SGCC Purchase Agreement – An Opposing View

Posted by Charnelle Wright, Somersett Association Member

The proposed new Somersett Golf and Country Club Agreement binding the entire Somersett Community to repayment, of a $2.75 million debt, is frivolous, detrimental and unnecessary.  It is obvious that negotiations were controlled by the demands of Blake Smith and Country Club president, Pat Gaskill.  This proposed Country Club Agreement will provide the greatest benefit to just 200 equity members of the Country Club, a very small minority of Somersett owners.  The 200 Country Club members want to keep the Country Club for their exclusive use.  They are controlling this agreement and causing the rest of the 2485 owners to pay for that exclusivity.  They want the community to take on a 15yr. debt of $2.75 million so they can build a clubhouse for their exclusive use.   They are giving nothing back to the community who will be paying for their clubhouse building.  In fact, this agreement limits play for owners to 4 times a year.  Is this what we get in exchange for taking on such a huge debt?  I say, let them pay for the clubhouse themselves if they want that exclusivity or, negotiate with Blake Smith to pay for it as was the original plan when Somersett was developed.  The only part of the agreement that is favorable to Somersett is obtaining “The Water Rights” and cancelling the reverter rights of the developer, Blake Smith.  The damaging parts of the deal are the 90 yr. lease, the $2.75m loan and the fact that the owners in Somersett can only play golf 4 times a year.  At the very least, Somersett owners should have been granted the ability to play golf at the country club for a fee whenever they wish.

We can only hope that if the agreement fails to pass with the required majority votes, the Attorney General’s office will proceed with its action against Blake Smith and maybe then, a new and better deal will be negotiated and developed. There are many owners in Somersett with professional backgrounds who could assist in these tough negotiations.  If they had been invited to form a strategy and assist in the negotiation process, we might have arrived at a more favorable proposal.  If the current proposed agreement passes, Somersett owners will be burdened with a very large debt in exchange for receiving nothing.

Charnelle Wright, Somersett owner and resident

August 27th BOD Meeting Recap

Somersett United
Somersett United

The SOA Board of Directors (BOD) held their bi-monthly meeting at The Club at Town Center (TCTC) on August 27th, the agenda for which may be accessed by clicking on the following link:

August 27 BOD Meeting Agenda

Prior to the start of official business, Jeff Mann from the Reno Parks and Recreation Department gave a status report on the Sierra Park to be located on the site of the old Northgate Golf Course. Pertinent points follow:

  • The park will be dedicated to outdoor recreation activities
  • There will be both walking and mountain bike trails.  No motorized vehicles allowed.
  • Outdoor activities will include an archery range, neighborhood park, and a small outdoor amphitheater.
  • A couple of access points from Somersett with trailhead parking.
  • The Park will not have any lakes, ponds or green space due to limited water rights.
  • No funding yet for the above except $137K for a loop trail. It is expected that most future funds will come from grants or private contributions.
  • Development of Sierra park will not impact the planned Somersett West Park, the funding for which comes from new home sales.  Mr. Mann stated that this park is currently only 30% funded.

A recap on some of the more important BOD agenda items follow:

Canyon 9 Golf Course Maintenance.  Contract will be put out for bid, some changes to the RFP were proposed and adopted.

Purchase of a Town Center Lot. Purchase of an available Town Center lot (i.e., the one previously targeted for construction of a Memory Care facility) was discussed.  The lot owner has advised the BOD that it could be purchased for $299K.  Some on the BOD felt this was too high given current market conditions.  A motion was passed to spend up to $2.5K for an appraisal, prior to any further negotiations with the owner.

CC&R Amendments.  A motion was passed not to extend the CC&R Amendment vote beyond the current October 11 deadline.  If enough votes have not been received for approval, the BOD voted to have the SOA attorney take it to a Judge to declare approval based on results to date and the apparent apathy of voters to reach closure.

SGCC Purchase Agreement.  Apparently the lawyers have determined that due to the structure of the SGCC Purchase Agreement, a 50% +1 majority vote of all owners is required for its approval. Hence the BOD voted to adopt the 50%+1 approval requirement. It is expected that the ballot process will commence in about one week. This puts the controversial 20% quorum issue (assuming the CC&R Amendment vote passes) to bed.

Current SGCC Lease Agreement. In the event the Purchase Agreement fails, the current lease agreement will still be in effect.  However, the BOD voted not to extend it (i.e., pick up the three year renewal option) past December 31.  The BOD really had no choice here given the AG’s position on its illegality.

Strategic Planning Consultant.  The BOD voted to hire a Strategic Planning Consultant to assess long term plans for the Somersett Community.  Three potential candidates were mentioned by the Strategic Planning Committee spokesperson.

August 27 BOD Meeting

Somersett United
Somersett United

The Somersett Owners Association Board of Directors (BOD) will be holding their open Board meeting on Wednesday, August 27th at 5:30 PM in the Canyon View Room at The Club at Town Center.  For those interested in attending, the meeting agenda may be accessed via the following link:

August 27 BOD Meeting Agenda

This should be a very interesting meeting as the following items will be discussed:

  •  Re view of current SOA litigation
  • Purchase of Town Center lots for amenity expansion
  • Deadline extension for CC&R Amendment Vote
  • Upcoming SGCC Purchase Agreement Voting Process and Structure
  • Hiring of a Strategic Planning Consultant
  • Alleged violation of Nevada law with regard to application of 20% quorum rule to purchase of the Country Club property

Homeowners are encouraged to attend and provide any comments you may have on agenda topics or other issues of concern. If unable to attend you may submit comments to the BOD via email at:  soa@mysomersett.com.

Website comments are also encouraged.

Lawsuit for Temporary Restraining Order and Permanent Injunction

The following post submitted by a homeowner group opposed to the proposed CC&R Amendments:

A large group of Somersett homeowners met Thursday Aug. 21st with two leading Nevada HOA attorneys to discuss filing a lawsuit to prohibit the SOA Board from continuing their charade of a fair and unbiased vote to amend the CC&Rs.

After reviewing all the facts the attorneys agreed that the SOA Board has clearly committed and continues to commit violations of the Law with respect to their conduct of the CC&R Amendment vote, and that the whole voting process has been tainted.  Hence, the filing of a lawsuit to forestall its implementation has merit.

An additional point of contention is that passage of the CC&R amendment would allow the SOA Board to conduct a vote to purchase the Somersett Country Club  property with approval requiring a mere 10% +1 of eligible association members (i.e., majority vote of a 20% homeowner quorum).  This represents a potential violation of Nevada Statute NRS 116.3112.

The alleged violation of NRS 116.3112 with respect to application of the 20% quorum to the Country Club purchase is an agenda item on the Wednesday August 27th BOD meeting (5:30 PM at TCTC). All homeowners are urged to attend this meeting to demand that the Board, regardless whether or not the CC&R Amendment vote passes, establish that purchase of the Country Club property shall only be passed by a majority (i.e., 50% +1) of all eligible SOA homeowners, and any such future vote shall be concluded accordingly and not extended beyond December 30, 2014.

20% Quorum – Reasonable or Unreasonable?

Somersett United
Somersett United

Following is an interesting comparison between what the current Somersett BOD is proposing (i.e., via the proposed CC&R amendments) and a 4000+ Del Webb Sun City Summerlin community in Las Vegas. The comparison sort of supports those CC&R Amendment opponents who believe the proposed 20% quorum provisions are too low and the $500K threshold to high.

Homeowner vote required for annexation of property into the community:

  • Proposed Somersett CC&R Amendment: Simple majority vote of members based a 20% quorum requirement. (Note: a 20% quorum equates to 500 out of approximately 2500 SOA homeowners, a majority of which would be 251. That is, for the vote to be valid, a minimum of 500 votes would have to be cast, of which 251 would be needed to approve the measure)
  • Sun City Summerlin CC&R’s: Two thirds (2/3) vote of all voting members, or 2667 out of 4000.

Homeowner vote required for annual assessment increases above established CC&R limits, as it relates to the acquisition of real property, lease of real property or funding of capital improvements:

  • Proposed Somersett CC&A Amendment:   Simple majority vote of members based on a 20% quorum.
  • Sun City Summerlin CC&R’s: Two thirds (2/3) vote of members constituting a 60% quorum.

Homeowner vote required to levy of a special assessment above established CC&R limits, as it relates to the acquisition of real property, lease of real property or funding of capital improvements:

  • Proposed Somersett CC&A Amendment:   Majority vote of members based on a 20% quorum.
  • Sun City Summerlin CC&R’s: Majority vote of members constituting a 60% quorum.

Spending limits subject to homeowner vote related to the acquisition of real property, lease of real property or funding of capital improvements:

  • Proposed Somersett CC&A Amendment:   $500K (approximately 10% of annual budget), above which requires a majority vote of members based on a 20% quorum.
  • Sun City Summerlin CC&R’s: Five Percent (5%) of annual budget, above which requires a majority vote of members based on a 60% quorum.

It should be noted that under the current Somersett CC&R’s, the SOA BOD cannot levy a special assessment that exceeds 25% of the annual assessment, or increase annual assessments more than 15% in any year without a majority vote of all members. However, under the proposed CC&R amendment, it would lower this requirement to only a majority vote of a 20% quorum if such increases relate to “acquisition of real property, lease of real property or construction of capital improvements”. The Summerlin CC&R’s do not make any distinctions regarding member voting requirements for annual increases or special assessments.

It should also be noted that in the proposed SOA CC&R Amendments, nowhere is the applicable quorum percentage mentioned. Nor did the BOD reveal the applicable percentage in any of their “information” documents accompanying the CC&R Ballots.  It is only by default that another existing CC&R provision points to a 20% quorum. A figure that was never intended to apply to acquisition of real property or the increase in annual or special assessments to accommodate such.

Makes one question what was the BOD thinking, or not thinking, when they thought it appropriate to enter into a $2.75M purchase agreement with the SGCC and, if necessary, levy a special assessment or increase annual assessments above established limits to accommodate such, all based on a simple majority vote of homeowners constituting a minimum 20% quorum.  Perhaps, in their quest, they just wanted to make it easier to pass!

20% Quorum & Country Club Purchase

Somersett United
Somersett United

In SOA Board of Director communications, it has been publically conveyed that the proposed purchase of SGCC property (see previous post), will be accomplished via a bank loan of $2.75M subject to a lien or deed of trust, with such loan being repaid via homeowner assessments. It has also been conveyed that if the proposed CC&R changes are approved, such purchase can be accomplished (approved) by a simple majority of a 20% homeowner quorum.

In a letter to the BOD, a Somersett homeowner has alleged that the proposed purchase of SGCC property subject to a 20% quorum  is in violation of Nevada Statute NRS 116.3112(1) “Conveyance or encumbrance of common elements”, which states:

“In a condominium or planned community, portions of the common elements may be conveyed or subjected to a security interest by the association if persons entitled to cast at least a majority of the votes in the association, … agree to that action; …..”

There are other conditions contained in the quoted statute, which may cause some to question its application to the Country Club purchase. However, in addressing a similar issue (i.e., purchase of land adjacent to The Club at Town Center) the then SOA attorney, Robert C. Maddox & Associates, issued the following legal opinion.

“Because the Club at Town Center is common area and any land on which the TCTC may be expanded would also be common area, it is my opinion that the Board may not purchase such land by the carryback without a vote of the membership and, specifically, a majority approval. The carryback loan would, unequivocally, encumber the common area, and, as such a majority of the voting membership must approve such a purchase.”

Since the purchase of SGCC property will add to the association’s common area via a security interest (i.e., bank loan), it is alleged that ratification of the proposed Country Club Purchase Agreement requires a majority vote of all Somersett homeowners and not a 20% quorum of such.

Whatever the interpretation of NRS 116-3112 and legal opinions, to base multimillion dollar common area purchases that  encumber all homeowners, via a 20% quorum vote,  is an abdication of the BOD’s fiduciary responsibility to all homeowners. Application of a 20% quorum rule provides a distinct advantage to special interest groups (e.g., Country Club members and Developers).

The BOD has agreed to place this issue on the August 27th BOD open meeting for discussion.rule

Country Club Purchase Agreement

Somersett United
Somersett United

The SOA, SGCC and SDC principles have reached an agreement on purchase of the Country Club land and water rights. This agreement has been posted on the association’s mysomersett.com website.  In general, the proposed agreement does not deviate significantly from the previously issued letter of intent.  For reader’s convenience, the Purchase Agreement document may be accessed via the following link.

Country Club Purchase Agreement 

Two homeowner information sessions on the Purchase Agreement have been scheduled as follows, no date has been set for a homeowner vote.

  • The Club at Town Center, Wednesday, August 20 at 5:30 PM
  • The Aspen Lodge, Tuesday, August 26 at 5:30 PM

In Summary, the proposed Purchase Agreement provides for the following:

  1. Purchase price is $2.75M, payable upfront
  2. Purchase includes approximately 220 acres of land and existing golf course maintenance building. Excluded from this purchase is the land and structures (approximately 6 acres) upon which the SGCC will build a clubhouse (reportedly with the $2.75M).
  3. Purchase includes certain water rights and water facilities consisting of water pump stations, water wells, related piping, irrigation system, etc.
  4. A new Water Facilities Agreement between the parties will replace what currently exists.
  5. The current Developer land & water reverter rights, should the property cease to operate as a golf course, will be terminated.
  6. Via a Lease Agreement, the SOA will lease back the land to the SGCC for continued use as a private golf course. Lease will be for $1000/year (subject to annual Consumer Price Index adjustment) for an initial term of 50 years with two twenty year SGCC renewal options. An additional rent of $1200/year (non-escalated) will also apply.
  7. If the SGCC fails to operate the property as a championship golf course, then the SOA has the right to terminate the Lease and assume full control and use of the property.
  8. The SGCC will pay for all utilities, taxes, insurance and maintenance costs as long as it occupies the property.
  9. During the Lease period, Somersett homeowners will have access to the following SGCC amenities:
  • Use of dining room (excluding SGCC member lounge), pro shop, and bocce ball courts with no fee (i.e., use subject to same costs as for SGCC members).
  • Ten dollar a day fee for use of SGCC member driving range, free use of back (synthetic surface) driving range.
  • Four foursome rounds of golf a year at prevailing SGCC member guest rates.

Detailed legal descriptions for the Property, Easements, Water Rights, Water Facilities, Lease Agreement, Water Facilities Agreement, Property Deeds and Bill of Sale are all attached as Exhibits to the Purchase Agreement and accessible via the above referenced link.

The above represents a very important step for all Somersett homeowners and should not be taken lightly.  Homeowners are encouraged to familiarize themselves with the details of the proposed Purchase Agreement, attend one of the information sessions and voice your opinions.  Comments on this website are also encouraged.

Town Center Lots & CC&R Vote Extension

Somersett United
Somersett United

Town Center Lots

The BOD held a special meeting on July 31 specifically for “Discussion and Approval Regarding Town Square Lots”. Takeaways from that meeting are as follows:

1. The lot adjacent to The Club at Town Center (TCTC) has been sold. This is the lot the SOA BOD had previously attempted to buy. The buyer has expressed a desire to build multi-level condominiums on the property. Some have questioned whether or not this is possible given an easement restriction on the property. Apparently the buyer does not believe this to be an issue. He has also expressed an interest in the lots discussed in item 2 below for the same purpose.

2. The lots at the end of the Town Center retail buildings are now open for purchase discussions. The owner has decided not to build the originally planned “Memory Care” units and is willing to sell the property.

3. The BOD is interested in buying the Memory Care lots to accommodate future expansion of TCTC amenities. They believe this is necessary given that the TCTC will not be able to accommodate future residents as Somersett continues to grow towards 3500 home sites.

4. Identified funds for purchase would come from the SOA Capital and TCTC Project Budgets. The Capital Budget consists of funds acquired from the sale of homes within Somersett. That is, when a home is sold within Somersett part of the sale proceeds are allocated to the SOA. The TCTC Project Budget consists of funds already allocated for improvement/expansion of TCTC. Since TCTC amenities are not available to Sierra Canyon residents, only those Capital funds resulting from non-Sierra Canyon home sales would be applied. Currently non-Sierra Canyon related Capital funds amount to approximately $213K whereas TCTC available Project funds amount to approximately $75K. This equates to $288K available for purchase of the Memory Care lots. The BOD believes that this is more than sufficient for a successful purchase.

5. Based on the need for TCTC amenity expansion, the BOD approved entering into discussions with the Memory Care lot owner to come up with a proposed Purchase Agreement or Letter of Intent (with appropriate conditions) to be presented and voted on at the August 27 BOD meeting.

6. Discussions related to the above included: 1) using the property for joint Somersett – Sierra Canyon usage, 2) use of the Sierra Canyon related Capital funds, 3) SOA CC&R applicability (present and proposed amendments) to the lot purchase, 4) the Memory Care lot owner preference to sell to the SOA rather than a developer, and 5) maintaining the existing CC&R’s applicable to the commercial Town Center property, which apparently due to the foreclosure process, no longer applies to the lots discussed above.

CC&R Vote Extension

The voting deadline for the CC&R Ballot submittals has been extended once again to October 11, 2014. The BOD, in an attempt to obtain the required number of approval votes, has hired a third party to conduct a door to door campaign of those who have not yet submitted their ballots, encouraging them to do so.