Lake Arrowhead Property Owners Covenants

Response to Property Owners Inquiries

The LAPOA Board is sharing with all property owners, responses to inquiries we received this past month. These issues have been raised a number of times and have been partially addressed at property owner meetings in the past. Some of you may have not attended these meetings; so we thought it might be beneficial to summarize the issues and print it in the March issue of the Arrowhead News and post it on the LAPOA Website for all to see and, hopefully, provide a better understanding. We want to be sure you have the latest information so we can move onto bigger and better things this year.

Ownership of Funds

When you pay your maintenance fees they are deposited to Lake Arrowhead Yacht and Country Club (LAYCC). LAYCC is a wholly owned subsidiary of Purcell Co. Inc. Article III, Section 2 of our covenants states that Purcell Co. Inc “assigns to LAYCC the complete and sole control and authority to manage and operate the Common Properties in such a manner as it sees fit, including the right to formulate rules and regulations regarding the use thereof, and, subject to the provisions of Section 3, Article III, the right to determine the persons entitled to use same.” These funds are to be used for the express purpose of security, management, operation and maintenance of Common Properties within Lake Arrowhead.

The current management fee structure consists of a 10% fee to Purcell Co. Inc. This percentage is calculated on gross revenues. There is a thought that the covenants placed a limit on this fee. This does not seem to be the case. Please refer to the information shown below.

Article IV, Section 2 of the 2001 Amendments placed a 10% cap on Purcell’s management fee. However, this was adjudicated “null and void” by the Superior Court of Georgia in February 2003 and, therefore is no longer applicable.
The prevailing Article IV, Section 2 can be found in the 1993 Master Covenants as amended in 2003. Neither of these documents make note of a limit on management fees. Note: There is a letter dated May 20, 2008 from Purcell management clarifying their reasoning to continue their management fee at the rate of 10%.
The 5.6% of gross revenues paid to HMS is considered a resort expense rather than a management fee.

Accumulated Deficit

Any net profit or loss from operating LAYCC is included in the equity section of the financial statements. The accumulated deficit can be offset only by future net profits.

In the normal course of business, all revenues will be used by LAYCC to offset operating expenses and make improvements to existing common properties within Lake Arrowhead. As a result, a net profit will be generated only when all operational expenses are fully covered.

Per our 2003 amendments, “no increase in assessments at Lake Arrowhead may be adopted without the prior approval of the majority vote of the Board of Directors of the Lake Arrowhead Property Owners Association”. According to Carl Joffe, legal counsel for Purcell Co. Inc., this clause was adopted predicated on the “thought that a responsible Board would approve increases in assessments when such increase would be necessary to reasonably operate and maintain common properties for the benefit and best interests of the community”.

No increase has been made since 2003 and the Board is monitoring the budgeting and actual income and expenditures associated with LAYCC. In addition, if there was a recommendation to increase dues, the funds from such an increase could be earmarked for specific property improvements.

Further Inquires

We hope this information will be helpful to you. If you haven’t done so recently, please take the time to review our covenants in their entirety. Click here for the Declaration of Convenants. If you have any questions you may send them to LAPOA Inquires, 486 Arrowridge, Waleska, GA 30183 or email us.