[This article has been changed to reflect the fact that Treasurer Denny Galford recused himself from the SLLA Board's vote on an amended agreement with Seven Lakes Country Club.]
In August of 2007, the Presidents of the Seven Lakes Landowners Association [SLLA] and Seven Lakes Country Club [SLCC] signed an agreement that ensured the Club's golf course would never be carved up into residential building lots.
On February 15 of this year, the Club filed with the Moore County Register of Deeds a Declaration, or set of Covenants, that would, in fact, allow the golf course to be converted into residential building lots.
The obvious question is: "How did this happen?"
Why Country Club Covenants?
When the news broke, in late 2006, that Seven Lakes Country Club was considering the sale of its old driving range for residential development, it sent shock waves through the community, which had never imagined that the five-acre expanse of grass beside the South Gate would ever be anything but green.
After considerable public debate and private negotiation, SLLA President Don Truesdell announced in August 2007 that the Association and the Club had approved and signed an agreement that would allow the development of the old range, subject to the covenants of Seven Lakes South, and would preserve forever the remainder of the Club's property as a golf course.
In the first clause of the five-point agreement, the SLLA granted the Club the right "to establish its own covenants limiting the use of all Country Club property to the operations of the golf course and country club." Association Attorney Hunter Stovall was granted the right to review the covenants "to insure compliance with this requirement."
It appears those covenants were written not long after the agreement was signed, but they were put to the side as the Club and Association joined forces to repel a lawsuit filed to overturn the agreement. After winning that suit, as an economic downturn cooled the real estate market and dashed the Club's hopes of selling the old driving range, neither Board apparently had much interest in dusting off the proposed covenants and finalizing the other four points of the 2007 agreement.
The driving range deal resurfaces
Fast forward to 2010, and a new SLCC Board developed renewed interest in selling the driving range. The SLLA Board found itself under persistent questioning from the membership about when the Country Club's covenants would be filed. Members also wanted to know when a second element of the 2007 agreement -- an easement creating a buffer between the property and Seven Lakes Drive, to prevent opening a second entrance into the South Side through the old range -- would be finalized.
Negotiations resumed, with the Club holding the easement hostage in order to obtain a rewrite of the fifth point of the 2007 agreement, which dealt with the relationship between any developer of the driving range and the SLLA's Architectural Review Board. The SLCC Board wanted to ensure that any developer of the old driving range would be treated fairly.
SLLA President Randy Zielsdorf -- the only member of his Board who was also serving in 2007 -- focused on the easement. Architectural Review Director Melinda Scott focused on the rewrite of bullet point five. SLCC President Steve Ritter handled the negotiations for the Club.
No one, apparently, spent much time reading the new Country Club covenants, other than SLCC Attorney Penny Hayes and SLLA Attorney Hunter Stovall, who was charged with ensuring that the document limited "the use of all Country Club property to the operations of the golf course and country club."
On Valentine's Day, the SLLA Board unanimously approved an amendment to the 2007 agreement that rewrote bullet point five [Treasurer Denny Galford, who previously served on the SLCC Board, recused himself from the vote.] SLLA President Zielsdorf and SLCC President Ritter signed the easement. Ritter signed the new covenants, which were filed the next day, and announced that a Raleigh-based home builder had signed a purchase contract for the old driving range. Photos were taken to commemorate the event.
No one noted during the meeting -- nor, so far as The Times has been able to determine, did anyone other than Attorneys Hayes and Stovall actually understand -- that the covenants Ritter signed allow any and all the acreage owned by Seven Lakes Country Club to be subdivided and sold as residential lots: from the Number 1 tee box to the Number 18 green, including the old driving range, the clubhouse and maintenance building, and even the tennis facility in Seven Lakes North.
The declaration that Ritter signed, filed with the County of Register of Deeds the following day, read, under the heading "Use Restrictions," as follows: "The Declarant's [SLCC's] use of the property shall be limited to the operation and management of a golf and country club or residential development."
"Or residential development."
That three word phrase means that the Club, or anyone to whom it might decide to sell all or part of its property, can subdivide the property and sell lots or build houses -- not that it is likely, or that it will happen, but that the Country Club's new covenants explicitly allow that use.
It is not clear when, in the process that created the Country Club's covenants, the phrase "or residential development" was added to "the operations of the golf course and country club," the limitation called for in the original 2007 agreement.
Attorney Hayes authored the document, but, after forwarding a copy to Stovall, lost the original in her computer. Stovall then recreated the text, so his name appears on the recorded copy as preparer.
It is clear is that Stovall believes the addition of "or residential development" is in keeping with the intention of the original agreement.
"That is absolutely consistent with the original agreement," Stovall told The Times. "It was never the idea that this could only be a golf course." While acknowledging that adding "or residential development" may not seem to square with the first point of the 2007 agreement, Stovall insisted it conforms to the overall intent of the document.
"The concern was," he explained, "if the golf course was not a golf course any more, what would happen with this property? The concern was that it not be commercially developed. What we didn't want to have happen -- and nobody wanted to have happen -- is that we wanted to avoid any type of commercial development on any of the country club property."
Stovall told The Times that restricting the use of the land solely to the operations of a golf course and country club "would be an impossibility."
"That would be like telling the newspaper that you always have to be a newspaper," he added. "It was saying 'You can be a country club.' If you're not a country club, the land would be sold, so that's why we talked about residential. I don't believe the agreement was ever about 'You can only be a golf course.'"
The original objective
In August of 2007, when he announced the SLLA Boards' four-to-three vote to approve the five-point agreement with Seven Lakes Country Club, then-President Don Truesdell read from a prepared statement explaining the rationale for signing the agreement.
"The four most important points in this agreement were," Truesdell said: "One. To insure that the Seven Lakes Country Club golf course could only be used as a golf course and no other purpose."
In the days following Truesdell's announcement, The Times interviewed each member of the SLLA Board of Directors, asking about their vote on the agreement.
Director Laura Douglass, who voted in favor of signing the agreement, told The Times, "We wanted to make sure that there was language in the agreement that stipulated that the entire golf course property -- except for the old driving range -- would forever remain a golf course."
Director Randy Zielsdorf -- now the Association's President -- told The Times that the agreement would prevent the Club or any future owner of the golf course property from carving up the fairways into building lots.
"Trying to preserve the golf course and trying to get some protection on the old driving range [that is, the buffer along Seven Lakes Drive] was more important than getting bogged down in the issue of houses on the old driving range,” he said.
Did anyone read the covenants?
By their own witness, the SLLA Board members who voted to approve the 2007 SLLA-SLCC Agreement believed they were protecting the golf course property from future residential development. How and when the Board's attorney came to misunderstand that intention is not clear. An intervening lawsuit and the simple passage of time may have played a role -- as well as the fact that only one Director remains from the Board that approved the 2007 agreement.
And that Director, now-President Randy Zielsdorf, was focused on the easement along Seven Lakes Drive, was uncomfortable reading legal documents, and trusted Stovall to look after the Association's interests in the wording of the SLCC's covenants.
"That document was blessed by our attorney," Zielsdorf told The Times when asked about the discrepancy between the 2007 Agreement and the 2011 SLCC covenants. "I'm not sure how many Board members sat down and read it."
"Personally, I did not get involved in the country club's covenants," he added. "I was relying upon [Attorney] Hunter [Stovall] to be the watchdog there."
Ziesldorf said that preventing the residential subdivision of the Club's property -- aside from the old driving range -- "was the whole purpose of the Country Club covenants." If the Club's covenants would allow development of the property, he said, "That would be a surprise to our Board, if that is what those covenants end up doing."
Stovall told The Times that he provided the draft covenants to Zielsdorf and Community Manager Alina Cochran for distribution to the full SLLA Board.
"Both attorneys agreed that the covenants seemed to be appropriate," ARB Director Scott told The Times. "We're paying them to look out for our interests." Scott was the Association's chief negotiator on the revisions to bullet point five of the 2007 agreement. She said she had read the proposed covenants when they were presented to the Board in July and "browsed through them a month or two ago."
"We were told that the attorneys had blessed both of those documents," she said.
SLCC President Steve Ritter told The Times that he hadn't read the Club's Declaration in the past six months.
"I'm not an expert on this stuff," Ritter said of the legal documents. "I'm not really eligible or able to discuss it intelligently at this point. I've read the documents a couple of times."
Ritter continued: "My comment to [SLCC Attorney] Penny [Hayes] was: 'Will this document allow us to take the former driving range and sell it for residential purposes?' I'm not an attorney . . . This was approved by the Country Club Board, and accepted by the landowners' attorney."
Development unlikely
Both Scott and Zielsdorf told The Times that they felt it was unlikely that the Club's property, aside from the old driving range, would ever be parceled into residential lots.
"Most of those fairways are pretty landlocked," Zielsdorf said. "I think that it would be very difficult for a developer to go in there and create building lots."
"It's ludicrous to think that, as long as they [the Club] are up and running, that they would start selling off the golf course," Scott said, adding "when I look at the country club members, everyone is absolutely invested in maintaining that golf course."
If financial difficulties ever forced the club into bankruptcy, Scott said, a bankruptcy judge would pay little attention to covenants when deciding how best to satisfy the Club's creditors.
Ritter told The Times his Board is firmly fixed on the objective of maintaining and improving the Club as a going concern. "The intent of the Seven Lake Country Club Board of Directors is to keep it a country club," Ritter said. "A lot of us [Board members] live on the country club . . . Our intent is to keep this a fine quality golf course."
South Side Covenants Would Apply
Should the land that currently makes up the Country Club's golf course, or its tennis facility, ever be sold to a developer, the new covenants provide that the property will be subject to the Declaration of Restrictive Covenants for Seven Lakes, South Side. The document explicitly notes that those covenants would be enforceable by the Seven Lakes Landowners Association.
That provision appears to be designed to satisfy Point 4 of the 2007 agreement, which reads: "Upon the sale of any Seven Lakes Country Club property for residential purposes such properties will be subject to the South Side Covenants."
The Section 6.3 of the Declaration gives the Club the right to amend it at any time, which calls into question the permanence of even the restriction of future uses of the golf course acreage to residential uses. However, the Club cannot amend the Declaration in a way that would take away the SLLA's authority to enforce the South Side Covenants on the property, if it were sold for residential purposes.
Public input lacking?
Having spotted the discrepancy between the 2007 Agreement and the Club's 2011 Declaration in a quick read-through, The Times asked Zielsdorf, Scott, and Stovall whether there might have been some virtue in releasing the document to the public before it was filed, so that, perhaps, its limitations might have surfaced in public debate.
All three said the Declaration is ultimately the Club's document, not the Association's. "It would have been inappropriate for the landowners association to have disseminated to the general public the country club's proposed documents," Stovall said.
SLLA Director Bud Shaver, also an SLCC member, told The Times that he felt the Association had no right to pass judgement on the Club's covenants. But he would have appreciated, as a Club member, having the opportunity to review and vote on them.
"I don't think I, as a [SLLA] Board member, have any business telling the country club what their covenants should say or not," Shaver said. "But I would like to see the Country Club present their covenants to the membership."
