Mistake costs Leisure World Seal Beach nearly $273,000

A $273,000 mistake has become the talk of the town in Leisure World Seal Beach.

The retirement community of about 9,000 is abuzz after the complex’s management company, Golden Rain Foundation, failed to pay the majority of a total of $3.5 million in property taxes on time, resulting in a penalty of $272,948.32.

“It’s a disgusting, huge blunder,” said David Lyon, a resident for 11 years. “It’s not just a simple mistake.”

Members of the foundation met with the Orange County treasurer-tax collector to try to get the penalty waived and was denied.

The affected self-governed residents groups at Leisure World, known as mutuals, have paid the penalty “under protest,” but are still waiting to hear how the money will be recouped, said Edie Hugo, chief financial officer for the complex’s largest group, Mutual 2.

Hugo, 63, called the situation an “administrative error,” and said a team of lawyers is working to get the money back.

“We’re looking at all of our options,” she said.

This all infuriates Juanita Brett, 66, who has lived at Leisure World Seal Beach for 21 years.

“We’re really upset,” she said. “How could that have happened? I don’t understand.”

Dan Schaeffer, an administrator for Golden Rain, declined to comment beyond a prepared statement in which he said, “The foundation and impacted mutuals have and/or are taking action through their respective attorneys to attempt to set aside the penalty currently imposed against the foundation.”

The foundation sought relief from the penalty on grounds that it had never been late with taxes and that the oversight was due to an unusual set of circumstances including a backlog of work, reduced staff because of jury duty and planned vacations, training a new employee and a massive workload related to month-end work, according to the foundation’s in-house publication.

But Shari Freidenrich, the county treasurer-tax collector, said in an e-mail that her ability to cancel a penalty is restricted under California law and limited to “late payments that occurred due to reasonable cause and only under circumstances that are beyond the taxpayer control.”

She also said she does not have the discretion to consider a history of timely payments as a basis for canceling penalties, and said she has closely reviewed the facts in the case with the foundation.

“Based on that review,” she said, “we found that the circumstances that led to the delinquent payments were within the control of the foundation and therefore, the foundation’s request for the waiver of penalties was denied.”

This is not the first time residents have been upset with Golden Rain.

In 2003, a group of residents filed the first of several small-claims lawsuits against Golden Rain to gain access to accounting ledgers, income tax filings and office phone bills.

Court rulings favored residents, but, in 2004, the foundation filed a countersuit to block future small claims made by the residents.

In a 2007 Orange County Superior Court decision, a judge ruled that Golden Rain is a homeowners’ association and, as a result, is required to produce its books under state law. In 2008, the state Supreme Court denied a request for an appeal and let the lower court decision stand in what was seen as a victory for residents in other similar giant complexes.

Lyon, who was among the residents who filed those lawsuits, said this latest issue is a “continuation of squandering the residents’ money through largely bad management. And Golden Rain is responsible for that management.”

Any tax penalty must be paid by June 30 to avoid any further penalties or liens. Leisure World consists of more than 100 tax parcels that stretch across more than 533 acres.

While the legal situation is sorted out, residents are waiting to see how this case gets resolved.

Alex Brett, Juanita’s husband, said that over the last 20 years, monthly fees for the couple’s two-bedroom corner unit — a prime spot, he said — have nearly doubled to more than $400.

“I really think that the GRF administration should pay for it, not the residents,” he said. “It should come out of their salaries.”

Though Alex Brett said he and his wife love living in Leisure World, this mistake has him fuming.

“It’s absolutely abominable,” he said. “How could you forget or not pay?”

nicole.santacruz@latimes.com