CLPOA enters into Fifth Amendment to Lake Lease

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After years of negotiations, Canyon Lake Property Owners Association (CLPOA) and Elisnore Valley Water Municipal District (EVMWD) entered into a Fifth Amendment to the Lake Lease on March 10, 2017.

What does this mean for Canyon Lake? For one, the Lake Lease that would have expired on December 31, 2022 doesn’t expire now until December 31, 2066. With the Fifth Amendment in effect, it also gives CLPOA a unilateral option to extend the Lease another 44 years after 2066 and on the same conditions and terms as are now in effect.

It also means that the Lake Lease payments that were being adjusted every year according to the cost of water will now be adjusted on a yearly basis based on the Consumer Price Index. Additionally, CLPOA’s Lake Lease payments will never increase more than four percent per year. The minimum increase will be one percent per year.

CLPOA feels this is a fair and stable payment schedule and projects that it will save CLPOA millions of dollars just over the next 10 years alone. How does this benefit EVMWD? EVMWD gets the benefit of having a predictable and stable revenue stream from the Lake.

During the negotiations, EVMWD was insisting that CLPOA agrees to an onerous indemnity provision that would require CLPOA to indemnify EVMWD for all loss related to the Lake, even if the loss was EVMWD’s fault. With the Fifth Amendment in effect, EVMWD is responsible for its mistakes, CLPOA is responsible for its mistakes, as well as those of its members and third parties.

Prior to the Fifth Amendment, there was no mechanism in the Lake Lease to prevent disputes between CLPOA and EMVWD from spiraling out of control. With the Fifth Amendment to the Lake Lease, there are now mechanisms in place to help head off any disputes that may arise between CLPOA and EVMWD. Specifically, there will now be an Interface Committee, comprised of CLPOA Board Members and EVMWD Board Members, who will meet as necessary to discuss any dispute between the parties that may arise. If the dispute persists, the dispute must then go to mediation, before a neutral third party, to see if the parties can voluntarily resolve the dispute. If mediation doesn’t work, the dispute is submitted to streamlined arbitration, so it is resolved as quickly and efficiently as possible.

The section of the Lake north of the north causeway, where the river feeds into the lake, is known as “Section 26” of the Lake. This section was governed by a separate lease agreement between CLPOA and EVMWD. EVMWD had the ability to grant rights of use to Section 26 to others, under certain conditions. Now, with the Fifth Amendment to the Lake Lease in effect, Section 26 will be governed by the same Lake Lease; however, some special provisions will apply.

EVMWD is permitted to install fencing or other access control devices around Section 26 to prevent visitors from using this portion of the Lake. Section 26 will remain open to CLPOA and its members for the same uses that were previously in effect.

Prior to the Fifth Amendment, there were no requirements with respect to CLPOA’s insurance of the Lake. With the Fifth Amendment in effect, CLPOA is required to maintain general liability insurance on the Lake, with EVMWD as an additional named insured, at amounts reasonable to cover any anticipated losses.

According to CLPOA, the current amount is $2MM per occurrence/$2MM in the aggregate. CLPOA and EVMWD have agreed to review the insurance limits on a periodic basis to see if any increase is needed. With this insurance in place, it will help to prevent any disputes between CLPOA and EVMWD.

Is the litigation between CLPOA and EVMWD over? Not all of it. The “Tax Case” (Riverside Superior Court Case No. RIC 1504034) which is now on appeal (Court of Appeal Case No. CIV NO. E065705) will be dismissed; however, the “Declaratory Relief Case” (Riverside Superior Court Case No. 1503428) is still pending.

The reason why the Declaratory Relief Case is still pending is because there are still a few important issues, which were not the subject of the Fifth Amendment, that need to be resolved. Both parties are seeking a definitive determination as to where the border of the Lake and shorezone actually lies. The parties also want to come to create a uniform process for future encroachments into the Lake/onto the shorezone, which involves all the necessary stakeholders (CLPOA, CLPOA’s Members and EVMWD).

CLPOA wants to be sure that everyone is on the same page in terms of what improvements are being maintained in the Lake/on the shorezone. Currently, there is no standard process between the stakeholders as to what improvements are being maintained, which could lead to inconsistent rights and obligations between CLPOA and EVMWD as to the improvements and property involved. CLPOA wants to change that so that everything is as fair, consistent and predictable as possible. CLPOA says they are committed to cooperating with EVMWD to resolve these remaining issues.

A spokesperson for CLPOA said “This truly is a monumental step forward. We are very pleased that hard work from both sides, and the patience and participation of CLPOA’s members, has produced this durable and lasting agreement, which will preserve the special character of the Canyon Lake community for decades to come.”