Lakota Canyon homeowners battle unwanted rec center deal
December 4, 2017
Homeowners at New Castle's Lakota Canyon Ranch and Golf Club are suing the development's owner and homeowners association after they say the owner monopolized the HOA board and forced it to buy the community's recreation center for more than it's worth.
Ryan Gilman, a Glenwood Springs attorney representing the plaintiffs in this lawsuit, said the HOA board agreed to buy the rec center from the developer, California-based Warrior Acquisitions, for about $1.6 million. That deal came a year after the developer tried to sell the facility for only $650,000.
The problem, according to the plaintiffs, is that the developer has control of the HOA board and single-handedly dictated the terms of the deal.
When Warrior Acquisitions bought Lakota Canyon Ranch through a bank sale, it also bought the "declarant rights" to the HOA, giving it certain rights and privileges.
Lakota Canyon Ranch's HOA board consists of three directors. And as the residential development's "declarant," Warrior Acquisitions has the right to fill two of those seats.
The plaintiffs say Warrior and its owner took over the HOA board and "conspired to compel" the board to buy the financially struggling rec center. They say it's a deal only benefiting Warrior Acquisitions and which the property owners will have to pay for, according to the complaint filed in Garfield County District Court on Oct. 11.
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Plaintiffs claim the HOA board "disregarded their fiduciary duties owed to the unit holders."
The plaintiffs are also trying to get the court to classify their complaint as a class action lawsuit, potentially including more than 380 property owners in Lakota Canyon Ranch. Currently, the only plaintiffs to the complaint are Vicki and Rory O'Halloran, who live at Lakota Canyon Ranch.
Gilman said all the Lakota property owners who want to get bound into the lawsuit will, but the O'Hallorans initiated the complaint to get the ball rolling. If the judge classifies this case as a class action lawsuit, all of those potential plaintiffs will automatically be included, and those who don't want to be party to the suit will have to opt out, he said.
At the same time, another group of homeowners is pursuing a separate legal course, alleging that Warrior Acquisitions is not the declarant of the HOA.
"Warrior packaged the deal, Warrior controlled the deal, and there was only one choice for the board: take it," Gilman wrote in the complaint. "Warrior, accordingly, dictates all the terms of the deal so that Warrior investors and [the company owner] can begin to cash out of Warrior.
"The HOA will buy the clubhouse for a lump sum and promissory at a price based on an appraisal obtained by Warrior," according to the complaint. The plaintiffs also say Warrior didn't obtain an appropriate appraisal of the building, and therefore the appraisal came in far higher than it should have.
The property owners also fear this deal will cause their HOA fees to increase and property values to drop. The complaint says that the HOA board conducted no analysis of the deal's impact to the property owners.
"Then the property owners will face increased assessments to pay a premium price for an unprofitable clubhouse and the prospect of lower lot values due to the increased assessments," wrote Gilman. "There is theoretically unlimited liability for the [unit holders] to the HOA, and Warrior is attempting to exploit this by compelling the HOA to purchase the clubhouse," according to the complaint.
The idea was for the company to unload an under-performing asset, said Gilman. However, the plaintiffs suspect the deal for the rec center could be the least of their problems, as they believe Warrior Acquisitions could be planning to do the same with other assets.
The plaintiffs were initially successful in getting a temporary restraining order, halting the sale. But after a hearing in October, another judge overturned that restraining order last week and denied a motion for a preliminary injunction on the closing. Gilman said he believes the deal closed immediately afterwards.
The Post Independent did not hear back from the defendants' attorneys on Monday. Meanwhile, Lakota homeowners were scheduled to hold their annual meeting Monday at the recreation center. The rec center situation was a topic of discussion on the agenda.
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