SGCC Lease Agreement Negotiations

The following summarizes our understanding on results of the July 2 meeting in Las Vegas between previous BOD members (Blake Smith, Tiffany Roland), the current  BOD President (Tony Fakonas), their respective attorneys and representatives of the Nevada Attorney General’s office.  Purpose was to discuss the alleged violations of law associated with the Country Club Lease Agreement and the filing of a “Complaint for Disciplinary Action and Notice of Hearing” before the Nevada Commission on Common Interest Communities and Condominiums.

  1. The AG’s office has stayed filing of the Complaint to allow the SOA BOD time to restructure the Lease Agreement with the Country Club and submit it to a vote of the homeowners.
  2. Vote on a restructured agreement will have to be accompanied by a corresponding amendment to the CC&R’s.
  3. The AG’s office has strongly encouraged that the Declarant (Blake Smith) reimburse the Association for all costs incurred with the voting process.
  4. If the homeowners ratify the restructured agreement and CC&R amendments with a majority vote, the AG’s office will in all probability drop the Complaint.
  5. If the homeowners vote not to ratify the agreement and CC&R amendments, the Complaint filing will go forward.
  6. If a deal on restructuring the Lease Agreement with the Country Club cannot be reached, and no vote is forthcoming, the Complaint filing will go forward.
  7. In the event of 5 or 6 above, the current BOD will be encouraged to void the current agreement as permitted under Nevada Law. This to preclude any liability on the part of the current BOD.

With regard to the restructured agreement, it appears that the current Country Club Committee (Tony Fakonas and Daniel Kirby) is proceeding with negotiations along the lines of that presented in the May 28 Homeowner “Information Presentation” Meeting. Significant elements include the following:

  1. A long term agreement of 8.5 years
  2. Substituting the original 2013 to be delivered amenity of a 18 Hole Putt-putt course with a 9 hole putting course and a sports court to accommodate pickle ball.
  3. Applicability to all unit owners with continued assessment amounts.
  4. The SGCC would be precluded from selling its assets to any third party during the agreement term except to the SOA.
  5. Voiding of the Land & Water Rights reverter clause in the current SGCC Deed and Bill of Sale. This is the clause that states all property, water rights, easements and equipment revert to the Developer if the property does not operate as an 18 hole championship golf course for 24 consecutive months.
  6. At the conclusion of the 8.5 year agreement, deeding over to the SGCC 5.5 acres of SGCC Land (i.e., that comprising the current area wherein the temporary buildings, bocce ball courts, parking lot and pipeline easements are located).

At the May 28 meeting there were many concerns raised by homeowners as to the viability of Items 4, 5 and 6.  Owning and/or having some control over operation of the SGCC comes with its attendant risks.  This as opposed to a simple “social membership” approach. 

Progress of the Fakonas/Kirby negotiations with the SGCC is unknown at this time. Hopefully, there will be more homeowner information meetings regarding content and soliciting homeowner input before going out for vote.

Readers are encouraged to let their opinions/preferences known to the BOD by submitting emails to soa@mysomersett.com and commenting via this website. For another perspective on this issue go to REReno.

Fact or Fiction

courtesy of Freedigitalphotos.net
courtesy of Freedigitalphotos.net

Posted by Herb James

Finding a way to save the golf course will be accomplished if the discussion is constrained by facts, not the ad hominem attacks and vitriol we have heard and read about.  Fabricated accusations about ill- intentions, name calling, claims of make-believe groups, false or irrational comparisons, fabricated crises, etc. divert attention from the core issues that need to be resolved if Somersett/Del Webb is going to preserve the golf course.  In any disagreement only the relevant and material facts should be discussed – providing the real goal is to achieve a mutually satisfactory solution.  To discuss the core issues, facts need to replace fiction.  With this goal in mind I present a number of issues that are either FACT OR FICTION.  I believe these issues are relevant and material to any discussion about the Lease Agreement and recommend they be addressed.

FACT OR FICTION:

The former Board made no effort to determine what if any new amenities, the property owners wanted prior to creating and implementing the Lease Agreement.

FACTOR FICTION:

The former Board made no effort to obtain an independent, objective cost analysis to determine the value of the amenities and to determine an appropriate cost for the property owners.

FACT OR FICTION:

Secret meetings between the former Board and the Somersett Country Club, Inc. were held to determine the cost to be charged to the property owners and then amenities to be provided.

FACT OR FICTION:

The former Board did not allow the property owners the opportunity to vote for this Lease Agreement, as required by law and the CC&R’s, prior to its implementation.

FACT OR FICTION:

The CC&R’s do not grant the Board the authority to add new amenities nor do the CC&R’s give the Board the power to force property owners to pay for new amenities property owners did not approve.

FACT OR FICTION:

The total cost to the property owners, for this 10 year Lease Agreement, is no less than $5,000,000.00 but more probably closer to $7,000,000.00.

FACT OR FICTION:

The book value of the Somersett Country Club, Inc. was artificially increased from approximately, $2,000,000.00 to between $7,000,000.00 and $9,000,000.00 solely as a result of this Lease Agreement.

FACT OR FICTION:

This Lease Agreement can be considered a very secure debt instrument that has a low risk of default.

FACT OR FICTION:

The Somersett Country Club, Inc. has the option of selling their club to a third party, the sale of which would include the golf operation ($2,000,000.00) and this Lease Agreement ($5,000,000.00 to $7,000,000.00).

FACT OR FICTION:

If the Somersett Country Club, Inc. sold the club, the Lease Agreement states the SOA is obligated to continue paying the new owners for this Agreement.

FACT OR FICTION:

If the Somersett Country Club, Inc. sold the club to a third party, the money from its sale would be shared only with its approximately 135 owners.

FACT OR FICTION:

The Attorney General’s Office is considering filing a formal complaint against the former Board because it created and implemented this Lease Agreement without the knowledge of the property owners.

FACT OR FICTION:

The current Board has the authority, under Nevada law, to void this Lease Agreement immediately and unilaterally.

FACT OR FICTION:

If the current Board exercised it power to void this Lease Agreement, the SOA would save over $36,000.00 per month, the threat by the Attorney General’s Office to file a formal complaint against the former Board would be removed and the SOA would save tens of thousands of dollar in unnecessary legal fees by not having to defend the former Board.

FACT OR FICTION:

Refusal of the current Board to void this Lease Agreement is a violation of the current Board’s fiduciary responsibility to manage the SOA in the best interest of the property owners.

FACT OR FICTION:

Handouts, welfare payments or subsidizes harm both the recipients and the providers.

FACT OR FICTION:

The purpose of this $5,000,000.00 to $7,000,000.00 Lease Agreement is fourfold:  1.) continue subsidizing the Somersett Country Club, Inc.; 2.) expand the club’s existing facilities; 3.) create a very secure debt instrument that would be sold along with the golf operation; 4.) help pay the cost for constructing of the club’s private clubhouse.

FACT OR FICTION:

The purpose of this $5,000,000.00 to $7,000,000.00 Lease Agreement is to provide new amenities.

These issues seem to be at the heart of the disagreement.  The proponents and opponents of this Lease Agreement have the same goal in mind – the preservation of the golf course in Somersett.  The disagreement seems to emanate from how this goal should be achieved.  Opponents of this Lease Agreement agree with Messrs. Blake Smith and Ray Lee who have publically stated this Lease Agreement will not save the club.  Proponents disagree with their assessment.

I hope the issues are discussed so a solution can be amicably achieved.  I make a quantum leap in assuming both opponents and proponents will respond to these issues.  I am especially interested in the response from the Somersett Country Club, Inc.’s erudite official spokesperson “Bagdad Barry”.  No doubt “Bagdad Barry’s” analysis will be sagacious, cogent and powerful; after all he is representing the official position and values of his fellow owners of the Somersett Country Club, Inc.

SOA Country Club Committees

Copy of James Haar Memo to the SOA Board of Directors dated 7/9/13.

As I understand it, a liaison committee consisting of Board members Fakonas and Kirby was set up to negotiate amendments to the current Lease & Management Agreement.  This has now been placed on hold pending resolution of the “Complaint” before the Attorney General’s office. These two Board members are now serving on a more formal Country Club Committee whose main purpose appears to be to negotiate with the SGCC to defer construction of the 2013 amenities and to maintain the “status quo” pending resolution of the “Complaint”.

 

[SU comment: the “Complaint” being the SGCC Lease Agreement alleged violation of law currently being prosecuted by the Nevada Attorney General’s office] 

It has also been reported that a proposed settlement for the “Complaint” would involve formulating a new SGCC agreement and submitting it to a vote of all eligible unit owners. One could logically assume that the current Country Club Committee Charter would be extended to negotiate the new agreement and that Mr. Fakonas and Ms. Kirby would be the negotiators. In this case, I have the following comments.

  1.  Mr. Fakonas and Ms. Kirby were acknowledged supporters of the existing Lease Agreement and therefore their objectivity could be in question.
  2. It is obvious that Mr. Lee, Mr. Hughes and Mr. Chan could not serve on this committee due to a direct conflict of interest.
  3. In consideration of items 1 and 2, would it not be preferable to form a non-Board member committee, as has been done with all other committees.  Homeowners who have applicable experience not only on the subject matter, but in negotiating contracts.
  4. This is not to say that Mr. Fakonas and Ms. Kirby cannot serve as advisors/counselors to the committee as is the case for other SOA committees.

Given the probable bias (no disrespect intended) associated with the existing Board members with regard to Country Club agreement negotiations, I believe it prudent to appoint a committee of non-Board members, or as a minimum, one whose makeup consists of a non-Board member majority.

Another suggestion is to let the Country Club take the primary responsibility for formulating the new agreement, truthfully acknowledge it purpose (e.g., the SGCC needs community dollar support to survive), promote its merits to the homeowners and pay for the voting process with their own funds. It is the needed community dollar support for the SGCC that is the real issue here and not new amenities for the SOA.  Therefore, the SGCC should lead the charge in taking it to the community, not the SOA.

UPDATE – Country Club Lease Agreement

A meeting was held in Las Vegas on July 2, 2013 between previous Somersett Owners Association (SOA) Board members (B. Smith, T. Roland, R. Lee), the  current SOA Board President (T. Fakonas), the SOA Attorney, and representatives from the Nevada Attorney General’s office. The purpose being to discuss the alleged violations of Nevada Law associated with the current Country Club Lease Agreement and the filing of a “Complaint for Disciplinary Action and Notice of Hearing” (the Complaint) before the Nevada Commission on Common Interest Communities and Condominiums (the Commission).

A proposed settlement calls for the current SOA Board of Directors to develop a new Lease Agreement with the Country Club and submit it to a vote of the homeowners.  In the meantime the AG will stay filing of the Complaint with the Commission, pending resolution of other terms associated with the proposed settlement and/or voting results.  As these terms become known, they will be posted on the Somersett United website.

If a settlement agreement cannot be reached, the Complaint will be filed before the Commission with an objective of voiding the existing Lease Agreement and seeking possible disciplinary action against some or all of the Respondents (i.e., the previous 2011 SOA Board members and the Somersett Development Company).

Previous to the above referenced meeting, the following was reported at the June 25, 2013 SOA Board meeting.

  1. Pending resolution of the Complaint, a status quo on the existing Lease Agreement will be in place. That is, the 2013 planned amenities will not be built, the $100,000 of up-front payment to the Country Club to build these amenities will not be provided, and the Country Club monthly payments of $15/mo/unit will be reduced accordingly.
  2. The current Board has been served by the Attorney for the Somersett Development Company to indemnify previous Board members against any loss associated with Complaint resolution. This is action is currently being reviewed by the SOA Attorney.

 

If the proposed settlement goes forward, it will be interesting to see if the current Board can come up with a new Country Club Lease Agreement that has strong enough appeal to obtain a majority vote of homeowners. That is, in lieu of reduced assessments and/or applying these funds to what may be considered as more worthwhile endeavors.