MORAGA COUNTRY CLUB SUMMARY DISCLOSURE ... - Golf Fusion

MORAGA COUNTRY CLUB
SUMMARY DISCLOSURE FOR PROSPECTIVE GOLF ASSOCIATE MEMBERS
(Approved by the Board of Directors November 18, 1999)
Thank you for considering the purchase of a proprietary Golf Associate Membership (Associate) and
joining our recreational family. It is our policy to inform interested parties of the rights and obligations of
membership and to make a thorough disclosure of details on the land ownership that pertains to the
recreational properties. This is but a brief summary of the documents covering this subject. Complete
detailed reference material including CC&R’s, Bylaws and Rules and Regulations, are available in our
administrative office for more comprehensive study.
RIGHTS OF GOLF ASSOCIATE MEMBERS
• Bylaws - The rights of all classes of membership are contained in the current Association Bylaws.
Please read a copy before your final commitment.
• Rights To Use Recreational Facilities -The right to use the recreational facilities are substantially
the same as those of Resident Members, with the exception of the use of the 3 satellite swimming
pools in the residential area, which are restricted to homeowner use.
• Membership Sale and Transfer - Sale of memberships is subject to an open bidding process and all
sales must be handled through the administrative office.
• Transfer Fee - A transfer fee of 50% of the sale price is retained by the Association upon sale.
• Right To Representation - Associates separately elect 3 members of the Board of Directors out of
the total of 12, for a 3 year term. A non-retiring Associate Director heads a subcommittee for the
nomination of a replacement Associate Director, each year.
• Vote On Recreational Development - Each Associate membership is entitled to one vote, the same
as Resident Members, in decisions to be assessed for Recreational Facility modifications and
improvements.
• Committee Representation - At least 4 seats of the Golf Committee are to be held by Associates
and they are encouraged to be members of other recreational committees and the Finance
Committee, following approval by the Board.
• Inspection Of Books - Associates have the right to inspect the books and records of the Association
in the same manner as Resident Members.
OBLIGATIONS OF GOLF ASSOCIATE MEMBERS
• Dues and Charges - Monthly dues, charges and assessments must be paid by the closing date
indicated on billings.
• Rule Adherence - Associates agree to abide by the established Rules and Regulations published by
the Association, both for themselves and in monitoring their guests.
RECREATION FACILITY LAND OWNERSHIP
Land underlying the first 8 holes of the golf course, the practice putting greens, driving range, clubhouse,
swimming pool, maintenance facility and tennis facility are owned by the Association. Land underlying
the last 10 holes of the golf course is subject to two ground leases, the major one being with the Town of
Moraga. Terms of the leases are as follows:
Moraga Town Lease:
• Term - 20 years expiring in October 2014.
• Rent - An annual charge of $4,200 is payable under this lease.
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• Renewal Options - 25 years, then there are three 10 year options, finally expiring in 2069 if all
options are exercised.
• Rent During Options - Determined after appraisal of the fair market rental value of the land. There
is a requirement that the land be appraised as “undeveloped” land owned by a municipality bearing a
general plan “open space” designation under the Town General Plan dated November 14, 1990. This
generally allows one home site per five acres, or twelve sites on the 60.68 acres owned by the Town.
During each of the option periods (though not in the initial term), the lease is subject to annual cost of
living adjustments of the rent charged at the beginning of the option period.
• Options To Purchase - There are none in the lease, although it is contemplated in the document that
a purchase may be desirable from either party’s standpoint. Procedures for the Club to initiate a
purchase are set forth in the lease and these procedures must comply with the Surplus Land Act of
the State of California. The Board currently believes that a purchase may be desirable at the earliest
possible date after resolution of the Bruzzone issue (below). Although the procedures allow the
possibility of purchase by a third party, such a purchase would still be subject to the Club’s right of
first refusal. If the property were nevertheless sold to a third party, the new owner would acquire the
land subject to the Club’s existing rights under the lease, as well as a reimbursement of the proceeds
of the sale, up to a maximum of $1.4 million.
• Public Access Rights - The lease also allows access to the putting green and very limited access to
the golf course, driving range and the annual fireworks display.
The Bruzzone Lease:
Three small parcels located on holes 12 and 13 and some other smaller portions of Club land are owned
by Russell Bruzzone and have been leased to the Club. Title to the land will pass to the Club shortly after
Bruzzone receives the final subdivision map for the neighboring subdivision at the north end of Augusta
Drive. The Planning Commission has approved the subdivision and the Town Council is expected to
finalize the matter in favor of Bruzzone. In the event that there is a delay past July 1, 2000 in the granting
of this map, we would have to re-negotiate with Bruzzone for ownership of these parcels, although the
Club’s lease rights would continue through renewal options finally expiring in 2067. Rent beginning July
1, 2000 will be set by appraisal, considering the actual use of the property, not at its highest and best use.
Bruzzone Development:
Land at the north end of Augusta Drive is owned by Bruzzone and is planned for the construction of 68
homes. Each of these homes will have membership rights equal to the rights of current Resident
Members if this subdivision is annexed to the Association. The present layout of the 13th tee may have to
be altered in the near future to avoid liability from nearby homeowners, as a portion currently crosses a
subdivision lot line.
Additionally, another 62 memberships are owned by Bruzzone and can be sold or transferred by him to
other local homeowner sites. These memberships will “run with the land” and current and subsequent
owners must maintain their membership by paying Associate level fees, or the membership will be
canceled by the Club.
Added Information:
An extensive study of land ownership and purchase, dated May 20 1999, is available in the administrative
office, as well as other original documents for your review.
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DATE: MAY 20, 1999
HISTORICAL OVERVIEW OF YOUR INVESTMENT IN THE 18 HOLE GOLF COURSE AT MORAGA
COUNTRY CLUB:
The Moraga Country Club Homeowners' Association expanded its former 9 hole golf course to an 18 hole
golf course, starting the expansion in 1986. The expansion was partially financed by assessment of the
homeowner members and by adding 375 Golf Associate memberships, offered to the general public. The
CalTrans land purchase and the Bruzzone land purchase are discussed below. Thus, the right to use the
golf course is shared by 521 Owner Members and 375 Golf Associates. There are also 130 Non-
Transferable Memberships of which three have been activated as of May 1999. These memberships are
described in “Summary of Lease from Russell Bruzzone” below. As part of the expansion and
reorganization of the golf memberships, Moraga Country Club applied for and received tax exempt status
as a social club under section 501(C)(7) of the Internal Revenue Code, and conforming state of California
statutes.
RIGHTS OF GOLF ASSOCIATE MEMBERS
The rights of Golf Associate Members are set forth in the Association's amended and restated Bylaws
and in the Declaration of Covenants, Conditions and Restrictions ("the CC&R’s"), as amended and
restated in July 1993. In general, Golf Associate Members have the same rights to use all of the
recreational facilities as do Owner Members.
Golf Associate memberships may be transferred in accordance with policy set by the Board. The seller
receives the sales proceeds less a Transfer Fee set by the Board of Directors (currently 50% of the sale
price). The first 375 Golf Associate members were considered charter members because they have
invested to finance the expansion. Their Transfer Fee is 50% of the difference between the amount
originally paid and sale price or $500, whichever is greater.
Golf Associate Members have an equal vote with Owner Members on any future development of
additional recreational facilities and elect from their group three of the twelve members of the
Association's Board of Directors. One-half of the members of the Association's Golf Committee must be
Golf Associate Members. In addition, they may sit on other committees, as appointed by the Board, and
they have the same rights as the Owner Members to inspect the books and records of the Association.
Furthermore, in the event of dissolution of the Association, Golf Associate Members are entitled to an
equal share with Owner Members of the proceeds of the sale of the recreational facilities. Non-
Transferable memberships are entitled to limited rights, as outlined in the paragraph 14.03 of the Bylaws.
OBLIGATIONS OF GOLF ASSOCIATE MEMBERS
Golf Associate Members pay monthly dues established each year by the Board of Directors for use of the
facilities. Monthly dues must be fair and equitable in relation to (a) dues charged by comparable golf
clubs and (b) the relative use and financial support of the recreational area and facilities by Owner
Members and Golf Associate Members. The Board may make additional assessments related to the
recreational area or facilities, provided that the amount assessed to each Golf Associate Member is no
more than the portion of the assessment paid by an individual Owner Member, related to the recreational
area and facilities. This has included cost overruns for the expansion; however, any surplus of capital
invested for this purpose and all dues and assessments paid by Golf Associate Members must be spent
for purposes related to the recreational area and facilities.
BYLAWS
Amendments to the CC&R’s permitting Golf Associate Memberships and detailing the rights and
obligations of Associate Members received the required percentage of approval by the Owner Members
in December 1986. Copies of the CC&R’s and the Bylaws have been furnished to all Owner Members
and Associate Members. Additional copies are available to members at the Association office.
LAND FOR EXPANSION
The expanded 18 hole golf course has been built on adjacent land currently leased from the Town of
Moraga and in part on land owned by the Moraga Country Club and Russell Bruzzone. A brief description
of the terms and conditions with respect to each lease is set forth below.
SUMMARY OF LEASE FROM TOWN OF MORAGA
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The 60.68 acres, now included as part of the land for holes 9 through 18, were purchased by the Town of
Moraga from CalTrans. This land, along with some other acreage in Orinda and unincorporated areas to
the north and west had been obtained by the State in order to build what was then referred to as Gateway
Boulevard. When the voters expressed their will to not approve this route, the Association took an
interest in acquiring the land for an expansion of the course. The Association worked in conjunction with
the Town of Moraga to plan the course expansion, and on a plan to acquire rights for the Association to
use the land. The State was unwilling to sell the land at that point, as there was still agitation to build
Gateway, and the transportation agency was reserving its hope that the politics would eventually support
construction of the road. The State was convinced to lease the property to the Town in order that the
Town could sub-lease it to the Association for use as a golf course expansion. The original terms of the
lease between the State and the Town were quite restrictive. The lease could have been cancelled under
this original lease after only five years and all the improvements would have reverted to the State.
Since the Association was convinced that the politics would never be reversed, it decided to proceed with
construction, using funds committed by a new class of members, the Golf Associate Members. These
members knowingly took a big risk - that the State could take back the land. Later, it was determined that
additional assessments would be necessary to complete the construction, and Owner Members and Golf
Associates were assessed equally for the additional cost. It was the intention between the parties that the
Town could only lease the land (and later exercise an option to purchase the land) using funds provided
by the Association. The Town had no use for the land itself, but was motivated by the notion of additional
open space, etc., to support the Association in its development. The Association could never have leased
the land from CalTrans, nor could it ever have purchased the land from CalTrans without first having
CalTrans comply with the provisions of the Surplus Land Act. This Act requires public agencies, prior to
disposal of lands held by such agency, to offer it first to other designated public agencies before it is
offered to the public. Because the Town was induced to do so by the Association, it became the agency
under the Surplus Land Act to lease (and later purchase) the land. Moraga Country Club could have
waited out the process in the Surplus Land Act then, or perhaps even later when CalTrans decided to sell
the property, but might have been pre-empted by low-cost housing, parks, schools or other qualified
interests in leasing or purchasing the property.
The original lease between the Town and the Association was signed in 1987, and amended in 1991 and
1994. Considerable details about the amendments are discussed below, as if there was only one lease,
as amended. At the end of the first twenty years (2014), the lease can be extended for consecutive terms
of 25, 10,10 and 10 years, or until 2069. The rent during each extended term is determined by appraisal,
and cost of living allowances are applied to each year during each extension period, based on the
increase from the beginning of that extension period. The appraisal and rent determination process is as
follows: [section 3.04 (b) of lease, 1994 amendment, page 2]:
1. Each party to the lease appoints one appraiser, fully qualified.
2. Each appraiser independently determines fair market value of premises.
3. Appraisers must value land as if it were undeveloped land owned by a municipality bearing a
general plan “Open Space” designation under the Town’s General Plan dated August 15 and
November 14, 1990, (generally, one home site per five acres of land).
4. If the appraisers are more than 40% apart, a third appraiser is appointed.
5. The Town then determines the rental value, limited by the higher of the two appraisals that are
closest to each other.
LOAN FROM US BANK TO SUPPORT PREPAYMENT OF LEASE
The Board of Directors decided to borrow $1.4 million to be used for the Town of Moraga to purchase the
60.68 acres. US Bank is the lender, and the terms are repayment of principal in the amount of $9,278 per
month plus interest on the unpaid balance at a rate that is fixed at 9.25% until October 1, 2000, and then
adjusts to 3/4% over the bank prime rate for the balance of the term. The 1999 budget for loan payments
on this loan amounts to $202,644($16,887 per month on average), and the balance at May 1, 1999 is
about $1,000,000. It is important to make a distinction between lease payments (virtually all prepaid until
2014) and loan payments, because the Board could at some point decide to assess the members for the
balance and reduce the annual budgets accordingly. The loan is payable even if the lease no longer
exists.
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GOLF COURSE IMPROVEMENTS
If and when the land finally reverts to the Town by virtue of the lease expiring, they would also own all the
related golf course improvements. Development of holes 9-18 cost the Association $4.6 million by 1992,
and substantial funds have been and probably will continue to be invested to maintain and improve the
facility. The total cost of the course is unknowable because the first eight holes were obtained as part of
the purchase of homes in the Association from the original developer. The larger point is that we have a
substantial investment to protect, and the lease agreements with the Town and with Bruzzone (described
below) are among the most important documents for the potential buyers to understand.
POTENTIAL LAND PURCHASE FROM TOWN - PROCEDURES
The Town is not obligated to sell the property to Moraga Country Club and no purchase options are in
existence. However, the lease provides the following procedures should the Association and Town
agree:
At the request of the Association, the Town can have the land declared “Surplus Property.” Technically
the Association can only request this during the last six months of the initial term of the lease, but
indications are that the Town would be willing to listen to an earlier inquiry.
1. If the land is declared “Surplus Property” under the Surplus Land Act, the Town must first have it
appraised and then offer it to required offerees under the act (low and moderate income housing,
park development, school construction, development of industry under an enterprise zone, etc.).
2. If none of them buys it, then Moraga Country Club has a sixty day exclusive right to purchase (60
days to notify the Town of its intention to purchase). The Town cannot declare the land Surplus
Property unless the Association so requests, and is not then under any obligation to do so.
3. If the process in paragraph 2 is started (declaration of the land to be surplus, offering it to
required offerees, and refusal to purchase by these entities) the Association could still decide not
to purchase the property. If the property is then sold to a third party, Moraga Country Club is
entitled to a reimbursement of $1.4 million from the proceeds of any such sale. The presumption
is that the Association would not try to initiate this procedure unless the following had already
been accomplished:
a. Acquisition of title to the Bruzzone property (see below).
b. A clear indication that none of the other governmental agencies as defined in the Surplus
land Act is likely to bid on the property.
ADDITIONAL PROVISIONS OF MORAGA COUNTRY CLUB’S LEASE WITH TOWN OF MORAGA
The lease requires Moraga Country Club to open its 18 hole golf course to the public "one day of every
other month of every year". In addition the driving range must be open to the public "one day of every
month of every year". The Association must also "provide two golf clinics each year for 12 hours each
clinic over three or more days", and "once a year hold a public open Tennis championship and an annual
public Golf tournament". In addition, the golf team of Campolindo High School will be allowed to use the
course as its home golf course. The Association has provided a public putting green and will permit the
Town to cross the course at an already designated location with a pedestrian trail. "Golf and Tennis
instruction must be provided to non-members up to 25% of instructor's available time, at the same rates
as provided to Moraga Country Club members". We must also allow the Town of Moraga to display
annual fireworks on the property.
SUMMARY OF LEASE FROM RUSSELL BRUZZONE AND RIGHTS OF NON-TRANSFERRABLE
MEMBERS
The other land that was needed to expand the Association's golf course is owned by Russell Bruzzone.
Bruzzone owns parcels referred to as parcels A, B1, B2 and C. He has retained and is planning to
develop parcel C. The Association has leased with an option to purchase parcels A, B1 and B2 from
Bruzzone. Rent and/or the purchase price consists of the issuance and transfer to Bruzzone or his
designees 130 Non-Transferable Associate Memberships. These memberships have the following
conditions:
1. They are similar to Golf memberships
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2. They are appurtenant to residences designated by Bruzzone
3. They are not liable for any initiation fee
4. They are entitled to limited rights on dissolution.
All 130 memberships will run with the land to which they are first assigned. Sixty-eight of these will be
assigned to lots in parcel C, the subdivision at the northern end of Augusta Drive, may be annexed to the
homeowner’s association under our agreement with Bruzzone, and will be non-transferable just as the
present Owner Members memberships are now.
The other 62 memberships can be assigned to any lots. Should an acquirer of any of these (62)
memberships sell his property, the new owner would either continue paying dues, or forfeit the
membership.
The Association will acquire parcels A, B1 and B2 if and when Bruzzone's final subdivision map has been
approved by the Town, or if a Development Agreement is executed between the Town and Bruzzone for
parcel C. In the event that Bruzzone does not get approval for development of parcel C by July 1, 2000,
Moraga Country Club’s purchase right to parcels A and B will expire. If the final map is not approved, the
lease will continue as long as there is an agreement with the Town for the 18 hole golf course, at rates to
be negotiated after July 1, 2000. The purchase price for the property is 130 Non-Transferable Associate
memberships, and this was also the consideration for the lease until July 1, 2000. Ownership of parcels
B1 and B2 will revert to Bruzzone if, in the future, the property is not used as part of an 18 hole golf
course. Parcel A would always remain property of the Association. Bruzzone has reserved various
perpetual non-exclusive easements for access of the necessary utilities for his subdivision. These will be
located when his final subdivision map is recorded. The Association, with Bruzzone's consent, has the
right to contest the real property taxes on the leased property it is obligated to pay taxes on. The
Association is responsible for general or special tax assessments during the lease term, as well as for any
installment payments that are due after the lease term. The Association is unable to assign the Bruzzone
lease during the term of the lease without his prior written consent.
The foregoing description of the terms of the lease between the Town and the Association, and of the
agreement and lease option between Bruzzone and the Association summarizes the Association's
understanding of the terms of these instruments as they have been executed. A copy of all these
agreements is on file in the Association office.
This Land Lease Study was approved in content by the Moraga Country Club Board of Directors June 24,
1999, and subsequently finalized with input from the Association’s legal counsel to the final form shown
above.
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