[2009] What Timeshares are Owner Controlled?

[Carolinian]

What is the definition of owner controlled? A lot of board may or have to be made up of all owners, but many developer plants also own at the resorts making them eligible to be on the board. So a resort may have all owners on the board, but some have interest that are not the same as the ownership as a whole.

That can indeed be a problem, and is one good reason to get the developer completely out of the picture when sellout is complete. A developer hanging on in management has too much tempation to manipulate things.

 

[rapmarks]

Lakewood Resort in Osage Beach, MO

 

[taffy19]

Laguna Shores in Laguna Beach, CA is also owner controlled as I called them today. The Management Company works for them so owners have full control.

 

[jbercu]

Any resort managed by VRI, which also includes the entire Vacation Internationale and ORE mini-systems.

Can someone help me verify if T_R_Oglodyte is correct? If all VRI managed timeshares are owner controlled...then all the following would be added, based on the VRI website...

What is the definition of owner controlled? A lot of board may or have to be made up of all owners, but many developer plants also own at the resorts making them eligible to be on the board.

That can indeed be a problem, and is one good reason to get the developer completely out of the picture when sellout is complete. A developer hanging on in management has too much temptation to manipulate things.

California Business and Professional Code Part 2, Chapter 2 “THE VACATION OWNERSHIP AND TIME-SHARE ACT OF 2004” Section 11212 (i)
"Developer" means and includes any person who creates a time-share plan or is in the business of selling time-share interests, other than those employees or agents of the developer who sell time-share interests on the developer's behalf, or employs agents to do the same, or any person who succeeds to the interest of a developer by sale, lease, assignment, mortgage, or other transfer, but the term includes only those persons who offer time-share interests for disposition in the ordinary course of business.

Also please note the Web site http://sales.vriresorts.com/buying.asp which states “Every one of these resorts is managed by VRI. We are not involved in timeshare resales at any resort where we are not responsible for hands-on management.”

So if we define an Owner Controlled Timeshares in a broad sense, than 99% of timeshares are owner controlled, since the developer is still an owner and is allowed to vote his/her share of the ownership.

If we define Owner Controlled as a majority of the Board members representing the interests of owner not holding ownership for the purpose of disposition, than most sold out resorts qualify.

If we define Owner Controlled Resorts as all of the Board members representing the interests of owner not holding ownership for the purpose of disposition, or management income, than every VRI managed timeshare that has a Board member that is part of VRI, including Roy Fraser, VRI Founder, is not an Owner Controlled Board. Also, the list of VI resorts that are part of the VRI Managed resorts would come off the Owner Controlled list.

Timeshare owners should understand that there is no Timeshare where all (100%) owners are actively engaged in the welfare of the timeshare. Therefore, it opens the door for minority owners to exercise undue influence on the decision that need to be made. A single developer on a five member Board representing 20% of the developer’s ownership may actually gain complete control over a timeshare, by nominating a full developer Board. Independent voting owners in a timeshare plan rarely represent more than 15% of the total votes with the rest made up by developer votes. Out of the 15% of independent voters about 50% of the independent voters give the proxy to the Board to vote for them.

The true test of an Owner Controlled Resort is Delinquency Rate and Owner voting record.

Show me a resort with delinquency rate under 4%, and independent owner voting record above 50% and I will show you an Owner Controlled Resort.

The Donatello Club – An Owner Controlled Resort

IMHO

 

[timeos2]

So is the test wrong or the theory?

Show me a resort with delinquency rate under 4%, and independent owner voting record above 50% and I will show you an Owner Controlled Resort.

IMHO

I know of at least three that fit that standard and, guess what, all are with VRI Management! So does that mean they aren't owner controlled?

(They most certainly are)

 

[T_R_Oglodyte]

It's a pretty big stretch of the concept "developer" to consider to be a "developer" an outfit such as VRI that does not build resorts, that is a management company that has a presence at a resort only because the owners of the resort entered into a management (and which to the best of my knowledge includes no resorts where the developer of the resort has any significant remaining interest), and that is involved in resales at a resort as a way to help the Owners Association return foreclosed properties to paying status.

If that fits your idea of a developer, well .... I guess you're entitled to believe so.

I'm fairly confident that as regards the issue of resort developers continuing to exert control of resort activities after sales are completed, most of us here would not consider VRI to be a developer.

 

[T_R_Oglodyte]

California Business and Professional Code Part 2, Chapter 2 “THE VACATION OWNERSHIP AND TIME-SHARE ACT OF 2004” Section 11212 (i)
"Developer" means and includes any person who creates a time-share plan or is in the business of selling time-share interests, other than those employees or agents of the developer who sell time-share interests on the developer's behalf, or employs agents to do the same, or any person who succeeds to the interest of a developer by sale, lease, assignment, mortgage, or other transfer, but the term includes only those persons who offer time-share interests for disposition in the ordinary course of business.

Ahhh - I see. Every person that is involved in timeshare resales as a hobby is, by this definition, a reseller. Also any homeowners association that forecloses on units in arrears and puts those units up for sale is also, by this definition a developer.

Thus, the only resorts that might quality as not "developer controlled" would be resorts where the HOA does not actively foreclose on and resell properties that are delinquent in payments.

For purposes of this thread, that strikes me as a pretty worthless definition.

 

[ecwinch]

California Business and Professional Code Part 2, Chapter 2 “THE VACATION OWNERSHIP AND TIME-SHARE ACT OF 2004” Section 11212 (i)
"Developer" means and includes any person who creates a time-share plan or is in the business of selling time-share interests, other than those employees or agents of the developer who sell time-share interests on the developer's behalf, or employs agents to do the same, or any person who succeeds to the interest of a developer by sale, lease, assignment, mortgage, or other transfer, but the term includes only those persons who offer time-share interests for disposition in the ordinary course of business.

Also please note the Web site http://sales.vriresorts.com/buying.asp which states “Every one of these resorts is managed by VRI. We are not involved in timeshare resales at any resort where we are not responsible for hands-on management.”

So if we define an Owner Controlled Timeshares in a broad sense, than 99% of timeshares are owner controlled, since the developer is still an owner and is allowed to vote his/her share of the ownership.

If we define Owner Controlled as a majority of the Board members representing the interests of owner not holding ownership for the purpose of disposition, than most sold out resorts qualify.

If we define Owner Controlled Resorts as all of the Board members representing the interests of owner not holding ownership for the purpose of disposition, or management income, than every VRI managed timeshare that has a Board member that is part of VRI, including Roy Fraser, VRI Founder, is not an Owner Controlled Board. Also, the list of VI resorts that are part of the VRI Managed resorts would come off the Owner Controlled list.

Timeshare owners should understand that there is no Timeshare where all (100%) owners are actively engaged in the welfare of the timeshare. Therefore, it opens the door for minority owners to exercise undue influence on the decision that need to be made. A single developer on a five member Board representing 20% of the developer’s ownership may actually gain complete control over a timeshare, by nominating a full developer Board. Independent voting owners in a timeshare plan rarely represent more than 15% of the total votes with the rest made up by developer votes. Out of the 15% of independent voters about 50% of the independent voters give the proxy to the Board to vote for them.

The true test of an Owner Controlled Resort is Delinquency Rate and Owner voting record.

Show me a resort with delinquency rate under 4%, and independent owner voting record above 50% and I will show you an Owner Controlled Resort.

The Donatello Club – An Owner Controlled Resort

IMHO

Since you are using CA statute as your definition of the "Developer", then in that context, the definition of the developer controlled resort is where the developer controls more than 20% of the total voting power. See 11269.b.(3)

(3) Class B membership shall be automatically converted to class A
membership, and class B membership shall thereafter cease to exist,
when the total outstanding votes held by the class B member falls below 20 percent of the total voting power of the association.

Under Cal law, the developer's membership is as a Class B member, and owners are Class A members. Until the target above is triggered.

 

[ecwinch]

Ahhh - I see. Every person that is involved in timeshare resales as a hobby is, by this definition, a reseller. Also any homeowners association that forecloses on units in arrears and puts those units up for sale is also, by this definition a developer.

Thus, the only resorts that might quality as not "developer controlled" would be resorts where the HOA does not actively foreclose on and resell properties that are delinquent in payments.

For purposes of this thread, that strikes me as a pretty worthless definition.

No, just reselling timeshares does not make you a developer. Nor do I suspect that VRI would qualify. The provision that:

but the term includes only those persons who offer time-share interests for disposition in the ordinary course of business

is where the distinction is. This clearly excludes private individuals doing it as a hobby. And VRI would argue that their ordinary course of business is the management of the resort, and their reselling activities are necessary but ancillary service related to their mgt. IMO.

 

[Passepartout]

Sorry I got into this party late, but I certainly feel that my 2 VRI managed mini systms and resorts are owner (HOA) controled. I've never gone to a VRI, MROP, or VI resort that offered any more than resales, though I haven't been to all of any system by any means.

Jim Ricks

 

[rcshelton]

Peppertree in Maggie Valley, NC

 

[ecwinch]

Sorry I got into this party late, but I certainly feel that my 2 VRI managed mini systms and resorts are owner (HOA) controled. I've never gone to a VRI, MROP, or VI resort that offered any more than resales, though I haven't been to all of any system by any means.

Jim Ricks

I think most resorts have some resale activity occurring - but as you probably are thinking - not your active sales process. My VRI resort does have a broker that will accept listings and make sales. He also makes sales for HOA repossessed units.

 

[T_R_Oglodyte]

No, just reselling timeshares does not make you a developer. Nor do I suspect that VRI would qualify. The provision that:

but the term includes only those persons who offer time-share interests for disposition in the ordinary course of business

is where the distinction is. This clearly excludes private individuals doing it as a hobby. And VRI would argue that their ordinary course of business is the management of the resort, and their reselling activities are necessary but ancillary service related to their mgt. IMO.

I don't think "ordinary course of business" excludes that at all. "Ordinary course of business" just means that it's a general part of the business. It doesn't mean it's the major part of the business; only that it is not an exceptional occurrence.

Absent other exclusionary governing language, the language indicates to me that anyone who regularly buys and sells timeshares as a business operation is doing so in the ordinary course of business. It might be a hobby, but it it still a business. Just as a hobby farm is still a farm.

***

But this is just a bunny trail. The point that we can all agree on is that for purpses of this thread a person who buys and sells timeshares as a hobby is not a developer. Neither is a homeowners association that acquires and resells timeshares that are delinguent in annual payments. The fact that they might meet the defnition of "developer" under the cited statute merely reinforces that that statutary definition is not useful or relevant to this discussion.

 

[Carolinian]

Statutory definitions exist for other purposes and really muddy the water for the purposes we are discussing here. They want to have a handle on those involved in sales of timeshares, and care nothing about management. As timeshares, on the other hand, it is the management and control aspects that we are concerned with. The NC statutory definition of a developer, for example, is extremely broad and essentially includes anyone who sells a timeshare except those who have owned and actually used it for personal purposes like staying there or exchanging. The NC Real Estate Commission has used it to go after and shut down out of state resellers who were selling NC timeshare. It is one of the reasons that anyone buying on eBay from a reseller has a very big stick to stand up to the reseller on what closing company to use. A complaint to the NC Real Estate Commission could cause them very big problems.

 

[ecwinch]

I don't think "ordinary course of business" excludes that at all. "Ordinary course of business" just means that it's a general part of the business. It doesn't mean it's the major part of the business; only that it is not an exceptional occurrence.

Absent other exclusionary governing language, the language indicates to me that anyone who regularly buys and sells timeshares as a business operation is doing so in the ordinary course of business. It might be a hobby, but it it still a business. Just as a hobby farm is still a farm.

***

But this is just a bunny trail. The point that we can all agree on is that for purpses of this thread a person who buys and sells timeshares as a hobby is not a developer. Neither is a homeowners association that acquires and resells timeshares that are delinguent in annual payments. The fact that they might meet the defnition of "developer" under the cited statute merely reinforces that that statutary definition is not useful or relevant to this discussion.

You might now be arguing against your initial position.

As you have noted, and I agree, classifying a reseller as a developer due to the fact they sell timeshare interests is flawed. So one has to assume that any exemption to the statute is intended to be broadly applied. To do otherwise would be unreasonable.

So the question hinges on the Ordinary course of business exclusion. Which as you note is legal term. The Uniform Commercial Code (UCC), provides a four part test for an Ordinary course of business. I would opt for third element of the test -

"and in the ordinary course from a person, other than a pawnbroker, in the business of selling goods of that kind."

As I noted in my original post - I would argue on that basis and the fact that a mgt company is not in the business of selling goods of that kind (i.e. timeshares). That those sales are resultant from the mgt of the resort and necessary for the proper operation. i.e. to dispose of foreclosed weeks.

Otherwise you could have a very complicated scenerio where the HOA (as the party selling weeks) is classified as the Developer. Triggering provisions designed to protect the HOA from the Developer.

i.e. at least one Board member has to be elected by votes other than the Developer.

If they both are the same - how does that work?

 

[Carolinian]

Using any of these statutes, which vary from state to state and are directing at regulating timeshare sales, not administrative control of the timeshare, is simply a flawed concept from the beginning.

 

[jbercu]

Symptoms

Using any of these statutes, which vary from state to state and are directing at regulating timeshare sales, not administrative control of the timeshare, is simply a flawed concept from the beginning.

I completely agree!
I think since the question was “What Timeshares are Owner Controlled?” I am sure we will never agree given there is no clear definition. However, there is enough expertise on this board to help Tuggers identify symptoms of Owner Controlled VS. Developer or Special Interest Controlled Timeshares.
1) High owner vote participation (Over 40%) in general elections is a symptom of an owner controlled timeshare.
2) A low delinquency rate (Under 4%) is a symptom of an owner controlled timeshare.
3) A high rate of owner usage of the resort (Over 50%) is a symptom of an owner controlled timeshare.
4) Any single entity that controls over 20% of the vote, even owner controlled points clubs such as VI should be a yellow flag.
5) Resort participation in the RCI Points program should be a yellow flag.
6) Expiring E-Bay listing of units for sale for $1 with no bids should be a yellow flag.
7) Excessive rental activity especially by such companies as RCI, II, Expedia, and Orbitz at the resort should be a yellow flag.
All yellow flags should be researched as they may be symptoms of special situations rather than Developer or Special Interest controlled resorts.
IMHO

 

[jbercu]

I know of at least three that fit that standard and, guess what, all are with VRI Management! So does that mean they aren't owner controlled?

(They most certainly are)

No, of course not!

In fact, Pacific Grove Plaza is an owner controlled resort that is managed by VRI.
Can you list the other VRI resorts that you know are owner controlled, or are you too convinced that any VRI managed resort is owner controlled?

Can you list the definition or criteria that you use to determine if a resort is owner controlled?

Thanks,

 

[T_R_Oglodyte]

I know of at least three that fit that standard and, guess what, all are with VRI Management! So does that mean they aren't owner controlled?

(They most certainly are)

No, of course not!

In fact, Pacific Grove Plaza is an owner controlled resort that is managed by VRI.
Can you list the other VRI resorts that you know are owner controlled, or are you too convinced that any VRI managed resort is owner controlled?

Can you list the definition or criteria that you use to determine if a resort is owner controlled?

Thanks,

I think you and John are in total agreement with each other. John's parenthetical is that "They most certainly are [owner-controlled]."

 

[jbercu]

The point that we can all agree on is that for purpses of this thread a person who buys and sells timeshares as a hobby is not a developer. Neither is a homeowners association that acquires and resells timeshares that are delinguent in annual payments. The fact that they might meet the defnition of "developer" under the cited statute merely reinforces that that statutary definition is not useful or relevant to this discussion.

A homeowner association that has the owner of VRI on its Board, that is managed by VRI that raises dues beyond what is acceptable to a minority (20%) of the owners, than takes back units from the distraught owners, then disposes of the units by selling them to a related VRI entity where VRI receives 50% commission, and does all this in executive sessions and claims all contracts signed in executive session as privileged, fits my definition of a Non-Owner Controlled Timeshare.
While “a homeowners association that acquires and resells timeshares that are delinquent in annual payments” should be a standard activity of any Timeshare HOA, a large quantity of this activity should raise a flag that this resort may not be owner controlled.

 

[jbercu]

1) High owner vote participation (Over 40%) in general elections is a symptom of an owner controlled timeshare.
2) A low delinquency rate (Under 4%) is a symptom of an owner controlled timeshare.
3) A high rate of owner usage of the resort (Over 50%) is a symptom of an owner controlled timeshare.
4) Any single entity that controls over 20% of the vote, even owner controlled points clubs such as VI should be a yellow flag.
5) Resort participation in the RCI Points program should be a yellow flag.
6) Expiring E-Bay listing of units for sale for $1 with no bids should be a yellow flag.
7) Excessive rental activity especially by such companies as RCI, II, Expedia, and Orbitz at the resort should be a yellow flag.
All yellow flags should be researched as they may be symptoms of special situations rather than Developer or Special Interest controlled resorts.
IMHO

8) Transparency. If an owner has relatively easy access to Timeshare ownership list, records, decisions, and members of the Board, this is a symptom of an Owner controlled timeshare

 

[T_R_Oglodyte]

A homeowner association that has the owner of VRI on its Board, that is managed by VRI that raises dues beyond what is acceptable to a minority (20%) of the owners, than takes back units from the distraught owners, then disposes of the units by selling them to a related VRI entity where VRI receives 50% commission, and does all this in executive sessions and claims all contracts signed in executive session as privileged, fits my definition of a Non-Owner Controlled Timeshare.
While “a homeowners association that acquires and resells timeshares that are delinquent in annual payments” should be a standard activity of any Timeshare HOA, a large quantity of this activity should raise a flag that this resort may not be owner controlled.

Which resort is that? Perhaps that is basis to discuss whether a resort ought then to be excluded from a list of owner controlled resort.

However even if the facts are totally as stated I would sill have a hard time classifying this a "developer controlled" for purposes of this thread.

"Developer controlled" and "Inappropriately influenced" are not the same thing.

While VRI might meet a statutory definition of a developer for purposes of some state law, that definition is not really relevant for this thread.

Legal definitions and the real world are two completely different realms and it's always useful to understand that and keep them separated. My chief business is working with companies to do exactly that. One of my standard comments when I do a presentation somewhere is that I can talk about regulations, or I can talk about common sense, but I generally can't talk about both of them at the same time.

An example - a latte machine is technically a steam boiler. That means that every barrista ought to have a boiler operating engineers license, and that all latte machines ought to be inspected by industrial safety officials routinely (every three years, IIRC).

 

[ecwinch]

Using any of these statutes, which vary from state to state and are directing at regulating timeshare sales, not administrative control of the timeshare, is simply a flawed concept from the beginning.

I would agree that most state statutes are focused on the sales aspect. But a large number of them have some provisions addressing the governance and/or management of the HOA.

There is some commonality among some states. A general rule with exceptions can be developed. Something along the lines of "most states view the HOA to not be in developer controller when the control less than XX% of the vote". Just as a benchmark.

 

[ecwinch]

I completely agree!
I think since the question was “What Timeshares are Owner Controlled?” I am sure we will never agree given there is no clear definition. However, there is enough expertise on this board to help Tuggers identify symptoms of Owner Controlled VS. Developer or Special Interest Controlled Timeshares.
1) High owner vote participation (Over 40%) in general elections is a symptom of an owner controlled timeshare.
2) A low delinquency rate (Under 4%) is a symptom of an owner controlled timeshare.
3) A high rate of owner usage of the resort (Over 50%) is a symptom of an owner controlled timeshare.
4) Any single entity that controls over 20% of the vote, even owner controlled points clubs such as VI should be a yellow flag.
5) Resort participation in the RCI Points program should be a yellow flag.
6) Expiring E-Bay listing of units for sale for $1 with no bids should be a yellow flag.
7) Excessive rental activity especially by such companies as RCI, II, Expedia, and Orbitz at the resort should be a yellow flag.
All yellow flags should be researched as they may be symptoms of special situations rather than Developer or Special Interest controlled resorts.
IMHO

While I agree with a large number of items you mention, I think you are heading more toward a definition of a resort with a high degree of owner involvement rather than owner control.

There are numerous resorts that are completely owner controlled - a 100% owner board - but have a disinterested ownership base and due to other factors, meet a large number of the conditions you outline above. For instance I own at the VRI managed Royale Beach & Tennis Club. Due to a number of special assessments related to storm damage - that resort would fail your test on multiple levels. Mainly 1,2,3,5, and 6.

 

[T_R_Oglodyte]

5) Resort participation in the RCI Points program should be a yellow flag.

I'm not quite sure what this has to do with owner control. It seems to me that owner control is all about not dictating to owners what they should and should not do.

For example, at Winners Circle (which is probably one of the best examples around of an owner controlled resort) the all owner board (which includes at least one TUGger) feels that it isn't any of the resort's business to decide how owners can use their units. If some owners want to use RCI weeks - fine. If some owner want to use RCI Points, fine. If some owners want to use II - fine. If owners want to use an independent - fine.

I can see no reason why an owner controlled board should want to take choices away from members. I can, however, see many reasons for developer controlled resorts to attempt to limit the privileges of owners.