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[2009] What Timeshares are Owner Controlled?

timeos2

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I'm in, I sit. Things are no better. Become an activist and stay informed

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 resorts 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.

110% agreement. Offering every choice possible is a sign of an owner controlled Board. A restriction on third party offerings MAY (but do to circumstances such as the original documents which are usually written by a developer) be a red flag of a hanger on Developer but not always. Each case needs to be looked at. Usually if the independent owners hold the majority of Board seats then the resort is owner controlled. Now work to make it WELL owner controlled as simply having owners on the Board doesn't magically make things better or well run. A good owner Board that keeps a bad management group (and they can be VERY hard to dislodge!) may still have problems they shouldn't. You have to look at the whole picture and those in charge need to do the work!
 

jbercu

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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 resorts 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.
WOW! What a jump!
From my number
5) Resort participation in the RCI Points program should be a yellow flag.
To: “no reason why an owner controlled board should want to take choices away from members”
What I am suggesting is that the RCI points system is a quick fix to the problem that exists in mature timeshares, where owners are no longer interested in owning and there is no market to dispose of their ownership. These owners are susceptible to paying a few k’s and agreeing to relinquish their use rights for a few years in return for …
These owners who chose this path have different interests than owners who use their weeks at the resort. For example, should the resort have financial problems and need a special assessment the RCI converted to points owners are less likely to vote for a special assessment since there is nothing in it for them. And indeed, they even walk away from their ownership rather than pay the special assessment. The RCI converted to points owners are also in general much less likely to participate in resort issues. In fact, it is clear from other posts on TUG, that some resort units are purchased based on the ratio of RCI assigned points to HOA dues, where the larger the ration, the more attractive the resort.
What is the point of an owner controlled Board if the owners assigned their usage rights to another entity?
What is the point of an owner controlled Board if the owners have no incentive to maintain their resort?
Resort participation in the RCI point program should be a yellow flag and more than 4% ownership in the program that requires the relinquishment of owner rights is a sign that the resort is subject to "Inappropriately influenced".
So I never suggested that a Owner controlled Board should outlaw the resort participation in the RCI Points program, and I find it ironic that the defenders of the RCI Points system in fact advocate a system that subjects owners to RCI control rather than Owner controlled Board.
IMHO
 

T_R_Oglodyte

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WOW! What a jump!
From my number
5) Resort participation in the RCI Points program should be a yellow flag.
To: “no reason why an owner controlled board should want to take choices away from members”
What I am suggesting is that the RCI points system is a quick fix to the problem that exists in mature timeshares, where owners are no longer interested in owning and there is no market to dispose of their ownership. These owners are susceptible to paying a few k’s and agreeing to relinquish their use rights for a few years in return for …

You clearly have a a specific axe to grind regarding VRI, and are intent on somehow forcing VRI into a "developer" net where it frankly doesn't fit.

You may have an issue that owners may not have the degree of control you would desire at one of your resorts. That situation, however, is quite distant from the notion that your resort is controlled by developers.

I can think of no good reason why involvement in RCI Points even warrants your yellow flag. Your sole argument in favor of that position has nothing to do with developer control of a resort. It may have a tenuous connection to a situation in which owners fail to assert themselves to take control of their resort, and thereby create a vacuum into which parties can insert themselves. But it's worth noting that could equally be a minority of owners that takes control of the resort to their own benefit. There certainly are examples of that situation.
 

taffy19

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110% agreement. Offering every choice possible is a sign of an owner controlled Board. A restriction on third party offerings MAY (but do to circumstances such as the original documents which are usually written by a developer) be a red flag of a hanger on Developer but not always. Each case needs to be looked at. Usually if the independent owners hold the majority of Board seats then the resort is owner controlled. Now work to make it WELL owner controlled as simply having owners on the Board doesn't magically make things better or well run. A good owner Board that keeps a bad management group (and they can be VERY hard to dislodge!) may still have problems they shouldn't. You have to look at the whole picture and those in charge need to do the work!
Why is that John? Once the contract runs out with the management company, they are free to choose another one. They probably could also kick them out for non-performance.

The problem is that many timeshare owners do complain but never want to get involved and do not even vote. They need enough votes to do the HOA meetings. A good HOA board keeps members up to date so people have more interest in their resort. We do. :)
 

timeos2

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Why is that John? Once the contract runs out with the management company, they are free to choose another one. They probably could also kick them out for non-performance.

The problem is that many timeshare owners do complain but never want to get involved and do not even vote. They need enough votes to do the HOA meetings. A good HOA board keeps members up to date so people have more interest in their resort. We do. :)

Most developer placed management contracts have very restrictive auto-renewal clauses. And they tend to have onerous prior notification clauses. They do everything they can to ensure that the owners don't think they have any choice but to stay with what they have. And they tend to filter any legal advice through their own best interests. It takes a strong Board to see through it and get independent advice regarding any management change. They also control the owners list and will attempt to limit the flow of information if they don't like it. They are not to be underestimated.
 

T_R_Oglodyte

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Most developer placed management contracts have very restrictive auto-renewal clauses. And they tend to have onerous prior notification clauses.

A common provision is that the management can be replaced only by a 50% vote of all owners.

That means that the Board does not have authority to fire the manager. The most the Board can do is put it on a ballot. Then once it gets to the ballot, the motion can only carry if 50% of all owners vote in favor; that's not 50% of votes at a quorumed meeting. Thus every owner who fails to vote (whether by abstaining or failing to proxy) is, in essence, a vote to retain the management contract.

Since meeting seldon have more than 15% to 20% of owners casting a vote, that 50% of all owners hurdle is, for practical purposes, insurmountable.

Then even if you get over that hurdle there will often be language in the contract or the by-laws requiring a one-year transition period for the change to occur. And during that transition period the management company may be authorized to bill a variety of termination charges to the resort during that year.
 

ecwinch

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A common provision is that the management can be replaced only by a 50% vote of all owners.

That means that the Board does not have authority to fire the manager. The most the Board can do is put it on a ballot. Then once it gets to the ballot, the motion can only carry if 50% of all owners vote in favor; that's not 50% of votes at a quorumed meeting. Thus every owner who fails to vote (whether by abstaining or failing to proxy) is, in essence, a vote to retain the management contract.

Since meeting seldon have more than 15% to 20% of owners casting a vote, that 50% of all owners hurdle is, for practical purposes, insurmountable.

Then even if you get over that hurdle there will often be language in the contract or the by-laws requiring a one-year transition period for the change to occur. And during that transition period the management company may be authorized to bill a variety of termination charges to the resort during that year.

Can you double-check this. Most of the ones I have seen allow the Board to terminate the mgt contract. If nothing else, a Board needs that ability to terminate the contract for cause. Otherwise the Mgr will argue that the Board does not have the authority to terminate.

But they do contain a 50% rule that allows the owners to override the board at renewal time - i.e. to provide a provision for the membership to over-ride a developer controlled board.
 

T_R_Oglodyte

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Can you double-check this. Most of the ones I have seen allow the Board to terminate the mgt contract. If nothing else, a Board needs that ability to terminate the contract for cause. Otherwise the Mgr will argue that the Board does not have the authority to terminate.

But they do contain a 50% rule that allows the owners to override the board at renewal time - i.e. to provide a provision for the membership to over-ride a developer controlled board.

Those are the provisions for the DRI resorts in Hawaii, and knowing how lawyers operate and the fact that this provision is now at least 15 years old I'm sure it's been used in other resorts as well.

In fact, the Timeshare Disclosure documents for the Hawai'i DRI properties state flatly that the provisions make it virtually impossible to replace the management company.
 

Carolinian

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They only ''control'' the owners list if a weak board allows them to, and is ignorent of the law. Every HOA I am aware of is organized as a non-profit corporation. One provision is every state's non-profit corporation law, at least as far as I am aware, is that ANY member of the corporation, which means any timeshare owner, has a right to inspect and copy the owners list, including addresses. Statutes generally restrict their ability to pass it to third persons or use it for commercial or other inappropriate purposes themselves, but they can get it and use it to communicate with other timesharers about resort management.

In North Carolina, the state Real Estate Commission has a record of helping timeshare member groups against abusive developers / management, especially during the long period when Blackwell Brogden was its timeshare guru. Brodgen even took on RCI Points and forced them to back down on some really key issues, which impacted their whole program, not just North Carolina. I wish he were still in the saddle with the RCI rentals controversy going, as I am sure he would have come up with a way to try to back RCI down on that.


Most developer placed management contracts have very restrictive auto-renewal clauses. And they tend to have onerous prior notification clauses. They do everything they can to ensure that the owners don't think they have any choice but to stay with what they have. And they tend to filter any legal advice through their own best interests. It takes a strong Board to see through it and get independent advice regarding any management change. They also control the owners list and will attempt to limit the flow of information if they don't like it. They are not to be underestimated.
 

Carolinian

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That may be the norm with the former Sunterror, now DRI, resorts, but that does not make it the norm everywhere. On the OBX, kicking out a management company has not been difficult at all. All four of the First Flight resorts kicked out First Flight back in the early 1990's. Outer Banks Beach Club I and II both kicked out Fairfield at the same time (Fairfield had taken over management when they acquired the original developer, Peppertree). Dunes South, Bodie Island Beach Club, and Sea Ranch II all kicked out Cape Management. The Windjammer kicked out a local management company whose name escapes me. All of those were done by board action.


A common provision is that the management can be replaced only by a 50% vote of all owners.

That means that the Board does not have authority to fire the manager. The most the Board can do is put it on a ballot. Then once it gets to the ballot, the motion can only carry if 50% of all owners vote in favor; that's not 50% of votes at a quorumed meeting. Thus every owner who fails to vote (whether by abstaining or failing to proxy) is, in essence, a vote to retain the management contract.

Since meeting seldon have more than 15% to 20% of owners casting a vote, that 50% of all owners hurdle is, for practical purposes, insurmountable.

Then even if you get over that hurdle there will often be language in the contract or the by-laws requiring a one-year transition period for the change to occur. And during that transition period the management company may be authorized to bill a variety of termination charges to the resort during that year.
 

T_R_Oglodyte

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That may be the norm with the former Sunterror, now DRI, resorts, but that does not make it the norm everywhere. On the OBX, kicking out a management company has not been difficult at all. All four of the First Flight resorts kicked out First Flight back in the early 1990's. Outer Banks Beach Club I and II both kicked out Fairfield at the same time (Fairfield had taken over management when they acquired the original developer, Peppertree). Dunes South, Bodie Island Beach Club, and Sea Ranch II all kicked out Cape Management. The Windjammer kicked out a local management company whose name escapes me. All of those were done by board action.
Steve - I understand what you're saying here, and I think that's probably accurate for timeshares that were created prior to the mid-1990's. I think the OBX properties you cite fit in that older category.

A similar example is the Vacation Internationale program, where the owner got together and terminated Sunterra's contract - though there was a fight to do so.

But I do suspect that since some time in the 1990s developers wanting to maintain control have inserted much more rigorous language in the timeshare program documents.

****

The language I quoted above seems to me to have been very clearly drafted to cement the management contract. Knowing how corporate attorneys operate, I would be amazed if similar language were not now extant in timeshare program documents all over whenever developers want to ensure control of resort management.

I seriously doubt that the provisions I cited were even original with the Sunterra Hawai'i properties. That would give Sunterra and its attorneys credit for originality far beyond what they ever exhibited in other matters. I would expect they copied it from someone else.

It would be interesting to see a sampling of what timeshare program documents indicate about management contract termination for resorts that have been developed since about 1965. None of mine are that new, so I can't help out there.
 
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timeos2

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They only ''control'' the owners list if a weak board allows them to, and is ignorent of the law. Every HOA I am aware of is organized as a non-profit corporation. One provision is every state's non-profit corporation law, at least as far as I am aware, is that ANY member of the corporation, which means any timeshare owner, has a right to inspect and copy the owners list, including addresses. Statutes generally restrict their ability to pass it to third persons or use it for commercial or other inappropriate purposes themselves, but they can get it and use it to communicate with other timesharers about resort management.

They "control it" because they basically control the funding. No matter how strong a Board, and often times they don't have the strong backbone required to face down a better informed and financially strong developer management, it can be a battle to get information out to the owners. No matter what the documents or law may say the management can make it very tough. Not to say it shouldn't or can't be done but don't be fooled to think its easy. No matter who is in charge they tend to fight as hard as possible to keep things in their hands.
 

timeos2

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Looking back is nostalgic but doesn't help fix todays reality

The language I quoted above seems to me to have been very clearly drafted to cement the management contract. Knowing how corporate attorneys operate, I would be amazed if similar language were not now extant in timeshare program documents all over whenever developers want to ensure control of resort management.

Yes, it is very common language and in fact got stronger in the late 90's as the developers came up with ever more creative ways to hang around and milk the Association money pot for as long as possible. I'd be surprised to find anything less in more recent contracts and the rise of the club / points system type exchange that also seems to tie owners to a single management (actually not true at all but no developer system is going to admit that) only adds to the pressure tha "you must stay with us".

Older, single resort developments had much less sophisticated developers that actually planned on a turn over to the owners and the contracts reflected that simpler time. Wishing things were as they once were, good or bad according to one's view, is a waste of energy now. We must deal with today no matter if its how exchange companies act or how developers have figured to hold on to management long after they should be out of the picture.
 

T_R_Oglodyte

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The use of trusts also cements developer control of the management contract. All of the deeds held by the trust are generally voted as a bloc by the trustee. Since well over half of individual don't proxy or vote in the annual meetings, if more than 20% of the deeds are held in a trust, the trust effectively controls the resort.

*****

Nominally the trustee is independent of the developer. In practice, the developer selects the trustee when the trust is created and is sure to select a "friendly" organization to be the trustee. The developer will often select an institution with which the developer has business relationship, such as a bank.

So you start with a cozy relationship between the trustee and the developer, with the background context that if the trustee should do something the developer doesn't like the developer might take their other business with the trustee elsewhere. Plus, the trustee would certainly not be installed as trustee for any trusts set up in the future, so there is also the threat of lost future business opportunities.

Now, the members of the trust could organize themselves and select a new trustee, but that is an effort similar to replacing the management contract at a resort without a trust.
 

chriskre

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Enchanted Isle resort.
My 2 weeks resorts are owner controlled:

Ft. Lauderdale beach resort as stated before which is VRI managed

and

Enchanted Isle in Hollywood beach which is managed by a small broker.

One of the great benefits of Enchanted Isle is that it is very owner centric.
They even allow you day privileges throughout the year and they also upgrade you if you exchange in thru RCI or do a last call. If you want to buy a resale unit the office keeps a pdf file of owners currently selling their units onhand with the contact info for each owner available on request.
 

T_R_Oglodyte

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Older, single resort developments had much less sophisticated developers that actually planned on a turn over to the owners and the contracts reflected that simpler time. Wishing things were as they once were, good or bad according to one's view, is a waste of energy now. We must deal with today no matter if its how exchange companies act or how developers have figured to hold on to management long after they should be out of the picture.

To be fair, John, we also need to consider the situation from the developers point of view. If the developer is building a branded mini-system, the developer will want to have influence on how the facilities that carry the barnd are maintained and operated. While they could address the naming issue by licensing naming rights, the reality is that once the resort is in their Club, it's difficult to cut it loose. It may be impossible if the deeds are tied up in a Trust where they are comingled with others.

*****

I'm not trying to minimize or neglect the fact that the management contracts are also lucrative. I am recognizing though that if I were in the situation of a developer creating a branded mini-system I would probably do something similar even if only for the sake of being able to control the brand name.

****

In the end it comes down to a basic issue of whether or not you want to get into bed with the developer at a particular resort, including what your options and costs might be should you decide you want to "switch beds" or forego beds entirely.
 

Cyndi

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Wapato Point, Washington
 

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There are things owners can do to fight back to some developer tactics. Sunterra had a habit of buying developer rights and remaining inventory from small developers in the UK, and probably elsewhere, and then sold points, where they controlled the votes of the underlying weeks and therefore controlled the resorts. I was told by a board member at Stouts Hill how that resort put in a poison pill that kept Sunterra away. When Sunterra showed up talking a great game about what they would do for the resort, he made a motion at the Annual General Meeting which passed that gave any owner a maximum of one vote at the AGM no matter how many weeks they owned. Limited to one vote, Sunterra could not have been in control so they departed.

That was very fortunate, considering that Sunterra later kicked the members out and sold the property at Club Britannia, and their successor, DRI is currently in the process of kicking the owners out at Wychnor Park and Thurnham Hall. Maybe they will ultimately be sold, too. Who knows, DRI has already sold off Carlton Court in central London, but that was all points based and had no pesky owners who had to be kicked out first.


The use of trusts also cements developer control of the management contract. All of the deeds held by the trust are generally voted as a bloc by the trustee. Since well over half of individual don't proxy or vote in the annual meetings, if more than 20% of the deeds are held in a trust, the trust effectively controls the resort.

*****

Nominally the trustee is independent of the developer. In practice, the developer selects the trustee when the trust is created and is sure to select a "friendly" organization to be the trustee. The developer will often select an institution with which the developer has business relationship, such as a bank.

So you start with a cozy relationship between the trustee and the developer, with the background context that if the trustee should do something the developer doesn't like the developer might take their other business with the trustee elsewhere. Plus, the trustee would certainly not be installed as trustee for any trusts set up in the future, so there is also the threat of lost future business opportunities.

Now, the members of the trust could organize themselves and select a new trustee, but that is an effort similar to replacing the management contract at a resort without a trust.
 

NTHC

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I didn't take the time to read this entire thread so if this is a duplicate sorry, but Mountainside Villas at Massanutten is and has been for quite some time.


Thanks,
Cindy
 

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Summer Bay Las Vegas Desert Club

Summer Bay Las Vegas Desert Club has a structure in which the owners elect eight seats to the HOA Board and the developer appoints three seats to the eleven-member board. At HOA elections for the eight owner board seats about 2200 of the total of 27,000 shares are voted by owners. The reason is that most owners do not vote, they just throw away their ballots after they get them in the mail. The developer is entitled to vote its unsold inventory shares in the owner-seat elections because it is an owner of its several unsold inventory weeks. Generally the developer votes its shares which are greater than the total number of other owners who vote. In six out of the last seven elections the developer has voted its unsold inventory shares in accordance with the owner vote to not tilt the election outcome for the owner seats. However, in the 2008 election Summer Bay voted its unsold inventory shares for other down-ticket candidates which had the effect of seating on the board candidates who did not win the owner vote tally--the first, second and fourth place finishers did not end up seated on the board.
The HOA has a huge number of Long-Term proxies it can vote as it sees fit. Approximately 4000 shares between owners and developer unsold inventory shares that are voted. The HOA holds more than 17,000 Long Term proxies. The HOA has voted its Long-Term proxies according to the outcome of the popular vote after the owners and the developer have voted their shares. In two elections, (2004--two board seats, 2006 -- one board seat) the HOA decided to vote its long term proxies for other candidates than the vote tally winners changing the outcome of who was seated on the board.
 
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I know this is an old thread, but its helped me out so much and I wanted to ensure everyone knew it was out there. I also wanted to add a few more owner controlled timeshares that I own at

  1. Vanderbilt Beach and Harbor Club, Naples, FL
  2. Quarter House, NOLA
  3. Sunrise Bay Resort & Club, Marco Island, FL
  4. Pinestead Reef, Traverse City, MI
 
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