Sand Dollar Villas

6-plex unit  

On June 5, 2013 an agreement was reached with Mr. Hodges and Mr. Gibb regarding the purchase of the Sand Dollar Villas a 6-plex unit from Mr. Larsen. 

 Under that agreement Mr. Hodges and Mr. Gibb declared that they would be converting the 6-units into 3 units and the board agreed to a reduction in fees to facilitate the sell. 

1)      The agreement reached was for two (2) individuals to purchase the 6-plex

2)      The 6-plex would be converted to 3 free-standing family villas.

3)      Based upon the reduction of units from 6 to 3, the meter fees at $10,000 each unit was reduced from $60,000 to $30,000.

4)      The $18,000 past due HOA fees were reduced to $10,000 to Hodges and Gibb to facilitate the purchase based on the declaratives of the sale.

5)      Hodges and Gibb were required to follow protocol to apply for their meters.

Hodges and Gibb did not meet the terms of the agreement reached June 5, 2013 and the other members of the latently formed LLC were not parties to the agreement at that time as far as the HOA is aware.

 Point 1 was based on two individual owners, and we have since learned the property is in fact owned by a 5-member partnership LLC formed 8/7/13 naming 7 individuals, 5 in addition to the two original parties who reached the agreement with the Board.  There is no agreement on file with the additional 5 undisclosed parties to the property.

                         original parties                                        undisclosed parties

                        David N. Gibb                                       Cliff Mays

                        Daniel J. Hodges                                    Sara Mays

                                                                                      George L. Wanner

                                                                                      Charles D. Lee

                                                                                      Kelly L. Lee

 2)  The 6-plex unit remains a 6-plex unit.  There was no conversion, and despite the negotiated reductions it would seem there were no plans to actually reduce the number of units with 5 distinct members of the LLC including 2 couples.  It would seem unlikely that 5 members were intended to share 3 units.  This seeming deception was further cemented in item 3.

 3)  Hodges & Gibb insist upon paying $30,000 as agreed upon for 6 meters for the unconverted 6-plex; however the agreement was never $30,000 for 6 meters.  The meters are $10,000 each and the $30,000 amount agreed upon was based on 3 units, not 6.    The $10,000 meter fee is firm and is the same for all association members.  The Board will not agree to preferential treatment of any member over another, especially one(s) who may have been less than straightforward with the board in the negotiations.

 4) The past due fees of $18,000 on the 6-plex had been previously reduced to facilitate a prior sale of the property.  The $18,000 in past due fees were further reduced when negotiating with 2 individual buyers for the 6-plex based on a conversion to 3 family style units.  As the agreement was reached based on misrepresentations, the Board would be more than justified in restoring the full outstanding association fees & dues to the underlying members of the LLC each owning one of the 6 units the original fees were based on.  These arrearages were secured by lien on the property and were legally included in the sale transaction, and the debt was accepted by the new owners as part of the purchase price. 

 5)  The meters agreed upon were exceeded in the application process thereby protocol was not followed.  When 6 units were not approved, Hodges and Gibb attempted to increase the size of the meters and double the units per meter.

 Finally, the board will need confirmation that the appropriate taxes from all LLC members were paid to the Hacienda.

 The HOA and elected board were formed to facilitate necessary functions and to maintain the peace and decorum of our community.  The HOA was not intended to be a nuisance which should be skirted or deceived.  As an organized community, we all have rules we must follow for the protection and preservation of our community.   The HOA does not have the ability or desire to meet out fees or favors partially.  The HOA must remain impartial to remain fair.  Using inflammatory language, accusations and threats will not achieve preferential treatment or encourage the HOA to turn a blind eye to what appears to be a gross misrepresentation that nullifies the agreements reached in what the HOA Board believed were good faith facilitating the sale between Mr. Larson and Mr.’s Hodges and Gibb.  Unfortunately we later learned we were not speaking to the true and correct owners of the 6 units. 

 Although Mr.’s Hodges and Gibb are listed as members of La Escapada De La Playa, LLC registered with the Arizona Corporations Commissions, they are not listed as Managers with authoritative rights over and above the other members of the LLC.   To date, all communications have been with Mr.’s Hodges and Gibb and no acquiesce or denials have been heard from any other members of the LLC.  Further, the LLC is an American, specifically Arizonan entity.  No evidence of its registration as a Mexican entity has been provided to date.

 The letter received from Mr.’s Hodges and Gibb dated May 2, 2014 is a contradiction in messages.  Although they decry the HOA organization, they request to speak before them without following protocol at the May 10^th HOA meeting.  And, although they decry the dues, they want to cherry-pick what services they are willing to support with HOA dues.   That is akin to designating ‘US Army’ on your April 15^th check to the IRS and expecting it to be earmarked only for that service. 

 The HOA is responsible for the well-being of the community at large, including the maintenance of public works, trash collection, patrolling and security, roads and walkways, sidewalks, rain drainage, sewers, street lighting as well as electric power.  It is not feasible for the HOA to accept partial dues and fees ear-marked for a select set of services when all are equally important to the continuity of our community.  It is interesting that the salutation in the May 2^nd letter describes the community as the ‘best beach in the world’ yet would seem to request the ability to short-cut services necessary to keep it that way. 

 The May 2^nd letter also states that the HOA has been less than welcoming to La Escapada de la Playa LLC, but it is important to note that the HOA was unaware of La Escapada de la Playa LLC.   The true owners throughout the negotiations and this process were not disclosed to the HOA.  At first the owners in the negotiation were represented as Hodges and Gibb, on September 10^th, 2013 we received a list of three individual owners not including Gibb, who when we inquired were told co-owned Unit A with Hodges.  Please note that the LLC listing 5 owners was filed a full month earlier on August 9 and they were still trying to represent as 3 individuals negotiating 3 electric units and 3 dues.  

  Additionally, La Escapada de la Playa LLC is not a member in good standing of the HOA as of yet and gives every indication they do not intend to be, but demands the rights and courtesies afforded members.    Mr.’s Hodges and Gibb understood fully this was an HOA community as they freely negotiated with the HOA to facilitate the sale of the units.  Now that the sale has been achieved, and the true owners revealed to obtain 6 meters they believe they can disregard the HOA and cherry pick which rules and regulations they will adhere to and which community services they will support.    They are correct in that membership in the HOA is not mandatory; however, sharing in the services afforded by the HOA is also not mandatory.

 While we appreciate the offer of $64,300 ‘all-in’, it presumes a negotiating advantage that does not exist and is based in part on agreements reached through false representations and erroneously interpreted rules.  I would like to direct the members of the LLC to the HOA website at www.playa-encanto.com, specifically the By-Laws of the community.  All of the point by point references to the May 2^nd letter and corresponding excerpts of the By-Laws can be verified directly on our HOA site.

 First, Mr. Hodges is incorrect in that “PENCA has no legal right to refuse approval of meters once PENCA has received the infrastructure reimbursement fee… this permission shall not be based upon or denied due to any rules, regulations or guidelines set by PENCA”. 

 Article 27 of the Mexican Constitution re Energy Reform was amended regarding Mexico’s national electrical system as follows:  …It corresponds exclusively to the Nation, the planning and control of the national electrical system as well as the public service of transmission and distribution of electrical energy; in these activities concessions shall not be granted, although the State may enter into agreements with private parties under the terms established by law which will determine the manner in which private parties can participate in the other activities in the electrical industry.” 

While CFE is unquestionably and rightfully the owner of Mexico’s transmission grid and distribution system, CFE entered a private sector support contract with PENCA for financing, maintenance, management, operation and expansion of the infrastructure.  That contract with CFE allows PENCA to place fee restrictions on access to the infrastructure we financed to insure current and future resources are available to meet PENCA’s ongoing obligation to CFE on behalf of our community.

 The infrastructure that the LLC wishes to take advantage of was paid for and established by the PENCA HOA on behalf of the members of the HOA, and the HOA has every right to refuse access to the infrastructure to non-members or members not in good standing.  Specifically, the By-Laws state: 

 Article 10. The rights of the association members are, A) to obtain the benefits resulting from the services provided by the association, B) to be heard and vote in the members meetings and C) to hold office.

 Connecting to the infrastructure services is a right afforded to the members of the PENCA HOA under Article 10 and only requires an infrastructure reimbursement fee by any member in good standing who wishes to utilize the infrastructure - again, a member in good standing.   

The LLC is requesting six (6) meters at a discount and only partial HOA memberships dues of 3 out of 6 units to include just trash removal, road maintenance and security services for all 6 units at $64,300 as their ‘final and best offer’.  Although the past due association fee lien of $18,000 were negotiated down to $10,000 with the two (2) potential owners in good faith by the HOA, those two (2) individuals misrepresented material facts in the negotiations and willfully withheld the true owners.  Even given the recent revelation of the true LLC member owners, they now have the audacity to offer only $5,000 of the $10,000 negotiated under false representations as part of their ‘final and best offer’.  While I believe the integrity of the HOA Board may persuade them to stand by the $10,000 compromise of past due fees, it would not be prudent of the board to accept only half of the already halved fees due the Association’s members.  Acceptance of this offer by the HOA Board would extend partiality to some members and non-members over the members in good standing.   The board would be remiss in its fiduciary duty to accept a compromise of the funds due the Association where the other negotiating party(s) has already proven to be less than truthful in their negotiations.   

 Further, the LLC has made requests to be heard in the May 10^th meeting which is also covered under Article 10.b above.  This is a privilege afforded members in good standing.  The LLC has stated emphatically that they have no desire to be members and even went so far as to state in the May 2nd letter that acceptance of their offer that includes partial dues “shall not constitute any association with, or membership in, PENCA”.

The LLC further states in the letter of May 2^nd that they might consider aligning themselves with HOA in the future provided that they determine that the organization is being managed in a fair and professional manner acceptable to them.  The HOA has an obligation to its members first and foremost, not a group that misrepresented who they were in negotiations, and that is adverse to paying their fair share of fees.  While they state the HOA has been less than hospitable, they seem to demand their financial burden be carried by others in the community.  The LLC further states in the letter that the less than welcoming actions on behalf of the HOA have made them somewhat reluctant to become members.  I believe they would find the HOA board and members far more welcoming if they were just truthful with us and did not attempt to short change the HOA at every negotiation.

 In their closing of the May 2^nd letter, they ‘trust that PENCA shall honor” their request to be placed on the May 10^th meeting agenda; however, they have no standing under Article 10 as noted and As further covered under Article 12  The General Members Meeting is the governing body of the association and its membership is made up of all the members in good standing who have paid the association dues and have not lost the standing as members.

 Also that PENCA ‘shall be forthright in passing a motion to agree to and accept our best and final offer’ which the board has no obligation to do and may well be a breach of their fiduciary obligation to the other members, especially considering the less than honest negotiations on the part of the LLC.

 They further state “PENCA…shall not in any way cause delay, financial burden, or otherwise hinder in the purchase and installation of these meters.”  I would state unequivocally that PENCA is not the party responsible for any delay in the installation of the meters.  The LLC need only adhere to the requirements of the Association By-Laws and meet the requirements to connect to the community infrastructure.  Those requirements are very simply to be a member in good standing which is outlined in Articles 7 and 8 and pay the appropriate fees.  The LLC members have not met any of their obligations in this.

Article 7. Membership in the association is open to all owner-possessors be it as owners or beneficiaries regardless of the manner in which they hold title of lots and/or buildings within the subdivision named "Playa Encanto" and its diverse sections such as "Playa Encanto Heights," "Playa Encanto Shores," and others within the same real estate development referred to in "Article 5."

Article 8. To be eligible for membership in the association, the person must be an owner or possessor regardless of the manner in which they hold title of lot(s) and/or building(s) and construction site(s) within the subdivision named "Playa Encanto" and its diverse sections such as "Playa Encanto Heights," "Playa Encanto Shores," and others within the same real estate development referred to in "Article 5." It is established that, prior to determining eligibility for membership, it shall be the responsibility of the applicant to be free of pending debts with the state or federal government of the Republic of Mexico. All persons who subscribe to the current bylaws as well as those who request admission in writing to the Board of Directors and receive the approval of the General Members Meeting will be admitted as members.

Article 9. The duties of the association members are as follows, A) To comply with the current bylaws, B) pay the dues which will be set by the Board of Directors with the approval of the General Members Meeting in order to accomplish the corporate purpose of the association.

Finally, they state that “La Escapada de la Playa LLC shall have the right to take any legal actions as necessary to protect its rights”.  The LLC certainly does as does the HOA under Mexican law which is covered under Article 2 for the members.

Article 2. The association being incorporated is Mexican and its partners agree that any foreigner who, during the incorporation or at any time in the future, acquires an interest or shares in the association shall be considered by that simple act as a Mexican citizen in regards to said interest and shares and it is to be understood that they agree to waive any right to seek the protection of their own government, under penalty, in case said agreement is violated, of forfeiting their interest and/or shares in favor of the Republic of Mexico.

Placing an acceptance by signature on the bottom of the letter was presumptive at best and overreaching the bargaining position the LLC falsely believes they have.  In their own letter of May 2^nd, they admit that compromise has been offered by the HOA in a generous effort to resolve the issues.  That generosity has been counteroffered with deception, rudeness and arrogance.  It is my opinion that the HOA should cease negotiations at this point, state clearly what the fees are to members wishing to connect to the community infrastructure and let that be the end of it.  The LLC will then need to decide whether to join the HOA and receive the benefits afforded the members of the HOA, or go it alone on their own.  Ultimately it is their choice whether to become part of our community or not.

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