[ 2012 ] MF Increases

[pacodemountainside]

Staying Out Of Jail

OP: Four letter word answer: "jail"!


I have noted that virtually all the posts here agree many TS Developers are crooks and raping, robbering, pillifering, plundering, etc. HOA funds. However, have not seen a single post where Developer/cronies are in jail or even criminally charged.


Yes, most of us have read about the Manhattan Club which is probably the worst run TS today. I understand Developer oversold and a class action lawsuit is pending as owners cannot make reservations while Developer rentals abound. I vaguely recall some South African resorts as really bad.

But how many Developers are there, very wild guess 100+ or more important, HOAs very wild guess 500+. If 10% of resorts are badly run that is 50. I don't think the number is that high. At what point does it go from some rotten apples to an epidemic?



Given, being on many condo BODs simply is having some spare time or know the president are main criteria. Wouldn't it be great if TS HOAs filed tax grievences. There is no way 1 BR TS was ever worth say $20K. Tax assessor says $1.00 sales not respresentative, but if 12 at a buck and one at $20K should throw out high and low and go with middle. If tax assessor doesn't like $1.00 then maybe go with minus $2K one has paid for passage on a Viking Ship!



Let's look at why we have so many TSs. Developers put up a condo and make a nice profit and that is it. They divide into 52 Intervals and make a huge profit AND do have an on going management contract. Of course, with II and RCI and floating weeks the disadvatage of fixed,fixed RTU weeks pretty much disappeared. Disney being major RTU excepion in USA!

Sea--gull and his escapades are well documented, but if he stole HOA funds to put up his mansion, indulge high maintenance chick, support 8 kids and 10 Segways why isn't he in jail?

Think about corporate America. Presidents of Tyco, World Com, Bernnie Madcoff, et. al. are in jail. Yet GM whose incompetent inbreed exectuives who bankrupted company are just out a few bucks due to worthless stock options. Who can forget their hubris flying down to Washington asking for billions of dollars and congressional committee beating the hell out of them. Did they learn anything. NO, today they want government to sell the rest of GM stock at big loss so they resume control and get their planes and bonuses back?



It is no secret when Wyndham sets up new resort and BOD they sign long term management contracts which typically pay Wyndham 10% of gross expense budget. Typically they renew until day of big fire. The Main Man so states in 10K and presentations to financial analysts. If this is ripping the HOA I guess we need Washington to pass a law making illegal just like they legislated Developer pay MF on unsold units.



The simple truth is BODs. Trustees, etc. have to use prudent business judgment which Courts tend to liberally interpert in their favor and insurance pays legal fees!



For example, HOA where I live decided to plant lots of nice flowery plants which I am allergic to. I would rather have a minature golf course.So, should I get a petition going they should be boiled in oil?



Looking at Festiva, Diamond and Westgagte, are any of these Developers actively building in Colorado where 100% owner BOD is mandated around 80%. I think the concept that truly owner controlled BOD is only way to go is ipso facto.



For some reason there seems to be alot of confusion about MFs and SA. If Developer chooses to subsidize to facilitate sales that is his option. But is opposite of stealing fom HOA. Of course, when he stops, things start wearing out and basic cost of living increases are factored in MF have to go up. I think other poster who came up with around 5+% was right on. 5% a year compounded for 10 years comes out around 70%-



Simply put, over a 10 year period it is going to cost so much to operate a resort, condo or house. For a time share lets say $10 million or one million a year. No need to bother with zeros. The BOD can collect say 1/2 by MF and other half by SA instead of funding reserves. . Works great if one sells before SA. Or, BOD can double MF and skip SA.. The third leg is insurance. If limited or high deductible then better have a separate cash insurance reserve. The one thing I have seen over last 10 years that upsets this equation is when Developers went to nightly rentals and furnishings wore out much faster and HK increased. Then it was a big bump in MF or SA. Of course, this assumes at least annual review and adjustment of reserves.

 

[Tamaradarann]

Hilton and Vacation Viillage Maintenance Fees

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.)

I am a HGVC and Vacation Village Owner for 5 years. My maintenance fees have done up some. However, over the 5 years some of the maintenance fees have actually gone down some years. From what I can observe neither Hilton or Vacation Village is trying to make money on the maintenance fees. Are they as low as they could be if I, a professional operations manager who can run operations at a lower cost and save more money than anyone I know, no. My maintenance fees over the last 5 years have gone up a total of less than 10% which in view of the increases in the cost of labor, energy, insurance and taxes is very low.

 

[timeos2]

While the virtual pillaging of owners is illegal - the Developers are usually quite good at skirting the rules - why do you want to pay 15-20% or more as guaranteed profit to them? Especially when the same work & quality can be easily obtained at big savings - and less that profit markup - by bidding out the work & having an Independent or self-managed resort. The big names are not afraid to way overcharge for services & individual owners can do little or nothing to stop it. Thats why we no longer own at non-owner controlled locations nk matter how much we may like them. Can't afford the basically blank check Developers get when they stay in control. The OP has it right.

 

[Carolinian]

Look up John ''Goldfinger'' Palmer, a former major timeshare developer in the Canary Islands, who received an 8 year prison sentence for his timeshare scams and also has had most of his property seized to pay restitution.

There are also other examples of prosecuted and convicted timeshare scammers in the report that can be downloaded free here: http://www.timesharereport.info/ (see the bottom of page 16 through page 18)

OP: Four letter word answer: "jail"!


I have noted that virtually all the posts here agree many TS Developers are crooks and raping, robbering, pillifering, plundering, etc. HOA funds. However, have not seen a single post where Developer/cronies are in jail or even criminally charged.


Yes, most of us have read about the Manhattan Club which is probably the worst run TS today. I understand Developer oversold and a class action lawsuit is pending as owners cannot make reservations while Developer rentals abound. I vaguely recall some South African resorts as really bad.

But how many Developers are there, very wild guess 100+ or more important, HOAs very wild guess 500+. If 10% of resorts are badly run that is 50. I don't think the number is that high. At what point does it go from some rotten apples to an epidemic?



Given, being on many condo BODs simply is having some spare time or know the president are main criteria. Wouldn't it be great if TS HOAs filed tax grievences. There is no way 1 BR TS was ever worth say $20K. Tax assessor says $1.00 sales not respresentative, but if 12 at a buck and one at $20K should throw out high and low and go with middle. If tax assessor doesn't like $1.00 then maybe go with minus $2K one has paid for passage on a Viking Ship!



Let's look at why we have so many TSs. Developers put up a condo and make a nice profit and that is it. They divide into 52 Intervals and make a huge profit AND do have an on going management contract. Of course, with II and RCI and floating weeks the disadvatage of fixed,fixed RTU weeks pretty much disappeared. Disney being major RTU excepion in USA!

Sea--gull and his escapades are well documented, but if he stole HOA funds to put up his mansion, indulge high maintenance chick, support 8 kids and 10 Segways why isn't he in jail?

Think about corporate America. Presidents of Tyco, World Com, Bernnie Madcoff, et. al. are in jail. Yet GM whose incompetent inbreed exectuives who bankrupted company are just out a few bucks due to worthless stock options. Who can forget their hubris flying down to Washington asking for billions of dollars and congressional committee beating the hell out of them. Did they learn anything. NO, today they want government to sell the rest of GM stock at big loss so they resume control and get their planes and bonuses back?



It is no secret when Wyndham sets up new resort and BOD they sign long term management contracts which typically pay Wyndham 10% of gross expense budget. Typically they renew until day of big fire. The Main Man so states in 10K and presentations to financial analysts. If this is ripping the HOA I guess we need Washington to pass a law making illegal just like they legislated Developer pay MF on unsold units.



The simple truth is BODs. Trustees, etc. have to use prudent business judgment which Courts tend to liberally interpert in their favor and insurance pays legal fees!



For example, HOA where I live decided to plant lots of nice flowery plants which I am allergic to. I would rather have a minature golf course.So, should I get a petition going they should be boiled in oil?



Looking at Festiva, Diamond and Westgagte, are any of these Developers actively building in Colorado where 100% owner BOD is mandated around 80%. I think the concept that truly owner controlled BOD is only way to go is ipso facto.



For some reason there seems to be alot of confusion about MFs and SA. If Developer chooses to subsidize to facilitate sales that is his option. But is opposite of stealing fom HOA. Of course, when he stops, things start wearing out and basic cost of living increases are factored in MF have to go up. I think other poster who came up with around 5+% was right on. 5% a year compounded for 10 years comes out around 70%-



Simply put, over a 10 year period it is going to cost so much to operate a resort, condo or house. For a time share lets say $10 million or one million a year. No need to bother with zeros. The BOD can collect say 1/2 by MF and other half by SA instead of funding reserves. . Works great if one sells before SA. Or, BOD can double MF and skip SA.. The third leg is insurance. If limited or high deductible then better have a separate cash insurance reserve. The one thing I have seen over last 10 years that upsets this equation is when Developers went to nightly rentals and furnishings wore out much faster and HK increased. Then it was a big bump in MF or SA. Of course, this assumes at least annual review and adjustment of reserves.

 

[Carolinian]

When resorts are still in developer sales, the developer has an incentive to keep them low, often artificially. At that juncture raising them would negatively impact sales. It is when a resort sells out that you get hit with fee increases by developers, as they no longer have the incentive to keep them down and may have to play catch up for some of their tricks to artificially hold them down while in developer sales.

I am a HGVC and Vacation Village Owner for 5 years. My maintenance fees have done up some. However, over the 5 years some of the maintenance fees have actually gone down some years. From what I can observe neither Hilton or Vacation Village is trying to make money on the maintenance fees. Are they as low as they could be if I, a professional operations manager who can run operations at a lower cost and save more money than anyone I know, no. My maintenance fees over the last 5 years have gone up a total of less than 10% which in view of the increases in the cost of labor, energy, insurance and taxes is very low.

 

[smileyface]

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

George, Was it difficult to find a buyer for the 4 weeks that brought in 85,000? What year was this? I didn't think my timeshare was worth very much now. I bought it in 2003 in the Caymans.

 

[baybee210]

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.

How does one find out whether the owners, developer or management company has control?

 

[pedro47]

Is this an old thread brought back to life.

 

[vacationtime1]

How does one find out whether the owners, developer or management company has control?

It varies resort by resort.

The hotel chains and major developers are obviously all management company controlled.

As to the others, ask.

(I know this is a 2012 thread)

 

[bogey21]

George, Was it difficult to find a buyer for the 4 weeks that brought in 85,000? What year was this?

Best I can recall it was in the 80s. The $85,000 is an estimate but is close. As to difficulty the answer is yes and no.

Marriott Sabal Palms - sold through Marriott Sales when their commission was 20%. It took 3 years but they rented it for me for enough to cover MFs while I was waiting...
Marriott Harbour Club - sold by a RE broker on HHI with a 10% commission. This one took about a month. I had to convince Broker to put an ad in the local HHI newspaper but the ad sold it...
Marriott Heritage Club - sold by same RE broker on HHI also with a 10% commission. This one was tricky as I had to accept 36 monthly payments. Note payments were always on time. During the 36 month period Buyer had use of the Week and paid the MFs. He didn't get title until I had all the money...
Marriott Monarch Crown Suite - sold through Marriott Sales (20% commission). This one took only a week to sell and sold for something over $40,000...

George

 

[DeniseM]

How does one find out whether the owners, developer or management company has control?

With almost all of the large chains, the developer or management company is in control. Owner managed resorts are usually smaller, stand alone properties.