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MSRA Covenant and Membership Information Paper INTRODUCTION: This information paper is intended to describe a two-part effort aimed at amending the current multiple covenants governing Mountain Shadows, while concurrently increasing revenue via mandatory membership in the MSRA. PURPOSE: To provide a unifying amendment to the current covenants covering Mountain Shadows while simultaneously providing an effective revenue stream for maintenance, improvement and renovation of common areas within Mountain Shadows. There are 26 individual covenants governing different sections of Mountain Shadows 580-plus homes. The current organization presents an almost impossible challenge regarding collective community voice, protection of the neighborhood interest, and overall homeowner investment. The mandatory two-tier membership portion has the purpose of creating a revenue stream to support much needed maintenance and upkeep of the common areas of the neighborhood, while still allowing the choice between two levels of monetary support. Finances are the primary obstacle to sustaining and improving the condition of the common areas in the neighborhood. The purpose of this two-fold effort is meant to create a more unified, attractive and valuable community. BACKGROUND: Numerous residents have voiced a
growing concern over issues that undermine the property values and
prestige of our neighborhood. With membership currently optional, and
participation at even the lowest level (Maintenance and Operations) below
2/3rds of homes, the income stream is unreliable and MSRA lacks sufficient
minimum funds to support adequate maintenance of common areas. The
current voluntary structure has an inherent bias of apportioning a common
burden among only the number of families who acknowledge an obligation to
pay a share of common expenses. Optional membership equates to optional
dues, a structure that is unheard of in any area neighborhood. In
addition, the current 26 separate sets of covenants (which are nearly
identical) exist because the neighborhood was built in multiple phases and
each phase was made subject to a separate set of covenants. Improving the
multiple separate covenants with a single page amendment will help
facilitate future decisions about issues impacting the neighborhood. To develop solutions, the MSRA Board initiated a Covenant Committee, charged with coming up with potential ways to attack the neighborhood issues. The Covenant Committee first developed a vision and mission statement for Mountain Shadows, which was approved by the Board and promulgated through The Shadow newsletter. Next the Covenant Committee presented different membership options and fee schedules to the MSRA Board. The Board approved a two-part initiative, which contains an amendment to the current covenants and a two-tier mandatory membership structure. As a point of comparison, other comparable neighborhoods have mandatory membership with the following examples:
The Enclave;
$700 a year for basic dues FEASIBILITY: Research of the existing covenants and membership, along with a consultation with a legal firm has proven that the individual covenants can be amended and that membership in the MSRA can be made mandatory. What is required is to obtain the necessary vote to ratify the proposed covenant amendment and membership structure. Amending the covenants and mandatory membership requires 66.7 percent “yes” vote from property owners. GOALS: Overall:
To meet the MS Vision of becoming the
premier neighborhood in the Chattanooga area. Ensure solvency of
MSRA. Mid Term (1-3 Years) Improve Entrances Long Term (3 –5 years and beyond) Decay problem
fixed…now upkeep DECAY: Attached are just a few pictures of the current state of repairs on the common areas.
Current Finances. Estimate for 2008: Current Membership Numbers and Revenue114 Full Memberships @ $475 $54,150 23 Social Memberships @ $175 $4,025 237 Maintenance/Ops @ $125 $29,625 TOTAL of 374 Members generating $87,800 PLUSOutside Pool Membership and Misc. Pool Revenue $ 8,400 Initiation and Interest $ 800 Budgeted Operating Inflows $97,000 Current Year Expense EstimateMaintenance/Ops (utilities, taxes, insurance, repairs etc.) $53,280 Social Functions $ 6,850 Pool $43,680 TOTAL: $103,810
Estimated Directory Net $9,000 Estimated Cash position $2,190 Current membership versus expense:Full Membership: 20% of residents pay 50% of budgetNon-members: 36% pay nothingNOTE: 208 residents are non-members
SPECIFICS OF THE TWO TIER STRUCTURE: Tier One will be the required baseline and will be akin to combining the current maintenance/operation level and the current social level. It will allow everyone to participate in all social events and include use of the tennis courts, playground, basketball courts and three visits to the pool each year. Yearly amount: $200…or roughly $.55 a day Tier One Members Pool Guidelines: All Tier One members receive 3 pool passes per household under the new amendment change. ID will be required at gate and the head of household member will have to sign the signature sheet. If you have any questions please contact a board member. Tier Two will include everything in Tier One plus unlimited use of the pool. Yearly amount: $475…or $1.30 a day Additionally, initiation fees are waived for new members in 2009 and the maximum membership cost can increase is 10% per year. Potential outcomes under Two-Tier proposal Assumptions: 114 Tier 2 members assumes no increase from current year Full Membership numbers 185 Tier 2 members assumes membership equal to peak Full Membership in past 10 years 114 Tier 2 (Full) Memberships @ $475 $54,150 468 Tier 1 (Maint/Ops/Social) @ $200 $93,600 TOTAL: All Members generating $147,750…a 68% increase over current
185 Tier 2 (Full) Memberships @ $475 $87,875 397 Tier 1 (Maint/Ops/Social) @ $200 $76,400 TOTAL: All Members generating $164,275…a 87% increase over current
DRAFT VERSION OF COVENANT AMENDMENT Each of the sets of restrictive covenants would have to be amended to include the following: Following to REPLACE second Whereas clause: WHEREAS it is the plan of the Developers to devote the lots in said Phase and Unit of said Subdivision (the “Lots”) to restricted residential purposes; Following to be inserted immediately before paragraph (a): Every Lot Owner as hereinafter defined, shall be a Member of the Mountain Shadows Residents’ Association (the “Association”) as defined and described in the By-Laws of the Association, a copy of which is attached hereto. For purposes hereof, Owner shall mean and refer to the Owner as shown by the real estate records in the Register’s Office of Hamilton County, Tennessee, whether it be one or more persons, firms, associations, corporations, or other legal entities, of fee simple title to any Lot, (but, notwithstanding any applicable theory of a mortgage, shall not mean or refer to the mortgagee or holder of a security deed who has acquired title pursuant to a foreclosure by exercise of power of sale or otherwise or a proceeding or deed in lieu of foreclosure), nor shall the term Owner mean or refer to any lessee or tenant of am Owner. TIMELINE: First step of this process was the July newsletter, which laid out some of the issues facing the MSRA. Second, all residents are receiving this information letter to notify residents of the proposed changes and the implications of these changes. Third, there are three scheduled neighborhood meetings meant to further explain the issues, cover planned improvements and answer questions. The informational neighborhood meetings are scheduled at the clubhouse on the following dates:
These will be approx. 30-minute presentation with Q&A and discussion (all held at clubhouse) At these meetings, the current covenants will be available for review. Additionally, there are designated neighborhood representatives who have been part of the Covenant Committee or are Board Members who have volunteered to help answer questions or up channel questions for those who cannot make the neighborhood meetings. For more information, please feel free to contact any MSRA Board Member. Finally there will be a vote regarding the covenant amendment and required membership. Voting can be done at the informational neighborhood meetings if you desire, and we will have additional voting dates (again scheduled at the clubhouse) on the following dates:
Our goal is to complete the voting process prior to early November 2008 in order to have the amendment to the covenants approved and in effect by the end of the fourth quarter of 2008 and to have the new membership structure is in place, effective for next years membership drive starting in January 2009. FAQs: What is the proposed 2-tier system? The two-tier system consists of a Tier 1 Membership, an enhanced version of the current maintenance and social level with three visits to the pool, and a Tier 2 Membership, which includes unlimited pool use. Tier 2 will be similar to the current full membership. What is the cost of the different tiers? The cost for Tier-1 is $200 annually. For Tier-2, it is $475 annually. How will fees work for current residents? The MSRA Board has voted that current residents who are not members of MSRA be given an initiation fee holiday. In other words there will be no initiation fee next year, 2009. The only fees that apply are those of either Tier 1 or Tier 2, based on your selection. What do I get for a Tier 1 membership? In addition to supporting the upkeep of common areas that directly impact your property value, it will allow you and your family to participate in the neighborhood social events and includes use of the tennis courts, playground, basketball courts and three visits to the pool each year. Tier-2? Tier-2 will include everything in Tier 1 plus unlimited use of the pool. Can I pay monthly? Absolutely. MSRA will also keep an annual payment option. What’s wrong with the current arrangement? To become the premier Chattanooga neighborhood, we expect all homeowners to participate in the MSRA at one of two membership levels and share in common expenses. Currently Mountain Shadows is neither the premier neighborhood nor is it cohesive. The current covenant situation requires votes from 26 different zones in order to present a unified front on subjects. If a community situation developed where Mountain Shadows needed to have a neighborhood decision made, we would have to poll each separate zone for approval. Under the current arrangement there is a high probability that some of the zones would not have sufficient votes due to non-participation, or have a split vote. The result would be zones that vote to pass (or defeat) a proposal, while the next zone (possibly right next door) have the opposite result. This is a self-defeating arrangement with an inherent inability to reach an accord. In addition, there is increasingly apparent decay of the common areas due to the long-term effects of voluntary membership and the limited income intrinsic to the current arrangement. What this has caused is a “thumb in the dyke” approach to repairs…what is the worst thing and can we even afford to fix it? This approach lacks long-term focus and has put us in the current position of struggling with upkeep of common areas. Why do I care about a unified MSRA front? A potential example is the possibility that Mountain Shadows will be selected for annexation or city sewer system. What that could mean is that Mountain Shadows would be required to have city sewage and the attendant fees associated with this “service”. The monthly cost could quickly eclipse the annual Tier-1 membership. If this is what we want for the neighborhood, so be it…but if not, then we need unity of effort to combat the endeavor. With the current arrangement, we would be 26 different zones without unanimity. Is there ANY chance the city would try and annex Mountain Shadows? You decide if the city is contemplating annexation of Mountain Shadows. Read the following link from an article in the Chattanooga Times Free Press on 8 September 2008, which specifically referenced Mountain Shadows. (http://www.timesfreepress.com/news/2008/sep/08/chattanooga-growing-population-land-mass-citys-fut/?local) For those without a link, here are a few excerpts. As Chattanooga’s population grows, there will be a day when the city’s land mass grows with it, according to Mayor Ron Littlefield. “We have the infrastructure already in place to serve a growing metropolitan city,” he said. “And the more we can share the cost of those services ... the lower the individual costs to taxpayers — the property owners — so that’s the important part of annexation and growth for the city.” A lot of the new growth in population has occurred on the fringes of the city around East Brainerd and Hixson, officials said. But as the city plans for growth, it also must plan for police and fire protection, along with sewer lines. Running sewer lines to the areas within the city’s growth plan would not be problematic, Public Works Administrator Steve Leach said. “They’ve already got sewers in the area,” he said. “It’s serving certain subdivisions. It’s not universal, but it could be.” Note: City Tax rates are nearly double that of county properties, approximately 5.2% city as opposed to 3.2% for the county. What are the covenant changes that may be adopted? The verbiage of your restrictive covenants will not change! What will be added is an amendment that says something to the effect of “Every Lot Owner as hereinafter defined, shall be a Member of the Mountain Shadows Residents’ Association (the “Association”) as defined and described in the By-Laws of the Association”. Said without legalese, the covenant that covers your house today will cover your house tomorrow. With the amendment, Mountain Shadows Resident Association as a whole can address issues that concern Mountain Shadows residents as a whole. Given the size of the Mountain Shadows Resident Association, in addition to the property value, we will then have considerable influence when zoning and development options are considered in our immediate or surrounding community. The addition of amendment language regarding MSRA membership will establish a formal bond and community across all residents. Can dues be included in closing costs with mortgage? Yes. How will title companies know our dues are mandatory? Title companies and realtors will learn about the fees when they pull covenants and restrictions related to the properties. We can send a notice to the larger companies in town once the change is made. Where will my money be spent? The vast majority of Tier-1 money will be spent on upkeep of common areas (entrances, street signs, tennis courts, playground, basketball courts and club house). Now it is possible that some of the Tier-1 money is spent on maintenance of the pool but since Tier-1 now includes pool use and since the pool increases the overall value of the neighborhood, it is reasonable and prudent to do so. Tier-2 money will also go towards upkeep of common areas and will additionally pay for the upkeep of the pool. In addition, money will be used to improve and pay down the mortgage on the clubhouse, purchase the land at the entrances (which do not belong to the MSRA) and promote greater social functions. Ultimately the MSRA Board will decide on the priority of repairs and improvements, but as MEMBERS of Mountain Shadows, you have a voice in that process. How much can the dues increase? A maximum of 10% per year. I see a potential $2,190 surplus for this, why do we need to increase income for MSRA? The surplus, as much as it is, only exists because we are paying off the clubhouse at a slower rate and have done very little in the way of improvements. Directory proceeds once used to make improvements have become a vital flow of funds to meet basic budget obligations. It is also an estimate of what will be left at the end of the fiscal year (which is not even 50% complete. In fact, the current budget does not even meet the needs of fixing what is in need of repair. To properly attack decay (and throw in a new State Law mandated pool drain which is highly probable), we are unable to do anything beyond pick a few of the worst areas and keep them from getting worse. Will there be a hardship clause in the membership fee structure? Absolutely! This will be handled on a case by case basis and final judgment determined by the MSRA Board. Why not a single membership level? Ideally a single membership level would simplify the structure of the MSRA. The reality is the changes being attempted are meant to be a step-by-step process. Step 1 is unification and mandatory membership. This is a big first step and by making that step a single level membership at a higher monetary expense increases the possibility of immediate failure. If we fail at step one, we end up no better off as a neighborhood and have the potential to require the association assess all properties for the cost of the upkeep of common areas. Though the assessment method will work, it certainly does not support the mission and vision of Mountain Shadows… To make Mountain Shadows the finest neighborhood in the Chattanooga Area, to a commitment to a “we” not “me” philosophy and to unify the neighborhood. A two-tier membership structure works to unify and improve the community while maintaining a level of choice regarding financial support versus your individual situation. The reality is, the more members that elect to join at Tier-Two, the sooner we will be able to renovate and improve the numerous areas that require investment. We hope all homes will consider investment at the highest amount, but allow for basic financial support at Tier-One. When and where can I vote? There will be 5 opportunities to vote. During the three informational neighborhood meetings, if you have the information you need to vote, there will be ballots available so you can vote and prevent a second trip. If you still have questions or you need to give more thought to the subjects, there are two more voting dates scheduled. Informational meetings are scheduled for:
These will be approx. 30-minute presentation with Q&A and discussion (all held at clubhouse) Voting times:
Will one person per house suffice for voting or is it both holders of the deed? The recorded owner of the lot will speak for the lot. Plain English, only one vote per lot is necessary or recorded. How is the vote recorded? Voting will be done via a check of photo ID versus residential listing of the lot owner. The vote will be placed in a lock box and once voting is complete, the designated Home Owners Association Representatives will record the votes. The recorded votes will be maintained with other HOA records. The results will be posted on the Mountain Shadows web page for all to see.
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DIRECT: (423) 364-4663 | OFFICE: (423) 899-5943 |
FAX: (423) 894-2570 Copyright 2005 Mountain Shadows Residents Association |
