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Condo owners sue management

ELKHORN — Forty-five Lake Lawn Lodge condominium owners have sued the resort and its condo association for more than $5 million over rent payments, a unit management agreement and other financial matters.

The suit, filed Sept. 26 in Walworth County, has been assigned to Judge James Carlson. The summons requires the defendants to respond with a written answer to the complaint within 45 days.

The 40-page complaint alleges that Lake Lawn and Lodges at Lake Lawn Resort Condominium Association manipulated agreements with the owners following the resort’s Aug. 5, 2009, foreclosure. The 45-condo owners allege that the defendants illegally obtained a majority of the governing board through four commercial units and assumed control of 70 percent of rental revenue when a customary percentage for management was 40 percent.

A spokesman for the resort said any reaction to the suit must come from General Manager David Sekeres, who is listed as a defendant in the suit. Sekeres did not return calls for comment.

The plaintiffs allege in the complaint that the resort and condo association conspired to create a post-foreclosure set of bylaws that gave the defendants “control over the association as an organization by its ownership of only four of the 226 units.”

The original bylaws assigned four seats on the association board to condo owners and three to the resort.

The condo owners allege that during the sheriff’s sale following the foreclosure, the defendants failed to purchase the four commercial units for a “nominal sum.” That failure, the owners said, significantly reduced the value of their units and prevented them from controlling “their own association.”

The omissions by the defendants caused the association to negotiate an inequitable unit management agreement, the condo owners said.

“The association negotiated an inferior contract for its members, which allowed Delavan Lake Lawn Management to initially take 70 percent of the rental proceeds,” the owners said in the complaint. “A reasonable percentage of the proceeds paid to the hotel manager would have been 40 percent.”

The unit management agreement was “a result of duress,” the owners said.

“They were entered into based upon misrepresentations of the association,” the owners said. The complaint alleges that Lake Lawn told the condo owners they could rent their units only through Lake Lawn and could not rent the units on their own. The owners called the agreement “unconscionable.”

The owners are asking for compensatory and punitive damages, attorney costs and a judgment declaring the unit management agreement void.