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Glossary of Real Estate Terms: Club Membership Terms

For the purpose of this discussion, the term "club" refers to facilities with recreational amenities such as golf, tennis, swimming, and fitness, that offer some form of membership. While there are many types of clubs and club structures, there are basic membership terms that are commonly used and considered essentially universal. What follows is intended as a primer of these fundamental club terms to assist in navigating the often choppy waters of the club membership due diligence and application process. It should be noted that if a membership purchase is under consideration, the potential member must thoroughly review the club membership documents associated with the club of choice, as all clubs have their individual nuances with respect to a variety of issues.

Structure - There are essentially three club structures: Private, Semi-Private and Public.

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Private Clubs - Until the early 1960s, most golf courses in the U.S. were built by groups of private individuals, organized to own, operate and enjoy the club. As private clubs became an increasingly popular amenity to real estate development, the terms and conditions of use were modified to provide value to the residential components while serving the members' needs.

Private clubs restrict access to members exclusively and do not permit usage of the club's amenities by non-members. In the case of real estate-driven clubs, non-members are generally non-residents. Private clubs that are not real estate-driven tend to have the strictest membership and application policies, and can be difficult to access unless the applicant has a direct relationship with an existing member.

The "private resort" club is a veritable oxymoron as it permits amenity access by members that own property within the community, yet permits guests of the resort hotel access to the amenities as well, effectively diluting the perception of "private. " In this regard, the private resort club is best defined as semi-private. If the resort has more than one golf course, quite often one layout will be restricted to member use, while the other will be available to both members and resort guests. Generally, there is a "private" clubhouse to which the resort guests do not have access, but the recreational amenities are generally available to all. Nevertheless, private resort clubs garner large initiation fees as they typically have some of the best amenities in the marketplace.

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Semi-Private Clubs are de facto public access facilities. While a semi-private membership provides specific privileges and benefits such as preferred tee times and locker room access, the golf course and, perhaps, the tennis facilities are available to the general public on a pay-as-you-go basis. Semi-private memberships are generally associated with large-scale residential development that has a significant ratio of homes to golf. Said another way, an 18-hole golf course may be the centerpiece of a 1,000- or 2,000-unit subdivision. Since the acceptable ratios of memberships to 18-hole layout generally ranges from 300 to 600, this imbalance would have bearing on the perception of exclusivity and exclusivity has bearing on membership value. By virtue of a lower membership value (cost), and by association the perception of a less exclusive golf experience, the semi-private club must permit walk-on play in order to be operationally efficient and fiscally successful. This does not necessarily have any bearing on the quality of the amenities or club operations. Many semi-private clubs possess award-winning amenities that are the envy of the industry. The benefits typically associated with a semi-private membership include priority tee times, lower or included greens and cart fees, carte blanche access to the locker room, tennis and golf practice facilities, and the familiarity associated with being a member which can provide personal services that are not offered to the public.

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Public Clubs tend to be golf-centric. In other words, they are generally not country clubs with an abundance of ancillary recreational or social amenities. However, there are more public facilities in the U.S. than private, and their popularity has served to escalate both the quality and the associated costs to play golf. Within the "public" category are municipal and daily fee facilities, which refer to golf courses that generally do not offer any type of formal membership. While daily fee golf facilities are privately owned, municipal golf facilities are those owned by the local government and operated by the city or county parks and recreation department. Municipal golf facilities tend to have the lowest greens fees of all golf facilities. While public access clubs are not known for offering memberships in the strictest sense, they often do provide an annual membership option that essentially serves to pay for the greens fee up front. If one is considering an annual membership option, consideration must be given to the cost as it relates to the number of rounds the "member" anticipates playing in the course of the year. As an example, if a public facility offers an annual individual membership for $1,500 and the pay-as-you go rate is $25.00, the golfer must play more than 60 rounds per year to make the membership worthwhile.

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Private Club Membership - Essentially, there are two types of private membership: Equity and Non-equity. These terms relate to the ownership and financial structure of the club and the associated membership. The Equity membership structure is typically defined as one in which the member is theoretically an "owner" of the club, which is run by a Board of Directors elected by the members. In this case, operation and maintenance of the club are the responsibilities of the members, who typically employ an outside resource to handle the day-to-day operations. In the Non-Equity model, the club and all of the amenities are owned by an entity other than the members. This entity could be the developer, or an organization that specializes in owning and operating club facilities. The Non-Equity approach effectively takes the responsibility of the operations, management and maintenance of the club off the shoulders of the members and places it squarely on the entity that owns the club and its amenities. This operational method has become increasingly popular in recent years as people find themselves with less and less time and would rather simply enjoy the benefits of membership without having to deal with operational issues.

The other difference between the equity and non-equity membership structures relates to the handling of the membership fee (deposit) upon resignation. In the case of the Equity model, the entire membership fee, or a portion thereof, is refundable upon resignation from the club. In some cases tenure dictates the percentage a member receives upon resignation. The typical program provides for 100% of the initial deposit to be refunded minus a transfer fee. In most cases, the transfer fee is generally in the neighborhood of 10% to 20% of the original fee paid. In other words, if a member paid $20,000 for the membership, he would receive $16,000 or $18,000 upon resignation. If the membership fee has appreciated in value, the Equity member benefits from that appreciation. However, if there are no new members waiting in the wings, the member may have to wait for his refund unless the club is willing to buy it back and reimburse the member immediately. The Non-Equity model traditionally was a non-refundable program but has evolved in recent years to provide for a percentage of the initial deposit to be refunded, similar to the equity program. However, any appreciation realized at the time of resignation typically goes to the benefit of the club and/or its owner(s).

While these membership parameters are relatively typical, each club is set up quite specifically and membership, resignation, transferability and refundability can vary greatly. These policies are outlined in the Club Membership Documents, which are given to potential members upon making application to a particular club.

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Club Membership Documents - Private clubs issue club membership documents to new members upon joining the club. These documents are quite lengthy as they specifically define the terms and privileges of membership, the policies and procedures for operating the club, and the rules and regulations associated with being a member of the club. Membership policies typically include explanations of ownership and the governing entity, membership qualification, eligibility and application requirements, a description of the property and the facilities that may be used by the members and the terms associated with that usage, and member rights, fee payment, and membership transfer guidelines. Other issues covered under the "policies" portion of the membership documents may include definitions and explanations of infractions and associated disciplinary procedures, the procedure for the suspension of a membership, and the process for amending the bylaws, which describe how the club is operated and under what terms. Other bylaw issues typically encompass when and where the annual meeting will take place, a description of the governing board, voting rights, and descriptions of the various membership categories and the rights and privileges associated with each. Rules and Regulations generally include the hours of operation, prohibited activities, guest privileges, reservation and cancellation policies, and club attire guidelines. Clubs with golf courses and/or tennis facilities may require registration for use, i.e., tee time or court time reservations, and golf cart and practice facility usage may also be governed and outlined in the club's Rules and Regulations.

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Private Membership Plans - There are two types of private membership plans: Tiered and Unitary. Both can offer a variety of membership categories that vary with respect to the privileges associated with each. In this regard, terms such as "Full Golf," "Limited Golf," "Sports," "Social," Tennis/Racquet, and "Club," are often used to describe the various categories. The primary difference between the tiered and unitary membership plans has to do with the way the initiation fees are determined and priced. The initiation fee is the initial fee paid to join the club.

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Tiered Membership - The initiation fee associated with a particular tiered membership plan category is priced according to the membership category selected and the scope of the included privileges. As an example, a "golf" membership would bear a higher initiation fee than a "social" membership, which typically would not permit the member to have access to the golf facilities except under certain limiting conditions. Since tiered membership programs are generally designed to limit the number of members per category in order to provide an optimum club experience, the social member might have difficulty trading up to a golf membership if all memberships in that category have been purchased. The exclusivity associated with membership has largely to do with the number of members permitted to have "full," i.e., unlimited golf access to an 18-hole golf course. Typical mandated member levels (caps) can range from as few as 250 members, representing a very exclusive golf environment, to as many as 500 or 600 members per 18-holes of golf. The higher member levels are typically found in more affordable communities or second home communities where homeowners do not reside full-time and over-crowding is not an issue. The membership category selected is essentially permanent over the life of the membership unless conditions for trading up or down to a different classification are inherent in the membership bylaws.

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Unitary Membership - In comparison to Tiered Membership, the unitary membership program is a "one size fits all" method to provide larger communities with sufficient golf opportunities for all residents. The Unitary membership approach is generally taken when the golf amenity may be perceived as insufficient to satisfy the demand of all residents based on established usage standards. The Unitary program compensates by offering just one class of membership at one price, thereby giving all residents the option to play golf by utilizing an annual selection method. This generally results in a lower membership value, e.g., initiation fee. Unlike a tiered membership, the unitary membership program provides the member with the right to select a different membership category each year and the annual dues are adjusted accordingly, again dependent upon the level of privileges associated with the selected option. The unitary club effectively permits all members/residents access to the golf course, as there is no enforcement of a "cap, " i.e., capacity limitation defined by the number of members/residents that may play golf.

In both membership cases, the annual (or monthly) dues charged vary in accordance with the privileges associated with the membership category selected. The following describes the typical privileges associated with some of the most common membership categories.

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Full Golf - The Full Golf membership essentially provides the member with unrestricted access to the golf course and does not require the payment of greens fees at the point of play, as they are included in the annual or monthly dues. The golf cart fee may also be included in some cases; in others the cart fee is usually discounted. Full Golf members typically have priority tee time reservation and locker facility privileges in addition to unlimited access to all of the club's amenities including tennis, swimming, fitness, etc. without having to pay additional usage fees.

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Limited Golf - The Limited Golf member has golf privileges on a restricted basis. Restrictions may apply to the number of times per year the member may play golf, the days of the week, and/or the number of days in advance that tee times may be reserved. The Limited Golf membership can also require the payment of greens and cart fees, which are often set at reduced levels. Limited Golf members typically have full access to all ancillary club amenities such as tennis, swimming, fitness, clubhouse, etc. without having to pay additional usage fees.

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Sports - This category is generally synonymous with the Limited Golf category and typically provides for all of the same privileges. In some cases, it can significantly restrict golf access or exclude it except on a pay-as-you-go basis. Nevertheless, the membership typically includes access to all other recreational and social amenities without the payment of additional usage fees.

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Tennis/Racquet - A tennis or racquet club member typically does not have golf privileges except as the guest of a member, in which case payment of the applicable guest greens fee applies. This category of membership provides for full access to the tennis/racquet facilities without having to pay court fees and provides for swimming, fitness and clubhouse privileges. In some cases, tennis/racquet members may have limited access to golf, generally three to six times per year, by paying a greens fee which may or may not be discounted.

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Social - A Social membership typically provides the member with clubhouse and swimming privileges. In some cases, tennis access may be included on a pay-as-you-go basis. Social members can play golf as the guest of a golf member with the payment of the applicable guest greens and cart fees.

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Club - A Club membership is generally a clubhouse or dining membership. The member typically has the privilege of dining at the clubhouse but may not necessarily have use of the swimming, tennis or fitness facilities. Club members may also play golf as the guest of a golf member by paying the applicable guest fee.

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A NOTE ON CLUB MEMBERSHIPS
The foregoing descriptions are generically broad and quite often have a variety of nuances associated with each. Sub-categories of the foregoing membership categories include "Senior" for those over a certain age; "Junior" for those under a certain age; "Individual," "Family," etc. for which definitions vary widely and are set forth within each club's respective documents. The "Non-Resident" category is usually an option at most real estate-driven private clubs and is used primarily as a marketing tool to garner interest in a community that is in the throes of early-stage development. This provides the developer of the community with the potential to convert the Non-Resident member to a resident of the community, assuming the club experience meets the Non-Resident member's expectations. Non-Resident memberships are also used at established residential clubs to compensate for attrition. The Non-Resident membership is typically recallable in the event the golf "cap" reaches capacity in order that new resident members may be accommodated within the established usage guidelines. Membership categories are also supplemented from time to time as club and market conditions change. Promotional efforts often serve to add temporary categories such as seasonal, weekday, and preferred tee time opportunities. These are most often found at semi-private clubs, as private club documents are not as flexible

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