Commitments and Contingencies

6 Months Ended

Jun. 30, 2013

Commitments and Contingencies

Commitments and Contingencies

14. Commitments and Contingencies

Standby letters of credit and performance bonds, issued by third-party entities, are used to guarantee our performance under various contracts, principally in connection with the development of our projects and land purchase obligations. At June 30, 2013 and December 31, 2012, we had $3.0 million and $4.5 million, respectively, annual letters of credit outstanding. Performance bonds do not have stated expiration dates; rather, we are released from the bonds as the contractual performance is completed. These bonds, which approximated $9.6 million and $8.4 million at June 30, 2013 and December 31, 2012, respectively, are typically outstanding over a period of approximately one to five years. Our estimated exposure on the outstanding surety bonds as of June 30, 2013 was approximately $3.6 million based on development remaining to be completed.

In accordance with various amenity and equity club documents, we operate the facilities until control of the amenities is transferred to the membership. In addition, we are required to fund the cost of constructing club facilities and acquiring related equipment and to support operating deficits prior to turnover. We do not currently believe these obligations will have any material adverse effect on our financial position or results of operations and cash flows.

We may be responsible for funding certain condominium and homeowner association deficits in the ordinary course of business.

Legal Proceedings

The Company and certain of its subsidiaries have been named as defendants in various claims, complaints, and other legal actions arising in the normal course of business. In the opinion of management, the outcome of these matters will not have a material adverse effect on our financial condition, results of operations, or cash flows. However, it is possible that future results of operations for any particular quarterly or annual period could be materially affected by changes in our estimates and assumptions related to these proceedings, or due to the ultimate resolution of the litigation.

Included in the legal actions noted above is one pending proceeding brought by a condominium association alleging construction defects and other matters. This pending proceeding was filed as a proof of claim in the Chapter 11 cases in February 2009 in an unliquidated amount. The Company asserted that all prepetition claims for construction defects were barred by the plan of reorganization and bankruptcy discharge, and therefore, any potential losses were determined not to be material to our financial statements. In May 2013, the condominium association received permission to file a state court action without violating the plan of reorganization and bankruptcy discharge. The Company has appealed and is vigorously defending this action. As a result of still being in the early stages of litigation, we are unable to estimate the amount of any potential loss.