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BucketBallsBy 2010, the privately owned 18 Hole Championship golf course at Somersett was bleeding to death, as was its owner, Somersett Development Company LTD.  On 15 October 2010, SDC transferred ownership of the golf course parcels to an affiliate, Somersett Country Club LLC, which in turn transferred ownership to the Country Club’s equity members – Somersett Country Club, Inc.  The recorded sale price was just under $4M (a portion of the equity the members had already contributed – no money actually changed hands) and included a bonus jack – a  $1.0M cash reserve fund to cover future operating losses – funds SDC had been holding in escrow until the completion of a permanent clubhouse.  There is a caveat that if the course goes brown for 24 months, ownership will revert to SDC.  The deed is a very interesting DOCUMENT.

The hemorrhaging continued, and the reserve fund was rapidly depleted.  In an act of genius (or collusion), the newly named Somersett Golf and Country Club (SGCC) convinced the Somersett Owner’s Association (SOA) to enter into a Lease and Management Agreement effective 1 January 2012. $15 of the monthly SOA dues for every lot in the SOA was dedicated to “leasing” access to existing and propose new amenities at SGCC.  Owners could play the Championship Course twice a year for $160 per foursome.  They could eat at the Sunsett Grille whenever they wanted.  They could hit a bucket of balls in a segregated section of the driving range for a fee, and even play a little bocce ball.  The 3 member SOA Board of Directors (BOD) never polled the association members to see if these “amenities” would be of any interest to the them.  It should be noted that the BOD at that time (probably illegally) consisted of the Master Developer, his employee assistant, and a non-equity SGCC member.

In 2012, $430,605 went to SGCC under the Lease agreement to allow Somersett residents access to the clubs “amenities’.  Turns out no one cared about those amenities a whit.  In fact according to this ANALYSIS provided by an SOA member based on usage statistics provided by SGCC, it cost the SOA $107 in lease contributions every time a resident hit a bucket of balls under the agreement.  Or ate at the Sunsett Grille. Or rolled a bocce ball.

In a revised Lease agreement currently under contentious discussion, after 8 1/2  years of lease payments the SOA would be deeded the lot where the existing club-tent, pro shop double-wide, and parking lot now exist.  After $4M or so in lease amenity payments over this time period, SOA would get a lot that is 30% impinged by utility right of ways and probably still be needed for parking for the “real” SGCC clubhouse if it is every built.  The proposal has not been warmly received by the SOA members.

Some SOA members strongly disagreed with the Lease and Management Agreement, and filed a complaint with the Ombudsman’s office at the Nevada Division of Real Estate.  This is the standard procedure in any dispute involving a HOA and its residents.  Usually, the Ombudsman holds a hearing, reaches a decision, and tells the parties how to proceed to resolve the issues.  Not this time!  The Ombudsman kicked the complaint upstairs to the Nevada Attorney General’s Office.  This rarely happens, and is indicative of the magnitude of the legal lapses in the Agreement – the AG’s office prosecutes criminal cases, not civil cases.  A case hearing is tentatively scheduled here in Reno on August 25 should resolution not be reached by then.

Last week, the BOD members involved in the original Lease and Management Agreement, representatives of the current SOA BOD, and lawyers all around convened  in an audience with Attorney General’s staff in Las Vegas.  The strongly suggested settlement proposed by the AGs office included:

–  “Shelter in place” on the existing Lease Agreement.  The funds that have already been release for new amenities are frozen, and should be rebated to the homeowners or applied to expenditures they vote may to approve.

– A revised Lease Agreement must be voted on and approved by the SOA  membership.

– If an Amended Lease Agreement is not approved, the AG  will proceed with prosecuting the violations at the scheduled August 25 hearing with the Nevada Division of Real Estate Commission on Common Interest Communities and Condominiums and propose disciplinary actions.

There is already a lot of chatter about all this on the Somersett United blog.  Somersett Untied actually formed in late 2011 to oppose the actions of the developer controlled BOD on the Lease Agreement, and their point of view appears to have been validated by the AGs actions.

Where this goes from here will be quite interesting to follow, will undoubtedly get quite ugly and personal, probably become a required disclosure for anyone selling Somersett property, affect property values there, make some lawyers even richer, and end really badly.  It doesn’t have to be that way since all parties in this mess have the same endgame in mind – keep the golf course green.  I have some ideas on how to do that, and I’ll share them in a later post since this one has become novel length.