SGCC Rockery Wall Repair Obligation

Deb Orick’s comment on the previous post “We Have a Vote Count” posed the question “What is the warranty from SGCC that Tracy referred to?” This with respect to a response from Mr. Tracy (FSR General Manager) regarding rockery wall failures adjacent to the SGCC’s 14th fairway, in which he reportedly stated: “There were two wall failures, one wall belongs to the SOA, the other is part of the golf course which carries a warranty from the SGCC”.

The answer to Orick’s question lies within the Real Property Purchase Agreement executed between the Somersett Owners Association (SOA) and the Somersett Golf and Country Club (SGCC) on August 18th, 2014. A copy of which may be accessed under the References Section of this website or by clicking on the following link:

SGCC Purchase Agreement (Executed)

The following section of the Purchase Agreement contains the warranty clause:

Article 9A “FOUR YEAR WARRANTY; AS IS PROVISION” (page 14). Which in part states: “Seller shall (at its sole expense) promptly and diligently repair, restore, and replace as required to maintain or to remedy all damage to or destruction of all or any part of the Property including capital expenditures. …….Seller’s maintenance and repair obligations hereunder shall continue for four (4) years after the Close of escrow (the Warranty Period), and this 4 year covenant to maintain and repair the property shall survive the Close of Escrow”.

The preceding Article pertains to the SGCC as the Seller of golf course property to the SOA. In addition the SGCC also has property maintenance obligations as a Tenant. This is delineated in Exhibit C “FORM OF LEASE” to the Purchase Agreement. Specifically, the following:

Section 8. REPAIRS AND MAINTENANCE, Subsection 8.1 General Tenant Obligations (Page 5). Which in part states: “Tenant shall (at its sole expense) promptly and diligently repair, restore, and replace as required to maintain or to remedy all damage to or destruction of all or any part of the Premises and the Tenant Property including capital expenditures”.

Section 9, DAMAGE AND DESTRUCTION, Subsection 9.1 Partial Damage to Premises (page 6). Which states: Tenant shall notify Landlord in writing promptly following the occurrence of damage to the Premises where the cost to repair exceeds $5,000. Tenant shall repair the damage as soon as reasonably possible, and this Lease shall remain in full force and effect. Tenant shall pay the cost of such repairs, except that upon satisfactory completion of such repairs, landlord shall deliver to Tenant any insurance proceeds received by Landlord for the damage repaired by Tenant.

Given the above, it is clear to most that the SGCC is liable for the rockery wall repairs on Country Club property sold to and subsequently leased back from the SOA. Obviously, the SOA has given the SGCC at least a temporary pass in this regard to pursue the Somersett Development Company (SDC) et. al. law suit (therefore, should not they be paying a portion of the SDC  legal expenses?).  This also raises the question as to whether an owner vote would also be required to pursue civil action against the SGCC, or would this fall under the NRS 116.31088 category of enforcing a contract with a vendor, for which an owner vote is not required, or would the default clauses of the Purchase Agreement rule? One would expect that the SOA legal team has already looked at this, but is keeping it under wraps for now.

We have a Vote Count!

Subsequent to yesterdays post on “Where is the Vote Count”, SOA management sent out an email to Association Members announcing the litigation vote count results. Was this just a coincidence, or was some prodding in effect here?  Whatever the case, the results were as follows:

  • 716 in favor of the law suit
  • 205 opposed
  • 36 unusable ballots

Note that the number of ballots submitted amounted to 32% of the approximately 3000 Somersett unit owners, and therefore, the 716 votes in favor of ratification fell way short of the required majority vote (i.e., 50% +1) of all unit owners.  Something the SOA did not address in their email. So what now? The Board could decide to extend the voting process, which ran heavy in favor of ratification. However, given the low percentage of initial ballot submittals, it would appear that the Board would be hard pressed to gather the additional 800 votes in favor of ratification should they decide to do so.

Hopefully a decision on how to proceed will be forthcoming shortly. Meanwhile, without a ratification vote, one would assume that litigation activities on the part of the SOA attorneys, and related legal expenses, are on hold.

As of mid-March 2018, SOA legal expenses for the rockery wall issue totaled approximately $62.6K.  This does not include an additional  $13.3K in legal expenses in a dispute with the Country Club over responsibility for the rockery wall failures adjacent to the 14th fairway.