96-002705 Division Of Real Estate vs. Ian R. Law And Benjamin Schiff Status: Closed Recommended Order on Tuesday, April 22, 1997.

Summary: Brokers were guilty of violations of Sections 475.21(1)(b) and (k), Florida Statutes, by improper transfers of large sums of other people's money.

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

DEPARTMENT OF BUSINESS AND )

PROFESSIONAL REGULATION, DIVISION )

OF REAL ESTATE, )

)

Petitioner, )

)

vs. ) CASE NOS. 96-2705

) 96-3002

IAN R. LAW, BENJAMIN SCHIFF, and )

FLORIDA HOME FINDERS REALTY, INC., )

)

Respondents. )

___________________________________)

RECOMMENDED ORDER

Pursuant to notice, a formal hearing was conducted in these

consolidated cases on October 22, 1997, at Miami, Florida, before

Administrative Law Judge Michael M. Parrish of the Division of

Administrative Hearings.

APPEARANCES

For Petitioner: Steve Fieldman, Esquire

Department of Business and

Professional Regulation

Division of Real Estate

Hurston North Tower

400 West Robinson Street

Orlando, Florida 32801-1772

For Respondent: Mark Herron, Esquire

Christopher R. Haughee, Esquire

Akerman, Senterfitt & Eidson, P.A.

216 South Monroe Street, Suite 200

Tallahassee, Florida 32301

STATEMENT OF THE ISSUES

This is a license discipline proceeding in which the

Petitioner seeks to have disciplinary action taken against two

individual licensees and one corporate licensee on the basis of

allegations of several violations of Sections 455.227 and 475.25,

Florida Statutes, by each of the Respondents. Each of the three

Respondents has been charged in an Administrative Complaint with

violation of the following statutory provisions: Sections

455.227(l)(j), 475.25(l)(b), 475.25(l)(j), and 475.25(l)(k),

Florida Statutes.

PRELIMINARY STATEMENT

These two consolidated cases began with the issuance of an

Administrative Complaint charging a total of ten Respondents with

a total of thirty-eight counts of violations of portions of

Chapters 455 and 475, Florida Statutes. The three Respondents in

these two consolidated cases were charged with a total of twelve

counts of violations, four each.

These three Respondents all disputed the charges and

requested an evidentiary hearing which was conducted on October

22, 1996. Prior to the final hearing on October 22, 1996, the

parties filed a prehearing stipulation in which they stipulated

to numerous facts. At the beginning of the final hearing the

Petitioner voluntarily dismissed counts 28, 35 and 36 of the

Administrative Complaint.

During the course of the final hearing the Petitioner

offered the testimony of three witnesses. The Petitioner also

offered eight joint exhibits and one Petitioner's exhibit, all of

which were received in evidence. The two individual Respondents

both testified on their own behalf at the final hearing. They

did not call any additional witnesses, nor did they offer any

additional exhibits.

At the conclusion of the final hearing the parties

requested, and were granted, thirty days from the filing of the

transcript within which to file their proposed recommended

orders. The transcript was filed with the Division of

Administrative Hearings on November 22, 1996. On December 10,

1996, all parties moved for an extension of time and on December

10, 1996, an order was issued extending the deadline for filing

proposed recommended orders until January 13, 1997. Thereafter,

all parties timely filed proposed recommended orders containing

proposed findings of fact and conclusions of law. 1 The parties

proposed recommended orders have been carefully considered during

the preparation of this Recommended Order.

FINDINGS OF FACT

Stipulated facts 2

1. Petitioner is a state government licensing and

regulatory agency charged with the responsibility and duty to

prosecute Administrative Complaints pursuant to the laws of the

State of Florida, in particular Section 20.165, Florida Statutes,

Chapters 120, 455, and 475, Florida Statutes, and the rules

promulgated pursuant thereto.

2. Respondent Robert Ian Law is and was at all times

material hereto a licensed real estate broker pursuant to Chapter

475, Florida Statutes, having been issued license number 3000835.

The last license issued was as a broker in care of Law Property

Services, Inc., t/a Century 21 Law Realty, 190 Malabar Road

Southwest 120, Melbourne, Florida 32907.

3. Respondent Benjamin Schiff is and was at all times

material hereto a licensed real estate broker pursuant to Chapter

475, Florida Statutes, having been issued license number 0449353.

The last license issued was as a broker at 9771 Northwest 41st

Street, Miami, Florida 33178.

4. Respondent Florid a Home Finders Realty, Inc., is and was

at all times material hereto a licensed real estate brokerage

corporation pursuant to Chapter 475, Florida Statutes, having

been issued license number 1003632. The last license issued was

at 1648 Southeast Port St. Lucie Boulevard, Port St. Lucie,

Florida 34952.

5. At all times material hereto, Selma Del Carmen Schevers,

Cheryl Ann Atwood, Lynn Marie Lake, Barbara Kay Davidson, Carol

Ann Chandler, and Beverly J. Klemzak were licensed and operating

as qualifying brokers and officers of Respondent Florida Home

Finders Realty, Inc.

6. On or about April 18, 1995, the real estate brokerage

corporate license (former license number 0027454) of Florida Home

Finders, Inc., was voluntarily dropped by Florida Home Finders,

Inc. Simultaneously, Florida Home Finders Realty, Inc.,

submitted documents for and received a real estate brokerage

corporate license effective April 18, 1995, from the Florida

Division of Real Estate.

7. Benjamin Schiff and Ian R. Law are directors of bot h

Florida Home Finders, Inc., and Florida Home Finders Realty, Inc.

8. Benjamin Schiff is the Chief Financial Officer for both

Florida Home Finders, Inc., and Florida Home Finders Realty, Inc.

Ian R. Law is the Chief Executive Officer for both Florida Home

Finders, Inc., and Florida Home Finders Realty, Inc.

9. On or about May 5, 1995, Selma Schevers and Cheryl

Atwood notified various banking institutions of the authorized

officers/directors and account signatories for Florida Home

Finders, Inc., and Florida Home Finders Realty, Inc.

10. On or about June 14, 1995, at the request of Benjamin

Schiff, Selma Schevers and Cheryl Atwood authorized various

banking institutions to transfer $2,492,000.00 in security

deposits and rental trust funds to an account entitled "Florida

Home Finders, Inc.," account number 3603969464 at NationsBank of

Florida. At no time material did the Respondents obtain the

authorization or permission of the owners of the trust funds to

transfer the funds.

11. Subsequent to the transf er referenced in paragraph 10

herein, the funds were used to purchase a certificate of deposit

(No. 012897).

12. After the purchase of the certificate of deposit,

Cheryl Atwood, at the request of Ian Law, signed a document which

placed the certificate of deposit as collateral for a commercial

loan (No. 018002410263) from loan officer F. Larry Robinette of

County National Bank of South Florida. The terms of the loan

were: $2,000,000 principal; Benjamin Schiff and Ian Law as

borrowers; proceeds payable to Atlantic Gulf Communities, Corp.,

as partial payment for the stock of Florida Home Finders, Inc.,

and two related companies.

13. On or about August 21, 1995, Respondent Law instructed

Barnett Bank to transfer $65,000.00 from Florida Home Finders,

Inc., Rental Receipts Account No. 2274002335 to Florida Home

Finders, Inc., Operating Account No. 2274027149. 3 After this

transfer Respondent Law instructed the bank to transfer the

$65,000.00 from the operating account to Atlantic Gulf

Communities Corporation, the former owner of Florida Home

Finders, Inc., a formerly licensed real estate brokerage company

and predecessor to Respondent Florida Home Finders Realty, Inc.

14. On or about June 14, 1995, the following bank funds

transfers were requested to be made to Florida Home Finders,

Inc., (FHFI) account No. 3603969464 at NationsBank of Florida

from the following accounts:

Barnett Bank Acct. Name Acct No. Date Amt.

FHFI Rental Receipts Escrow Acct 1700027712 6/22 138,000

Rental Security Deposit Acct 1 700027810 6/22 398,000

FHFI Rent Receipts Acct 3388072440 6/21 38,000

FHFI Security Deposit Acct 3388072558 6/21 158,000

FHFI Rent Receipts Escrow Acct 2274002335 6/15 179,000

FHFI Rental Security Escrow 2274002343 6/15 609,000

SunBank Acct Name Acct No. Date Amt.

FHFI Escrow-Rental Receipts 0809000005795 6/16 87,000

FHFI Escrow-Rental Security 0809000005806 6/16 285,000

1st Union Nat. Bank Acct Name Acct No. Date Amt.

FHFI Rental Receipts-Escrow Acct 2161006 787374 6/14 152,000

FHFI Rental Security Escrow Acct 2161006724586 6/14 406,000

1st Bank Acct Name Acct No. Date Amt.

FHFI Rental Receipts-Escrow Acct 20-116845-06 6/15 8,000

FHFI Rental Security Escrow 20-116888-06 6/15 34,000

Additional facts based on evidence at hearing

14. Prior to April of 1995, Florida Home Finders, Inc.,

then a licensed real estate brokerage corporation, engaged in

soliciting, obtaining, and leasing to tenants the real property

of others, pursuant to contracts between Florida Home Finders,

Inc., and the property owners.

15. A substantial majority of the money, probably more than

75 percent of the money, contained in the security deposit

accounts and rental receipts accounts that was transferred in

mid-June of 1995 was money collected from tenants on behalf of

property owners while Florida Home Finders, Inc., was a licensed

real estate brokerage corporation. 4

16. Subsequent to the transfers of funds in mid-June of

1995, there was on at least one occasion insufficient funds in

some of the security deposit and rental receipts trust accounts

to meet disbursement demands. On that occasion the bank paid a

number of checks for which Florida Home Finders, Inc., did not

have sufficient funds on deposit and requested that Florida Home

Finders, Inc., make an immediate transfer of funds to cover the

insufficiencies. Shortly thereafter a transfer was made to cover

the insufficiencies.

17. Subsequent to the transfers of funds in mid-June of

1995, on some occasions funds that had been collected from new

clients after those transfers took place were paid out to meet

the demands of clients who were owed money that had been paid to

Florida Home Finders, Inc., prior to the mid-June transfers.

18. At the end of March of 1995, Respondents Schiff and Law

purchased Florida Home Finders, Inc., a real estate brokerage

corporation licensed pursuant to Chapter 475, Florida Statutes,

(license number 0027464) from Atlantic Gulf Communities

Corporation. The purchase price was three and a half million

dollars, with the Respondents to pay $500,000.00 down and the

three million dollar balance within three months.

19. One aspect of the business plan of the Respondent's

Schiff and Law was to create a separate company to conduct real

estate brokerage activities and to continue to engage in property

management activities with the existing corporation, Florida Home

Finders, Inc. Respondents Schiff and Law met with all managers

and employees of Florida Home Finders, Inc., during the first

week of April of 1995 to explain the business plan to them. At

that time they also explained that they intended to utilize the

provisions of Section 83.49(1), Florida Statutes, to hold

security deposits in a manner which would allow them to pay

interest to tenants.

20. Respondents Schiff and Law were not involved in the day

to day operations of either Florida Home Finders, Inc., or

Florida Home Finders Realty, Inc.

21. At the time the Respondents Schiff and Law purchased

Florida Home Finders, Inc., the corporation maintained at least

three types of accounts for deposits received from its

operations: sales escrow accounts, rental receipts accounts, and

security deposit accounts. Each of the seven offices of Florida

Home Finders, Inc., maintained its own separate set of accounts.

22. The sales escrow accounts maintained by Florida Home

Finders, Inc., contained money derived from purchasing and

leasing transactions.

23. The rental receipts accounts maintained by Florida Home

Finders, Inc., contained money received from tenants for the

payment of rent. The use of these funds was governed by the

property management agreements with the landlords. Typically,

the funds in these accounts would be used to pay for such things

as maintenance and repairs to the rental properties, mortgage

payments due on the rental properties, and/or property management

fees, with any excess funds being periodically paid to the

respective landlords.

24. The security deposit accounts maintained by Florida

Home Finders, Inc., contained money received from tenants for

security deposits to be held to guarantee the tenants'

performance under their respective rental agreements.

25. Shortly after the formation of Florida Home Finders

Realty, Inc., and its licensure as a real estate brokerage

corporation, the sales escrow accounts of Florida Home Finders,

Inc., were transferred to Florida Home Finders Realty, Inc.

There were no irregularities in any of the sales escrow accounts

while they were under the control of either of these two

corporations.

26. Following the creation of Florida Home Finders Realty,

Inc., Florida Home Finders, Inc., did not engage in any licensed

real estate brokerage activities. All such activities were

conducted by Florida Home Finders Realty, Inc., after it was

licensed as a brokerage corporation.

27. On or about June 27, 1995, Florida Home Finders, Inc.,

posted a security deposit bond in the amount of $250,000.00 with

the Florida Secretary of State in an effort to comply with

Section 83.49(1)(c), Florida Statutes.

28. None of the landlords and none of the tenants were ever

provided with notice that money had been transferred from the

security deposit accounts and from the rental receipts accounts.

None of the landlords and none of the tenants were ever provided

with notice that Florida Home Finders, Inc., had posted a bond

with the Florida Secretary of State and intended to rely on the

provisions of Section 83.49(1)(c), Florida Statutes.

29. Subsequent to the transfer of the $2,492,000.00 to the

NationsBank account, the funds were used to purchase three

separate certificates of deposit. One certificate of deposit in

the amount of $242,000.00 was purchased from NationsBank and

secured a loan of the same amount. The second certificate of

deposit in the amount of two million dollars was purchased from

County National Bank in Miami in the name of Florida Home

Finders, Inc., and was used to secure a personal loan to

Respondents Schiff and Law in the amount of two million dollars.

The third certificate of deposit in the amount of $250,000.00 was

purchased from NationsBank in the name of Florida Home Finders,

Inc., and was used as security for the bond posted with the

Florida Secretary of State.

30. The loan proceeds secured by two of the certificates of

deposit described above, plus $100,000.00 from the operating

account of Florida Home Finders, Inc., at Barnett Bank, were used

to pay Atlantic Gulf Communities Corporation against the balance

of the purchase price of Florida Home Finders, Inc.

31. B etween the time of the mid-June transfer of funds from

the accounts of Florida Home Finders, Inc., and the freezing of

the assets of Florida Home Finders, Inc., in September of 1995,

Florida Home Finders, Inc., was able to pay all current demands

for funds from tenants and landlords.

32. As of September 21, 1995, all funds transferred from

the various security deposit and rental receipt accounts of

Florida Home Finders, Inc., remained in accounts and financial

instruments in the name of Florida Home Finders, Inc. However,

$2,242,000.00 of those financial instruments in the name of

Florida Home Finders, Inc., were pledged as security for personal

loans of the Respondents Schiff and Law and were not available to

Florida Home Finders, Inc., while those personal debts remained

unpaid.

CONCLUSIONS OF LAW

33. The Division of Administrative Hearings has

jurisdiction over the subject matter of and the parties to these

consolidated cases. Section 120.57(1), Florida Statutes.

34. Only twelve of the counts in the Administrative

Complaint allege violations by the three Respondents in these

consolidated cases. Of those twelve counts, six have been

voluntarily dismissed by the Petitioner. 5 Based on those

voluntary dismissals, the following six counts should be

dismissed: XXVI, XXVII, XXVIII, XXXV, XXXVI, and XXXVIII (26,

27, 28, 35, 36, and 38).

35. The remaining counts relevant to these two consolidated

cases are: VII, VIII, X, XVII, XVIII, and XIX (7, 8, 10, 17, 18,

and 19). In these six remaining counts each of the three

Respondents is charged with one count of violating Section

475.25(1)(b), Florida Statutes, and with one count of violating

Section 475.25(1)(k), Florida Statutes. Counts VII and XVII (7

and 17) charge Respondent Law, Counts VIII and XVIII (8 and 18)

charge Respondent Schiff, and Counts X and XIX (10 and 19) charge

the corporate Respondent, Florida Home Finders Realty, Inc.

36. Petitioner seeks to impose discipline which includes

the possibility of suspension or revocation of Respondents'

licenses to practice real estate brokerage. Therefore,

Petitioner must prove its allegations by clear and convincing

evidence. See, Ferris v. Turlington , 510 So.2d 292 (Fla. 1987);

Nair v. Department of Business and Professional Regulation , 654

So.2d 205 (Fla. 1st DCA 1995). Recent amendments to the

Administrative Procedures Act have codified the burden of proof

set forth in Ferris v. Turlington and its progeny. Section

120.57(1)(h), Florida Statutes (1996 Supp.), now provides that:

"Findings of fact shall be based upon a preponderance of the

evidence, except in penal or licensure disciplinary proceedings

or except as otherwise provided by statute, and shall be based

exclusively on the evidence of record, and on matters officially

recognized." [Emphasis added.]

37. The nature of clear and convincing evidence has been

described as follows in Slomowitz v. Walker , 429 So.2d 797, 800

(Fla. 4th DCA 1983):

We therefore hold that clear and convincing

evidence requires that the evidence must be

found to be credible; the facts to which the

witnesses testify must be distinctly

remembered; the testimony must be precise and

explicit and the witnesses must be lacking in

confusion as to the facts in issue. The

evidence must be of such weight that it

produces in the mind of the trier of facts a

firm belief or conviction, without hesitancy,

as to the truth of the allegations sought to

be established.

See also, Smith v. Department of Health and Rehabilitative

Service , 522 So.2d 956 (Fla. 1st DCA 1988), which, at page 958

quotes with approval the above-quoted language from Slomowitz .

The Smith case also includes the following at page 958:

"Clear and convincing evidence" is an

intermediate standard of proof, more than the

"preponderance of evidence" standard used in

most civil cases, and less than the "beyond a

reasonable doubt" standard used in criminal

cases. See State v. Graham , 240 So.2d 486

(Fla. 2nd DCA 1970).

38. Pursuant to Section 475.25(1), Florida Statutes (1994

Supplement), the Florida Real Estate Commission is empowered to

revoke or suspend real estate brokerage licenses or otherwise

discipline real estate brokerage licensees upon a determination

that any of the acts set forth in that Section were committed,

which include a determination that the licensees:

(b) Has been guilty of fraud,

misrepresentation, concealment, false

promises, false pretenses, dishonest dealing

by trick, scheme, or device, culpable

negligence, or breach of trust in any

business transaction in this state or any

other state, nation, or territory; has

violated a duty imposed upon him by law or by

the terms of a listing contract, written,

oral, express, or implied, in a real estate

transaction; has aided, assisted, or

conspired with any other person engaged in

any such misconduct and in furtherance

thereof; or has formed an intent, design, or

scheme to engage in any such misconduct and

committed an overt act in furtherance of such

intent, design, or scheme. It is immaterial

to the guilt of the licensee that the victim

or intended victim of the misconduct has

sustained no damage or loss; that the damage

or loss has been settled and paid after

discovery of the misconduct; or that such

victim or intended victim was a customer or a

person in confidential relation with the

licensee or was an identified member of the

general public.

* * *

(k) Has failed, if a broker, to

immediately place, upon receipt, any money,

fund, deposit, check, or draft entrusted to

him by any person dealing with him as a

broker in escrow with a title company,

banking institution, credit union, or savings

and loan association located and doing

business in this state, or to deposit such

funds in a trust or escrow account maintained

by him with some bank, credit union, or

savings and loan association located and

doing business in this state, wherein the

funds shall be kept until disbursement

thereof is properly authorized; or has

failed, if a salesperson, to immediately

place with his registered employer any money,

fund, deposit, check, or draft entrusted to

him by any person dealing with him as agent

of his registered employer. The commission

shall establish rules to provide for records

to be maintained by the broker and the manner

in which such deposits shall be made.

[Emphasis added.]

39. Section 475.01(1)(c), Florida Statutes, defines the

term "broker" as follows, in pertinent part:

. . . a person who, for another, and for a

compensation or valuable consideration

directly or indirectly paid or promised,

expressly or impliedly, or with an intent to

collect or receive a compensation or valuable

consideration therefor, appraises, auctions,

sells, exchanges, buys, rents, or offers,

attempts or agrees to appraise, auction, or

negotiate the sale, exchange, purchase, or

rental of business enterprises or business

opportunities or any real property or any

interest in or concerning the same, including

mineral rights or leases, or who advertises

or holds out to the public by any oral or

printed solicitation or representation that

he is engaged in the business of appraising,

auctioning, buying, selling, exchanging,

leasing, or renting business enterprises or

business opportunities or real property of

others or interests therein, including

mineral rights, or who takes any part in the

procuring of sellers, purchasers, lessors, or

lessees of business enterprises or business

opportunities or the real property of

another, or leases, or interest therein,

including mineral rights, or who directs or

assists in the procuring of prospects or in

the negotiation or closing of any transaction

which does, or is calculated to, result in a

sale, exchange, or leasing thereof, and who

receives, expects, or is promised any

compensation or valuable consideration,

directly or indirectly therefor; and all

persons who advertise rental property

information or lists.

40. Florida law imposes a high standard of ethical conduct

upon real estate brokers. In Zichlin v. Dill , 25 So.2d 4 (Fla.

1946), for example, the Florida Supreme Court stated:

The broker in Florida occupies a status

under the law with recognized privileges and

responsibilities. The broker in this state

belongs to a privileged class and enjoys a

monopoly to engage in lucrative business

. . . The state, therefore, has prescribed a

high standard of qualifications and by the

same law granted a form of monopoly and in

doing so the old rule of caveat emptor is

cast aside. Those dealing with a licensed

broker may naturally assume that he possesses

the requisites of an honest, ethical man.

In a similar vein, the Florida Supreme court, in Ahern v. Florida

Real Estate Commission , 6 So.2d 857 (Fla. 1942), stated that "the

real estate broker is now the confidant of the public in much the

same manner as the lawyer or the banker. His relation to the

public exacts the highest degree of trust and confidence. . . ."

41. Any person or entity engaging in activity set out in

Section 475.01(1)(c), Florida Statutes, must be licensed by the

State of Florida as a real estate salesperson, broker, or

brokerage corporation and must comply with Chapter 475 of the

Florida Statutes and rules enacted pursuant thereto. Sections

475.15 and 475.42(1)(a), Florida Statutes.

42. Florida Administrative Code Rule 61J2-14.008(1)(a)

defines a "deposit" as "a sum of money, or its equivalent,

delivered to a real estate licensee, as . . . a payment, or a

part payment, in connection with any real estate transaction

. . . or such sum delivered in escrow, trust or on condition, in

connection with any transaction conducted, or being conducted, by

such licensee within the scope of Chapter 475, Florida Statutes."

43. Florida Administrative Code Rule 61J2-14.010(1)

provides that "every broker who receives from . . . persons

interested in any real estate transaction, any deposit . . .

shall immediately place the same in a bank, savings and loan

association, trust company, credit union or title company having

trust powers, in an insured escrow or trust account. . . ."

44. Florida Administrative Code Rule 61J2-14.011 provides

that a broker who receives a deposit "shall not have any right to

or lien upon said deposit, except upon the written agreement or

order of the depositor so long as the depositor has sole control

of said deposit, until the transaction involved has been closed.

. . ."

45. Prior to April 1995, Florida Home Finders, Inc., was

leasing property to tenants, and thereby brokering pursuant to

Section 475.01(1)(c), Florida Statutes. Florida Home Finders,

Inc., collected security deposits and rental payments in

conjunction with that brokering activity. Therefore, Florida

Home Finders, Inc., and those acting on its behalf, were required

to comply with Chapter 475 of the Florida Statutes and the rules

enacted pursuant thereto.

46. Florida Home Finders, Inc., and those acting on its

behalf, were required to maintain the security deposits and

rental receipts collected prior to April of 1995 in an escrow or

trust account until disbursement of those funds was properly

authorized by the parties to the leasing transactions.

47. Turning first to the charges against the individual

Respondents, in Counts VII and VIII (7 and 8) of the

Administrative Complaint, Respondents Law and Schiff are each

charged with having violated Section 475.25(l)(b), Florida

Statutes. Both of these individual Respondents violated Section

475.25(l)(b), Florida Statutes, by reason of the following

conduct. They caused the transfer of $2,492,000.00 of security

deposits and rental receipts from various separate bank accounts

into a single Florida Home Finders, Inc., account at NationsBank,

the vast majority of which funds had been collected while Florida

Home Finders, Inc., was a licensed real estate brokerage

corporation engaging in brokerage activities. They then caused

that money to be used to purchase certificates of deposit.

Thereafter, they caused $2,242,000.00 of that money in the form

of two certificates of deposit to be pledged as collateral for

personal loans to the two individual Respondents. Additionally,

on or about August 21, 1995, the Respondent Law caused a series

of transfers to take place by means of which $65,000.00 of money

from the rental receipts account of Florida Home Finders, Inc.,

was paid to Atlantic Gulf Communities Corporation. Neither of

the individual Respondents, nor anyone else on their behalf or on

behalf of Florida Home Finders, Inc., obtained authorization or

permission of the tenants or the property owners to transfer the

funds, purchase the certificates of deposit, pledge the funds as

collateral for personal loans to Respondents Law and Schiff, or

disburse some of the funds to Atlantic Gulf Communities

Corporation.

48. Respondents' pledging of the security deposits and

rental receipts funds of others to secure their personal loans

was inconsistent with the trust which had been placed in them,

particularly since the Respondents are licensed real estate

brokers governed by the high ethical standards of Florida law.

Such failure breached the Respondents' agreements to hold those

funds in escrow and subjected the tenants and property owners

involved, undoubtedly without their knowledge, to the risk that

the Respondents may not have been able to timely disburse the

security deposits and rental trust funds to the appropriate

parties, due to some unforeseen contingency rendering the

Respondents unable to fulfill their obligation to the lenders

holding the trust funds as collateral.

49. In Counts XVII and XVIII (17 and 18) of the

Administrative Complaint, Respondents Law and Schiff are each

charged with having violated Section 475.25(l)(k), Florida

Statutes. Both of these individual Respondents violated Section

475.25(l)(k), Florida Statutes, in that they caused the removal

of $2,492,000.00 in security deposits and rental receipts funds

from the escrow and trust accounts of Florida Home Finders, Inc.,

and ultimately used those funds to purchase certificates of

deposit which they then caused to be pledged as collateral to

secure their own personal loans.

50. The vast majority of the $2,492,000.00 in security

deposits and rental receipts were "deposits" within the meaning

of Florida Administrative Code Rule 61J2-14.008(l)(a), which had

been collected by Florida Home Finders, Inc., from or on behalf

of tenants and property owners while Florida Home Finders, Inc.,

was a licensed real estate brokerage corporation engaged in real

estate brokering, as defined in Section 475.01(l)(c), Florida

Statutes. Therefore, the individual Respondents and Florida Home

Finders, Inc., had an obligation to maintain those funds in an

escrow or trust account, unencumbered and available for immediate

disbursement.

51. In reaching the foregoing conclusions regarding the

violations of Sections 475.25(l)(b) and 475.25(l)(k), Florida

Statutes, I have not overlooked the Respondents' arguments to the

effect that, by operation of Section 83.49, Florida Statutes,

they were excused from compliance with various requirements of

Chapter 475, Florida Statutes, and, therefore, were not in

violation of any provision of Chapter 475, Florida Statutes. At

the time of the various transfers of funds in 1995, Section

83.49, Florida Statutes, read as follows in pertinent part:

(1) Whenever money is deposited or advanced

by a tenant on a rental agreement as security

for performance of the rental agreement or as

advance rent for other than the next

immediate rental period, the landlord or the

landlord's agent shall either:

(a) Hold the total amount of such money in

a separate non-interest-bearing account in a

Florida banking institution for the benefit

of the tenant or tenants. The landlord shall

not commingle such moneys with any other

funds of the landlord or hypothecate, pledge,

or in any other way make use of such moneys

until such moneys are actually due the

landlord;

(b) Hold the total amount of such money in

a separate interest-bearing account in a

Florida banking institution for the benefit

of the tenant or tenants, in which case the

tenant shall receive and collect interest in

an amount of at least 75 percent of the

annualized average interest rate payable on

such account or interest at the rate of 5

percent per year, simple interest, whichever

the landlord elects. The landlord shall not

commingle such moneys with any other funds of

the landlord or hypothecate, pledge, or in

any other way make use of such moneys until

such moneys are actually due the landlord; or

(c) Post a surety bond, executed by the

landlord as principal and a surety company

authorized and licensed to do business in the

state as surety, with the clerk of the

circuit court in the county in which the

dwelling unit is located in the total amount

of the security deposits and advance rent he

or she holds on behalf of the tenants or

$50,000, whichever is less. The bond shall

be conditioned upon the faithful compliance

of the landlord with the provisions of this

section and shall run to the Governor for the

benefit of any tenant injured by the

landlord's violation of the provisions of

this section. In addition to posting the

surety bond, the landlord shall pay to the

tenant interest at the rate of 5 percent per

year, simple interest. A landlord, or the

landlord's agent , engaged in the renting of

dwelling units in five or more counties, who

holds deposit moneys or advance rent and who

is otherwise subject to the provisions of

this section, may, in lieu of posting a

surety bond in each county, elect to post a

surety bond in the form and manner provided

in this paragraph with the office of the

Secretary of State. The bond shall be in the

total amount of the security deposit or

advance rent held on behalf of tenants or in

the amount of $250,000, whichever is less.

The bond shall be conditioned upon the

faithful compliance of the landlord with the

provisions of this section and shall run to

the Governor for the benefit of any tenant

injured by the landlord's violation of this

section. In addition to posting a surety

bond, the landlord shall pay to the tenant

interest on the security deposit or advance

rent held on behalf of that tenant at the

rate of 5 percent per year simple interest.

(2) The landlord shall, within 30 days of

receipt of advance rent or a security

deposit, notify the tenant in writing of the

manner in which the landlord is holding the

advance rent or security deposit and the rate

of interest, if any, which the tenant is to

receive and the time of interest payments to

the tenant. Such written notice shall:

(a) Be given in person or by mail to the

tenant.

(b) State the name and address of the

depository where the advance rent or security

deposit is being held, whether the advance

rent or security deposit is being held in a

separate account for the benefit of the

tenant or is commingled with other funds of

the landlord , and, if commingled, whether

such funds are deposited in an interest-

bearing account in a Florida banking

institution.

(c) Include a copy of the provisions of

subsection (3).

Subsequent to providing such notice, if the

landlord changes the manner or location in

which he or she is holding the advance rent

or security deposit, he or she shall notify

the tenant within 30 days of the change

according to the provisions herein set forth.

This subsection does not apply to any

landlord who rents fewer than five individual

dwelling units. Failure to provide this

notice shall not be a defense to the payment

of rent when due.

(3)(a) Upon the vacating of the premises

for termination of the lease, the landlord

shall have 15 days to return the security

deposit together with interest if otherwise

required, or in which to give the tenant

written notice by certified mail to the

tenant's last known mailing address of his or

her intention to impose a claim on the

deposit and the reason for imposing the

claim. The notice shall contain a statement

in substantially the following form:

This is a notice of my intention to impose a

claim for damages in the amount of ________

upon your security deposit, due to ________.

It is sent to you as required by s. 83.49(3),

Florida Statutes. You are hereby notified

that you must object in writing to this

deduction from your security deposit within

15 days from the time you receive this notice

or I will be authorized to deduct my claim

from your security deposit. Your objection

must be sent to ____ (landlord's address) ____.

If the landlord fails to give the required

notice within the 15-day period, he or she

forfeits the right to impose a claim upon the

security deposit.

(b) Unless the tenant objects to the

imposition of the landlord's claim or the

amount thereof within 15 days after receipt

of the landlord's notice of intention to

impose a claim, the landlord may then deduct

the amount of his or her claim and shall

remit the balance of the deposit to the

tenant within 30 days after the date of the

notice of intention to impose a claim for

damages.

* * *

(d) Compliance with this subsection by an

individual or business entity authorized to

conduct business in this state, including

Florida-licensed real estate brokers and

salespersons, shall constitute compliance

with all other relevant Florida Statutes

pertaining to security deposits held pursuant

to a rental agreement or other landlord-

tenant relationship. Enforcement personnel

shall look solely to this section to

determine compliance. This section prevails

over any conflicting provisions in chapter

475 and in other sections of the Florida

Statutes. [Emphasis added.]

52. In 1996, several months after the actions which led to

the charges in these consolidated cases, the Florida Legislature

enacted an amendment to paragraph 3(d) of Section 83.49, Florida

Statutes. As amended in 1996, paragraph 3(d) of Section 83.49,

Florida Statutes, reads as follows:

(d) Compliance with this section by an

individual or business entity authorized to

conduct business in this state, including

Florida-licensed real estate brokers and

salespersons, shall constitute compliance

with all other relevant Florida Statutes

pertaining to security deposits held pursuant

to a rental agreement or other landlord-

tenant relationship. Enforcement personnel

shall look solely to this section to

determine compliance. This section prevails

over any conflicting provisions in chapter

475 and in other sections of the Florida

Statutes and shall operate to permit licensed

real estate brokers to disburse security

deposits and deposit money without having to

comply with the notice and settlement

procedures contained in s. 475.25(1)(d).

53. The Respondents' argument to the effect that their

reliance on Section 83.49, Florida Statutes, insulates them from

liability under Chapter 475, Florida Statutes, fails for several

reasons. In this regard it is first noted that the language of

paragraph (3)(d) of Section 83.49, Florida Statutes, as of the

date of the 1995 conduct at issue in these consolidated cases

referred to "compliance with this subsection," which was a

reference to subsection (3) of Section 83.49, Florida Statutes.

The plain and ordinary meaning of that statutory language as it

existed in 1995 was that real estate brokers who made refunds of

security deposits in the manner described in subsection (3) of

the statute were excused from compliance with any conflicting

provisions in Chapter 475 regarding the procedure for making

refunds of security deposits. The terms of the statute limiting

its scope to "compliance with this subsection" could not be

logically read as authorizing a real estate broker to take

advantage of any of the three alternatives in subsection (1) of

the statute and thereby be excused from compliance with any

conflicting provisions in Chapter 475 regarding the manner in

which deposits received by licensed real estate brokers must be

held.

54. Under the 1996 amendments to paragrap h (3)(d) of

Section 83.49, Florida Statutes, (which included substituting the

term "this section" in place of the earlier term "this

subsection") it now seems clear that a real estate broker is

authorized to take advantage of any of the three alternatives in

subsection (1) of the statute and thereby achieve exemption from

compliance with any conflicting provisions of Chapter 475,

Florida Statutes, with respect to the manner in which security

deposits and advance rental payments must be held. The

Respondents argue that the 1996 amendments were intended by the

Florida Legislature to be retrospective. The Legislative intent

in that regard is far from clear. But even assuming that

retrospective effect was intended, for the reasons set forth

below, the Respondents' arguments still fail.

55. If retrospective effect is given to the 1996 amendments

to paragraph (3)(d) of Section 83.49, Florida Statutes, in order

to be eligible for the benefits of paragraph (3)(d), as amended,

the Respondents must be in compliance with the requirements of

Section 83.49, Florida Statutes. They failed to comply in

several ways; the most obvious failure being their failure to

give the notice required by subsection (2) of the statute. That

subsection requires the landlord to advise the tenant of various

specified details regarding the manner in which any security

deposit and advance rent is being held, including the name and

address of the depository where the funds are being held. That

subsection also states: "[I]f the landlord changes the manner or

location in which he or she is holding the advance rent or

security deposit, he or she shall notify the tenant within 30

days of the change according to the provisions herein set forth."

No such notice was ever provided to any tenant following the

transfer of the security deposit money.

56. The Respondents also appear to have failed to comply

with the requirements of Section 83.49(1)(c), by filing a bond of

doubtful efficacy, inasmuch as the status of Florida Home

Finders, Inc., is incorrectly described in the bond filed with

the Florida Secretary of State. In the second paragraph of the

bond document Florida Home Finders, Inc., described itself as a

"Landlord" in several specified counties in Florida. Florida

Home Finders is not a landlord in those counties, or in any other

counties; it is the agent for numerous landlords in several

counties. This misdescription of the status of Florida Home

Finders, Inc., casts serious doubts as to the extent to which the

bond could be enforced.

57. Finally, the Respondents appear to have failed to

comply with the requirements of Section 83.49(1)(c), Florida

Statutes, because the statute does not appear to be susceptible

to an interpretation which would allow one agent to file one bond

as security for the obligations of numerous landlords.

Throughout paragraph (1)(c) of the statute, as well as throughout

all other paragraphs of the statute, all references to "landlord"

are in the singular; the references are all in terms of "the

landlord" or "a landlord." There is nothing in paragraph (1)(c)

or anywhere else in Section 83.49, Florida Statutes, that

purports to authorize a group of landlords, either on their own

behalf or through an agent, to post a single bond covering the

liabilities of numerous landlords. In sum: Inasmuch as the

Respondents failed to comply with Section 83.49, Florida

Statutes, when they transferred the $2,492,000.00 out of the

several trust and escrow accounts, the Respondents fail to come

within the scope of the provisions of paragraph (3)(d) of Section

6

83.49, Florida Statutes, as amended.

58. Turning now to the charges against the corporate

Respondent, Florida Home Finders Realty, Inc., the two remaining

counts against this Respondent which have not been voluntarily

dismissed are Counts X and XIX (10 and 19) of the Administrative

Complaint. Those two counts allege the following:

COUNT X

Based upon the foregoing, Respondent Florida

Home Finders Realty, Inc., is guilty of

fraud, misrepresentation, concealment, false

promises, false pretenses, dishonest dealing

by trick, scheme or device, culpable

negligence, or breach of trust in any

business transaction in violation of Sec.

475.25(1)(b), Fla. Stat.

* * *

COUNT XIX

Based upon the foregoing, Respondent Florida

Home Finders Realty, Inc., is guilty of

failure to maintain trust funds in the real

estate brokerage escrow bank account or some

other proper depository until disbursement

thereof was properly authorized in violation

of Sec. 475.25(1)(k), Fla. Stat.

59. The evidence in t hese consolidated cases is

insufficient to prove either of the violations quoted immediately

above. The only evidence of any business transaction engaged in

by the Respondent Florida Home Finders Realty, Inc., is that when

Florida Home Finders, Inc., relinquished its corporate real

estate brokerage license, the Respondent Florida Home Finders

Realty, Inc., received from Florida Home Finders, Inc., all of

the latter's trust funds related to real estate sales. The only

evidence regarding the manner in which the Respondent Florida

Home Finders Realty, Inc., handled its trust funds was to the

effect that all of its trust fund accounts were in proper order.

In this regard it is important to note that none of the

approximately two and a half million dollars of security deposit

money and rental receipt money that forms the basis of the

charges against the other Respondents was ever in the possession

of the Respondent Florida Home Finders Realty, Inc.

60. In view of the insufficiency of the evidence, the

charges in Counts X and XIX (10 and 19) against the Respondent

Florida Home Finders Realty, Inc., should be dismissed. 7

RECOMMENDATION

For all of the foregoing reasons, it is RECOMMENDED that a

Final Order be entered in these consolidated cases to the

following effect:

(1) Dismissing all six of the counts of the Administrative

Complaint which were voluntarily dismissed by the Petitioner;

(2) Dismissing Counts X and XIX (10 and 19) against the

corporate Respondent Florida Home Finders Realty, Inc., on the

basis of the insufficiency of the evidence;

(3) Concluding that the Respondent Law is guilty of

violations of Sections 475.25(1)(b) and 475.25(1)(k), Florida

Statutes, as charged in Counts VII and XVII (7 and 17);

(4) Concluding that the Respondent Schiff is guilty of

violations of Sections 475.25(1)(b) and 475.25(1)(k), Florida

Statutes, as charged in Counts VIII and XVIII (8 and 18);

(5) Imposing a penalty against the Respondent Law consisting

of the revocation of his real estate broker license and an

administrative fine in the amount of two thousand dollars; and

(6) Imposing a penalty against the Respondent Schiff

consisting of the revocation of his real estate broker license

and an administrative fine in the amount of two thousand dollars.

DONE AND ENTERED this 22nd day of April, 1997, in

Tallahassee, Leon County, Florida.

___________________________________

MICHAEL M. PARRISH

Administrative Law Judge

Division of Administrative Hearings

The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32301-3060

[phone] SUNCOM 278-9675

Fax Filing [phone]

Filed with the Clerk of the

Division of Administrative Hearings

this 22nd day of April, 1997.

ENDNOTES

1/ The Respondents also filed a separate memorandum of law

addressed to the issue of the extent to which the Respondents may

rely on Section 83.49, Florida Statutes, in these proceedings.

The memorandum has been carefully considered.

2/ In their Prehearing Stipulation all parties stipulated to all

of the facts set forth in paragraphs 1 through 14 of the findings

of fact in this Recommended Order.

3/ In their Prehearing Stipulation in the first sentence of

paragraph 13, the parties inadvertently referred to Florida Home

Finders, Inc., as a "Respondent." Florida Home Finders, Inc. is

not a Respondent in these proceedings. And it is clear from

other evidence that the $65,000.00 transferred in August of 1995

was transferred from accounts controlled by Florida Home Finders,

Inc., not from accounts controlled by the Respondent Florida Home

Finders Realty, Inc.

4/ With regard to the security deposit and rental receipts trust

funds that were eventually used to buy the three certificates of

deposit, the evidence in the record of these proceedings does not

directly show how much of that money was received while Florida

Home Finders, Inc., held a brokerage license and how much was

received after Florida Home Finders, Inc., relinquished its

brokerage license. However, other evidence in the record reveals

that each year approximately 20 percent of such funds were paid

out to landlords who discontinued their relationships with

Florida Home Finders, Inc. As of the time of the transfer of the

subject funds, Florida Home Finders, Inc., had been operating

without a brokerage license for approximately two months; from

mid-April to mid-June of 1995. It follows logically that the

vast majority of the security deposit and rental receipts funds

in the possession of Florida Home Finders, Inc., in mid-June were

funds that had been received while Florida Home Finders, Inc.,

held a brokerage license. The exact amount received while it was

licensed as a broker is irrelevant to the disposition of these

proceedings because, under any view of the matter, at the time of

the mid-June transfers a very large amount of the transferred

money was money Florida Home Finders, Inc., had received while it

held a brokerage license.

5/ The Petitioner voluntarily dismissed the following three

counts at the commencement of the final hearing: XXVIII, XXXV,

and XXXVI (28, 35, and 36). (See page 5 of the transcript of the

final hearing.) The Petitioner voluntarily dismissed the

following three counts when it filed its proposed recommended

order: XXVI, XXVII, and XXXVIII (26, 27, and 38). (See

paragraphs 48 and 50 of the Petitioner's proposed recommended

order.)

6/ In response to the Respondents' argument that they were

insulated by operation of Section 83.49(3)(d), Florida Statutes,

the Petitioner also argued that the Respondents were estopped

from relying on that defense because it had been resolved against

them in Circuit Court proceedings involving the same facts and

parties. In view of the conclusions reached here regarding the

application of Section 83.49, Florida Statutes, to the facts in

this case, it is not necessary to reach the estoppel issue.

7/ In addition to the insufficiencies in the evidence, upon

careful review of the allegations of the Administrative

Complaint it appears that the facts alleged regarding the

Respondent Florida Home Finders Realty, Inc., even if proved,

would be insufficient to make out either of the violations

charged in Counts X and XIX. There are simply no allegations in

the Administrative Complaint of any conduct by the Respondent

Florida Home Finders Realty that would constitute a violation of

either of the statutory provisions relied upon in Counts X and

XIX.

COPIES FURNISHED:

Steve Fieldman, Esquire

DBPR - Division of Real Estate

Hurston North Tower

400 West Robinson Street

Orlando, Florida 32801-1772

Mark Herron, Esquire

Christopher R. Haughee, Esquire

Akerman, Senterfitt & Eidson, P.A.

216 South Monroe Street, Suite 200

Tallahassee, Florida 32301

Henry M. Solares, Division Director

Division of Real Estate

400 West Robinson Street

Post Office Box 1900

Orlando, Florida 32802-1900

Lynda L. Goodgame, General Counsel

Department of Business and

Professional Regulation

1940 North Monroe Street

Tallahassee, Florida 32399-0792

NOTICE OF RIGHT TO SUBMIT EXCEPTIONS

All parties have the right to submit written exceptions within 15

days from the date of this recommended order. Any exceptions to

this recommended order should be filed with the agency that will

issue the final order in this case.