SHOULD YOUR BUILDING RUN A RESTAURANT?

All initially went well with the 150-seat, glass-atrium eatery with views of a lake and lit fountain plumes, plus a 200-person ballroom. Dubbed the Areca (after the palm trees in the dining room) and run by The Hamlet's developer, The Holiday Organization of Westbury, Long Island, when it opened in 2002, it attracted favorable attention from the likes of Nation's Restaurant News and a positive review from The New York Times . Offering breakfast, lunch and dinner service, the restaurant was assured of steady income by a requirement that owners spend monthly minimums, ranging from $150 to $200.

The developer ran Areca (pronounced uh-REE-kuh) under a renewable lease outlined in the offering plan, and also opened it to non-residents through a membership program. Reservations were required so that non-residents could be allowed into the gated community by the security guards. The developer told the Times that the goal was to operate the restaurant at a break-even point as an amenity for the owners.

There was trouble brewing, however. According to one person who requested anonymity, some residents opposed the concept of the restaurant from the beginning. That faction became even more incensed at the idea of allowing outsiders to use what had been promoted as an amenity for the property owners.

Others complained about such fancy dishes as seared striped bass in lobster-and-wine emulsion with baby bok choy, and braised veal breast with summer truffles, shallot confit and chive potato puree. "People would come to meetings and say, ‘Why can't we get tuna fish?'" recalls Robert Mayer, an owner who later served as treasurer of the homeowners association.
Breakfast and lunch were eventually discontinued because of poor attendance, and the relationship between Holiday and the residents deteriorated the point that in Spring 2004, the developer sold the lease after first offering it for about $800,000 to the homeowners association, which turned it down, says Mayer.

The new operator, which court and New York State Liquor Authority documents list as Dinner Club Corporation of 1 Hamlett Drive in Plainview, installed a less expensive menu and stepped up catering to outside groups. Frequently, as many as 50 cars from non-residents headed to a ballroom affair, with cars were stacked up on the service road waiting for security-guard clearance, creating a traffic jam for residents trying to get home. The food, service and housekeeping in the restaurant itself deteriorated, said Lew Kroll, a past president of the homeowners board and the current treasurer.

After negotiations failed between the homeowners and Dinner Club (whose officials could not be located for comment), the owners began withholding their monthly restaurant minimums, putting them into escrow instead. The ensuing legal wrangle ended when the courts decided against the homeowners association. (The lawyers who handled the case for the homeowners association declined to comment.)

But, finally, the homeowners association got its out. The land for The Hamlet had been deeded by the town of Oyster Bay, which granted the necessary zoning permits, and the association's lawyer found in the original paperwork a covenant stating that The Hamlet's clubhouse "shall be limited to services provided exclusively to the members of the homeowners' association of the development and their guests." That meant no outsiders, despite what the offering plan said.

Around this time, the court appointed an arbitrator to arrange a buyout. By Fall 2005, the cost was settled at $1.15 million, more than $300,000 above what the board could have gotten it for earlier, notes Mayer, who wasn't on the board at the time.