A federal bankruptcy court judge ruled in August that the Garden Oaks Maintenance Organization (GOMO) had to stop collecting transfer fees, its primary source of revenue since forming in the early 2000s. Judge David Jones also asked GOMO to exclude transfer fees from its Chapter 11 restructuring plan, which was presented to current and former homeowners for a neighborhood-wide vote.
The people of Garden Oaks apparently like transfer fees a lot more than the judge.
GOMO did not seek confirmation of its bankruptcy plan in a Tuesday court hearing because not nearly enough homeowners supported it. While conducting a vote that essentially ended up even, GOMO office manager Pam Parks said homeowners made it clear they preferred a transfer fee – a one-time payment upon completion of a home sale – to the annual mandatory fee of $80 that was included in the Chapter 11 plan.
“People wrote on their ballots that they would have voted for it if it would have been a transfer fee instead of a maintenance fee,” Parks said. “We put that annual maintenance fee in there because the judge basically painted a picture that we needed to go in that direction. So we tried and lost.”
Parks said a continued hearing has been set for May 9. Between now and then, GOMO can modify its plan for another potential vote or pursue a joint plan with the court-appointed committee of unsecured creditors, which represents the interests of nearly 400 claimants, many of whom are seeking the return of their .75 percent transfer fees.
Doubt about GOMO’s authority to collect transfer fees precipitated its bankruptcy filing in April of last year. A 2016 state district court ruling in favor of Garden Oaks resident Peter Chang, a member of the creditors committee, revealed that GOMO had no standing to collect his transfer fee because it violated the Texas Property Code while petitioning residents to include them in the neighborhood’s deed restrictions.
Nonetheless, a transfer fee is now part of the restructuring plan devised by the creditors committee. Its original plan, which also included an $80 annual fee, was submitted to the court last month and was to be vetted by Jones at Tuesday’s hearing.
But creditors committee attorney Charles Rubio submitted an amended plan Monday night that instead included a reduced transfer fee of $1,500, subject to annual increases. If that transfer fee is adopted, Rubio said the amount would be deducted from each of the creditor’s claims.
A restructured homeowners association also could charge that amount to every new Garden Oaks homeowner since the collection of transfer fees was suspended in August, creating revenue moving forward.
“We determined that it’s unlikely that this community is going to approve an annual assessment in lieu of the transfer fee,” Rubio said.
As part of the new plan by the creditors committee, and because there would not be any changes to the deed restrictions, Rubio said it would be voted on only by the creditors and not all 1,142 of Garden Oaks’ homeowners. The idea is to expedite the conclusion of the bankruptcy case by satisfying the creditors and allowing the homeowners association to reorganize with new leadership.
Amending the deed restrictions – a key part of GOMO’s restructuring plan – could then be tackled by the neighborhood as a whole. Rubio said such a process also would allow the transfer fees to be properly incorporated, whereas they were improperly incorporated in the early 2000s.
Under Texas law, Rubio said changes to deed restrictions must be approved by at least two-thirds of all homeowners. Fewer than 400 ballots were cast in response to GOMO’s restructuring plan.
“We just want to do the most straightforward and easiest thing to get (a restructuring plan) approved,” Rubio said.
Parks said GOMO has a similar desire. So instead of continuing to proceed with competing restructuring plans, GOMO and the creditors committee could agree on a joint plan.
Parks and Rubio said the two sides will continue to negotiate and, if they settle on one plan, could request to return to court before May 9. Parks said there is a “heightened desire” for such a scenario.
“We would hope they would approve of the ideas of what we’re doing here,” Rubio said. “We’re certainly willing to work with them and take their ideas and combine our ideas and go out with a joint plan.”