Letters to the Editor
Letter to the editor | Capital improvements at Madrona
PenMet has made serious allegations about the Tyson family’s (“Tysons”) failures to honor their obligations. The allegations require a determination of responsibility for Madrona’s operating expenses and capital improvements. The deficiencies must then be classified either as operating expenses or as capital improvements. This Letter addresses capital improvements.
Original lease
Starting with the original 1977 lease (the “Lease”) between the City of Tacoma (“Tacoma”) and the Tysons:
- Tysons, at their expense, were required to build the golf course and all structures necessary to operate the golf course
- They were also required to buy, at their expense, an additional 14 acres to provide sufficient space for an 18-hole golf course.
- Paragraph 10 of the Lease says:
The Lessee agrees to keep and maintain the leased premises in good condition and repair, and at the expiration or termination of this lease, Lessee shall return the leased premises…to the City in good condition and repair, reasonable wear and tear…excepted.
- Rent was to be reevaluated every five years
What is “reasonable wear and tear” over a 50-year span? Open question, but it is not the same condition the course was in 50 years ago. The Lease described the capital improvements the Tysons were to make, but was otherwise silent on the issue. An assumption could be that whatever additional capital improvements would be required over the next 50 years would have been Tacoma’s obligation. No reasonable lessee would enter a lease that requires substantial capital improvements throughout the lease term without being given a lease term sufficient to allow the lessee to recover those investments. PenMet is now in Tacoma’s shoes.
1984 Unnumbered Amendment
This amendment does not mention any deficiencies or capital improvements.
1988 Unnumbered Amendment
No mention of any deficiencies or capital improvements.
1999 Second Amendment
There appears to be no 1993 amendment. At this point, the Tysons had sublet the operation of the golf course to JDL. This Amendment required JDL to invest 1.5% of the greens fees in “capital improvements,” but was silent on who pays for any capital improvements over that. My assumption that Tacoma had this responsibility still stands. No mention of any deficiencies.
2004 Third Amendment
This Amendment decreased JDL’s obligation for capital improvements from 1.5% to 1.0%. My assumption still stands. No mention of any deficiencies.
2009 Fourth Amendment
This is an important document! This is the first amendment where PenMet is a party. PenMet required the Tysons (not JDL—see below) to invest 1.0% of the greens fees in capital improvements. This is critical because it contradicts PenMet’s current belief that all capital improvements are Tysons’ responsibility. If PenMet felt then, as it does now, that all capital improvements are the Tysons’ responsibility, this provision would be meaningless.
2015 Fifth Amendment
Stutsman is the new sublessee/operator. PenMet agreed to shift the responsibility for investing 1.0% in capital improvements from the Tysons to Stutsman. My assumption still stands. No mention of any deficiencies.
2020 Sixth Amendment
This Amendment increased Stutsman’s responsibility to invest in capital improvements from 1.0% to 1.5%. Stutsman was also required to submit an annual capital improvements report directly to PenMet. If he did, what did PenMet do with those reports? It’s important to note that the reports were to go directly to PenMet and not the Tysons. If the Tysons were responsible for 100% of the capital improvements would it not make sense that the reports would go to both PenMet and the Tysons?
What PenMet has not done since 2008
PenMet did not raise issues in 2009, 2015, or 2020. It’s taken years for Madrona to get in the condition it’s now in. PenMet either knew or should have known of the growing list of deficiencies, but did or said nothing until recently. “Laches” is a legal term meaning if one holding rights fails to exercise those right in a reasonable timeframe, those rights may become unenforceable.
In its July 2024, Notice of Default, PenMet asserted the Tysons built the course cheaply and incorrectly. I’ve found no documentation from Tacoma or PenMet raising this issue–46 years after the fact? Laches?
My conclusion
PenMet required the Tysons to spend 1.0% on capital improvements. PenMet then shifted that obligation to Stutsman and then increased Stutsman’s obligation to 1.5%. For any of this to have any meaning, one has to assume PenMet believed all capital improvements over the stated percentage were its obligation. When interpreting a vague contract provision, a judge would assume the provision was there for a reason and then would not select an interpretation making the provision meaningless. PenMet also faces an equitable issue of fairness by demanding the Tysons make millions in investments without granting the Tysons a lease term that would allow them to recover their investment. There are 4 years left to run.
PenMet, please seriously consider my previously published solution. And, please let the employees of Stutsman and Kelly know their fate.
Craig McLaughlin
Fox Island
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