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