A reasonable question

One of the features of a Blog is that people who want to remain anonymous can pose questions to insure that the Owners understand the facts before they vote. Yesterday, an anonymous person made the following comment:

Hey, as long as people are questioning DOL coverage let’s be reminded CK you ran governance, and made no strides on the seawall. Zero. And the you helped with the EDC contract that has contributed to our density concerns. Easy to be on the sidelines right? Why will you be a better BOD member now … how will you add value and be effective?

Here is my response to this question.

Seawall: The J-Lot and M-Lot seawalls were built in the 1990s and the Phase II seawall was built in the 2000s. For whatever reason, the seawall was a low visibility issue until Hurricane Matthew in October 2016. Matthew damaged parts of the seawall and the issue became more visible. Management, the Board and the seawall lots owners discussed the issue during 2017 and 2018, but little was done. I started my service on the Board in January 2019. In January 2019, the Club had not received a comprehensive legal opinion or a title search to determine the governing documents for each seawall lot. I identified Nelson Mullins as a firm with expertise in both Homeowner Association law and seawall issues and the Club retained N-M to provide a legal analysis of the rights and obligations of the Club and the seawall lot owners. Based upon the N-M legal opinion, the Board communicated its position to the J-Lot owners during a meeting in May 2019 and in a letter dated 10/06/20, and to the M-Lot and Phase II lot owners in a letter dated 1/19/21.

The Board instructed the Board President to engage in discussions with the J-Lot Owners. In the absence of the Board President, I attended one meeting on May 28, 2019 and thereafter the Board authorized the Board President to speak as the Board's "one voice." By late 2019, it was clear to me that a quick settlement of the seawall dispute would not happen. Clues that such was the case were the retention of at least two different law firms by various J-Lot owners, along with a communication to the Board from the J-Lot owners alleging breach of duty and negligence by the Board. I believe that the dispute should settle on a basis that is fair and equitable to both the seawall lot owners and the 550 Owners who do not own property on the Colleton River. However, I did not believe that settlement would occur until a lawsuit had been filed. The Board elected to continue to "negotiate" with the J-Lot owners rather than to file a declaratory judgment action (in which the Club would simply ask the court to rule on the rights and obligations of the Club and the lot owners).

The dispute continued after I left the Board in November 2020 and in May 2022, the J-Lot owners filed suit against the Club in February 2022. I didn't "resolve" the lawsuit while I was on the Board, but I did:

-    Obtain a legal opinion from a firm with expertise in seawall law stating the Club's responsibilities.

-    Inform the Board of the Club's rights and obligations as determined by our SC lawyers.

-    Supported the Board's decision to have the Board President lead the settlement negotiations.

-    Supported the Board's decision to continue to negotiate rather than to file suit.

-    Made an insurance claim when the Board was accused of a breach of duty and negligence.

-    Provided background to the member-lawyer currently advising the Board on seawall issues.

As you can see, I did quite a bit more than "zero" during the 22 months that I was involved in the seawall dispute. One wonders what the anonymous commentator believes has been done by the nine members of the Board in the 24 months since I left the Board?

My opinion then--and my opinion now--is that the Board should be keeping the Owners fully informed about the seawall issues and any proposed settlement. Instead, the Board doles out information piecemeal and only when asked. I also tend to be a zealous advocate and I believe that as long as the litigation continues, the Club should aggressively defend the lawsuit.

EDC. Yes, I was involved in negotiating the EDC deal. I had no role in identifying EDC, nor did I participate in the initial meetings between EDC and the Club. In December 2019, the Club purchased about 95 lots from the Phase II (Dye) developer. The purchase was submitted to the Owners for a vote. Reasonable arguments could be made for or against the purchase, but 74% of the Owners who voted approved the purchase. In early 2020, there were about 400 rooftops in the community. In December 2019, there were 35 homes for sale (21 for less than $1,000,000) and 26 lots for sale (11 for "$1"). The consensus of the Board was that we needed 550 "rooftops" to be financially stable during a recession (lots tend to default at a much higher rate than houses). Hence the EDC deal--which obligated EDC to build about 10 houses per year for seven years). Coupled with the then-normal buildout rate of about 10 homes per year, the Board expected the EDC deal to promote reaching 550 rooftops within 5-10 years.

Then COVID happened. Real estate prices escalated and people became enthused about building on their lots. Hence the congestion. But there are things the Club can do to alleviate congestion:

-    The Club owned about 20 lots that are not part of the EDC deal.

-    There are about 20 long term delinquent lots that the Club could acquire.

-    Rather than removing the 610 golf member cap, the Club could have removed the requirement that lifestyle dues be at least 50% of golf dues. 

Both the buildout of the undeveloped lots and changing residence patterns following COVID have increased the utilization of our golf courses. The world has changed and all options to alleviate congestion should be considered.

How can I add value?

Fair question. The facts indicate that I added value during my two years on the Board. The Club passed four key initiatives during my tenure and I was an active participant in drafting the language and influencing the content of each major initiative:

-    Goodwin purchase;

-    Builder program to incentivize both EDC and Owners to build rooftops;

-    Membership model: a grand compromise that created by lifestyle (social) and non-property owner (IP) memberships; and

-    Entity purchase restrictions: technical fix to eliminate the longstanding risk of LLCs buying Lots and subsequently defaulting.

In addition, I led the team that developed the 2019 strategy (which as far as I can tell is still the Club's strategy): control our destiny; establish a strong financial base; and offer a superior membership experience. Two thirds of the strategy has been implemented and the Board needs to determine what constitutes a "superior membership experience" and take steps to implement it.

I supported the decisions of the Board to delegate settlement negotiations on the seawall to the Board president and to defer filing suit against the J-Lot owners (a decision that I personally disagreed with). I also supported the Goodwin purchase, the EDC deal and the membership model--all of which were compromises approved by the entire Board.

I work hard and am honest. I also try to avoid participating in group think and ensure that the Board considers (if not agrees with) alternative courses of action. All I ask is that you read my campaign material and--if you agree with me--vote for me.