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

5 thoughts on “20% Quorum & Country Club Purchase

  1. It comes down to what actions will the Home Owners take to protect their rights and stop this Board from ignoring them on a ongoing basis. When the Boards decisions have a negative financial impact on every Somersett Household to benefit 200? Country Club Members it warrants the attention of all Home Owners. If every Somersett Home Owner is on the hook for the $2.7 million to purchase the Golf Course it should become a community owned property and the rights to use such should be the same for every one.
    How can the Country Club be exclusive for the current and future members when the whole community is asked to pay for it ? The Board and Country Club Members are practicing dictatorship with no regards for the rest of the Community. Another issue was there a independent appraisal obtained to determine the purchase value of the Golf Course ? Most of us like to see the Golf Course succeed but there has to be fairness and consideration for all Somersett Residence.

    1. I agree, why should we subsidize the people who want to play golf. I have no desire to use the golf course and it was not a determining factor for me buying in Del Webb. Why should I have to pay and be on the hook for a loan for the purchase of the course. I receive no added value for a golf course. All the owners who live in Somersett that do not want to pay for the Golf course should get togather and make their feelings known. If the golfer want a course let them pay for it. It can also be open to the public and make it cost effective so it makes a profit.

  2. There some additional things to consider regarding this discussion.

    The CC&R vote has not been completed and there is no indication that it will be completed to have any impact on the SGCC agreement.

    The SGCC agreement must be completed prior to December 15, 2014 in order for escrow to be closed within 2014. That requires both the vote by the equity owners of SGCC and the vote of the property owners of Somersett be completed and approve the transaction. The SGCC vote will be completed by August 28, 2014. I have no idea if or when the SOA will initiate their vote.

    It is also my understanding that regardless of what the SOA approves (via their board of directors), the SGCC will insist on at 50% plus one vote. The SGCC would not want anything to be consider that would not represent the majority view of the community.

    Terry Retter

    1. Terry

      Your understanding (I assume you are referring to a 50% + 1 vote of ALL association members) is welcome news as the 20% quorum provision just doesn’t hack it. Hopefully the SOA BOD is on the same page with this. Unfortunately Section 11.1.6 “Ratification by the Buyer’s Members” does not state this, so we will see.

  3. 1. The SOA’s CC&R’s have to be changed to allow for the incorporation of the CGC into the Somersett community (and PUD?).

    2. The $2.75 million purchase is an immense financial obligation for the Somerestt community owners.
    Hence I believe that the Board should tells us now that this will be done under the 50% + 1 rule (like the SGCC is doing) as requitred by NRS 116.
    (thanks Terry for the heads up)

    3. The community is not apathetic and the people who live here do vote:

    a) we voted to spend money to litigate (1360 voters) against Moana
    b) The CCR change vote which should beeen done with similar unanimity – has garnered well over (1750 votes).
    Most CCR and Rule changes done by HOA’s around the country are normally unanimous – ours is unusual!! Why??

    c). A significant number of residents have believed that the changes proposed by the board were done hastily and incomplete (by their own admission).

    d) They made a mistake with lease provision – which would allow them unlimited power to “lease stuff” with out a vote.

    e) The annual $500K spending “limit” without a vote was far too high for a community with revenues of only $4.5 million.

    We are already in debt for $8 million of assets (the TCTC and the Canyon 9.

    No small business would add to their debt burden without “all the facts” and a good business case which the majority believe makes sense!

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