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"Rubbish" 

apparently there is no obstacle too great for the board to overcome

“Rubbish,” Roz Berman announced triumphantly at this month’s board meeting concerning false rumors on the prospects that Chef Tirzo Hernandez will not be joining Sun City as our next Trumpets operator. With that comment, Roz proceeded to outline the ups and downs of Chef Tirzo’ efforts to gain our continued interest, or as some may conclude, our board’s dogged work to secure Chef Tirzo’ services. While eating a good serving of crow is not especially appetizing to me, it's disappointing to learn that the board's offering just ahead is full of some unsavory dishes and choices.

Included in her history of events was the apparent admission that Chef Tirzo, who apparently was counting on the availability of publically available financing, one assumes the type that most business establishments would rely on for securing a loan for a proposed venture, was unavailable. I guess that means he failed to qualify for a loan under current and admittedly tightened credit conditions.

Some time back I asked the rhetorical question of just how far the board would be willing to go to secure the services of Chef Tirzo. We are now beginning to learn just how far Roz Berman board is willing to go.

As Roz explained at the last board meeting, some current and former residents had contacted Chef Tirzo in an effort to alert him to a potential problem in connection with the board’s plans to enter into a lease, or as Roz might put it, to interfere with the board’s alleged authority to enter into a lease under any terms they deem appropriate. This same “lease” issue was raised 9 months ago when the Boulevard Group withdrew their interest in Trumpets. The question then, as now, is whether or not NRS requires the association to obtain an affirmative vote of the unit owners in favor of the board's decision before they can enter into a lease. Some have argued that is exactly what NRS requires, while others have argued just the opposite. The issue centers around the definition of what the term “lease” means. Ultimately, the State may have to decide this issue if someone files an objection.

If the term “lease” means "conveyance," as that term is used in NRS 116.3112 in mandating one form of unit owner approval, then, notwithstanding the wishes of the board, the board’s proposed lease arrangement with Chef Tirzo is toast insofar as NRS is concerned. That the board may be unaware of that likelihood is testament to their apparent willingness to go down with the ship in the time of need. While any law school student, including our veteran legal counsel John Leach, should know that lease and conveyance are virtually synonymous terms in any legal context, apparently the board has been told or misled to believe otherwise. At this point, even Chef Tirzo knows what’s up on this lease issue because it's apparent that he has competent legal counsel advising him. So, then, what’s up with the board?

Unfortunately, the board has been given an opinion that is not worth much more than the paper it is written on. An opinion, after all, is just that, someone’s opinion. A legal opinion, especially one from the association's legal counsel, should represent something more since others may wish to rely on that opinion for some type of legal action. That is exactly the situation we have here.

Here we have the board relying on the advice of John Leach. Now, John knows very well what he’s doing and has done concerning what the term conveyance means. On the other hand, individual members of the board, sadly, appear to be ignorant of the issues involved. Mr. Leach is apparently willing to defend the board’s right to enter into a lease without securing unit owner approval. For the community’s benefit, I hope Mr. Leach is willing to do so pro bono rather than billing us for his firm's services in the event that particular need should arise.

At some point, it’s going to come out that the board is relying on a very thin reed to support their flimsy position. That reed is a legal opinion from John Leach that has little, if any, bearing on the merits of whether a lease is a conveyance under NRS. What’s even more interesting is that Chef Tirzo apparently knows that Leach is on weak ground in suggesting that they have authority to lease without obtaining unit owner approval. On the other hand, it would appear that members of our board do not know that or, if they do know, they do not care.

Why do I say that Chef Tirzo knows that Leach’s opinion is merely an argument designed to persuade a prospective lessee rather than a fact? Let’s consider that the association’s legal counsel has presumably advised Chef Tirzo that the association has full authority to enter into a lease without the need for unit owner approval. The board’s appeal to Chef Tirzo is merely an attempt to bolster the lessee’s decision that’s it’s OK to proceed, nothing more. Under normal conditions, a letter from the association, or it’s legal counsel, should settle the matter of the board’s authority to lease once and for all. Indeed, such a letter should have provided Chef Tirzo with the assurances he would require in order to enable him to proceed with execution of a lease. However, it is evident that did not happen since our assurances were obviously insufficient to convince Chef Tirzo to proceed. Reading between the lines, that should suggest to all homeowners that the old lease issue is alive and kicking and is a little more complex than everyone is letting on.

Apparently Chef Tirzo, by his own actions, is leery of the assurances he has been given by the association. Clearly, Chef Tirzo does not wish to take the association merely on the word of their legal counsel to trust us and that all is well only to find out later, after making a significant investment in starting up a new business enterprise, the lease can be overturned based on a ruling of the Nevada Real Estate Division. Is that a possibility? In a nutshell, that is a strong possibility.

If that were not a possibility, Chef Tirzo would have easily dismissed those who were telling him otherwise and would have already executed a lease agreement with the association. As Roz explained, that did not happen.

So, since learning of the lease issue, what does Chef Tirzo want from the association as a condition of his agreement to proceed under such a potentially threatening cloud? Well, Chef Tirzo is demanding two things, a change from the proposed lease conditions on revenue sharing more favorable to the lessee, and protection designed to make him whole in the event of a reversal of fortune on the “lease” issue as a result of any State intervention to enforce NRS. Here is what he is asking of the association:

• While offering a nominal increase in rent, Chef Tirzo proposed a reduction in revenue sharing by lowering the percentage on gross revenue that goes to the association from the amount the association and the lessee had initially negotiated; and
• Indemnification against any losses, costs and adverse consequences that would be incurred as a result of any State action that resulted in the termination of the lease on the basis of the association’s failure to secure prior approval of unit owners before entering into a lease.     

What was the board’s response to Chef Tirzo’ recent demands? Apparently so anxious to secure the chef’s services, the board readily agreed, although Mike Dixon expressed his concern about the precedent being established over something as significant as agreeing to indemnify a prospective lessee. One got the impression that there was very little the board would not have agreed to do.

One also might get the impression that the board or Mr. Leach would like to use the association as a test case on the application of NRS vs. the authority of an HOA to enter into a lease agreement without obtaining unit owner approval. If that were the case, perhaps Mr. Leach’s law firm should bear the cost of doing so. Why? Incredibly, a reasonable application of the law and NRS runs counter to Leach’s opinion concerning whether a lease is a conveyance and, therefore, is subject to NRS. Mr. Leach's strange opinion, relying as it did on a layman's definition of conveyance, was expressed in his letter to the association on 29 December 2007.  Any board member with knowledge of the contents of that opinion should have sufficient cause to question the advice being rendered by John on this issue.

Is there anything else you should know? After failing to secure traditional financing to support his proposed venture, Chef Tirzo was without a source of funding. The absence of traditional funding posed a real obstacle to his initial plans. As Roz explained, Chef Tirzo then decided he would attempt to tap what Roz termed were “private” sources. However, those private sources were not identified as to type, whereabouts, or name. According to Roz, Mr. Hernandez’ refusal to divulge his private sources was an effort on his part to protect them from those interfering residents who might wish to inform his private investors of a potential lease issue.

If we can take Mr. Hernandez at his word, as explained by Roz Berman, it sounds as if Mr. Hernandez would prefer to withhold material information from his private investors on any possible impediments that might have an adverse effect on their investment decision. Let's hope that is not the case. Also, with one or more “private” investors in the picture, is there any pertinent information the association should obtain about that arrangement before proceeding? As you might begin to understand, these issues can become extremely complicated. The more complicated, the greater the potential risk for an association that is only too willing to absorb the consequences of any unforeseen failure in the Tirzo Hernandez Trumpets venture.

According to Mrs. Berman, there will be a forthcoming board workshop in May to present the details of their efforts to bring Chef Tirzo Hernandez to Trumpets. Assuming that everything goes ahead as the board is currently planning, it was stated that full scale operations would likely not begin before October 2009 due to various licensing procedures.