Subdivision squabble: Developer, homeowners

at odds in Rehberg Ranch Estates


Article Courtesy of The Billings Gazette

Published June 29, 2004

Rather than buying an upscale Western-style home on a former Montana cattle ranch, some residents of the Rehberg Ranch Estates in Billings are finding that they have invested in a herd of rules and regulations.

Some had expected to live in a subdivision surrounded by a lush 18-hole golf course with neighborhood access to nearby state lands for hiking and biking. Now, the golf course idea has been killed, residents can't directly access state lands yet, and they have seen their subdivision restrictions increase dramatically.

"The new covenants were so onerous and so biased toward the Rehbergs' side that they were overpowering," said George Radovich, a Billings attorney who reviewed the documents for his legal secretary, Pam Capp, and her husband, Ray, who bought a Rehberg lot.

A relatively simple 14-page declaration of subdivision restrictions adopted in the summer of 2002 was replaced in May 2003 with five documents running nearly 180 pages that control growth and give veto powers to owner/developer Jan Rehberg.

Rehberg and her husband, U.S. Rep. Denny Rehberg, R-Mont., are developing the Rehberg family ranch near the top of Zimmerman Trail under the name Rehberg Ranch Estates LLC. So far, 88 lots have sold, and 43 families are living there.

Some homeowners have talked about taking legal action, although none have yet.

When he reviewed the estate's original covenants, Radovich said they seemed reasonable, so the Capps bought a building lot there and moved into their new house in April 2003.

When the revised documents arrived, drawn up by the Atlanta law firm Hyatt & Stubblefield, Radovich again agreed to review them. He said they are complex and give the Rehbergs a lot of power. He said he checked to see if any other subdivisions in the country gave developers similar powers.

"There is no case that even remotely resembles this," he said.

Pam Capp said the original covenants required the Rehbergs to get written consent of 75 percent of the lot owners before any changes. Capp said that wasn't done, so the latest changes are improper.

"She didn't just alter or amend, she superseded and replaced in their entirety the original rules," Capp said. "Why wasn't this disclosed a year and a half ago when people started buying lots?"

Rehberg said she and her husband owned 89 percent of the lots when the changes were adopted last year, so the move was proper.

Big project, big rule book

Jan Rehberg said the 815-acre development is a large and long-term project - one that needs in-depth planning and a homeowners' association to be successful.

"The document is long, there is no doubt about it, but 95 percent of that is establishing a functioning homeowners' association that can take over operation of what essentially will be a Montana city," she said.

She also said she has no plans now to use some of the veto powers she has under the new language and has no immediate plans to charge homeowners special assessments for community projects.

Still, several homeowners object to these changes, although Jan Rehberg doesn't necessarily agree with their interpretations. Here's how some residents read a few of the rules:

The founder (Jan Rehberg) gets to appoint, remove and replace three of the five board members until the founding control period ends.

That period could last as long as two years after 75 percent of the homes have been sold.

Control eventually will shift to the homeowners, but critics said until then Jan Rehberg can unilaterally amend the bylaws for any purpose. She can veto proposals that she feels hurt the subdivision or the association.

If homeowners want to amend the bylaws and charter, they must gather a supermajority of 67 percent.

If homeowners don't like the board's budget, they need to get 75 percent of the homeowners' approval, plus Rehberg's vote.

Buyers of new homes may have to make a one-time, nonrefundable payment of $34. This fee, which hasn't been levied yet, is to provide working capital for the homeowners' association.

Finally, the Rehberg Estates board can take half of 1 percent of the sale price when residents sell their homes. That amounts to $1,500 on a $300,000 home. The money, along with other possible fees, would go into the homeowners' association to maintain and improve the property.

As far as her taking what some have called near dictatorial control, Jan Rehberg said she has the most financial commitment and knowledge of the huge project, and the informed parties should make the decisions. Other homeowners at this early stage don't know the nuances and cannot be expected to learn them all, she said.

Jan Rehberg's dream

Jan Rehberg talks with conviction and energy when she explains how she is trying to make the fourth-generation family cattle-and-goat ranch two miles from Billings Logan International Airport into a first-class subdivision.

She pointed proudly to the Western gate leading into the community and to the custom-designed Western streetlights made in Montana.

"People will know their neighborhood and the kids in the street," she said. "They'll wake up in the morning and say, 'This is great! This is beautiful.' "

Because the Rehberg subdivision was annexed into the city of Billings, the residents pay a special assessment to the city to maintain the streets, streetlights and other common property. Rehberg said there may be other special assessments for the homeowners' association to pay for costs the city doesn't cover and to help build a sense of community.

For instance, she had to convince the city to let her upgrade the streetlights.

"In order to get the city to OK these instead of taking standard ones off a rack, we had to agree to keep spares," she said.

She also wants to protect the common trees planted to enhance the natural landscaping of the sandstone and pine tree coulees.

The dream has hit a few snags, she said, including a legal fight with Billings broker Tom Llewellyn.

Llewellyn says he has an exclusive contract to sell all the lots in Rehberg Estates. All went well at first until he had a falling out with the Rehbergs last November.

Llewellyn has sued Rehberg Ranch Estates LLC for $1.37 million, plus attorney's fees and damages, claiming his contract was violated. The Rehbergs have countercharged that Llewellyn violated the contract first.

Protests by nearby residents about using groundwater nixed the idea of a golf course. Rehberg said those protests weren't anticipated and that change can be expected on a big development.

"There's always a weak link. I suppose for the next 15 years, we're going to be tweaking," she said. "We don't have it all in place."

Jan Rehberg has attended classes at the Urban Land Institute in Washington, D.C., to learn about land use and development issues.

"They are finding that enthusiasm in the community is not so much to a golf course, as the open spaces, so you don't necessarily have to have a golf course," she said.

In response to the claims by some homeowners that they bought lots at inflated values based on the golf course promise, Rehberg said the land remains valuable.

"They've already made money on their investment. If they bought in the beginning, they can sell for a profit," she said.

The development is planning a public park, and Rehberg said she is trying to get the A.J. Livery Stable built as soon as she can get water and roads built to that area.

Rehberg said she also is negotiating with state officials for easements to build horse and hiking gates onto state land. She urged people to be patient.

"Generally speaking, I am very impressed with people out here," she said. "Most of them get it. Most of them understand."

Fourth of July

One of the ways Jan Rehberg wants to build community spirit is holding events like a Fourth of July parade and handing out flags.

The Capps said they wouldn't have bought if they'd known of the homeowners association and the fees.

Pam Capp objected to potentially being charged for formal events. She prefers informal block parties with potluck food.

"She wants to have a Fourth of July parade and buy flags with our money and hand them out," she said. "It's not that I can't pay $15 a month. It's the idea that's not proper."

Rehberg said block parties are fine, but they don't always get the job done.

"They can hold those and serve smorgasbord, but who is going to buy the balloons? Who's going to send out the invitations?" she said. "A newsletter is pivotal. Someone has to do that. It takes time and it takes money."

Radovich said using community funds for a Fourth of July celebration when one of the owners is a U.S. congressman is a hard place to draw a line.

"They could hold a parade and take lots of pictures of people with flags and say, "Look how loyal this subdivision is and how patriotic and, by the way, Denny's running again for office," Radovich said.

Capp said she isn't a troublemaker. She's just looking out for the investment she and her blue-collar husband have made.

"We've busted our butts. We're hard workers," Capp said. "I'm not a paranoid, distrustful person, but I kept all the faxes and letters and I took notes."

Pam Capp used to race barrel horses at rodeos. Her husband, Ray, is one of a small band of professional sheepshearers left in Montana.

Quarrel at the OK Corral?

Resident Diana Donahue spent a decade helping administer the property owner's association at Homestead Business Park in West Billings. She believes covenants cannot be changed without a homeowner's review.

"There was no review whatsoever. They were just changed, and you cannot do this," she said.

Donahue also was bothered that the development kept advertising the golf course until residents were told during a meeting in April there wouldn't be one.

However, her biggest concern is the fee if she sells.

"The one thing I am totally abhorred about is the half-point assessment when I sell my home. That's absurd. That's ridiculous," she said.

Mark Wilson and his wife bought in Rehberg Estates, partly because of the golf course.

Wilson, one of the morning Breakfast Flakes at KCTR radio, said he is disappointed about the golf course plans being cut. But he said he isn't that worried about homeowners' assessments because none have been levied yet.

Suzi Steffanich and her husband, Roger, bought a house from Kenmark Construction and moved in June. They bought at Rehberg Estates for the golf course, the equestrian trails and access to state lands.

She said they never received the bylaws or charter from the builder or the title company before closing June 1. The bigger surprise was learning about the homeowners' association and the potential fees. She said they wouldn't have bought their house if they had known that fact.

"I'm absolutely flat-footed and dumbfounded," Steffanich said.

Rehberg said that problem of the rules changes not getting out to potential buyers dates back to Llewellyn.

She said she took a stack of documents down to the title company used for most closings, so buyers can see them.

Llewellyn said he did disclose the changes.

"I gave it to them all the time, plus that's part of their title report," he said.

Radovich said piling unanticipated assessments on homeowners who were told there would be no special charges because they are part of the city isn't fair.

"It isn't a small matter. People buy houses on a budget and if they get hit with unexpected charges, they could be in financial trouble," he said.

Out-of-state companies

Jan Rehberg said she hired Hyatt & Stubblefield, an Atlanta law firm, to draw up the covenants and Griffin & Associates of Boulder, Colo., to market the development because they were the experts.

She said her husband asked another congressman from Atlanta to recommend the best experts at setting up successful homeowners' associations and was referred to Wayne Hyatt.

After the Llewellyn disagreement, she said she wanted to get back on track as soon as possible.

"It's always hard, especially when your husband is a congressman, to go to outside consultants, but we were developing something different for Montana," she said.

Burrs under the saddle

Radovich acknowledged Jan Rehberg's argument that she knows the subdivision better than anyone.

However, he doesn't buy her argument that homeowners don't need to worry about these new rules because she doesn't intend to use them yet.

"If you don't plan on using the power, then why do you need these rules? That's what doesn't add up," Radovich said.

Rehberg said she can't pass a fee or rule without a board vote. And she portrayed her veto power as more of a preventive measure to keep the community something special, rather than a run-of-the-mill development.

"It's more of a safety valve," she said.

Rehberg, who worked as a water rights attorney at the Crowley Law firm until her husband was elected to Congress four years ago, pointed to page 49 of a document.

She explained the rules say she "may" establish a community enhancement fee. It doesn't say "shall," which means "must" in legal language.

"You give people the opportunity and let them fly with it, if they want to," she said. "It's one of the tools for the community to do great things as opposed to ordinary things.