Rescind and Replace

Posted by Herb James

There are several reasons why the subsidy agreement (i.e., Lease and Management Agreement) between the SGCC and the HOA needs to be rescinded and replaced.

One reason is the de-valuation of our property caused by:  (1) Liens and (2) Uncertainty

1.)  Liens

This agreement has encumbered all of our properties with over a $6,000,000.00 lien (collectively).  We are obligated to pay this lien for the benefit of approximately 172 owners of a private golf club.  This was not a voluntary lien placed against our properties, it was levied without our knowledge or consent.  Normally, a lien is granted or agreed to by the property owner, such as a mortgage or HOA fees (at time of purchase).  Not in this case.  In this case, Party #1 (a private golf club) negotiated with Party #2 (builder-controlled board) to force Party #3 (property owners) to pay Party #1 over $6,000,000.00 without Party #3’s knowledge or consent.  This is a clear violation of the CC&R’s.   Our property values have diminished, because we are now responsible for subsidizing the operational deficit of an insolvent, private golf club through this lien.

This de-valuation is exacerbated, because this $6,000,000.00+ lien may only be the first lien placed against our properties for the benefit of a private golf club.  In the funding section of the “trigger event” (page 8 section IV, subsection 10 of the Lease Agreement) is a requirement that the amount of money the HOA pays the golf club will increase, if the golf club looses members.  (The “trigger event” is the building of a clubhouse, which the club members will own.)  For example, if 20 members leave the club, the HOA is required to increase its’ payment to the club by approximately $29,000.00+ per year (a potential increase of $87,000.00+ over 3 years) just to cover construction costs.  The requirement that property owners pay more to the golf club, if club membership decreases, is currently limited to construction costs.  However, a linkage or obligation has been created, for the first time, which causes a financial burden to accrue to the property owners, if membership in this private golf club decreases.  This action, on the part of the board, is consistent with the obligation, again for the first time, that property owners must subsidize the operational deficit and construction costs of this private golf club.  As with any forced subsidizing, subsidies only increase.

2.)   Uncertainty READ MORE

10 thoughts on “Rescind and Replace

  1. If the homeowners have to subsidize the country club, why aren’t they compensated with some small golf privledges? (I know then it would be somersett residents public course)–but that seems the only way out. The country club is doomed and the entire reno area knows it and by not fixing your problem, you are making fools of yourselves.

  2. Heh fool…. Haven’t you noticed property values are increasing, not decreasing. There is very little inventory in Somersett BECAUSE it’s such a desirable community for many reasons, which includes all the amenities provided by the HOA AND the Country club (access to a GREAT local restaurant, Access to a golf driving range, access to a world class golf course, a Bocce ball court, an upcoming 18 hole putting course (still in the planning stages), a beautiful lush community, etc….)

    Are you really serious?

    1. Barry,

      We can all pontificate on real estate values in Somersett, but no one knows for certain what the future holds as there many factors at play here. However, from your perspective your argument is moot if the SGCC is indeed solvent without SOA funding (as many SGCC members have stated), because in this event there is no potential for course closure to affect real estate values. However, Mr. James’s perspective is currently operative as there can be no denying that the SOA has a significant incurred liability in its “Lease Agreement” with the SGCC, and that this liability could be a deterrent to future homebuyers, especially if additional assessments are forthcoming as the Lease Agreement allows.

      This again raises the fundamental question: To what extent should the Somersett homeowners subsidize the operation of a private golf course and should this decision be made by a special interest SOA Board of Directors, or by the Somersett Community at large? I think we all know the right answer here.

      1. I researched the facts associated with the agreement between the SOA and the Somersett Country Club. As I suspected Herb’s posting is completely inaccurate and filled with false and misleading information. Below please find the “REAL” facts associated with the agreement between the two entities…

        There is no lien on Somersett properties. The word “lien” would indicate a creditor’s claim against property. There is no such claim, nor would SGCC have any basis for filing a lien. The $6 million quantification is also a misrepresentation/misinterpretation of the underlying facts of the agreement.

        The SOA financial commitment per the agreement is as follows:

        The SOA pays $15 per month per dues paying residence to SGCC for a period of 3 years. In the third year, the payment may decrease or increase in that year only depending upon the number of SGCC equity members. This clause was actually designed to REDUCE the SOA commitment upon the club successfully obtaining more members. The monthly payment of $15 could reduce by $1 per every 20 equity members added from the Base Membership as defined in the contract. Regardless, the fee is capped and could never be higher than $15 in the 3rd year so there is in fact no increase in the per resident payment possible over years 1 and 2. At present, this represents a monthly payment of approximately $36,165 to the club for a total of $1,301,940 over the 36 month contract period. This is the only and actual financial commitment the SOA has per the agreement.

        The SOA does have two fixed price options to renew the agreement; one for an additional 3 years and one for a 4 year period thereafter, both at a monthly dues of $12 per dues paying SOA member. Under these independent options, the SOA monthly payment would reduce to $28,932 for a total payment of $1,042,000 over the first 3 year option period and $1,390,000 over the final 4 year period. If the SOA exercise both of its options with no other changes to the number of dues paying members, it would pay a total of $3,732,228 over the next ten (10) years for access to the amenities as described while SGCC bears the costs of providing these amenities.

        An option was built in the agreement that when SGCC is ready to build a permanent clubhouse, the SOA, AT ITS OPTION my elect to design SOA determined amenities into the club house, the value and cost of which would be then determined should the SOA exercise its option at its own discretion. Again, this would be an amount that would be negotiated but is indeterminable at this point in time. Should the SOA elect not to participate in the clubhouse design to add future amenities to the community, upon completion of a clubhouse, the SOA access to club facilities would reduce to the driving range and the putting course only and the monthly fee would reduce to $5 per resident for the remaining term of the agreement.

        It should be clear that to describe the transaction as a lien against all Somersett properties is totally misleading. It is also unfortunate that terms such as “subsidy” are used to describe the agreement. Subsidy would indicate or infer that money is being given to the club by the SOA for which it receives nothing in return. The facts are that this was an arms’ length agreement discussed in open forums during the SOA 2012 budget process and SOA board meetings. From my perspective, the resultant agreement is balanced, as it provides new community amenities to ALL Somersett residents, which SGCC installs and maintains at its expense, while providing SGCC a source of revenue over the three year term.

        As a result of the agreement, this year, SGCC incurred costs in excess of $200,000 of the committed $300,000 in delivering amenities to the community. The SunSett Grill was introduced this April with a full kitchen and expanded seating capacity. Respected Executive Chef Colin Smith was engaged as a consultant to assist the club in delivering a quality breakfast, lunch and dinner dining option to the community at affordable prices within 5 minutes of home. The club opened its driving range to the community as an amenity until the resident driving range was completed and opened Memorial Day weekend. By July, the Club finished and opened up new bocce ball courts, and stocked the pond located near the Town Center with 1,500 brim and 500 bass to complete the new fishing amenity. Lastly, the club is planning to spend approximately $100,000 on constructing a putting course for the residents on club property to be available by June 30, 2013.

        Community residents have access to these benefits plus the opportunity to play golf for no increase in their homeowners’ dues. Compare this to a social membership at Hidden Valley Country Club which provides access to their facilities, excluding golf, for an entrance fee of $1,000, $75 per month in dues and a $900 annual food and beverage minimum; or to a social membership at Thunder Canyon which calls for a $500 entrance fee and $100 per month in dues. Even compare benefits to the non-resident social membership that SGCC offers at $25 per month in dues plus another $70 for driving range access. Residents also benefit from the $20 million investment in the golf course infrastructure via its watering, turf grass and drainage systems. These systems serve as a filter for runoff to control flooding and dust and pollen in the community and provide a cooling effect for the surrounding property. The course benefits the local environment and serves as a fire break for the entire community. (Water from the lake on the 14th hole was used to extinguish fire hot spots during the Peavine fires.) In addition, the golf club spends in excess of $700,000 per year to maintain this infrastructure at no cost to Somersett non-club residents.

        So to say the agreement represents a subsidy and in fact, depreciates home values in Somersett belies the facts. We know that home values in Somersett have been increasing and when compared to other developments in Reno like Wingfield or Double Diamond, the per square foot values are $30 to $50 higher in Somersett.

    2. Mr. Lazow,

      Thank you for your last 2 replies. In my nearly 7 decades I am confident I have acted foolishly at least once. I hope it occurred in the first decade not the current decade. Naturally, I disagree with several points you raised and will try to provide the basis for my disagreements.

      You wrote: “The word “lien” would indicate a creditor’s claim against property. There is no such claim, nor would SGCC have any basis for filing a lien”. I never wrote or implied that the SGCC had a basis for filing a lien or would file a lien against our properties. The SGCC has not been vested with the power and authority needed to levy a lien against our properties. I wrote: “This agreement has encumbered all our properties with over a $6,000,000.00 lien (collectively).” The SGCC did not levy the debt against the property owners, it accepted the debt. The HOA’s board levied a lien against our properties when the board approved this contract and agreed to pay a private golf club over $6,000,000.00 for this contract. The board has levied a 10 year debt or claim on all of our properties to satisfy this contract. I believe a convincing argument can be presented to show that the board abused and exceeded its’ scope of authority when it entered into this lease agreement and abused its’ authority when it increased property assessments to pay for this contract. I hope to elaborate on these opinions in a later article.

      It seems you and I are in agreement about the nature of a lien. A lien is a “creditor’s claim against property”.

      Creditor ———– Somersett Owners Association
      Property———– All residential real estate in Del Web/Somersett
      Debt—————-Over $6,000,000.00
      Debtor ———— All residential property owners
      Enforcement —- Against all residential property owners

      Black’s Law Dictionary describes a lien as: a right a creditor (SOA) has over the property (all residential properties) of a debtor (all property owners) as security for a debt ($6,000,000.00). Other sources describe a lien as (paraphrasing):

      – A charge upon real property for the satisfaction of a debt;
      – A right to retain or enforce a charge against the property of another until a claim is satisfied;
      – Any official claim or charge against property for payment of a debt or an amount owed for services rendered;
      – A claim against real or personal property.

      Buy any definition this is a lien. Therefore, the statement: “this agreement has encumbered all of our properties with over a $6,000,000.00 lien” (collectively)” is accurate. A creditor’s claim, debt or lien has been placed against our properties – by the HOA board. The board’s decision was final. This lien cannot be absolved, it must be paid. It appears the board purposely did not provide hearings or information to the property owners so property owners could voice their opinions, learn the details of this contract, make an informed decision or try to dissuade the board from approving this contract. It appears the board purposely failed to take reasonable steps or make reasonable inquiries, such as a survey, to determine what the residents of Del Web/Somersett wanted.

      This increase in our assessments is not “necessary to defray the common expenses of the Association” and it is not a special assessment (Article III, section 5). It is a claim, a debt, a lien used to replace the subsidy Somersett Development Co. had been paying the golf club. We are now forced to pay this subsidy. This lien is mandatory and involuntary. We do not have the option not to pay this lien. We do not even have the option to challenge this lien. This payment is enforceable and sanctions against our properties can accrue for non-payment. This lien was placed against our properties without our knowledge or consent and we derive no benefits worth anywhere near $6,000,000.00+ from this lien.

      One of the primary purposes of this $6,000,000.00+ lien was to supplant the subsidy Somersett Development Co. had been paying the golf club over the prior 2 years. 2 years ago Somersett Development Co. agreed to subsidize the golf club for 2 years as an incentive for the equity members to take ownership of the golf club. That 2 year subsidy agreement ended December 31, 2011. This new subsidy agreement began the next day, January 1, 2012. The relationship and purpose are obvious.

      This may only be the first lien placed against our property for the benefit of the golf club. Please refer to my original article – “Rescind and Replace” August 19, 2012.

      You write “his ‘uncertainty’ paragraph is inaccurate and misleading…”. I will address your criticism in a future article. Suffice it to say home builders, such as Shea and Toll Bros., are curtailing building homes around golf courses, in part, because of the significant financial liabilities caused by a golf course. Buyers seem unwilling to incur the financial liabilities and risks resulting from golf courses.

      You have raised other interesting points in your reply to my article. I will try to address these points in future rebuttals. I hope other folks will provide their opinions about your reply, my rebuttal or any of the articles. One point you raised is just not true and needs to be addressed. That point is: “The facts are that this was an arms’ length agreement discussed in open forums during the SOA 2012 budget process and SOA board meetings”. This statement would make Saul Alinsky proud. This point and the truth about the genesis of this contract needs to be examined in more depth and detail. When the relevant and material facts are presented, I am confident the reader will be convinced that this was not “an arms’ length agreement” that “was discussed in open forums during the SOA 2012 budget process and SOA board meeting” but is an agreement that forces the property owners, without their knowledge, to continue paying Somersett Development Co’s subsidy to the golf club in order to eliminate the clubs operating deficit and prevent the golf club from closing.

  3. Mr Lazow,

    How about making your point without demeaning others by referring to them as “fool.” That language is beneath the level of polite discourse and, frankly, does not reflect well upon you.

    1. Actually, you are right and I regret referring to him as “fool”, but I get so worked up when people misrepresent the facts in such an egregious and over the top way.

      Referring to the agreements as Liens on our properties is so off the wall. A lien implies there is a debt that must be paid before the property can be sold, which is absolutely not the case. There are no liens against anything as a result of the agreement.

      Also, his “uncertainty” paragraph is inaccurate and misleading, as are most of the negative posts on this site about the agreement, the Country Club, the HOA and the community in general…

  4. I was using foolish as a general term for those that dont attempt to correct a large problem. I should have used the word denial… my sources tell me even Arrowcreek is considering alternatives for their courses, but are doing so in a rational way and not airing their dirty laundry by in-fighting and denying the root problem and I think the probability is high they will save at least one of their courses for this reason. Somsersett looks like a huge lawsuit waiting to happen and affect every homeowner, possibly spiral out of control
    and possibly uncover other material agreements and inequities hidden by what a appears a self centered set of golfers. All Somsersett homeowners beware and be on red alert when those in power might be your biggest enemy. My 2 cents from someone who backed out of a short sale gladly when I first sniffed out this deep problem and used the non disclosure of this event as the basis opf the refund of my escrow money and am so glad I am not in the middle of the mess and thankful i was spared the grief I fear will hit the front page of the RGJ again often.

  5. And from what Ive heard verbally, I’d fear that the heavy hitters that dumped the country club on the current members and community haven’t hidden some even deeper problems that a straigh-forward investigation might uncover. The whole way this country club issue has developed smells of greed, deciet and possible criminal actions. Its like the national debt…..the longer you let it fester, the worse the outcome will be. Good luck to those honest souls searching for some facts and straght talk they can distrubute to the community. I don’t know if it exists.

  6. I think Herb James has done a good job of describing the obligation that the SOA board has placed on every homeowner. The SOA Board went to great lengths to avoid homeowner scrutiny of the agreements until after the deal was inked. The Board sought a legal opinion from Maddox law firm on how to avoid a homeowner vote on the contracts. That is why it is structured as a lease–it’s explained in the Maddox opinion.

    There was no need for the Board to rush to sign these agreements. Residents were not clamboring for access to a driving range, stocked pond, etc at a cost of $15/month. The Board by its own admission never conducted a financial analysis of the contracts.

    Finally it is questionable how much value if any SGCC adds to property values. Sierra Canyon owners have no golf views. Most Arrow Creek lots have no golf course view but rather native brush. However if every Somersett home buyer has to become a SGCC member then property values will fall drastically. The only potential buyers of homes in Somersett would be those who want to be a SGCC member. If that were a large number SGCC wouldn’t be hurting for members.

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