So after Monday's meeting where boards members could not articulate the rational behind the new for profit corporation they want to start, they put their collective heads together (along with their legal counsel I suspect) and have drafted this lengthy diatribe about how and why this is necessary to vote on and pass. As a purely public service, i will post the content here: Rationale for Formation Sun City Property Holdings Company The Recreation Centers of Sun City, Inc. (RCSC) Board of Directors will be voting on a motion at the June 30, 2016 Board meeting to establish a new corporation, Sun City Property Holdings, Inc. (SCPH), which will be wholly owned by the RCSC. This corporation is being formulated in case RCSC should foreclose on a suitable property without a superior lien for non-payment of RCSC fees and associated legal costs so that it can place a bid on the property to protect RCSC’s interest and avoid unnecessary liability should it be awarded the property. The RCSC Board of Directors is not interested in being in the real estate business or acquiring any Sun City AZ property. They are simply interested in upholding their fiduciary duty through due process of collecting all fees due the RCSC whenever possible. Therefore SCPH will simply place a bid to cover all RCSC fees and associated legal costs on a property being foreclosed on by the RCSC. If another bidder bids higher, which is what is expected, then all RCSC fees and associated legal costs will be paid for by the highest bidder and there will be no further action taken by SCPH. If in the unlikely event that no one out bids the SCPH, then SCPH would become the owner of the property. SCPH would then seek to sell the property to cover its costs, to include RCSC fees and associated legal costs. The cost to the RCSC is about $2,000 for establishing and filing the legal documents to form the corporation and $1,000 to open a checking account, plus about $200 a year for operating costs. This is a very inexpensive insurance policy for the RCSC, as it protects RCSC from any liability associated with such real estate. While historically, RCSC has rarely, if ever, foreclosed on a property in Sun City AZ, it is very important for Sun City AZ homeowners to understand that could be a result of repeatedly not paying RCSC fees. If you assume because there was no such holding company created in the past it was not needed, that would be an incorrect assumption. The number of properties that are delinquent with annual property assessments or other fees is a dynamic number that changes daily. The reasons for the delinquencies are as numerous as the number of property owners. Why a property owner is delinquent correlates, to some degree, whether a delinquent account is resolved before being referred to outside collections or before suit is filed with the courts. We have resolved delinquent accounts at each step in the collections process. When this occurs is dependent on the property owner. As per Board Policy Resolution No. 28, RCSC files a lien on any property 60 days past due. Filing the lien is vital to protecting the RCSC and comes into play whenever someone tries to sell the property, as the lien must be paid in full to receive clear title. However, it does not provide the same benefit if the homeowner remains the owner. In these cases the only option is to pursue all legal avenues of collecting the debt, up to and including foreclosure. My thoughts to follow.
i could only smile as i read this effort to make it sound like this corporation was there to protect our interests. Let's see, after 56 years, we now know every board has been in breach of their fiduciary responsibilities because they didn't start some bogus corporation to foreclose on property owners. Because make no mistake about this, it's the only reason for them to do something so far removed from their charge under the articles of incorporation. I challenge any board member or the general manager to come to this site and tell us the number of times the RCSC would have benefited in years past by having this corporation in play. The board satisfies their fiduciary responsibilities by placing liens on those delinquencies (as pointed out in accordance with board policies). Any pretense that by placing bids on properties that are equivalent to what is owed the RCSC is absolute and utter foolishness. Sun City properties up for auction most often have far higher starting bids than what is owed to the RCSC so they immediately are out of reach for us (yes dearies it's our company). Further, there are so many flippers in Sun City, no properties are selling for anything near starting bids. This is such a pathetic and lame explanation, they should really have to do better, but they won't, they'll just expect this munbo jumbo to be bought by the handful of folks reading it and ignored by the masses. I will break down what happens next in the thread on that subject.
My BS meter was running wild while reading this and realized how important it is to break things down for folks to better grasp. Often overstating things becomes an explanation unto itself. Here's the one sentence we all can get our teeth into: " Therefore SCPH will simply place a bid to cover all RCSC fees and associated legal costs on a property being foreclosed on by the RCSC." For our purposes lets take an RCSC property that hasn't been paid on in 10 years. We'll use today's rec fees of $472 times the 10 years (even though it's far less). That comes out to $4720.00. The RCSC liens the property and can charge interest. Let's say that interest generates an amount double the original indebtedness bringing it around $9400, but for our sake we'll use $10,000. Say they give it to a collection agency and the lawyers get involved and we double that to a even $20,000 owed the RCSC, collection agency and attorneys. Not a small amount, but in accordance with the language they sent us printed above, the RCSC holding company could bid up to $20,000 on that property. Now tell me this: when was the last time you saw a Sun City property purchased for $20,000 at auction?
Perhaps all of this is an exercise in silliness because what we may be overlooking is this portion of that sentence: "on a property being foreclosed on by the RCSC." One can only speculate if this is the logic behind such a meaningless motion...to move the RSCS into the foreclosure business?
For the board to release a legal statement is not an explanation. Why do you think they are doing this? Again I am baffled by a board that makes grand gestures...I can't understand what's in it for them. They are not trying to establish a career ladder. I'm missing something here in the way of understanding how the board operates.
Spot on C, none of this makes any sense if you just take it at face value. There's not enough skin in the game for the risk involved in doing this. My biggest fear is this singular action will give legs to the lawsuit and put all of us in Sun City in harms way (after all, it's the residents who will pay if the RCSC is found liable for their actions). I've always functioned under the belief that people do things for valid reasons. It's why i have struggled with the 40 million dollar golf investment, it's not logical. It's why i struggle with this, it's not logical. And just to further debunk, the myth of the Red Herring better know as the Rational for the Foundation; think about this...$200 yearly costs. Wonder who is going to watch properties, bid on them and then if they get them, sell them off for that $200 yearly salary?
The email is just a regurgitation of the circular logic being spewed at the meeting. Who benefits from this? What problem is being solved? Who works for who here?
Arizona is not a Super Lien state, meaning that generally a lien by a condo association or home owners association falls below that of the property tax lien and lender's lien and possibly other liens recorded ahead of the association's * This could leave the association's lien unsatisfied following a foreclosure.* In Super Lien states, such as Washington, the association's lien ranks ahead of the lender's lien in most situations.* If the RCSC were to force a foreclosure on a home it risks coming up empty as it is very unlikely that the past due RCSC assessments is the only delinquency or lien on the property. It would be very rare that the RCSC would be in a superior lien position. Recording date priority also comes into play in AZ.
Thanks fix, you have a way better handle on this than i do. In all likelihood, if they aren't paying the RCSC, there's a good chance they aren't paying others. I would guess unpaid property taxes would place higher on lien holders as would any mortgages that are delinquent. Would that be true F?
In AZ a lien by a HOA would be subordinate to property tax, lender, IRS, as well as some other liens recorded chronologically ahead of the RCSC lien in most cases. It would be unusual for the RCSC lien to be the only lien.* Less than half of the states are Super Lien states, where the association's lien has a high priority.* A property in foreclosure may seem like a bargain, until you total *up all of the liens and encumbrances, such as mortgage or deed of trust. The total could exceed the value, especially in properties that are "under water".* What the RCSC is doing is removing liabilities from the non profit to a new corporation, likely on advice from their legal counsel.*
But if the non-profit owns the new corporation, isn't the non-profit responsible for the actions of the corporation? With an annual operating budget of $200, isn't it likely someone who works for the RCSC would be doing business for the new corp? Does that make it messy when trying to keep the to businesses seperate?
Yes, yes and yes to all of the above V. Of course the logic is the RCSC is insulated by the separate corporation, but the old adage "follow the money, or go for the deepest pockets" will absolutely apply. As far as foreclosures fix, the RCSC claims they will only go after quality properties...those that aren't upside down. Sun City is so a strange anomaly; occasionally properties are left to distant relatives who have never been to Sun City and have no clue about how it works. It's rare, but most often they are left to them and they do nothing other than let debt accrue. It makes no sense, but it does happen. Most often, the properties that go to foreclosure are upside down and are in trouble financially across the board. rec fees are usually one of the things they feel they can pass on. As the amount mounts, the RCSC try's in-house collections first and then sends it outhouse. Once there is when the costs start to soar. In the end, everyone looses.
