NEWS FLASH: The residents of the Country Club section of River Hall, at turnover, will be expected to pay for the unrecovered cost of constructing the golf course, Tiki Bar and pool.

Do I have your attention? Good. I put the summary of this post at the beginning because some of the information below can be confusing. Therefore, I thought it best to provide a brief overview of what you will be reading.

What happens regarding the golf course at turnover? I have been asked this question more times than I care to think about. Actually, all this information has been available in the Declaration, which is a public record and should have been provided to all residents when they purchased property in River Hall. As I am sure you will appreciate, not reading it is no excuse for not knowing what is in it.

Remember, the Declaration is a legally binding document superseded only by County or State law. Therefore, property owners in River Hall are legally bound by the Declaration.

I provided six points below representing my interpretation of what the Declaration says. I also provided, after each point, the section of the Declaration that I believe substantiates my interpretation.

Further below, I listed the exact wording of the sections of the Declaration I referenced. Immediately below each verbatim section, I provided additional commentary.

While reading the following, keep in mind that GreenPointe paid $550,000 for ALL the River Hall assets. That includes the golf course and Amenities Center. GreenPointe DID NOT build either the golf course or the Amenities Center. The platted lots were encumbered by bond debt. The golf course and Amenities Center were not. The golf course and Amenities Center were transferred to separate LLC’s presently controlled by the founder of GreenPointe.

According to my interpretation of the Declaration:

     1. The Developer, before turnover, through the Developer controlled HOA Board, was permitted to take cash from the HOA’s bank accounts to reimburse it for various golf course items.
Article III, Section 10.

     2. The Developer was entitled to recover the un-repaid cost of constructing the golf course. Article IX, Section 4.

     3. The Developer, before turnover, through the Developer controlled HOA Board, was permitted to take out loans to pay it for any items for which it was owed, thereby obligating the resident controlled HOA Board to pay the loans after turnover.
Article III, Section 10.

     4. The Developer, before turnover, through the Developer controlled HOA Board, was permitted to place a mortgage lien on the Common Areas within the Country Club to secure the loans referenced in (3) above.
Article III, Section 10.

     5. The Common Areas include the golf course.
Definitions section of the Declaration.

     6. The resident controlled HOA Board would be required to use the profits of the golf course to pay the golf course debt until fully paid.
Article IX, Section 4 – Fourth Amendment to the Declaration which was recorded on July 18, 2012.

I could not find anything in the Declaration that “required” the Developer to use the profits from the golf course before turnover to repay itself for the cost of constructing the golf course. If that is the case, the presumption is that the Developer was free to use the profits any way it wanted.

Details from the Declaration.
Article III – COMMON AREAS; EASEMENTS.
   Section 10 – Club Facilities.
      Sub-section (d) – Acquisition of Accounts, Inventory and Prepaid Items. “On the date of turnover, the Association shall provide the Developer a cash payment in an amount representing the book value of (a) all accounts receivable existing as of Turnover, (b) all prepaid contracts, (c) all pro shop, food and beverage, supply, chemicals, fertilizers, gasoline, and (d) other consumable inventories existing as of the date of Turnover, less any accounts payable related to the same. The Developer may withdraw such amount from the Association’s cash accounts immediately prior to Turnover. The Board, at the Developer’s election, shall obtain a third party loan for payment of these items or payments due the Developer. Any such loan may be acquired prior to the date of Turnover, and shall be the Association’s responsibility after Turnover. Notwithstanding anything to the contrary in this Declaration, such loan may be secured by a mortgage lien on the Common Areas.”

To summarize Article III, Section 10(d): The HOA, UNDER CONTROL OF THE DEVELOPER:

     1. Was permitted to take cash from the HOA’s accounts and pay itself for various assets of the golf course before it was turned over to the residents. That would have seriously drawn down the cash in the HOA accounts. Wouldn’t that cash belong to the residents?

     2. Was permitted to take out a loan to pay for those items, or other payments due the Developer, before it was turned over to the residents. That loan would then have been the obligation of the resident controlled HOA Board and, ultimately, the Country Club residents. That could have meant an increase in assessments.

     3. Was permitted to take out a mortgage on the Common Areas, which includes the golf course, to pay for those items it believed it was entitled to. Again, the residents of the HOA would have been obligated to repay the loans secured by the mortgage.

Note that section (d) is silent on what would have happened to the cash in the golf course bank accounts, which would have been controlled by the Developer, and would have included assessments Country Club residents paid for the use of the golf course.

Note also that no mention is made of golf course equipment. Who owns that, and would that cost have been part of the “payments due the Developer” in section (d)?

Before continuing with the Declaration, some clarification is needed to determine what the Developer was supposed to pay the HOA before turnover.

Florida Developers, before turnover, may choose between one of the following two options:

     1. Pay annual assessments on their lots just like homeowners; or

     2. Fund any deficit between the annual HOA assessments homeowners pay and the amount of expenses incurred by the HOA. Stated another way, if the expenses of the HOA exceeded the payments from homeowners, the Developer would make up the difference.

The River Hall Developer chose the latter, as many developers do, because paying assessments on the individual lots they owned would probably have exceeded the amount they would have paid making up any HOA budget shortfall.

Now back to the Declaration.

Article IX – COVENANTS FOR ASSESSMENTS.
   Section 4 – Club Facilities Assessment. (The original section of the Declaration was amended. That amendment was recorded on July 18, 2012 and is included here. 

Beginning on line 3:

     “Prior to Turnover (a) the Developer shall establish the Club Facilities Assessment as reasonably determined by the Developer, but not necessarily directly correlating to the Club Facilities Revenues then being received or the Club Facilities Expenses then being incurred and (b) any excess Club Facilities Revenues over Club Facilities Expenses may be retained by Developer to offset any subsidy or deficit to be satisfied by Developer under Section 12 below, and after such subsidy or deficit is satisfied to satisfy the Golf Course deficit (defined below).”

Continuing to line 24:

     “As of the date of Turnover, the Developer may establish the deficit, if any, incurred by the Developer in constructing, developing and operating the golf course, golf clubhouse and golf practice facility prior to Turnover (“Golf Course Deficit”). From and after Turnover, the Developer shall be entitled to payment from the Association of any Club Facilities Revenues in excess of the Club Facilities Expenses to offset the then remaining Golf Course Deficit, which amount until such time as the Golf Course Deficit is paid in full. The Club Facilities Deficit shall be paid to Developer by way of the Club Facilities Management Agreement if the Developer is the manager thereunder, or in addition thereto to any amounts payable under the Club Facilities Management Agreement if the Developer is not the manager.”

To summarize Article IX, Section 4, as amended: Club Facilities Assessments, for want of a better term, are the dues the Country Club residents pay for the use of the golf course. Residents are required to pay them since the Country Club section of River Hall is a bundled community.

The Developer initially set the rates for the assessments. The excess revenues (profits) from the golf course could have been used to pay the Developer for the amounts it paid to make up for any HOA budget shortfall. In other words, even though the Developer agreed to fund the HOA budget shortfall prior to turnover, it could keep any golf course profits to pay itself back for those amounts. Once any budget deficits funded by the Developer were paid, the Developer could keep golf course profits to reduce the amount it was still owed to build the golf course and related facilities.

At Turnover, the Developer could determine the unpaid balance to build the golf course, etc. That is the Golf Course Deficit. After turnover, the resident controlled HOA Board, through the residents, would have to use any golf course profits to pay the Golf Course Deficit until fully paid. It would be paid through a management agreement. Those payments could also have meant an increase in assessments.

Article IX – COVENANTS FOR ASSESSMENTS.
   Section 12 – Uniformity of Assessments; Developer Election.

Beginning on line 7.

     “Developer shall be obligated to fund such deficits only as they are actually incurred by the Association, and shall not be obligated to fund or pay the Initial Reserve Assessment or the Improvements Reserve Assessment. Prior to Turnover, any Assessments levied which, together with other revenues and funds of the Association, exceed actual expenditures shall be paid to Developer to repay advances made by Developer, including repayment of any difference previously funded by Developer.”

To summarize Article IX, Section 12: The Developer was required to fund the difference between the HOA revenues and HOA expenses. It was not obligated to fund any reserves. Furthermore, before turnover, the Developer would have been able to receive the difference between the assessments residents paid and the actual expenses of the HOA from ANY other revenues or funds of the HOA to repay itself for deficits it previously paid. The language “…together with other revenues and funds of the Association,…” could, and probably does, mean golf course revenues.

Now let us put the icing on the cake. The golf course opened in 2007. Therefore, construction would have begun in 2006 or earlier. Tees, greens, irrigation systems and other items constructed at that time are now approaching the end of their useful lives and will have to be replaced. If they are not replaced before turnover, they will have to be replaced after. That usually entails another assessment on the members.

If they are replaced before turnover, will the residents be asked to pay the cost after turnover? I’m sure you remember the old saying, “I’ll give you three guesses, and the first two don’t count.”

In addition, the Tiki Bar and pool planned for the Country Club will be transferred into the same LLC that owns the golf course, RH Golf, LLC. Does anyone honestly believe the residents will be “given” the Tiki Bar and pool without any obligation to pay for them? Or is it more likely that the cost to build both will be added to the amount GreenPointe believes it is owed from the residents at turnover for any unpaid cost to build the golf course? One thing is certain, based on the language in the Declaration. Turnover will not be, “Here are the keys to the store. Good luck”. It most likely will be, “Here are the keys to the store. Good luck. Oh…by the way, we mortgaged the store and everything in it and you have to repay the mortgage.”

To summarize all of the above: At turnover in 2025, or before, River Hall Country Club residents will be expected to pay for the unrecovered cost to build the golf course, Tiki Bar and pool…unless they choose to do something about it.