, Florida 33302, and to Alan R. Hochman, Esquire, 7101 S.W. 102nd Avenue, Miami, Florida 33173, and to Jorge L. Piedra, Esquire, Presidential Circle, 4000 Hollywood Boulevard, Suite 254 South, Hollywood, Florida 33021, on this 13th day of January, 1998. Karl M. Scheuerman, Arbitrator Right of Appeal In accordance with section 718.1255, Florida Statutes, a party adversely affected by this final order may appeal from the order by filing, within 30 days of entry of the order, a complaint for trial de novo with a court of competent jurisdiction within the circuit in which the condominium is located. This order does not constitute final agency action and is not appealable to the district courts of appeal. 18