Big Canoe Covenant Series (Pt 1): What Class “D” Rights does the Big Canoe Developer still hold?

The current position of the Developer has been substantially misrepresented to Property Owners, by the current and previous POA Boards.

PART 1:

There is a very special legal issue that surrounds the question of how many Class “D” Votes the Developer still holds.   Here is an excerpt from the 2005 Amended Covenants ;; top of Pg 3.

Section 2. Surrender and Transfer of Rights to the POA.
Excerpt: The Developer, the Company and the Type “D” Member, individually and collectively, further surrender the right to a supermajority vote as provided in Article III, Section 2….

Let’s dig a little into this legal reference to “a supermajority vote as provided in Article III, Section 2“.  You don’t actually see the word “supermajority” in the referenced covenant section.  That is a term used by various people over the years, including writers in the Smoke Signals, and POA Board members trying to explain things, but here’s the actual legal language from Article III Section 2 of the 1988 Declarations and Covenants :: Pg 13.

TYPE “D” – The Type “D” Member shall be the Company. The Type “D” Member shall be entitled to the same number of votes as cumulatively held by all Type “A,” “B,” and “C” Members plus one (1), provided that Type “D” membership shall cease at such time as the Company has less than five percent (5%) of the total number of votes held by all Members of the Association

So, when the 2005 transitional Covenants state that the Developer/Company is going to “surrender the right to a supermajority vote” of the above section, does that mean all 50% + one (1)???  Or does it mean they just surrendered the “plus one (1)”?  Because the term “supermajority vote” isn’t actually used, and so the interpretation of exactly what is meant is not specified.

The term “supermajority” is generally defined as a requirement for a proposal to gain a specified level of support which is greater than the threshold of one-half.  50% is not a supermajority.  It is one-half, not “greater than” one-half.  We know the Developer still holds Class “D” voting rights, so it is clear all 50% was not given up.  It is also clear that 50% of the vote (without the +1) is not legally a supermajority by any metric.  A further review of covenant changes also doesn’t provide for the Developer (“Company”) to have given up any specific smaller % of that 50%….. not  10%, nor 25%, nor 37.65%, nor any other arbitrary percentage.  It just says they “further surrender the right to a supermajority vote”.  I read that to legally mean that they simply gave up ONE (1) Vote.  It has never been legally clarified, and the POA won’t make a clear statement on the matter.  I believe the Developer/Company legally still holds 50% of the vote.  If I am wrong, then let the POA Board go on record as stating the facts clearly.   And let the Developer go one record as stating their position clearly, because the language is very vague and is subject to interpretation by future courts.  It is also possible that they still hold that 50% openly, and the POA is perfectly aware of that.  It is the Property Owners that are in the dark on this very important issue.

PART 2:

The Developer has not only retained his Class “D” status; under the 2005 Amended Covenants (Pg 11), Developer Class “D” Rights were actually extended until “two (2) years after the date that the number of individual lots (improved and unimproved) on the POAs assessment records is greater than 4,500.”

Since we have lost Potts Mountain as developable land, and are currently only at around 3750 lots in “Mother Canoe”, this effectively means that the Developer is now with us essentially FOREVER, because the odds are we will never hit 4,500 lots because there is nowhere for them to come from.  So Big Canoe Realty Company gets to feed off our new marketing department for free, with no seeming time limit cutting them off.

They also get all their little freebie perks (all in the 2005 Amended Covenants):

• Access the new POA Real Estate Marketing Division’s data and contacts for free
  * question: how to other resident realtors feel about their dues subsidizing their competition?
• Developer retains 1st Right of Refusal on all Property Sales
• Ability to Replat Lots, including reacquisition Lots
• Annex property into the community at will
• Can Modify the Master Plan (important to remember as you continue down)
  
• Maintain 3 Developer Platinum cards
• Developer Guests have same rights as Members
• open up “INN(s)” or “RESTAURANTS” within, or adjacent to the Community, and have them annexed under the Covenants, and have the Inn Guests have the same rights of Members, and guaranteed tee and racket times.
  (More on this later in an article in which we explore how Luxury Resort Specialist, GM Jill Philmon, the POA Board, and the Developer are using Property Owner Dues to finance a transition of this community into a Vacation Resort Cash Cow for the Developer – and all the “Investor Class” Property owners – leaving actual residents who call Big Canoe home, footing the bill for the increased congestion and suburbanization)
• They can also pull public utility and commercial ventures in under the Covenants.  We’ll have a separate story in the near future on this substantial and important issue.
• Read pages 7 onward of the 2005 Amended Covenants to see the entire list of benefits the Developer has almost eternal rights to now.

And here is another hidden gem from the 2005 Amended Covenants. The Developer, and his one (1) board seat, can still completely control the Board on many issues.  Here are some excerpts from Section 7 (Pgs 11 & 12)…..

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Section 7. Reconciliation of Potential Disagreements Over Proposed Actions.

(a) Introduction. The Company will retain one seat (director) on the Board of Directors (“Developer Director”) until the termination of its Type “D” membership and will remain an active, voting participant in Board deliberations. However, Board decisions require only a simple majority vote. The approval rights discussed in this section rest in the process of discussion and participation in Board deliberations and shall take place in real time rather than after the fact.

(b) Discussion. The Elected Directors (as defined in the By-Laws) and the Developer Director(s) shall discuss all proposed POA actions as part of Board deliberations. Should the Company, voting through the Developer Director(s), believe that any such action would violate the POA’s obligation not to hinder the Company’s right to develop and sell or change the fundamental character of Big Canoe as those rights are expressed in the POA’s governing documents effective January I, 2005, this belief shall be shared and discussed within the context of Board deliberations.

(c) Further Consideration and Deliberation. Should the Board not be able to reach a resolution that is acceptable to the Company, the matter shall be tabled for sixty (60) days in order for there to be further consideration and deliberation between the Board and the Company. At the end of such sixty- (60-) day period or such earlier period as both parties might agree, unless both parties have reached agreement, either the Board will abandon the action or the Company will have the right to pursue a resolution of the matter through the process set forth in Section 7(d).

(d) Alternative Dispute Resolution. The POA agrees that it, acting through its Members or the Board, will take no actìon to hinder the Company’s right to develop, sell or conduct its business, as those rights are expressly provided in the POAs governing documents effective January 1, 2005. Should the Company believe that a proposed action would do so, the Company, following the procedures set out above, shall make its views known to the Board. Should there be no mutually acceptable resolution following the sixty- (60-) day period for consideration and deliberation, thus resulting in an impasse, the Company may seek judicial relief or may refer the issue to mediation and, ultimately, to binding arbitration, The Company shall notify the Board of its decision within ten (10) working days following the expiration of the sixty- (60-) day period and begin the process within forty-five (45) days thereafter.

SUMMARY: The Developer isn’t going anywhere.  The Developer still has substantial power over the Board, and even has the explicit right to “modify the master plan” and  “change the fundamental character of Big Canoe”.  The POA can be dragged into binding arbitration in the event of a dispute, and the language of the document has legally front-loaded the process in favor of the Developer by agreeing to “take no actìon to hinder the Company’s right to develop, sell or conduct its business”.  Basically, all the Developer has to due is argue that something is part of their business plan, and they win.

The POA and others have ACTIVELY misrepresented to the Property Owners that the “Developer is on the way out”, when in reality, the Developer is snuggling into a warm cozy chair, prepared to quietly ride out the coming recession, then leech off of the Property Owners for many years to come. In the meantime, they have the POA Board & Luxury Resort GM spending our money on creating a future Resort Infrastructure that fits into their long range plans.

NOTE:  This is why the entire Board needs to be turned over and tossed out.  It is also a Screaming reason for why Steve Wilson should NOT be given a repeat invitation to the Board.  We’ll have a more indepth report on the many betrayals of the Property Owners by Steve Wilson coming shortly before the Ballots arrive.  Shucking and Jiving, and flipping a few burgers at community events, and making sure you get seen everywhere does not a good Board Member make.  It just makes you a run-of-the-mill politician that can’t be trusted.

Please share our website with neighbors, as we continue to unearth all the hidden agendas within Big Canoe.

Peace,
-david hh / publisher