By Shawn Raymundo
The Rancho San Clemente Business Park Association is disputing claims that it didn’t have the authority to sell 10 acres of property to Emergency Shelter Coalition, saying it was “acting in the best interest” of its board and tenants to do so, according to recent court filings.
Back in February, Olen Commercial Properties, along with other members of the business park, filed suit against the association over its sale of a pair of open-space parcels to ESC, a nonprofit organization that intends to develop a homeless shelter on the land.
Olen, which had offered to purchase the land last fall after learning of the then-pending sale, alleges that the association’s board didn’t possess the legal authority to execute the sale to ESC, as it lacked the support of its members, or tenants.
Olen and the other businesses had vehemently objected to the sale in the months leading up to its finalization in late January and have sought to void the agreement.
This past April, the San Clemente City Council voted to condemn the land, as the city is looking to acquire the property through eminent domain. Eminent domain proceedings are expected to commence in Superior Court in the coming months.
In its legal response to Olen’s lawsuit, the association cited the business park’s CC&Rs, which “empowers” the association “to do ‘anything that may be necessary or desirable to further the common interest of the Members, to maintain, improve and enhance the Master Association Properties and to improve and enhance the attractiveness, desirability, value and safety of the Project Area.’ ”
The association then made the argument that homeless individuals known to reside on the property, located on the north side of Avenida Pico opposite Calle del Cerro, pose a liability and risk for the business park.
“One of the primary aims in selling the Subject Property was to address this liability issue,” the Association’s response stated. “The sale of the Subject Property was solely for the benefit of the RSCBP Association members. None of the Board members derived any monetary benefit from the sale of the Subject Property.”
The association had previously explained that the parcels have cost $20,000 a year for maintenance, contending they’re also of very little value to the business park, as they’re located within the city’s open space and, therefore, subject to development restrictions.
One such restriction is the city’s Measure V ordinance, a voter-approved initiative that mandates any open space project covering more than one acre must go to a vote of the people.
Noting those issues as reasons to support the sale, the association, in its argument, stated “all of these considerations were solely for the benefit of the members.”
According to the court documents, the association’s board members first discussed the potential sale of the land to ESC back in May 2019. Before that time, ESC was looking to develop a homeless shelter within the main part of the business park, which is zoned specifically for such projects.
“The Association did not want a shelter inside the business park for various reasons, and this was well known to the Board,” the argument stated. Subsequently, the sale agreement came with a condition that ESC wouldn’t develop an emergency shelter for the homeless within the business park.
By early June 2019, the association’s board of directors had voted unanimously via email in favor of selling the two parcels to the coalition, and later in the month, the two parties signed a letter of intent, which included the caveat that ESC wouldn’t operate a shelter in the park.
“This commitment by the ESC was believed to be of considerable value to the Association and the Board in that it would avoid a shelter being developed in RSCBP, which could diminish or negatively affect the RSCBP property values,” the argument stated.
In a letter forwarded to other business park tenants as an attempt to rally support for the lawsuit this past February, Olen similarly made the claim that even a homeless shelter outside of the business park “will cause irreparable harm to the value of the properties in the park, as well as disrupt business operations.”
“The certainty of financial harm to each of the owners, as well as the impact on security and business operations within the park, is substantial, making this a necessary business decision to protect our substantial investment in this park,” Olen’s letter stated.
Last September, the association notified members that the parcels were in escrow and that the coalition would purchase the land for $19,500. As another condition of the sale agreement, the coalition sought to terminate the CC&Rs over the property—an action that required a vote of the business park tenants.
When news of the sale agreement broke, Olen, as well as the city of San Clemente, made offers of $20,000 for the land if the sale with ESC were to fall through. The city, as it does now, wanted to acquire the parcels and turn them into a conservation easement as a means of thwarting one of the Transportation Corridor Agencies’ now-abandoned toll road route extensions.
After a lengthy voting period over the CC&Rs that had been delayed to late December, the results were roughly 2-to-1—54 votes opposed and 23 in favor—against terminating the rules and guidelines. However, a month later, ESC decided to move forward with the sale anyway, officially buying the property.
Olen’s lawsuit alleges that because most of the business owners had opposed both the termination of the CC&Rs and the sale in general, the association violated its fiduciary duty to all its members by agreeing to the sale “in direct contravention to the will of the Association’s membership.”
According to the complaint, Olen and the fellow plaintiffs are seeking declaratory relief from the court and that the Association was not authorized to make the sale and, therefore, it should be canceled.
Pointing to the business park’s CC&Rs, Olen claims the association was required to get a majority of membership approval before selling the property.
The association, however, argued that Olen’s claim is misplaced, as the section of the CC&Rs the complaint refers to is regarding the sale or transfer of property to a “public or governmental agency or authority.”
“The transaction was a conveyance to a corporation, not to a public or governmental agency or authority,” the association’s court filing stated.
In conclusion to its response, the association again emphasized that the sale was done in the interest of the business park, further noting that ESC is unlikely to develop on the property because of the open-space restrictions.
“It could take years, if ever, for the zoning to be changed,” the argument stated. “Further, the Association no longer has to pay for the maintenance and insurance and cannot be sued if a fire or a crime occurs on this Subject Property.”
The next court hearing for the lawsuit is scheduled on Aug. 27.
Shawn Raymundo is the city editor for the San Clemente Times. He graduated from Arizona State University with a bachelor’s degree in Global Studies. Before joining Picket Fence Media, he worked as the government accountability reporter for the Pacific Daily News in the U.S. territory of Guam. Follow him on Twitter @ShawnzyTsunami and follow San Clemente Times @SCTimesNews.