CC&R Amendments – Setting the Record Straight

Somersett UnitedUnit owners who did not submit their previous ballots on the proposed CC&R amendments have recently received a new ballot to submit. In these ballot mailings, the BOD chose to include supplemental information understandingly biased toward obtaining an approval vote. In this supplemental information, it is not so much what was said, but what was not said.  Let’s perform a Reality Check on some of the BOD Statements contained therein.

BOD Statements: 1) “The purpose of the proposed changes is to clarify and set limits on the authority of the current and future Boards of Directors”. 2) “This proposed change defines stricter limits on the powers of the Board of Directors than the Current CC&R’s require”. 3) The current CC&R’s have “no limit specified” regarding “Maximum value of property purchase or acquisition before homeowner vote is required”. 4) “Approval of these changes will not change your assessments”.

Reality Check: 1) The current CC&R’s contain no provision granting the BOD the authority to purchase, annex or lease real property into the common area, therefore the real purpose is to grant such authority. 2) The proposed amendments do not change any wording in the Current CC&R’s, rather they simply add provisions related to the purchase, annexation or lease of real property. 3) The no specified limits comment regarding property purchase is a moot point, since the current CC&R’s do not grant the BOD such authority, there is no need to mention limits. 4) The no assessment change is also a misleading statement, whereas approving the amendments in itself will not affect assessments, the downstream purchase, annexation or leasing of expensive property certainly will.

The BOD statements would imply that, to the benefit of homeowners, they simply want to limit the BOD’s authority to enter into purchase. annexation or lease agreements. This is really a stretch as both the current CC&R’s and the proposed amendments do not support this premise.  However, putting all the rhetoric aside, simply put, the proposed amendments (additions) to the CC&R’s clearly grants the following authority to the BOD:

  1. To purchase or annex real property into the SOA up to $500K without homeowner approval.
  2. To purchase or annex real property into the SOA greater than $500K with no upper limit subject to a simple majority vote from at least 20% of all unit owners (Note: currently this would represent 496 unit owners, a simple majority of which would be 249).
  3. To lease real property into the SOA with no upper limit and without homeowner approval.
  4. To increase annual assessments and/or levy special assessments above currently specified limits to fund the purchase, annexation or lease of property subject to a simple majority vote from at least 20% of all unit owners.  (Note: the current CC&R’s limit annual assessment increases to 15% per year and special assessments to 25% of the annual assessment amount. Per the current CC&R’s increases above these limits require the “approval by vote or written consent of Owners holding a majority of the voting rights”).

Bottom line:

If you want to grant the BOD the authority to: 1) purchase, annex or lease property into the association with unspecified dollar limits, 2) increase annual or levy special assessments above currently specified limits to fund such, 3) the preceding based on a unit owner vote representing as little as 20% of total homeowners and 4) you trust that the current and future BOD’s will not abuse such authority, then you may wish to vote to APPROVE.

If however, you: 1) do not wish to grant the proposed purchase, annexation or lease authority parameters, 2) believe that homeowner approval levels are set too low (they could have been set higher if so desired), or 3) do not completely understand the amendment ramifications, then you should vote to DISAPPROVE.

New Country Club Agreement Questions

Somersett UnitedThe SOA Board of Directors (BOD) has solicited questions from home owners on the proposed purchase and amenity agreement with the Somersett Country Club (SGCC), which they will publish on the SOA website (www.mysomersett.com) along with answers.  These can be accessed under the SOA website  LOGIN tab by clicking on the “Frequently Asked Questions List”.  The BOD has currently responded to nine questions with many more outstanding.  For our readers who do not access the SOA website these “FAQ’s” have been reproduced herein and may be accessed by clicking on the following:

Letter of Intent Frequently Asked Questions

Readers are encouraged to access the above and draw their own conclusions as to the answers provided by the BOD.  Also to post any comments related thereto.  If you wish to submit your own questions to the BOD you may do so via email to soa@mysomersett.com.

Suffice it to say that quoted answers reflect BOD biases and not necessarily those of others or the community at large.  Therefore, they need to be taken with some degree of uncertainty.  SU suspects there are valid counter opinions to the majority of them, which readers are encouraged to express via the “Comment” link to this post.

SU agrees with Mr. Bower’s previous post that equal space be provided for both pro and con statements in Ballot mailings.  Thereby providing homeowners the opportunity to assess opposing viewpoints and vote accordingly.

New Country Club Agreement Vote

Posted by Joe Bower –  Letter sent to the SOA Board on January 27, 2013

Thank you for allowing questions and comments to made by members of the Somersett Owners Association. Here is a suggestion.

Having lived in another HOA that had a very contentious issue facing the community and which was to be resolved by a vote of all association members, I would like to suggest that Somersett follow what was done in that association to help bring the matter of the New Agreement (Association/Golf Club) before all association members in a very informative manner.

  • The Board appointed a committee of 4 anti people and 4 pro people with one board member being the liaison for the committee.
  • The committee’s job was to come up with ten questions that were of concern to all association members.
  • A community meeting was held before the voting took place.
  • At that meeting each side of the committee publicly gave their answers to each of the ten questions.
  • The questions and the answers given by both sides were put into a written document which was mailed to all association members with their ballot.

Also, I don’t know if in the case of the New Agreement the ballot will contain a single Approve/Disapprove question or more than one. If more than one, each needs to be voted upon individually.

Joe Bower, Del Webb Owner & Member SOA

CC&R Amendment Required for SGCC Agreement?

Posted by Jim Haar – Somersett Homeowner

In response to homeowner questions, the SOA Board of Directors (BOD) stated that an amendment to the CC&R’s is not required to enter into the proposed purchase agreement with the Somersett Country Club (SGCC). That is, to quote the BOD:

The proposed new deal with the SGCC is a stand-alone package.  If passed, the homeowner vote would approve the proposed deal and authorize the Board to put that specific deal in place”.

This statement appears to be contrary to Article II Section 1 of the current CC&R’s, which define the “Purpose” of the SOA, none of which deal with the purchase, annexation or leasing of real property to expand the common area.  Section 1 also states:

“The Association shall have no other purpose than those specified herein and as allowed or mandated by the Act or other applicable law, and shall expressly be prohibited from representing the Owners and occupants of Units within the Subdivision on issues of land use, planning, municipal annexation, master plan amendments, growth, area development or similar matters”

Furthermore, in the wake of the “Complaint” drafted by the Attorney General’s (AG) office (i.e., against the validity of the existing SGCC Lease Agreement), all parties signed an “Agreement To Stay Investigation” document, which stipulated the following:

“Item 1.c  All proposed amendments to the Somersett Second Amended and Restated Declaration of Covenants, Conditions and Restrictions (Declaration) and ratification of the Lease and Management  agreement, as the same may be amended, will be brought  to the homeowners of the SOA for a vote.

 Item 2.  In the event negotiations are successful, and the SOA and the Club agree to proffer amendments to the Declaration and Lease and Management Agreement and assuming homeowner approval thereof,  and together with homeowner approval of the Lease and Management Agreement, as modified, supplemented or revised, NRED agrees not to file, prosecute or proceed with the allegations presently alleged in the draft Complaint in proposed Case No. IN-12-1581.”

Given the preceeding, it is logical to conclude that the CC&R’s do need to be amended in order for the SOA to enter into the proposed SGCC purchase agreement. The SOA only has the rights given to it by the CC&R’s and the current CC&R’s don’t allow the lease that currently exists, much less what is being proposed.  The intended purpose of the Stay Agreement was to allow the SOA time modify the CC&R’s, negotiate a new SGCC agreement and send both out for a vote by the owners, and if approved, the Complaint would not be prosecuted.

The BOD has been asked where, under the current CC&R’s, they believe they have the authority to negotiate and enter into the proposed SGCC purchase agreement and whether or not legal opinions have been obtained.  To date no response has been forthcoming. In order to protect the validity of the proposed SGCC purchase agreement, and to preclude downstream problems, I suggest that legal closure between the SOA and AG attorneys is required.

249 is a “Black Magic Number”

Posted by Joe Bower, Del Webb Owner & Member Somersett Owners Association

Currently there are a total of 2,478 units owned in Somersett and its sub-associations.

Per State Law quorum is 20% (496) of owners present in person or by proxy at a meeting

“Majority Percentage Vote” of the quorum is 249 (50% +1).

Approving the proposed 4 CC&R Amendments (the vote is for all 4 or none) means that without a vote of all 2,478 owners, the Board will be able to:

  • Purchase or annex property up to a market value of $500K
  • Lease real property without a defined dollar limit
  • Increase annual or special assessments above allowed limits
  • Hold a “black magic vote count” – legally known as a “Majority Percentage Vote” – to purchase or annex property in excess of $500K, for example, purchase of the Country Club property for $2.75M as the BOD has proposed for the new Country Club agreement.

“Majority Percentage Vote ” means an affirmative vote count of at least 249 of the owners voting in person or by proxy at a quorum meeting.

Also, this same “Majority Percentage Vote” count (249) applies when at least 496 owners vote by written/mail-in ballot.

DON’T LET 249 OWNERS APPROVE SOMETHING YOU MAY DISAGREE WITH

Don’t confuse the 4 CC&R proposed changes with the goings on with the Golf Club. They are separate. HOWEVER, if the CC&R changes are approved, just 249 unit owners can approve the soon to be voted upon New Agreement between the Association and the Club.

IF YOU DON’T WANT THE EFFECTS OF THE 4 AMENDMENTS TAKING POWER OUT OF YOUR HANDS AND GIVING IT TO THE BOARD, THEN EITHER CAST A DISAPPROVE BALLOT OR DON’T VOTE AT ALL

A NON-RETURNED BALLOT IS THE SAME AS A DISAPPROVE VOTE.

Reno Golf

Reno Golf Course Blog article, “Fore”, recently posted on the REreno.com  website follows.  Reposted with the permission of REreno.

golf ball on lipReno has lost several golf courses over the last few years.  The Crystal Peak 9 hole course in Verdi is now brown (and a really ugly story).  D’Andrea brown.  Northgate is now the Dave Aiazzi State Dog Walk Park, double brown!  I forget the name of the public course that used to part of RNO, but it has been closed for airport expansion.  Rosewood Lakes is still green, but about to undergo major “renovation” to accommodate the Southeast Connector road project.

Lakeridge Golf Course sold out of bankruptcy last week for $5.5M, having last sold for $8.35M in 2006 in a less than arms length transaction.  Heritage Bank held a $5.5 1st and a $500K 2nd loan on the course, so this was a better than expected outcome for them, though they took back $1,925,000 in paper on the deal.  Lakeridge has a 7300 SF clubhouse, and a stable membership.

Somersett Golf and Country Club (SGCC) is proposing a sale and lease back arrangement with the Somersett Owners Association (SOA).  For a proposed $2.75M, SOA will buy the land and let SGCC run it as a private club as long as they can.  The proceeds of the sale will allow SGCC to bolster their reserve fund and construct a (minimal) clubhouse.  Or not – the equity members could just close the course and split the proceeds for about $26,000 each, though the personalities involved make me believe this is not the intent.  For SOA members, this looks like a great deal.  They will have the same access to SGCC amenities they have now, but at half the cost to SOA.  If SGCC fails, SOA can run it as a golf course or let it revert to natural open space or groomed open space or a combination, but they will not be able to develop the golf course into housing.  All in all, this seems like a win-win for all the parties involved.  The price appears to be the current market value of the water rights plus the irrigation and pumping infrastructure – the land is free.

ArrowCreek on the other hand, is the Jahi McMath of country clubs.  For sale for $4.75M, it has not found any takers.  Washoe County just posted a Delinquent Special Assessment Sale notice – they are $208K behind in their special assessments, and will be “sold” to anyone who comes up with the $1.1M in remaining principal/interest/fees.  If you “bought” Arrowcreek at the sale, the current owners could redeem the property by paying the total assessments and paying you 1% per month for your time, which is pretty nice return.  To actually take title free and clear, you would have to come current on their delinquent property taxes and water/sewer liens – $975,382 as of the last update (a Property Tax Lien Sale will be coming up shortly and will be in 1st position).  I cannot imagine any scenario where ArrowCreek County Club can survive in its current form.  None of the lien holders have deep enough pocket to pay off the immediate debts to the County and to absorb the negative cash flow the club is generating.  Brown out one or both courses?  Their mixed use zoning already allows for some development.

Golf courses in the desert, what a jenius (sic) idea.  They may not be the brightest idea for your retirement portfolio, but ArrowCreek is low hanging fruit that you developer types should take a look at.  The prospect of Section 8 housing down the 12th hole fairway elicits a wry grin from this blogger!