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LWA President Responds to FOLW

Message from the Lake Wildwood
Board of Directors’ President Mike Doscher

Greetings Lake Wildwood Residents
Questions & Answers Based on Friends of Lake Wildwood (FOLW) Emailing (and Letter to Editor, March 1 Edition)

The Board has recently received three emails from Association members regarding the Holub Ranch purchase. Each email had similar wording taken from a recent FOLW email that was sent to their followers. This is a general response to the questions posed in these emails and FOLW’s published positions.

From the FOLW perspective there seems to be no issue with the economic decision making regarding the purchase. The Board received detailed legal support prior to acting on this purchase and post purchase based on subsequent challenges by the FOLW leadership. The answers below are based on language in our Association documents. Members of the Association can reference these documents on the website if they wish. We have been assured by our legal counsel that there is no existing law that supersedes or conflicts with our governing documents regarding how the purchase of the Holub Ranch was undertaken.

What gives the Board of Directors of the Lake Wildwood Association the authority to buy property? FOLW leadership stated that they and their lawyer couldn’t find a reference that would support the Board’s authority to purchase property. The Articles of Incorporation for the Lake Wildwood Association state two principal purposes of the Association and the very first purpose is to further and promote the common interests and welfare of the owners of real property in the Lake Wildwood community and the second stated purpose is to:

Provide all types of services, facilities, and improvements deemed beneficial and helpful to said owners; to enforce restrictions, conditions, liens, charges and covenants pertaining to said real property’ to purchase, lease, construct, contract for, develop or otherwise acquire such property, real and personal, tangible or intangible, as may be necessary or convenient to carry out such primary objects and purposes; to care and maintain all property under its control . . . . and to have and to exercise all rights and powers, and to do any and all things that a corporation can do for the benefit of its members pursuant to the General Corporation Law of the State of California.
The Bylaws, Article VI, Section 1 provides for the general powers of the Board of Directors to carry out the business of the Association.

Subject to the provisions of the California Non-Profit Corporation Law and any limitations in the Declaration, Articles of Incorporation and these Bylaws relating to action required to be approved by the Members, the business and affairs of the Association shall be conducted and all corporate powers shall be vested in and exercised by or under the direction of the Association’s Board of Directors.

Language in the Declarations noted below reinforces the power to purchase property. In fact, knowing the financial risks facing the Association with regards to the dumping arrangements on the Holub Ranch property, the Board would have been neglecting their fiduciary duty to the Association by not purchasing the property.

Finally, the Davis Stirling Act authorizes the Association to transfer monies from a reserve fund to the Association’s general operating fund to meet short-term cash flow requirements or other expenses. Given the uncertain future regarding ownership of the Holub Ranch property during an immediate and pending foreclosure sale, it was in the Community’s best interest to mitigate the significant additional costs of having the Association haul lake spoils

to an alternate, distant disposal site.

What is the legal authority that supports the associations’ treatment of the Holub property as not being a part of the common area? There are other factors but the simplest way to answer this is to look at the Lake Wildwood Declarations, Article I – Definitions, Section 7. It tells us that a common area is for the common use and enjoyment of the owners. That Section also tells us that property acquired by the Association that is not for the common use and enjoyment of the owners is not Common Area. The Holub Ranch was purchased for the stated purpose of disposing of lake spoils. It is not for the common use and enjoyment of owners, such as the Lake, Golf Course, the Club House, or the private roads within Lake Wildwood. This designation does not negate specific uses like an evacuation route or hiking trails. Please note this definition in Article I, Section 7, which specifically says that the Association may owne property that is NOT Common Area reinforces the conclusion that property being acquired by the Association is within the scope of the Association.

Declarations, Article 1, Section 7. “Common Areas” shall mean the real property owned by the Association for the common use and enjoyment of the Owners. The term “Common Areas” shall not refer to any real property acquired by the Association unless such property is for the Common use and enjoyment by the Owners. The Common Areas owned by the Association as of the date of execution of this Declaration are listed in Exhibit C attached hereto.
What authorizes the Association to deny the members a right to vote on special assessments that will be used to purchase the property? In our Declarations we have Article IV, Section 4, dealing with Special Assessments. In paragraph (a) that Section clearly states the Board can levy a special assessment without a vote of the membership if it is below the limitation of 5% of the previous year’s budgeted gross expenses (a limitation that is set forth in the Davis-Stirling Act). The Holub Ranch purchase was below that amount. In an open meeting the Board discussed funding options and voted to have a Special Assessment in fiscal year 2019-20. In this same section the purposes for special assessments are outlined. Under paragraph (c) (ii) please note that Special Assessments may be levied by the Board for the acquisition of new Association property.Section 4. Special Assessments.
Generally. In addition to the annual Regular Assessment, the Board of Directors may levy, at any time during the fiscal year, a Special Assessment to fund the cost of any project or undertaking for the common benefit of the Association and its Members that is not contemplated by the Regular Assessment and is otherwise authorized by subparagraph (c) below. Unless otherwise authorized by section 1366 of the California Civil Code, the Board of Directors may only levy a Special Assessment in excess of 5 percent of the previous year’s budgeted gross expenses with the prior approval of a majority of a quorum of the Members. In computing the 5 percent limitation on the Board’s Special Assessment authority, the proposed Special Assessment shall be aggregated with all other Special Assessments previously imposed in the same fiscal year.

(c) Purposes for Which Special Assessments May Be Levied.

(ii) Capital Improvements. The Board may also levy Special Assessments for specific Capital Improvements or for the acquisition of new Association property. Where the cost of a Capital Improvement requires the accumulation of funds for a period in excess of one fiscal year, the funds may nevertheless be collected by means of a Special Assessment (subject to the limitations contained herein) and accumulated; provided, however, that any funds collected by Special Assessment to fund an undertaking in a subsequent fiscal year shall be separately identified in the financial records of the Association. In the event the Board of Directors determines, in any subsequent fiscal year, that Special Assessment funds accumulated for a specific future undertaking are not to be applied to such undertaking, or if the accumulated funds exceed the cost of the undertaking, the fund balance shall be transferred to the Association’s general fund in order to serve as a credit against the Owners’ Regular Assessment obligations.

We hope this information helps the membership understand that the Board of Directors was acting in the best interests of the membership and within our authority. We regret that the leadership of FOLW continues to disseminate erroneous information suggesting that the Holub Ranch acquisition was not consummated in accordance with applicable laws and our Community’s Governing Documents. FOLW’s position and analysis are also contrary to the opinions received from the Association’s legal counsel and the best judgement of the Board.

 

 

Editor’s Note: Thursday, February 28, Nevada County Superior Court Judge S. Robert Tice-Raskin rejected a Petition filed by FOLW Representatives in the case of Lucinda Price, former member of the LWA Board who was asked/forced to resign her seat on that Board last summer.

 


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