Chapter 3 - The Settlement Agreement of 1987
The original 1972 General Declaration provided (in Article IV, Section 2) that the Company could convey to the Association at any time of its choosing, but no later than December 31, 1992, certain properties owned by the Company. Examples of such properties were; amenities, maintenance buildings, security gate houses, ball fields, nature preserves, etc. The same provision allowed the Company to make the Association pay for these conveyed properties with the price not to exceed the book value of the properties.
During 1984 the Company began discussions with the two Elected Directors with a view towards conveying the common properties to the Association. At one point the asking price was only one dollar, but the Elected Directors were greatly concerned (among other things) over the run-down condition of most of the property and the cost to the relatively few assessment paying members at that time to restore the property to a satisfactory condition and maintain it that way.
In December 1985, the Company ended the discussions and decided to convey all of the then existing “common properties” (including amenities) in Big Canoe to the Association effective January 1, 1986. At a special POA Board meeting on December 24, (and known thereafter as the “Christmas Eve Massacre”) the Company presented the Elected Directors with documents consisting of over 100 pages of legal terms defining the conveyance, and then called for an immediate board vote on the matter. The major terms of the conveyance were:
- a price to be paid by the POA of $850,000;
- all properties to be conveyed “as is”;
- a requirement for the POA to keep all properties in “good condition and repair” even though most were in various stages of disrepair;
- a 40% increase in the assessment rate paid by property owners to finance the additional burdens and obligations being imposed on the POA;
- a Management Agreement appointing the Company as the management firm for the POA on a cost-plus basis with an additional management fee of $320,400 the first year and increasing each year based on the Consumer Price Index; and,
- an agreement that Marketing and Sales guests of the Company would be permitted free usage of all recreational amenities in order to support the Company’s sales efforts.
In spite of intensive objections by the two Elected Directors (Bill Wainwright and Walter Elcock) the vote was conducted, and the conveyance resolution was approved by a vote of three to two. In addition the Company-controlled POA Board had also scheduled a POA membership meeting for December 28, at which time the two Elected Directors demanded that the Developer Directors, as the majority of the POA Board, rescind the conveyance resolution. The Developer Director who was serving as the President of the POA and as the Chairman of the POA Board of Directors stated that he would not agree to rescind the resolution because his loyalties were with the Company, not the POA.
Once word of this event spread to the property owner body, there was a loud “hue and cry” to “do something” to stop the conveyance under the stated terms. However, the POA was in no position to represent the property owners in this matter. Not only did the Company control the POA Board, but the Company also staffed and ran the POA administratively. At this point, the Big Canoe Homeowner’s Association (HOA) stepped into the breech. The HOA had been formed as a civic-type organization to serve the “residents” of Big Canoe, and as such, had no governing authority or responsibility. However, the HOA Board, led by its president, Mike Caton, quickly adopted the role of opposing this Company/POA action as a civic duty in behalf of all property owners, not just homeowners.
;The HOA formed a Property Owner Legal Defense Fund, held informational meetings with property owners in Big Canoe and in Atlanta, and obtained the necessary funds to mount a legal challenge. In addition to opposing the conveyance action, the HOA expanded their complaint to include demands regarding the Big Canoe water system. The system was owned and operated by the Company/Developer, and for years had been accused of having poor water quality, pressure, and dependability.
In early 1986 the HOA retained the Atlanta law firm of Rogers and Hardin to represent the property owners, and a law suit was filed on March 13, 1986 against the Company, the Company-controlled POA, as well as named individuals working for the Company. The named plaintiffs for the lawsuit were property owners James M. Neely, Irby David Terrell, Jr., and Geraldine Ellen Wells. The primary spokesmen for the HOA/Property Owner’s Legal Defense Fund were Mike Caton and property owner Arthur Howell (an attorney). In September of 1986, the parties began discussions with a view towards settling the matter out of court, and soon thereafter attorneys for all parties jointly filed a motion for a “stay” to delay a trial until settlement efforts had run their course.
By late 1986 the parties had crafted a Memorandum of Intent for a proposed settlement that included far-ranging benefits for the property owner body. Primary among these were; equal POA Board representation (three Elected Directors and three Developer Directors), creation of a free-standing POA separate and apart from the Company, a virtual debt-free start for the new independent POA, hiring of a dedicated General Manager for the POA, significant steps to improve POA costs performance, a “balanced Budget” mandate for POA annual operations, major improvements to the water system, repayment of all legal costs to the plaintiffs, and repayment of the POA’s legal costs. In view of all the benefits accruing to the property owners, the final agreed-upon sale price was established as $950,000, to be paid monthly by the POA on a ten year amortization schedule with a balloon after five years.
By April 1987, the parties had come to an agreement on all issues, and a ballot was mailed out to property owners describing the proposed settlement terms and conditions. Possibly the most significance change from the Memorandum of Intent was the inclusion of an Amenity Agreement. This document was intended to provide a means for providing future new amenities without creating another “book value sale” such as the one that prompted the lawsuit. In over-simplified terms, this Amenity Agreement established an Amenity Reserve Fund that could only be obligated by the Company for repayment to the Company for building certain types of amenities in Big Canoe that the Company would then transfer to the POA. The Fund was to be funded by diverting a portion of future assessments paid for each new home completed after May 14, 1987 and for each newly developed lot sold by the Company after that same date. The Agreement had no expiration date.
The vote of the POA membership was affirmative, and the terms of the Settlement Agreement were approved effective May 14, 1987. A copy of the Settlement Agreement documentation is maintained in the POA Administrative Office. It constitutes about a twelve inch thick stack of legal-size documents contained in two press board binders. This file will continue to be important in Big Canoe’s governance since there are provisions in it that do not reside in any other official documents. One such provision modifies a Water Easement held by the Company and restricts water sold by the water system to properties within Big Canoe.
During the Settlement Agreement process, the Southeast Holding Company was still the Company/Developer, however, all parties knew that a prospective buyer was prepared to buyout the Company depending on the outcome of the settlement. Very soon after the lawsuit was resolved, the Big Canoe Company became the Company/Developer. The Big Canoe Company was a partnership composed of the Byrne Corporation of Georgia and the Patten Corporation of Big Canoe.
As an aside, during the negotiation period leading up to the Settlement Agreement, there was a consortium of property owners who were interested in buying out the Developer and who made contact with the Southeast Holding Company in that regards. There is no evidence that they were ever seriously considered as a potential buyer.
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About This Site
This site is presented as a resource for use by Big Canoe property owners. Information found on this site will often differ from that which is presented by the POA Board, the current administration, and some of the committees. Much of what you will see here is opinion, but the opinions will be formed from the best available information.
As property owners and users of this site, you are urged to bring attention to the good things you see as well as the bad. You are particularity urged to bring attention to acts by our employees when those actions exceed your expectations.
Property owners have strongly held views and they are encouraged to express their views on this forum. Please refrain from name-calling or attacking individuals. Keep in mind that the goal is to effect change, not create enemies. -
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Recent Comments
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