Property owners in a private Beaufort County community are sparring with its developer and board members over how a large pot of the community’s money is overseen and spent.
Bull Point property owners sued the community’s property owners board members, including developer Billy Gavigan, alleging they improperly changed rules to control and misue money in a community reserve fund.
In the lawsuit filed in December, the owners say Bull Point developer and board president Gavigan and other board members were wrong to eliminate rules establishing a contingency fund and an independent committee to oversee the money. After changing the covenants, the board used the reserve money to add utilities to vacant lots — some of which are owned by the developer — and for legal fees related to a separate case involving Gavigan and Bull Point, property owners said in the court papers.
The board denied wrongdoing in changing the rules in its response in court filings, and in a hearing Wednesday said earlier covenants related to the fund committee were illegal under state law regulating nonprofit organizations and that the new rules allowing the board oversight were necessary.
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Bull Point is a 750-acre gated waterfront property off of U.S. 17 in northern Beaufort County not far from Old Sheldon Church ruins.
The community includes 300 home sites, from 2/3 of an acre up to 10 acres, according to its website. Community docks, three stocked ponds and a clubhouse are among the amenities.
Gavigan, who took over Bull Point in 2017, said in his court response that property owners had conspired to buy the development themselves in part with the help of the community funds and that the legal action was part of a strategy to tie up Gavigan’s resources and eventually take over development rights. Gavigan countersued in court papers filed Tuesday, saying property owners defamed him and his business and asking for more than $1 million in damages.
Property owners asked a judge for an injunction requiring Gavigan and the board to adhere to earlier rules establishing an independent committee, not spend the reserve money unless approved by the committee and to provide proper accounting of the money.
The committee was made up of property owners and served as a protection for money the homeowners had contributed to the reserve fund via annual fees, attorney Dawes Cooke said during a hearing before Judge Marvin Dukes in Beaufort County court.
As part of an agreement reached during the hearing, the Bull Point board will provide public notice five days ahead of a meeting involving the use of reserve funds and must document how it plans to spend the money. Property owners can attend the meeting and money can’t be spent until another five days after a board decision.
“Everybody wants a community to be successful,” Gavigan’s attorney Ian Ford told a reporter after the hearing. “... There are some growing pains with a new developer. We’re hoping to reach a resolution.”
A fund to cover unexpected expenses for road maintenance, common areas, budget shortfalls due to unpaid dues and other similar emergency situations had grown to more than $900,000 by the end of October 2018, attorneys for the property owners said.
Issues arose when the board asked the committee for reserve money to pay for power and data services to some community lots and for legal fees related to a separate lawsuit related to Gavigan and an individual property owner. The committee approved $25,000 for the lot improvements but rejected the legal fees, Cooke said.
Gavigan then sent a letter to property owners announcing the board’s decision to repeal rules related to the committee based on the community’s operational needs, court filings show. In December, more than $120,000 was moved from the reserve fund, Cooke said.
The money was moved to a general fund and the bulk allocated for road work, with some directed to utilities, and legal fees for a property owners association attorney. The rest went paid for lingering storm damage, board member and retired federal forensic accounting investigator Chris Quick testified during the hearing. About $40,000 of the money has been spent, Quick said.
Before joining the board, Quick had been hired by Gavigan to audit the community’s finances after Gavigan took over the development, Quick testified. He said his audit found that a previous development group including property owners had used reserve fund money to hire an attorney to explore the possibility of taking control of the development.
But Cooke said the attorney was hired only to protect the committee and reserve money. Property owners had explored the possibility of pursuing development rights to protect the community from a predatory investor, Cooke said, but the group dissolved when Gavigan took over.