A Membership That's Not a Membership... Quasi-Membership Schemes Become a Funding Tool

[The Loophole at Non-Membership Golf Courses] Not Golf Course Memberships, They Say, but the Benefits Are the Same

Lodging and Loan Contracts Spark Controversy Over Circumventing Restrictions on Membership Recruitment
Protection for Access Rights and Deposits Also Uncertain if Operators Become Insolvent

The controversy over quasi-membership rights at non-membership golf courses stems from the gap between the form of the contract and the way the business actually operates. Instead of golf course memberships, operators use condominium or resort memberships or monetary loan contracts, while offering buyers benefits comparable to those of members, such as long-term green fee discounts and non-name-designated access. On paper, these are lodging or financial products, but in practice they have a business structure similar to that of membership golf courses.

Not all quasi-membership rights are illegal. Products combining lodging facilities with golf course access are permitted if they meet certain requirements. However, they may raise legal issues if they give specific customers booking priority or restrict access for ordinary golfers.

Lake Hills Golf Group was sold to several companies after a liquidity crisis. Korea Tourism Organization website.

Lower Taxes, Secure Funding... Membership-Style Operations Hidden Behind Contracts

Demand for funding among golf course operators is driving the spread of quasi-membership rights. Membership golf courses can recoup initial investment costs by recruiting members, but non-membership golf courses are, in principle, prohibited from doing so. As a result, some operators are securing funding through condominium or villa sales or monetary loan contracts.

Lodging-linked products bundle golf access benefits with high-priced condominium or villa sales. Under the monetary loan model, customers lend money to the golf course operator in exchange for green fee discounts. Golf course operators secure an additional funding channel beyond borrowing from financial institutions, while buyers enjoy benefits comparable to those offered by membership golf courses.

These practices are fueling concerns about fairness because they intersect with tax benefits for public golf courses. Public golf courses are subject to a lower tax burden than membership golf courses, with the aim of improving access for ordinary golfers. If they engage in membership-style operations through separate contracts, they could end up enjoying both tax benefits and the advantages of recruiting members.

These practices could also affect profitability. Substantially discounting or waiving green fees for specific contract holders widens the price gap between them and ordinary customers. However, it is difficult to attribute low operating margins solely to quasi-membership rights. Other cost factors, including labor costs, financing costs, and depreciation, should also be considered.

The key to determining whether the law has been violated is how bookings are actually handled. Green fee discounts alone do not constitute illegal membership recruitment, but the legal assessment may differ if specific contract holders can book before ordinary customers or are guaranteed a certain number of opportunities to play over an extended period. Both the contract terms and actual booking and attendance records must be reviewed.

Namhangang S-Park CC, which opened as a public golf course last April, is under prosecution investigation over pseudo-membership rights. Namhangang S-Park website.

Do Benefits Disappear When a Golf Course Is Sold? The Consumer Protection Blind Spot

Quasi-membership rights also expose buyers to risks because the company selling the product and the company operating the golf course may be different. If the seller's financial condition deteriorates or the golf course changes ownership, it may be unclear whether existing benefits will continue.

The Lake Hills Golf Group case is a prime example. Lake Hills, which once operated five golf courses and five golf hotels, sold resort memberships bundled with non-name-designated booking and access benefits at its affiliated golf courses.

After the 2008 financial crisis, falling membership prices coincided with demands for the return of membership deposits, worsening the company's financial difficulties. The golf courses and resorts were sold off separately or entered rehabilitation proceedings, leading to disputes over whether existing members' rights would be transferred. Buyers of resort memberships lost their golf access benefits or had difficulty getting their membership deposits returned.

Dongyang Golf, which has sold golf access services, has also faced problems with delayed payments for services and service disruptions. The membership industry is concerned about unpaid receivables from golf courses and harm to product buyers. The full extent of the losses and the status of related investigations still need to be confirmed.

Quasi-membership rights offer various benefits, such as non-name-designated access for four people, at a relatively lower cost than official golf course memberships. However, the risks borne by buyers vary depending on the financial condition of the other party to the contract and the terms governing the transfer of rights. For products that promise to return a security deposit, the seller's ability to pay is particularly important.

Min Byunghoon, a team leader at Dong-A Membership Exchange, advised, "You should never buy quasi-membership rights. To make a safe purchase, you must check the operating company's track record and financial statements." He added, "Ordinary memberships do not provide for the return of a security deposit. Any membership operated on the basis that the deposit will be returned needs to be checked carefully."

This content was produced with the assistance of AI translation services.