https://gotoby.com/wp-content/uploads/2020/10/go-toby-logo.jpg 0 0 Toby Tobin https://gotoby.com/wp-content/uploads/2020/10/go-toby-logo.jpg Toby Tobin2009-09-24 00:00:002021-03-19 15:02:48Bonita Bay Battles Members over $245 Million in Refundable Golf Membership Fees
Bonita Bay Battles Members over $245 Million in Refundable Golf Membership Fees
Naples area developer says it doesn’t have the money to repay members – now wants to change the rules for refunds.
Palm Coast, FL – September 24, 2009 – One of Naples, Florida’s leading real estate developers, Bonita Bay Group, built 7 luxury golf communities; luxury homes surrounding signature golf courses. Now the developer faces at least 15 lawsuits brought by members after Bonita Bay refused to refund golf club membership deposit fees.
At the heart of the lawsuits is the language in the membership agreement which says the membership deposit is refundable on demand. Members reportedly paid as much as $185,000 for each membership with total deposits totaling $245 million. When the economy went south, some members began dropping their memberships, requesting a refund. The trend grew into what amounted to a "run on the bank." After returning only $77 million over the past three years, Bonita Bay announced that it was changing the rules. It points out that the membership agreement stipulates that the rules "may be amended from time to time." Under the new plan, refunds are granted on a 1:3 ratio; one refund for each three new memberships.
Bonita Bay says they don’t have the money for additional refunds. Their debt load and the dearth in sales has them cash strapped, a position shared by most developers, including some of Palm Coast’s most prominent; Ginn, Crescent Resources/LandMar, and WCI.
Separately, Bonita Bay is negotiating the possible conversion of the club to a member-owned (equity) club. The Bonita Bay Turnover Committee is representing the interests of the members. Naturally, the disposition of the deposits is playing a key role in the negotiations. Bonita Bay says that if they are required to refund all deposits on demand, they will be forced into bankruptcy, an action which would further jeopardize the status of the deposits.
GoToby,com has obtained an update email sent to members by the Bonita Bay Turnover Committee. A portion of that email is reproduced below (with key text highlighted by GoTobycom):
From the email sent by the Bonita Bay Turnover Committee to club members on September 22, 2009
Unfortunately, we are still a long way from finding any common ground that would be acceptable to both BB Group/Key Bank (BB’s primary lender) and your Committee or that the TOC believes would have any reasonable chance of being approved by a sufficient number of our members.
One of the critical issues that has not been resolved is the allocation of responsibility for providing refunds to resigned members. BB Group has reversed its previous position with respect to accepting liability for all resigned members. Please see "Liability for Resigned Members" below for further commentary on this important issue. BB Group is now requiring that the continuing members of the new Club assume the liabilities for all members’ deposits, including both the liabilities for deposits paid by members who have already resigned and not received a refund and those members who decline to join the new Club. We believe that in total, this liability could amount to $20-25 million and possibly more.
There are a number of other important issues upon which no agreement has yet been reached. These include the new Club receiving credit from BB Group for dues that are prepaid by the members ("deferred revenues"), protections for new Club on the pricing and availability of irrigation water from Resource Conservation Systems (a BB Group company) which is the sole source supplier of irrigation water to the Club, the honoring by BB Group of special deals offered by BB Group to certain Club members (such as the owners in Tavira), and the payment of transfer taxes and other closing costs.
Your Committee also requested that BB Group provide the members of the Club with an unambiguous right of first refusal with respect to the possible sale of all or any part of the Club. BB Group indicated to us that they would take this request under consideration. To date, we have not received a response to this request.
BB Group continues to express confidence in their legal position that they have the unilateral right to amend the rules and regulations of the Club, including the refund policy, and that our promissory notes are therefore only due 30 years from their date of issuance. Accordingly, BB Group seems to prefer waiting until the courts adjudicate this issue rather than negotiating a compromise solution with the TOC. In the meantime, BB Group plans to continue to operate the Club, as long as this can be done profitably, and may seek other potential buyers for all or part of the Club.
Your Committee has taken the position that it opposes the continued ownership and operation of the Club by BB Group for an indefinite period or the sale of all or any part of the Club to a third party. This position was stated to BB Group in a letter dated August 13, 2009 and attached to this report as Exhibit B. The justification for this position is set out in the letter as follows:
"The reasons for this conclusion are numerous but include BB Group’s unilateral decision to suspend refunds to the members in breach of its contractual obligations, the statements relating to its future intentions not to pay any refunds to members, the assertion in court that the promissory notes of members who have resigned are not currently due and payable, the dramatic reduction in the services being provided to members of the Club, the deferment of necessary maintenance expenditures, and the continued application of the dues paid by members to purposes unrelated to the Club.
There has been such an erosion of trust between BB Group and the members of the Club that we are convinced that the members of the Club, as well as the TOC, would not be willing to rely on BB Group to operate the Club in the best interests of its members rather than in its own financial self interest."
Your Committee continues to be willing to negotiate with BB Group and Key Bank. To date, BB Group has appeared to be in no hurry to conclude a deal since they have been enjoying a sizeable positive cash flow from the Club. We remain optimistic that this will change in the coming weeks.
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Unilateral right to amend?
I am surprised to see a company like Bonita Bay argue they have a legal right to unilaterally amend an existing contract with their members. The Florida supreme court held in St Joe Corp v McIver "… a party cannot modify a contract unilaterally. All the parties whose rights or responsibilities the modification affects must consent."
Matanzas Woods "golf course"
Good Mornong Toby,
Question…Are the owners of the Matanzas course responsible for cutting the grass on the course? The grass is quite high, and I’m sure will become the home of a few creatures, as well as present a fire hazard.
Reply to Ernest
Yes, the owners are responsible for mowing. You can call the Palm Coast code enforcement office to find out what the code requires. The code enforcement manager is Barbara Grossman at 386-986-4739.