Termination at Will
Current Club practice
Termination at will is not permitted. A member who resigns will be enrolled on the surrender list even if the member:
- (1) Resigns, and
- (2) Agrees to forfeit proceeds from reissuance of the membership, and
- (3) Asks to be removed from all Desert Mountain lists.
Can a member resign without further obligation?
The July 1, 1994 bylaws gave members (on page 16) the right to resign at any time. But the July 1, 1994 deferred equity membership plan required (on page 7) that “a resigned member shall be required to continue paying dues and will be entitled to use the Club Facilities until the membership is reissued by the Club.” That changed at some time before March 2004.
Bylaws issued on March 31, 2004 deleted mention of a resigned member and substituted (in paragraph 6.1.4) language requiring those on the surrender list to continue paying dues and charges. Presumably, those who terminated their membership and were not placed on the surrender list (because they did not claim the surrender payment) had no further liability for dues and charges. Bylaws issued March 31, 2006 and December 31 2010 include the same language. All three sets of bylaws (2004, 2006 and 2010) state clearly that a membership may be surrendered for reissuance (in paragraph 6.1.3).
Can members be locked in for life?
Changes have been made to club membership agreements and bylaws in an attempt to resolve any ambiguity about the right of members to resign. Members are said to be bound by the latest rules and bylaws, not rules and bylaws in effect at the time a member joined.
August 2014 bylaws provide only two ways to quit the club: (1) the monthly membership auction, or (2) by recruiting a replacement member. In either case, a $65,000 transfer fee has to be paid to the club.
Temporary or permanent disability does not release a member from the obligation to pay club dues and charges. Section 3.7.8 prohibits any leave of absence. Section 3.7.4 prohibits downgrade of any membership, such as from a golf membership to a non-golfing membership.
Even death of a member does not extinguish obligations to the club. Section 4.6 requires the spouse of a deceased member to either assume the membership, get a family member to assume the membership, or put the membership up for sale in the monthly auction described in section 4.1.
Under the section 4.1 auction, a member who wants to quit the club must make a request for resale at least two days before the end of each month and must identify the asking price. The club advises prospective members of current asking prices. If a membership is not sold during the month, the request for resale expires. More memberships are offered for sale than there are buyers. Some members have been trying to sell their membership for 5 years or more. When a membership is sold, bylaws section 4.7.3 requires that the selling member make up any difference if the sale price is less than $65,000.
Section 4.8 describes the other way to get out of the club: Recruit a new member and pay the $65,000 transfer fee. But note that section 4.10 prohibits advertising a membership for sale.
The club has an inventory of unissued memberships and has a financial incentive to sell memberships from inventory rather than from the resale list. Bylaws section 4.3.1 gives the club authority to sell memberships at the ratio of one inventory membership to each resale membership. Section 4.2 allows the board to set the asking price of memberships sold from club inventory.
A member on the resale list has club privileges and must pay dues and charges until the membership is sold. But bylaws section 4.3.3 revokes all privileges if a member on the resale list falls 60 days delinquent. When 120 days delinquent, the board can remove a member from the resale list and file suit to collect. Bylaws section 5.5 sets the late fee at 10% per month. Bylaws section 5.2 gives the club the right to add attorneys’ fees and collection charges to delinquent accounts. Section 4.1 requires the selling member to pay all fees, charges, interest, late fees and attorney fees assessed against that member before requesting a resale. Membership agreements give the club authority to demand a credit card or bank transfer authorization to make automatic charges against a member.
The club claims the right to impose new charges and restrictions without consent of a member. That means a member’s contract can be changed at any time by majority vote of the club’s board of directors. Section 5.2 of the bylaws authorizes the club board of directors to change club rules when needed to cover an operating deficit. Every change in the rules and bylaws is said to supersede promises made earlier by the club.
For example, club bylaws were changed in 2014 to impose an equity golf transfer fee of $65,000 regardless of what had been promised in any prior membership agreement. Compare Section 4.7.3 (“Conflicts”) in the August 1, 2014 bylaws with Section 4.6.3 (“Conflicts”) in the July 1, 2013 bylaws.
Violations of these club rules are enforced by a disciplinary committee. Section 6 of the bylaws give the board authority to fine, suspend or expel members. Members have been disciplined for many reasons, including criticism of club management. Discipline committee hearings do not comply with due process standards. For example, the committee does not have to reveal the names of persons making accusations or allow the accused to present witnesses. Suspended members have to pay dues and charges while under suspension. Expelled members still have to pay the $65,000 transfer fee.
The disciplinary committee also enforces a non-disclosure agreement against Desert Mountain board members. Disclosing to a club member anything discussed at a board meeting is prohibited and can result in expulsion from both the board and the club.
Club Offers Exit Passes for $32,500
In response to slow membership sales and to raise $5 million in cash, the Club offered on May 16, 2016 to sell 150 exit passes to members for $32,500 each. Members report that all 150 exit passes were sold in the first three days. Questions to consider: What’s the value of an exit pass if there’s a change in ownership, such as a foreclosure by lenders? Can members who bought an exit pass trust management not to change Club rules again, thus invalidating their exit pass? Still, all 150 exit passes were sold and more have been offered at the same price, $32,500.