Partners Van A. Tengberg, Christopher Celentino, and Mikel R. Bistrow authored an article in the July 2013 issue of Golf Inc. Monthly titled, “Restructuring the Private Club: How to Deal With Refundable Membership Liability.” The article examines the relatively large liability that private non-equity golf clubs face due to refundable membership deposits, which now represent an economic burden that most clubs and buyers want to avoid. Many clubs have concluded that this is not a short-term phenomenon and are taking immediate and decisive steps to make fundamental changes in case the situation does not improve. As a result, many private non-equity clubs are exploring ways to rid themselves of, or at least minimize, this economic burden — but are finding that there are no easy solutions.
The article explores some alternatives, including 1) revising membership programs to eliminate the membership deposit liability; retaining the membership deposit liability but creating and selling new categories of memberships; or retaining the membership deposit liability but allowing members to resell their memberships on the open market or 2) restructuring the membership program and reorganizing the club through a Chapter 11 bankruptcy. Both options have drawbacks, particularly bankruptcy, so exhaustive analysis of all of the facts and circumstances as well as caution and care should be taken before embarking on an approach.