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RMA releases answers to development questions posed at November meeting

Published Wednesday, January 15, 2003

The Rancho Murieta Association on Wednesday released answers to questions posed by the public at its Nov. 19 meeting on the Mutual Benefit Agreement.

That session, which ran 3 1/2 hours, was designed to gather public input on the agreement, which was negotiated over 2 1/2 years to guide the final build-out of the community.

The six-page questions-and-answers document, dated Monday, was prepared by RMA legal counsel and is signed by General Manager Greg Vorster. It makes the case for the RMA's negotiations to develop the remaining land and the RMA board's pending action on the Mutual Benefit Agreement.

It was mailed to about 20 residents who posed questions at the November meeting.

The RMA board and the Murieta Holdings development team reached agreement on the Mutual Benefit Agreement last fall, before the November election put three new members on the seven-member RMA board. The board has not yet voted on the document.

The Q-and-A document answers commonly voiced questions about annexation, custom homes, the developers' building plans and more. Here is the full text:

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At the November 2002 community meeting addressing the proposed MBA, numerous residents addressed specific questions to the Board. The following responses attempt to answer those questions. Hopefully these responses will provide a better understanding of the Mutual Benefit Agreement.

FREQUENTLY ASKED QUESTIONS CONCERNING THE PROPOSED RANCHO MURIETA "MUTUAL BENEFIT AGREEMENT"

Question: Are the developers of Rancho North obligated to annex their land to the existing development?

Answer: The Rancho Murieta common interest development was initiated in the 1960's by the Pension Trust Fund of the Operating Engineers through a development entity called Rancho Murieta Properties, Inc. ("RMPI"). The 3500 acres comprising what is now known as Rancho Murieta was subjected to a Sacramento County Planned Development Ordinance, which allows the future development of the community to include golf courses, residential parcels, a mobile-home park and commercial areas. Much of that development has already occurred, although many acres of Rancho Murieta remain to be developed as of this date.

The bulk of the undeveloped properties in Rancho Murieta north of the Cosumnes River (the "Rancho North Property") are owned by Rancho North Properties, LLC, a successor in interest to the Pension Trust Fund and RMPI. Rancho North Properties, LLC has the right to develop its lands in a manner that is consistent with the Planned Development Ordinance, and Rancho North Properties is not legally obligated to annex its development to the existing Rancho Murieta development. "Annexation" is the process by which a subdivider brings newly developed property into an existing common interest development. Under Regulations of the Department of Real Estate that were in effect during the development of Rancho Murieta, RMPI and other developers had the unilateral right to annex their undeveloped lands to the existing development for a stated period of time and that time expired. When the first Amendment to the Second Restated Declaration of CC&Rs for Rancho Murieta was approved in 1998, the developers' rights of annexation, with approval of only the RMA Board, was revived, subject to the important qualification that the developers had to propose an annexation plan that involved no amendments or modifications to the existing Rancho Murieta Governing Documents. If the developers wanted to annex pursuant to a plan that included amendments or modifications to the existing governing documents, the proposed annexation required approval of both the RMA Board and the members of RMA. Under the Second Restated Declaration, annexation on these terms remained a choice of the developers – not an obligation.

Question: What is the development plan for the Rancho North Property?

Answer: There are two principal reasons why the Rancho North Properties, LLC chose not to annex their lands to the existing development. First, the acreage included in their development plan is substantial and will take several years to develop. Any real estate development of that scale involves a substantial investment of capital and Rancho North Properties wanted to preserve greater control over its destiny than would be possible if the new development was subject to a resident-controlled owners' association. Second, Rancho North Properties' development plans include housing that does not conform, in every respect, to the Second Restated Declaration of CC&Rs and therefore, annexation would only be possible with a member vote.

The Rancho North development plan calls for a new association of property owners with jurisdiction within the Rancho North Property. However, because the new development, consisting of approximately 1093 lots, will share roads with the existing development and owners of lots in the Rancho North Property will have rights under existing agreements to use the parks and open spaces within Rancho Murieta, the Rancho Murieta Association Board of Directors has negotiated an agreement with Rancho North Properties and the Pension Trust fund that commits Rancho North Properties to honor certain development standards and density limitations and which seeks to clarify how the two communities will operate in the future with as much cohesiveness as possible. This negotiated development plan for the Rancho North Properties is documented in the Mutual Benefit Agreement.

Question: Does the Rancho Murieta Planned Development Ordinance state that all housing north of the Cosumnes River must be custom homes that are annexed to the RMA?

Answer: The answer to this question is "No". The 1977 Ordinance (77-PD-10) recites that it replaces all prior ordinances related to Rancho Murieta and the 1977 Ordinance does not require all lands to be developed as a single common interest subdivision, and the 1977 Ordinance clearly contemplated construction of townhouse, multi-family and even commercial development north of the Cosumnes River. Consistent with that development plan, the original CC&Rs for Rancho Murieta (Article XIII, Section 4) provided as follows: Any portion of such property described above and available for annexation into the Properties may, at the option of Declarant, its successors or assign, and subject to approval by the Board of Supervisors of Sacramento County, be so annexed for use as a multi-family residence, guesthouse, inn, motel, or hotel facility. Should property related to any of such uses not be so annexed, the Association shall, nevertheless grant to the Owners thereof the right to the use and enjoyment of the private streets and parks within the Properties, or any other assets or facilities of the Association, upon the payment of a reasonable charge for maintenance, repair, and upkeep or in return for the reciprocal use and enjoyment of common areas or such like assets and facilities, or a combination of both, that may be contained within any such property.

Question: Is the Second Restated Declaration of CC&Rs a legal document?

Answer: All properly drafted and recorded CC&Rs constitute covenants and restrictions that are said to "run with the land" so as to bind not only those persons who own property affected by the covenants at the time of recording, but also future owners of that property. However, it is perfectly legal (and common) for recorded CC&Rs to contain a provision that permits the covenants to be amended so long as the amendment(s) are approved by a stated percentage of the owners of affected lands. In 1996, the members – by a super majority vote – approved the Second Restated Declaration of Covenants, Conditions and Restrictions which, by its terms (see Recital H of the Second Restated Declaration) was intended to "amend, restate and supersede the First Restated Declaration and the Declarations of Annexation, all in accordance with the procedures for amendment set forth in Article XIV of the First Restated Declaration.

Question: Do the current and future owners of the Rancho North property have the right to use RMA's private roads and parks?

Answer: One of the key issues in the PTF litigation that has resolved by the Mutual Benefit Agreement concerns the rights retained by the developer of the Rancho North property to access those properties through the roads in Rancho Murieta. On the original subdivision maps for Rancho Murieta there are easements reserved in favor of Rancho Murieta Properties, Inc., and there are several undeveloped parcels now owned by Rancho North Properties that can only be accessed via the existing system of private roads within Rancho Murieta (that is, the parcels are otherwise landlocked). Also as noted in the bold quote from the original RMA CC&Rs quoted above, from the outset of the development it was contemplated that lands within the area of the Planned Development Ordinance might not be annexed and yet the RMA was obligated by the original CC&Rs to grant rights of access in exchange for payment of a reasonable fee. That is one of the principal objectives of the Mutual Benefit Agreement.

With respect to the access issue it is also important to note that pre-existing rights and easements have been established in favor of the Community Services District and the owners of lands in the jurisdiction of the Planned Development Ordinance that are not annexed to RMA. Specifically, Rancho Murieta Association is already subject to a recorded Easement Agreement between the RMA and the CSD that gives the District rights of access and use with respect to the lakes in Rancho Murieta and to several recorded Park Development Agreements that were signed by the RMA and the then owners of all unannexed lands in the PD Ordinance area in 1991. Those Park Development Agreements were the result of negotiations with the CSD that enabled RMA to continue to own common facilities that were to be available to all residents of the area administered by the Rancho Murieta Community Services District.

Question: Does the Board of Directors have the right to enter into the Mutual Benefit Agreement without member approval?

Answer: The answer is YES. The Mutual Benefit Agreement is a document that has its origin in the settlement of litigation between the Pension Trust Fund and the RMA (Sacramento County Civil Action No 96-AS03878). That litigation was resolved pursuant to a Letter of Intent that contemplated various terms of future access and development of the Rancho North Properties to be documented in writing. Perhaps the single most important reason for filing the lawsuit was to prevent PTF's foreclosure against the Anderson companies from nullifying the Park Agreements. In the settlement PTF agreed to subordinate its deed of trust to the Park Agreements and to complete the conveyance of the park sites to the Rancho Murieta Association. The Board of Directors had the authority to initiate the lawsuit on behalf of its members and the authority to settle that suit on terms that the Board, in its discretion, considers fair and reasonable to the Association's members. That authority to initiate and resolve litigation is found in Article IX, Section 1(s) of the Association Bylaws and the general statement of Association powers and authority found in Article VII, Section 1 of the Association Bylaws and Article III, Section 6, of the Second Restated Declaration.

Prior to initiation of the Arbors development, approval of the members of Rancho Murieta Association was solicited because that development involved property that was already annexed to the existing Rancho Murieta development and the development plan resulted in a reduction in the total number of assessable lots from 154 to 87 lots. Because that assessment reduction impacted both the Rancho Murieta Association and Murieta Townhouses, Inc., Mr. Schumacher (the developer of the Arbors) conditioned his willingness to proceed with the development of the two Associations first obtaining approval of the development plan from their members. In addition, the Arbors development plan called for an amended subdivision map that impacted the Association's common area and this served as an additional reason for obtaining member approval.

Question: Why doesn't RMA have direct lien rights to collect the RMA dues from future lot owners in Rancho North?

Answer: A key provision of the Mutual Benefit Agreement calls for the new Master Association with jurisdiction over the entire Rancho North Property to make monthly payments to the Rancho Murieta Association, called the "RMA Contribution", to compensate RMA for its expenses of owning, maintaining and operating the common facilities to which the Rancho North property owners will have access and the private streets that the RMA owns and maintains. The RMA Contribution is determined by multiplying the number of lots in the Rancho North Property that are subject to assessment by the Rancho Murieta North Association (the "new Master Association") times the amount of the Rancho Murieta Association's Regular Assessment (Article IV, Section 2 of the RMA Declaration), as levied on the members of Rancho Murieta Association from time to time (less certain line items in the RMA budget related to cable television service in excess of basic cable, certain future RMA amenity expenses relating to facilities not approved by the new Master Association and to which the Rancho North property owners have no rights of access, and costs associated with the RMA Internet/Broadband Project or other RMA telephone services unless the Rancho North Property also joins in the development of those services). Each Rancho North property owner's share of the total RMA Contribution is referred to in the Mutual Benefit Agreement as the "Individual Contribution Amount".

Article IV of the Mutual Benefit Agreement provides as follows: The RMA Contribution shall be a Common Expense of the Rancho Murieta North Association. Subject to the terms, conditions and restrictions set forth in this Mutual Benefit Agreement, the obligation of the Rancho Murieta North Association to pay the RMA Contribution to Rancho Murieta Association shall be appurtenant to the Rancho North Property and a covenant running with the land as provided in Section 14.02, below. The lands to be benefited by receipt of the RMA Contribution payments include all lands comprising the Rancho Murieta Property and the owners of such lands….

Other provisions of the Article IV of the Mutual Benefit Agreement give Rancho Murieta Association a right of action against the new Master Association, but "Rancho Murieta Association shall have no right to maintain a collection action against any lot owner on account of any default in the lot owner's payment of individual Contribution Amounts."

When an obligation that is tied to the ownership of land meets the requirements for a "covenant running with the land", that obligation is binding not only on the initial parties who enter into the obligation, but also on their successors in interest who acquire any portion of the benefited or burdened property. In this instance, the original promisor is the developer of the Rancho North Property and the original promisee is the Rancho Murieta Association. The California Department of Real Estate will not allow the RMA to use lien and foreclosure procedures as a means of collecting delinquent individual Contribution Amounts because the persons who are obligated to pay those sums to the New Master are not members of the RMA. However, the Master Declaration of CC&Rs for the Rancho North Property will give the new Master Association the right to use lien and foreclosure remedies to collect the individual Contribution Amount from its members.

Hopefully the above responses provided you the information you were seeking. If you have additional concerns, please put your questions in writing and forward them to me.

Sincerely,

Greg Vorster, PCAM, CCAM
General Manager

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