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2013: The Year the Grownups Talk About Failed Golf Courses Or Just More Litigation?

January 28, 2013
A. Kimberly Hoffman and Robert A. Harris
Golf Dispute Resolution - Tracking the Intersection of Golf and Law

Golf disputes making their way to court dockets often involve issues arising out of failed golf courses. Owners desire to turn the course into residential housing or commercial property or to sell to developers who will undertake such efforts. Recent examples of such battles can be found herehereherehere and here.

As a general proposition, litigation rarely is the most efficient way to resolve disputes. It is economically inefficient, its results are unpredictable, and it stifles the ability of those with competing interests to design solutions that, often, can accommodate the legitimate goals and requirements of all concerned.

The destructive battle lines drawn by litigation are amply demonstrated by the courtroom wars over the future of failed golf courses, as the perceived short term gain that local governments hope to accomplish by resisting efforts to repurpose economically unviable courses can prove to be shortsighted.

Local governments should make a New Year’s resolution to take a more sophisticated approach to the redevelopment of failed golf courses. If so, 2013 might be the year that, rather than letting the best be the enemy of the good, consensus will build around clustered, mixed use or even low density redevelopment plans with a public open space component as a win-win solution. That way, the community (also known as “those who pay taxes”) can get the open space it wants after a course fails as a going concern without the expense that litigation involves.

With many states still struggling with high unemployment, the political will to raise property taxes and acquire these properties through condemnation does not exist. Why then do some localities continue to pour resources into lengthy litigation battles instead of hammering out compromises with golf course owners?

There are demonstrable benefits to abandoning the zero sum game approach, where a local government seeks to order a private owner to continue to operate a course with no viable business plan, or fights for a declaration that the entire property remain “open space,” leaving no money available to repurpose some of the property for public use.

The golf industry would benefit by eliminating the siphoning of players from financially viable courses to those that, due to governmental resistance to redeployment, effectively are required to remain open but unprofitable. Similarly, new courses would have an improved chance for financing by taking a big, scary negative comparable out of the appraisal picture. Local governments and community groups have good reasons to make deals instead of resorting to the courts.

Permanent Preservation

When the owner of a struggling or failed golf course proposes doing something else with the land, the community often reacts as though the land is a public resource, not private property. Zoning laws and deed restrictions may reveal weak or non-existent provisions relating to the future use of the land should the golf course use be abandoned. Therefore, a well-planned mixed use, clustered or low density residential community with a substantial open space component can create clear rights and obligations with regard to the future preservation of open space through the new restrictions recorded in conjunction with approval of a new development. This will obviate the likelihood of future litigation and disagreements, especially with regard to homeowners who purchased homes directly on the course.

Additionally, establishing a scheme of homeowners’ dues or deeding the newly created open space to a public custodian (such as the state or a preservation trust) will facilitate a financial plan for the initial repurposing and perpetual preservation of the open space that does not rely exclusively on property tax or other public revenues. Conversely, a litigation “victory”, whether by a citizens group or local government, mandating the preservation of an unfunded, economically unviable golf course as open space leads to a shortsighted, counterproductive, irresponsible result. Open space, especially when it abuts existing development, does not maintain itself for free, and without a plan and funding for its long term management, the public cannot safely and without trespassing enjoy its benefits.

Environment

Golf courses have not always been maintained in an environmentally responsible way, at least by current standards. Problems with failed courses sometimes include latent hazardous conditions resulting from the past application of fertilizers with ingredients now considered harmful. However, once redevelopment begins, government funding aimed at the cleanup of “brownfields” in redevelopment programs may become available.

Historically, many courses have also complicated a community’s attempts to address drainage problems. Unlike modern drainage codes that now require a course to control water quality and quantity, older courses—not designed in accordance with such requirements–have sometimes (but often not) undertaken at best some piecemeal remedial measures to improve drainage conditions for the course and surrounding lands into which the course drains. Adding to the complexity may be a lack of written and recorded drainage easements in favor of surrounding lands, as well as pressure from regulators for states and local governments to show improvement in water quality within large watersheds.

A golf course may play an outsized role in government’s ability to reach drainage goals if the surrounding lands have been densely developed with a lot of impervious surface. Responsible redevelopment provides opportunities—and funding–to remediate drainage and other environmental conditions without reliance on tax revenue, potentially creating the only viable avenue for addressing these important needs within a foreseeable timeframe.

Economic

When a golf course fails, jobs are lost and the local economy suffers. Responsible redevelopment can serve to replace, and even enhance, the economic value of the land as a community resource, first though construction jobs and transfer taxes, and over the long term by creating employment opportunities in parks and recreation and mixed use retail. Ultimately, the property tax base increases, both from new households and from an increase in the fair market value of existing homes in the community.

When a combination of political intractability and impracticality overrides a reasoned pursuit of these benefits, a failed course becomes at best a white elephant for the community. At worst, the course will bring down surrounding property values, leave environmental conditions unaddressed, and deprive the community of a public amenity with a realistic long term plan for enhancing quality of life.

Will 2013 be a year when short term, intense political gain realized by opposing reasonable redevelopment compromises for failed golf courses gives way to pursuit of long term public good? Since it’s only January, it’s too early to tell, but there is always hope. Bring up the subject if you run into your local government officials or neighbors on the golf course.

ABOUT THE AUTHORS:

A. Kimberly Hoffman focuses her practice on commercial real estate and land use matters including litigation and transactional work at the Delaware law firm of Morris James LLP. She represents a diverse group of local and national developers, property owners, and institutions, including golf course owners, investors and financial institutions in workout situations involving golf courses. While Ms. Hoffman does not play golf, she enjoys riding in golf carts as well as having the house to herself to write articles about golf and real estate while others hit the links. Ms. Hoffman has been named one of “America’s Notable Lawyers in Land Use and Zoning” by Chambers USA, America’s Leading Lawyers for Business, 2007-2012. Ms. Hoffman can be reached at khoffman@morrisjames.com or call 302.888.5209. Follow her on Twitter @KHoffmanMoJames or learn more about her practice at www.morrisjames.com.

Rob Harris is general counsel to Clayton Holdings, LLC. He also serves as a mediator and arbitrator and he authors the Golf Dispute Resolution (http://www.golfdisputeresolution.com) website that tracks the intersection of golf and law. He serves as a member of the National Golf Industry Advisory Committee and is a member of the American Arbitration Association’s National Golf Industry Panel. Mr. Harris can be reached at rharris@golfdisputeresolution.com or  call 914.482.2448 .

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