[ 2012 ] MF Increases

[winnipiseogee]

So once a developer has sold all the units what is to stop them from just increasing MFs by a ridiculous amount and making a large annual profit?

 

[DeniseM]

Usually not, but maintenance fees do not go to the developer - they go to the HOA, and the funds are managed by the board of directors - other owners at the resort.

 

[vacationtime1]

So once a developer has sold all the units what is to stop them from just increasing MFs by a ridiculous amount and making a large annual profit?

Developers frequently subsidize the HOA budget while a development is in active sales so as to reduce the stated MF's. When the project is sold out, the subsidy ends and MF's do increase -- although usually not by a ridiculous amount.

If the developer continues to control the HOA (which is the norm in all branded or chain timeshares, such as Marriott, Starwood, Wyndham, etc.), you may rest assured that the developer will continue to make a profit managing the project into the indefinite future. One can only hope that it will be limited to a reasonable profit.

 

[timeos2]

That is a very real possibility - especially when a Corporate operation has near total control (development, management and all too often the HOA Board).

It is the key reason we have reduced our timeshare ownerships strictly to Owner controlled resorts. They tend to offer the very best is accountability and cost effective management. Dollars to them tend to go to the improvement and maintenance of the resort, NOT to 15-25% or more Corporate profit. We still enjoy the corporate operated locations but by renting them or trading in rather than owning. It seems to be much more value than owning a group of time & the obligation to ever increasing fees that brings.

The true cost of any timeshare ownership is the ongoing fees. Purchase cost does nothing to change them if you buy for tens of thousands or a single dollar. Never pay much to buy any timeshare and always buy resale is great advice.

 

[tschwa2]

The subsidies that I have seen have been relatively small maybe $68-$88 per interval. Another way developer keep prices down while still in the selling stage is by under funding the reserve funds. Then down the road when things aren't so new and need to be replaced the HOA has to raise MF's to adequately fund the reserve which may mean a few years of higher fees to get it where it should have been.

 

[bogey21]

It is the key reason we have reduced our timeshare ownerships strictly to Owner controlled resorts. They tend to offer the very best is accountability and cost effective management. Dollars to them tend to go to the improvement and maintenance of the resort, NOT to 15-25% or more Corporate profit.

Agree 100%. This is why I sold my Developer Managed Weeks and went the Independent HOA controlled route 7 or 8 years ago. I think I sold my 4 "Chain Resort" weeks for about $85,000 and bought 6 carefully selected Independents for a total of less than $8,000. At the time the MFs for the HOA controlled Resorts were about $400 - $450, well less than half the MFs at my Developer Managed Resorts (both have since gone up but the spread between the two has actually widened). Before anyone makes the point, I agree that my Developer Weeks were more luxurious but then again I had well over $75,000 in my Bank Account to compensate.

George

George

 

[winnipiseogee]

How does you figure out if a resort is owner managed? I've just purchased in Harbor Ridge in large part because the owner management keeps fees down. I just have no idea how I would figure out about other ones.

Also, I was thinking about buying at an RCI points property in vegas because the MF/Point ratio is so low but I suspect that will change within the next few years and then why did I pay a premium to buy the unit?

 

[timeos2]

How does you figure out if a resort is owner managed? I've just purchased in Harbor Ridge in large part because the owner management keeps fees down. I just have no idea how I would figure out about other ones.

Also, I was thinking about buying at an RCI points property in vegas because the MF/Point ratio is so low but I suspect that will change within the next few years and then why did I pay a premium to buy the unit?

You have to research the resort and find out from owners and maybe from management who exactly is in control. If you can get an answer from management a great place to start is who sits on the HOA Board. Are they independent owners in majority or do employees of the management/developer hold the real control? A truly independent resort is likely to freely give you the information. A corporate controlled one may try to work a rather non-committal answer to sound good but hide that they alone have the power that should belong to the owners.

 

[pacodemountainside]

Developers Do Not Criminally Steal MF

For clarity, I am probably one of the top 10 Wyndham bashers and would never buy from a Developer again.

There sems to be a major misconception that MF are a Developer's personal ATM and piggy bank. While my experience is limited to Wyndham and Colorado condos/timeshares there is no basis in fact for this proselytizing.

In Colorado "The Colorado Common Interest Ownership Act"(CCIOA)CRS 38-XXXXXXXXXX
is the basis for governing documents Developer has his Philadelphia Lawyers prepare. Granted each of 50 states has its own laws but in general they cover same or similar things.

They provide that when around 25% of a development is sold an owner not "related" to Developer gets a board slot assuming three member BOD, at around 60% a second and around 80% Developer is outta dare! Sure a Developer can put his wife on using maiden name, a drinking buddy, college roomie, etc. but can you imagine Sea-gull in an 8 by 10 cell.

In addition most HOAs require a CPA audit their records.

On my 4 deeded Wyndham properties I get a package with budget, a list of people running for the BOD with curriculum vita, etc.. None list any Wyndham affiliation and of course I am free to submit my name. On my CWA I vote for a trust member and am free to join the race.

Wyndham 10K also states Developer signs long term managment contracts with HOA to uh, "manage" for 10% of gross expense budget.

WVO also maintains control over deeding, hence the outrageous $299 transfer fee and $2,395 to convert fixed week fee!

Wyndham also maintains control over VOI Trust by refusing to add 4 independant owner member and Arkansas AG said perfectly legal.

So lets stick wiith the facts. Per Wyndham 10K Developer does subsidize new projects as people focus on low M. F He understates reserves as everything is new and contractor warranties apply, takes a chance and has cheap insurance with high deductibles. So, yes when he abandons to new owner elected Board HOA fees almost have to go up after a few years. Colorado has addressed this by mandating HOAs have professionally prepared reserve studies done AND fund them.

When the FVPUMT of 1991 increase fees all the money goes to the Trust, none to Wyndham.



While I don't doubt Developers have stolen money from HOAs, would be interested in seeing documention this is wide spread. Obviously a judgment call on things like how much does Developer reimburse HOA for his use of resort facilities for sales..


Robert: what is the basis for this assertion. I know it does not apply to Wyndham.

If the developer continues to control the HOA (which is the norm in all branded or chain timeshares, such as Marriott, Starwood, Wyndham, etc.), you may rest assured that the developer will continue to make a profit managing the project into the indefinite future. One can only hope that it will be limited to a reasonable profit.
__________________
Robert

 

[vacationtime1]

Robert: what is the basis for this assertion. I know it does not apply to Wyndham.

If the developer continues to control the HOA (which is the norm in all branded or chain timeshares, such as Marriott, Starwood, Wyndham, etc.), you may rest assured that the developer will continue to make a profit managing the project into the indefinite future. One can only hope that it will be limited to a reasonable profit.
__________________
Robert

Your post provides some answers to your question:

1. Wyndham will earn a 10% management fee into perpetuity for managing the HOA (unless they lose control of the HOA, which is unlikely; you point out that they are able to stonewall on appointing independent board members). It creates a cash cow for them.

2. Wyndham hires itself, subsidiaries, or captive subcontractors to do much of the work associated with running the operation (reservations, repairs, suppliers, etc.). The inherent conflict of interest in hiring itself rather than the best or the cheapest outsiders cannot inure to the benefit of the HOA -- and Wyndham gets a 10% mark-up on excessive costs as part of its management fee, an actual disincentive to control costs. For example, how much does the HOA pay to Wyndham for running the reservations desk? Is it a profit center for Wyndham? What costs are passed through? Does the one page financial summary that you receive annually permit you to parse out the internal cost accounting allocations? I am certain it does not.

3. Wyndham charges $299 to transfer an ownership and $2,395 to convert a fixed week -- fees you agree are "outrageous".

4. Wyndham "takes a chance" on not having to pay on construction defects, chargebacks, and insufficient reserves. The protection of an outside audit is often illusory. We know that auditors, even honest, outside auditors can miss a lot (e.g. Enron).

I am not suggesting that Wyndham is worse than others and as I stated above, I am fine with a developer making a "reasonable" profit; that's why they are in business. My comment was directed at OP's valid question about the possibility of abuse.

Everyone active on this BBS has seen multiple instances of developers, managers, and exchange companies doing things ranging from abusive to illegal. Individual owners can do little when this happens. To suggest to OP that it is not the case would be to hide reality.

(Note: I own several Starwood units, like them a lot, and am fine with Starwood making a profit managing them -- which I believe it does well. But a couple of years back, when Starwood took away my right to exchange my reserved week and replaced it with a "blended value" trade week, it was apparent that Starwood was manipulating trade inventory for its benefit and to my detriment. I consider that to be abusive.)

 

[ronparise]

So once a developer has sold all the units what is to stop them from just increasing MFs by a ridiculous amount and making a large annual profit?

First of all, I dont think it happens, and im not too concerned about what might happen...If it does Ill walk away

 

[am1]

First of all, I dont think it happens, and im not to concerned about what might happen...If it does Ill walk away

Im in the same point. I am sure budgets could be less but there is not much I can do.

 

[ronparise]

Im in the same point. I am sure budgets could be less but there is not much I can do.

Im not concerned if the developer and/or manager makes a profit or even an obscene profit...I get concerned when I can rent something from a for profit company for less than the mf I pay my non profit HOA. Thats a problem and a problem, that if I cant fix, Ill walk away from

 

[dougp26364]

In the FWIW column, we have seven timeshares, three of which would be considered sold out. For the most part I can budget a 6% increase across the board and be pretty on target with the average increase in MF's. Last year some had no increase while others were above the 6% mark. I believe last years average was 5% across the board.

The biggest issue I had has been brought up. Our Polo Towers HOA underfunded the cash reserve, resulting in a nearly $2,000 special assesment to refurbish the units. I believe this has been corrected by the HOA and I don't believe this will happen again or, at least not in the near future. All of the rest of our ownership interests collect what I feel is an adaquate amount for the cash reserves. Hitlon and Marriott are by far the most aggresive with maintaining a high cash reserve balance.

 

[pacodemountainside]

Originally Posted by pacodemountainside

Robert: what is the basis for this assertion. I know it does not apply to Wyndham.

If the developer continues to CONTROL the HOA (which is the norm in all branded or chain timeshares, such as Marriott, Starwood, Wyndham, etc.), you may rest assured that the developer will continue to make a profit managing the project into the indefinite future. One can only hope that it will be limited to a reasonable profit.

********I would like to see your documentation that the Developer controls the HOA after say 80% of inventory has been sold and has free reign to raise MF! They definately do not in Colorado.
_________________
Robert

Your post provides some answers to your question:

1. Wyndham will earn a 10% management fee into perpetuity for managing the HOA (unless they lose control of the HOA, which is unlikely; you point out that they are able to stonewall on appointing independent board members). It creates a cash cow for them.

*******This has nothing to with control of HOA. Developer BOD signed sweetheart contract back in day of great flood that renews until the day of the big fire. To void requires a vote of super majority of owners which is impossible to obtain. Not like my Condo HOA management contract that has to be renewed annualy by BOD!



2. Wyndham hires itself, subsidiaries, or captive subcontractors to do much of the work associated with running the operation (reservations, repairs, suppliers, etc.). The inherent conflict of interest in hiring itself rather than the best or the cheapest outsiders cannot inure to the benefit of the HOA -- and Wyndham gets a 10% mark-up on excessive costs as part of its management fee, an actual disincentive to control costs. For example, how much does the HOA pay to Wyndham for running the reservations desk? Is it a profit center for Wyndham? What costs are passed through? Does the one page financial summary that you receive annually permit you to parse out the internal cost accounting allocations? I am certain it does not.

******You clearly do not understand how Wyndham, et. al. operates. WVO does hire resort GM with approval of BOD. He/she is a professional and if does not run in an acceptable business like manner such as putting contracts out to bid owner BOD would fire.

******The reservation system and other common resort functions are run by the VOI Trust. Owners pay a minimum of $98 for this service. The audited financials for Trust show owners paid $33,664,000 for reservation services in 2011.
Next biggest expense was $19,989,000 for our "free" RCI membership.


3. Wyndham charges $299 to transfer an ownership and $2,395 to convert a fixed week -- fees you agree are "outrageous".

******Absolutely, but one agrees to when they purchase either from Developer or resale. No stealing by Wyndham!

4. Wyndham "takes a chance" on not having to pay on construction defects, chargebacks, and insufficient reserves. The protection of an outside audit is often illusory. We know that auditors, even honest, outside auditors can miss a lot (e.g. Enron).

******In Colorado auditor will not "approve" financials if proper documetation is not in place. Pretty hard to miss if cash reserve fund should be a million dollars and is a couple thousand.




I am not suggesting that Wyndham is worse than others and as I stated above, I am fine with a developer making a "reasonable" profit; that's why they are in business. My comment was directed at OP's valid question about the possibility of abuse.


********Wyndham does make a very "reasonable" plus profit as evidenced bystock increase from around $3 a share a couple years ago to $53+ today.

****Unfortunately abuse is rampart in our society. Medicare fraud comes to mind since it affects me. Housing collaspe due to fraud by many, from local real estate appraiser to Wall Street, $40 Air Force toilet seats, ad infitinum.


Everyone active on this BBS has seen multiple instances of developers, managers, and exchange companies doing things ranging from abusive to illegal. Individual owners can do little when this happens. To suggest to OP that it is not the case would be to hide reality.


******Individually there is nothing we can do, collectively we can save Developer purchasers. Also, RCI did get sued twice and lost, but just increased exchange fee to cover legal fees. When Wyndham gets sued and loses they make Plaintiff sign "sealed agreement" so no one else can use their case as a precedent.

GO BRONCOS AND PEYTON!




(Note: I own several Starwood units, like them a lot, and am fine with Starwood making a profit managing them -- which I believe it does well. But a couple of years back, when Starwood took away my right to exchange my reserved week and replaced it with a "blended value" trade week, it was apparent that Starwood was manipulating trade inventory for its benefit and to my detriment. I consider that to be abusive.)
__________________



Wyndam does likewise with VIP bennies which are sales incentive vs deeded right!
Robert


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Last edited by vacationtime1 : September 17, 2012 at 03:50 PM.

 

[pacodemountainside]

How does you figure out if a resort is owner managed? I've just purchased in Harbor Ridge in large part because the owner management keeps fees down. I just have no idea how I would figure out about other ones.

Also, I was thinking about buying at an RCI points property in vegas because the MF/Point ratio is so low but I suspect that will change within the next few years and then why did I pay a premium to buy the unit?

Buy in state like Colorado where it is mandated by statute.

Still will not protect you if Developer bought cheapo insurance with big deductibles and a building burns down or does not put tons of money in cash reserve.

Also, cannot predict like several years ago Federal law mandated Developers pay MF on unsold units. To recover this cost they went to nightly rentals which put excessive wear and tear on units and big increases in unit renovation costs.

Simple solution! Rent bargains here or Wyndham points for $500/ 100K with VIP discounts. No brainer! No use, no lose! Cost me about $30K over 11 years ago but am a fast learner. Free to you!

 

[Carolinian]

The problem is the interlocking developer controlled webs that sometimes exist. With both management and the HOA board controlled by a developer, they can use their board control to pay excessive fees to their management company. Sometimes a developer tries to lock in control of management by long term management contracts, where even if the members take over the board, they are stuck with developer management for a long period. In South Africa with Stewart ''The Bullfrog'' Lamont, one of the most notorious timeshare operators, this often means lifetime contracts for this management company, First Resorts.

 

[gravityrules]

For clarity, I am probably one of the top 10 Wyndham bashers and would never buy from a Developer again.

There sems to be a major misconception that MF are a Developer's personal ATM and piggy bank. While my experience is limited to Wyndham and Colorado condos/timeshares there is no basis in fact for this proselytizing.

__________________
Robert

There are too many examples of developers who use MFs to extend and build their empires to accept your statement. Look into the business model of Festiva, Diamond, and Westgate if you are skeptical.

 

[GHT]

First of all, I dont think it happens, and im not too concerned about what might happen...If it does Ill walk away

Can you please explain the nitty gritty details of how you "walk away" from a timeshare so that someone can successfully do just that.
And second of all, what you say you don't think happens, I know for certain that it does happen. That's why I would like to "walk away" from some of my timeshares.
I read in the timeshare financial statement that there is a line-item for "bad debt expense". I asked at the owners meeting what that was. The answer was that it is basically a way the industry can "maintain" their revenue stream in the event of some foreclosures by owners who can no longer pay their maintenance fees. To me, this would be like a mortgage bank raising everyone elses mortgage payments so that they will get the same revenue stream and won't be affected by foreclosures. Fortunately for mortgage payers the banks can not do this, only timeshare companies can.

 

[Beefnot]

Can you please explain the nitty gritty details of how you "walk away" from a timeshare so that someone can successfully do just that.
And second of all, what you say you don't think happens, I know for certain that it does happen. That's why I would like to "walk away" from some of my timeshares.
I read in the timeshare financial statement that there is a line-item for "bad debt expense". I asked at the owners meeting what that was. The answer was that it is basically a way the industry can "maintain" their revenue stream in the event of some foreclosures by owners who can no longer pay their maintenance fees. To me, this would be like a mortgage bank raising everyone elses mortgage payments so that they will get the same revenue stream and won't be affected by foreclosures. Fortunately for mortgage payers the banks can not do this, only timeshare companies can.

Walking away is simply defaulting. Anyone can do that if they so choose to accept the consequences.

Bad debt expenses can be accrued in advance if there is a reasonable expectation that bad debts will be incurred. If I know over the past four years that I have incurred actual expenses related to defaulting owners of, say, $1M, $2M, $500k, and $500k, respectively, in the upcoming annual budget I may choose to accrue an allowance for bad debt of $1M because I expect to incur those losse on averages. I do not necesarily Need to wait until losses actually occur to raise or lower MFs from year to year due to fluctuating bad debt expenses. Now, as with any accrual, there should be periodic true-ups and/or adjustments to the accrual rate as actual experience dictates.

 

[Tia]

How about this Wyndham contract-

'Auto renewal of 5 year contract term and the Association may terminate 90 days prior to renewal with 25% affirmative vote of non-developer owners or as required by governing docs.'

Not sure why/where the governing docs .....

 

[blueparrot]

There are too many examples of developers who use MFs to extend and build their empires to accept your statement. Look into the business model of Festiva, Diamond, and Westgate if you are skeptical.

Agreed. You have listed a rogue's gallery of greedy developers.

 

[timeos2]

There are too many examples of developers who use MFs to extend and build their empires to accept your statement. Look into the business model of Festiva, Diamond, and Westgate if you are skeptical.

Lets look at a few actual situations rather than speculation.

At our Fl resort the Developer, like most, put in place a system that made it virtually impossible to dislodge them as management. Thus although there was an Owner based HOA they were locked into a very bad management contract. How bad? Delinquencies - 50%+. Reservations - under Developer Control. Owners were not forced to pay fees due before using their time (generated "flow" fro sales). Priority given to sales over owners for prime times. Fees: Over $1 million for management in 2001! Plus numerous sweetheart contracts that turned out to be subsidiaries of the Developer (for phone service/equipment, tv service, Designer work, and more). Ranking: Lost Gold Crown and was in danger of losing any ranking at all. Resort maintenance poor with most work being concentrated on the new resort Developer was building next door. Reserves seriously underfunded. And more.

Owners revolted and through an acrimonious lawsuit managed to gain control and put an independent management in place. Within 3 years management fees reduced to $350,000. Contracts bid out to lowest qualified bidders for big savings. Delinquencies <5%. Gold Crown ranking restored. Units renovated. The money that was going to the Developer pockets redirected properly to resort maintenance. A total turnaround.

Or the Manhattan Club today. The developer refuses to allow Owner control. Fees are over 20% for every dollar collected - even taxes & reserves! Owners complaining of readily available to outside, non-owner renters yet unavailable to those paying the fees! Fees have jumped from $500 to over $2200/year!

There are many more examples such as Wastegate already mentioned but you can easily include Wyndham, Marriott and others that insist on getting a fixed return, no bid procurement and worse. Having near total control leads to abuses and costs the owners dearly.

You can try to say it doesn't matter but the truth is it does. If you want to own a responsible and well run resort or system find those that have Owner, not Developer, control and independent management. Otherwise you are at the mercy of the developer and that is a place you never want to be. It will cost you big. Why place 15%+ automatically to a Developer? Use the money for the resort as that is why you own there not to guarantee an ongoing profit center for a big company.

 

[Carolinian]

The problem of excessive fees from developer controlled resorts is a problem in Europe as well, as this report from Sandy Grey, head of the Timeshare Consumers Association points out in detail:

http://www.timesharereport.info/

It can be downloaded free.

 

[theo]

Not taking sides, just observing "aloud"...

<snip> There sems to be a major misconception that MF are a Developer's personal ATM and piggy bank. <snip>

I no longer own within Wyndham, and my own "exit" was based solely upon a complete dissatisfaction with the specific Wyndham resort in FL at which I owned one (converted) week, rather than with any MF issues.

That much clearly said, I owned (...also no longer, thankfully) within Celebrity Resorts, now currently known in its' post-bankruptcy reinvention / iteration as "Legacy Vacation Club". In that system, it was my clear and consistent observation that the "Developer" was indeed apparently using and abusing maintenance fee coffers as a piggy bank / ATM. My bet is that the situation there remains completely unchanged even now;
I don't know (...or care) if their recent entrance into RCI Points has changed the picture there at all.

Celebrity / Legacy boards are all packed with and controlled by company stooges --- any illusion that the HOA represents anyone but the developer is just that --- an illusion. Maintenance fees are comparatively very high (I certainly have enough other ownerships over many years now to make direct and valid first hand comparisons), yet improvements and fundamental maintenance were always sadly lacking. What other conclusion could possibly be drawn, other than that of the developer / piggy bank / ATM analogy???

The thieving parasites at Celebrity / Legacy may be an exception to the Developer rule. I don't know -- but I do know that I will never again have any ownerships with any Developer presence or influence...