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