Competing Interests at Equity Club Turnover

Posted in Clubs

Equity club developers and equity club members often view turnover and member due diligence completely differently. The typical developer position is: “The Club will be turned over to the members ‘where is, as is’ in accordance with the club documents.” The typical equity member view is: “We want to find out if there is any problem with the Club facilities, membership program or Club finances, and we expect the developer to fix any problem.” Which position is right?

The developer is generally correct that all it is required to do is turn over the Club in accordance with the club documents, and most club documents provide for a “where is, as is” turnover. However, the club documents may include title, deficit funding, reserve, and accrued liability payment requirements. Turnover must comply with such requirements.

Club members may also look beyond the club documents, and claim certain rights by virtue of side agreements, correspondence, representations in marketing materials, and even alleged verbal representations. These materials should be reviewed, as well as any Club document disclaimers regarding such ancillary materials and representations. Continue Reading

Franchise Agreement Transfer Provisions

Posted in Franchise, Hotels

The number of hotels, particularly limited service hotels, operating under franchise agreements has exploded in recent years, and this trend is expected to continue in the near term.  Franchise agreements, including those in the hospitality industry, are personal contracts for the benefit of the named franchisee only, and are further limited by the franchisee’s ownership structure as of the effective date of the franchise agreement. From this point of beginning, it is logical that the franchise agreement would also include strict limitations on the franchisee’s ability to transfer ownership interests of the franchisee both within the franchisee company and to third parties. Each franchisor will adopt its own unique approach to the transferability of interests, but there will be certain commonalities that franchisees should be aware of and carefully study.

Franchisees would be wise to assume that a transfer of any direct or indirect ownership interest in the franchisee is prohibited without the prior written consent of the franchisor or expressly permitted under the franchise agreement.  Regardless of some of the variations of language, this means every transfer and covers direct and indirect transfers within the entirety of the franchisee’s ownership structure. There will be variations in the requirements to obtain the franchisor’s consent, and some transfers that may not require consent, but the general expectation should be that the general rule under the franchise agreement will be to prohibit transfers.  Continue Reading

Hospitality Sector Leads the Way

Posted in Hotels

It is difficult, if not impossible, to miss all of the positive indicators pointing to a robust and exceedingly vibrant hospitality sector. Whether it is the acquisition, financing, construction or opening of a limited service hotel in a suburban location or a non-NFL city, or the awe inspiring deals like the sale of the Waldorf Astoria or the Baccarat, the signs are all positive and the appetite for trophy product seems insatiable. Our experience working on both the Waldorf Astoria and Baccarat transactions has provided an up close and personal view of just how powerful our industry is right now and how transactions of this stature and magnitude are likely to continue.  All of the excitement and publicity over these types of transactions should not lead us to conclude that the competition for quality product will always go to the swiftest or the one with the deepest pockets.  The execution of these deals and even deals of far lower price tags will remain achievable only through experienced and capable principals, advisors and lawyers being present at each phase of the transaction.  Read more about these transactions.

Considerations for the Boat Slip Sales Re-Emergence

Posted in Marinas

Florida MarinaThe long dormant boat slip and storage unit sales market is re-emerging after years of dismal sales. Marinas such as Sunset Harbour Yacht Club in Miami Beach, which had long slip sell lists a few years ago, now have waiting lists to buy slips, according to Ginger Hornaday of AquaMarine Global Group. The Sun-Sentinel recently reported on the re-emergence of the market for boat slip and boat storage sales in South Florida. The Sun-Sentinel noted an uptick in sales at Soverel Harbour Marina in Palm Beach Gardens and The Bluffs Marina in Jupiter, as well as the grand opening of the Dania Beach Boat Club, south of Fort Lauderdale. (Hemlock, Doreen. “‘Dockominium’ Sales Pick up Speed.” Sun Sentinel, Nov. 28, 2014, Money sec.)

Marina owners and boat storage facility developers will likely be considering new slip and storage unit offerings. Such owners and developers should consider the options for sales programs, and issues that impact the availability and desirability of the different options. Options for slip and boat storage sales programs include:

  • Deeded structures, including dockominiums or rackominiums, or subdivided land, or
  • Non-deeded structures, including equity or non-equity membership programs or long-term subleases. Continue Reading

Employee Characteristics and Effective Hotel Leadership

Posted in Hotels

Written by Nelson F. Migdal and Molly Kane.

What are the most important characteristics to possess in the hospitality industry? This question was recently posed among a highly experienced group of hospitality industry attorneys. Responses to the question included: enthusiasm for customer experience, working as a team, reliability, honesty, and being proactive as among the most important characteristics to possess in the hospitality industry. We thought the question was worth a deeper look.

On Bill Marriott’s list of 12 Rules for Success he states that “it is more important to hire people with the right qualities than with specific experience.” So what are the qualities Bill Marriott was referring to and how do they match up with some of the responses to our question?  Continue Reading

Which Family is Welcome at the Club?

Posted in Clubs

The days of the men’s golf club are over, and clubs that emphasize family oriented facilities are increasingly more common. Both traditional golf clubs and other clubs are struggling to define the family of members who have facilities use privileges. The trend is to expand the family definition, especially in resort and second home communities, to attract the family oriented market. Clubs have adopted a number of different family definitions: Continue Reading

Resigned Members: It’s the Same Category

Posted in Clubs

Clubs that resell resigned memberships generally have separate “sell lists” for each membership category. Therefore, if a club sells memberships in a different membership category, those sales do not trigger resales of resigned memberships and the corresponding refund payments to the resigned members. When clubs issue memberships in “new” categories, the question arises as to whether the new category is truly a different membership category. In two separate cases (one decided in August 2011 and the other in January 2014), resigned members of Hamilton Farms Golf Club challenged the club’s determination that membership sales in what the club called a new membership category did not count toward reissuing resigned memberships. In both cases, the club moved to dismiss the cases, and the court denied the motions, allowing the cases to proceed.

Continue Reading

Urban Land Institute (ULI) Spring 2014 Meeting Sets Positive Tone

Posted in Hotels

The key phrase seems to be “slow and steady.” Market indicators in the hospitality sector are mostly in growth mode with upward pointing arrows in most, but not all, areas of inquiry. There appears to be a significant degree of confidence in hotel performance, but some discomfort as to the risk-reward relationship of debt positions. Transaction volume remains below 2006-2007 levels, but yet is tracking to be better than any year since 2007. Since a picture is worth a thousand words, we commend you to the U.S. Hotel Industry Performance created by Jan Freitag, Senior Vice President of STR, Inc

Claremont Club Case: It’s Not Just Dodgeball

Posted in Clubs

Lotz vs. Claremont Club, Court of Appeals, Division 2, California (August 15, 2013)

This decision illustrates both the general risk of club liability when liability waivers are unclear and when a club does not follow its written management policies and the unique risk of club liability when a club offers child care. In this case, a member’s child was injured playing dodgeball in the club’s childcare program. The trial court ruled that (i) a release signed by his father barred the claims, (ii) there was no evidence showing the club’s conduct amounted to gross negligence, and (iii) the injuries were an inherent risk in dodgeball. A finding of gross negligence was relevant because in California, a liability release for gross negligence is generally unenforceable. In an unpublished opinion, the Court of Appeals reversed and held that there were triable issues of material fact regarding each of the trial court’s findings.

Continue Reading

Being Hospitable to Service Animals*

Posted in ADA Compliance, Hotel Guest Health and Safety, Hotels

The Equal Rights Center based in Washington, D.C. has recently published a short and helpful booklet for users of service animals and other types of assistive animals.  It is a “users” guide for persons seeking accommodations for their service animals, including advocacy tips and resources for reporting violations.  The hospitality industry is often at the forefront of accommodating guests, and this publication is a useful and simple tool to better understand how and when to accommodate guests.

One important point for the hospitality industry is that under the ADA, public places, such as hotels, must provide reasonable modifications for service animals.  Under federal law a service animal is a dog.  There are other types of assistive animals that provide emotional and therapeutic support, but only dogs are considered service animals. 

In addition to the provisions about service animals, the Justice Department’s ADA regulations have a separate provision about miniature horses that have been individually trained to do work or perform tasks for people with disabilities. Miniature horses generally range in height from 24 inches to 34 inches measured to the shoulders and generally weigh between 70 and 100 pounds. Hotels would be wise to review their service animal policies and make modifications where necessary to permit miniature horses where reasonable. The federal regulations set out four assessment factors to assist entities, like hotels, in determining whether miniature horses can be accommodated in their facility. The assessment factors are (1) whether the miniature horse is housebroken; (2) whether the miniature horse is under the owner’s control; (3) whether the facility can accommodate the miniature horse’s type, size, and weight; and (4) whether the miniature horse’s presence will not compromise legitimate safety requirements necessary for safe operation of the facility.

Click here to go directly to the Equal Rights Center’s new guide.  

[*Nelson Migdal serves as a Commissioner on the Montgomery County Commission of Persons with Disabilities.]