ACHOA Responds to Resident’s Golf Course Purchase Question

ACHOA Responds to Resident’s Purchasing Golf Course Questions posted on January 24, 2015 on ACHOA Associa website as Member_Letters_and_HOA_Responses

The questions are restated with the response below.

Date: Saturday, December 27, 2014
Re: Purchasing Golf Course

To: Board of Directors, ArrowCreek HOA

Dear Sam Fox,

Please make sure that each Board Member get copy of this email.
Also I would like to request an official response which acknowledge receipt of this email and signed by the Board.

Here is my opinion on the subject:

50%+1 or even a Super Majority vote is not satisfactory for this fundamental change of our homeowners’ association – in my opinion this requires 100% of all eligible voters to approve or not approve the purchase of the Golf Course.

The reason is very simple: to avoid the risk of multiple lawsuits. If the HOA is sued, each homeowner is being
sued.

You cannot force any single resident of ArrowCreek to own or engage in a Joint Venture without his/her consent
(vote).

Also:

The voting ballot should state the following:
– I understand that HOA proposes the purchase of a “bottomless money pit”: the Golf Course
I understand that my fee can be increased by the HOA Board without any vote by the home owners to cover the costs of the Golf Course
– I understand that I, as part owner, will be responsible for any and all costs necessary to maintain the Golf Course and the Club House
– I understand that, as part owner, I will be liable for any debt accrued by Golf Course
– I understand that the increase of the HOA fee does allow me to eat at the Club House and participate in social events, but does not include the right to play golf
– I understand that Golf Course Joint Venture most likely will be losing money because the Golf Course has never been profitable
– I understand that any lawsuit against the Golf Course and the HOA will directly affect my lifestyle, because all legal fees will be paid by all ArrowCreek residents in some way
– I understand that I, as part owner, will be paying salaries for all people working at Golf Course and I will be liable for any workers’ comp suits and disputes
– I understand that I , as part owner, will be liable for any injury of any person on the Golf Course property, for any theft or damage of property on the Golf Course property
– I understand that high, uncapped HOA dues may make it difficult to sell my house.

Without such a disclaimer any voting should be forbidden as six month later there is going to be chaos: people will stop paying HOA fees (most likely the ones who vote “NO”) and challenge everything in court over and over again. I will not be surprised if members of the HOA Board of Directors get sued for bringing this disaster to a very nice community. Each lawsuit against the board is a lawsuit for which all homeowners as members are liable. When the assets of the HOA are exceeded by such litigation, the members have to make up the difference.

There is a very good (important) reason why a HOA is a non-profit organization and we want to keep this way.

The ArrowCreek Communications Committee has been tasked to respond to your questions and comments in the letter forwarded to the ACHOA Board of Directors on December 27, 2014. Your letter forwarded in an email follows [precedes here] the responses provided. The responses provided are from both the ACHOA Board of Directors and the ArrowCreek Community Club Committee (ACCC).

Each member of the ACHOA Board and the ACCC received copies of your letter.

The ACHOA Board appreciates the time you committed to developing and communicating your concerns about the potential Ballot concerning the acquisition and potential operation of “The Club At ArrowCreek.” As we all know, the potential acquisition and operation cannot occur unless the ACHOA members vote for the proposition.

1. “100% of all eligible voters to approve or not approve the purchase of the Golf Course, to avoid the risk of multiple lawsuits. If the HOA is sued, each homeowner is being sued.”

The ACHOA Board are fiduciaries and shall act on an informed basis, in good faith and in the honest belief that their actions are in the best interest of the association, The ACHOA Board members are required to exercise the ordinary and reasonable care of directors of a corporation subject to the business judgment rule. [Nevada Revised Statute 116.3103] Taking the legal advice of “fifty percent (50%) plus one (1) of the Owners” from Board legal counsel does avoid liability for the ACHOA Board.

In addition, the ACHOA Board of Directors are required to purchase Insurance Policies as per NRS 116.3113 to 116.31138. Such policies have been annually purchased and the cost of defense and any legal obligated to pay judgments are paid by the insurance policies. The ACHOA members are insureds under these policies. Therefore, all ACHOA member Homeowner policies with their HOA assessment coverage are excess above the insurance policies procured by the ACHOA.

If an ACHOA member(s) pursue a lawsuit against the ACHOA, the ACHOA Board and the ACHOA members for voting for or against the Ballot proposition, such lawsuit will be basically suing ourselves. The purchased ACHOA insurance policies will respond and provide the necessary defense for the ACHOA, the ACHOA Board and any named ACHOA members in the law suit. However, as long as all NRS policies and procedures are followed by the ACHOA Board in providing oversight to the Ballot process, the probability of a law suit is reduced.

2. You cannot force any single resident of ArrowCreek to own or engage in a Joint Venture without his/her consent (vote).

The ACHOA Board and ACCC agrees that no resident can be forced to acquire or own “The Club At ArrowCreek” or engage in the operation of “the Club At ArrowCreek” without a proper secret Ballot of the ACHOA membership. This is a requirement of the NRS and the ACHOA Board will follow the statues and regulations that apply to Ballot questions proposed to the ACHOA membership.

3. The Ballot should state specific or disclose certain informational items. Without such a disclaimer any voting should be forbidden as six month later there is going to be chaos: people will stop paying HOA fees (most likely the ones who vote “NO”) and challenge everything in court over and over again.

The ACHOA Board and the ACCC agrees that all Ballot information provided with the Ballot should provide full disclosure of positive and negative information concerning the acquisition and operation of “The Club At ArrowCreek”. Legal counsel advice will be provided to determine all appropriate disclosures for a proper secret ballot. The ACHOA Board and ACCC believe that several of your statements may be included in the disclosure. It is too early to determine which if any of the statements will be included.

The Joint Venture, not the ACHOA, will be responsible for all debts, expenses, and liabilities created by the operation of “The Club At ArrowCreek”. The Joint Venture will procure separate and proper insurance policies with the ACHOA as an additional insured on the Joint Venture’s policies to avoid any liability transferring to the ACHOA and its members. The Joint Venture will provide a five year pro forma for all ACHOA members to review and future annual budgets will be subject to approval by the ACHOA Board of Directors. This will be the basis for evaluating ACHOA monthly assessments in a transparent open process currently followed by the ACHOA Board of Directors. It is planned that the negotiated Joint Venture operating agreement will address any and all operating losses and any caps on capital calls. This is still pending in the negotiations.

The social and recreational aspects of the Joint Venture are still being negotiated. Access to those negotiated services will be provide to the ACHOA members and may include certain golf privileges. This is still pending.

The Board has a collection policy in place that dictates a fair and equitable procedure to be followed for the collection of delinquent monthly assessments. The collection policy is on the ACHOA website for your review.

As for potential challenges in court concerning an affirmative or negative vote of the membership, at best this is speculative since all disclosures will be transparent and any information requested by the ACHOA members will be provided. The ACHOA Board of Directors have procured the necessary insurance coverages to provide defense for such actions. These are normal business expenses anticipated within the ACHOA budget process. Please see the 2015 approved budget on the ACHOA website.

4. I will not be surprised if members of the HOA Board of Directors get sued for bringing this disaster to a very nice community. Each lawsuit against the board is a lawsuit for which all homeowners as members are liable. When the assets of the HOA are exceeded by such litigation, the members have to make up the difference.

The ACHOA Board of Directors are required to purchase Insurance Policies as per NRS 116.3113 to 116.31138. Such policies have been annually purchased and the cost of defense and any legal obligated to pay judgments are paid by the insurance policies. The ACHOA members are insureds under these policies.

If judgments exceed the procured limits of coverage, the NRS requires that the ACHOA Board of Directors assess the membership for the shortfall. At this point in time, all ACHOA member Homeowner policies with their HOA assessment coverage will be triggered and the ACHOA member will be reimbursed to the limits of insurance purchased in their homeowner’s policy. Many ACHOA members are
procuring $25,000 to $50,000 limits to cover this contingency for both catastrophic property and casualty losses in their home owner’s insurance policy.

5. There is a very good (important) reason why a HOA is a non-profit organization and we want to keep this way.

The ACHOA Board of Directors understand your commitment to keeping the ACHOA as a not-for-profit entity. Unfortunately, if the ACHOA members vote for the acquisition and operation of “the Club At ArrowCreek”, the Board of Directors and ACCC have been told by tax experts and legal counsel that the ACHOA will need to become a “For-Profit” entity as allowed under the NRS. This will be a consideration in the vote by the membership.

ACHOA Board of Directors

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