# San Clemente Inn Ownership= junk bond status



## skimble (Oct 17, 2010)

The San Clemente Inn has always been a comfortable place to stay.  It's situated in a decent location, and the accommodations are 3 star at best.  It's a converted hotel.  
The best thing about the place has always been the moderate quality at a moderate price for ownership and moderate maintenance fees.  
All that is changing due to a poor fiscal choice by the BOD. 
The BOD has made the decision this year to increase our maintenance fees by 20%.   
WHY, in a time when unemployment is incredibly high, in a time when finances are tight for nearly everyone would they do this?  
I realize, 2 years ago, they started a refurbishment and finished two buildings.  I know they'd like to finish the other two buildings instead of putting it off indefinitely.  I also realize there's a problem with the foundation in two of the buildings.   The sum total of the repairs will be about $4 million.  
THIS is the time for a special assessment, NOT a fee increase.   
Once they're put in place, maintenance fees, like taxes, never go away or go down.  And, the values of our weeks are commensurate with the cost of maintenance fees.
I honestly believe we will lose a LOT of our dues-paying owners.    
People are already dealing with rampant inflation, tight finances, dubious trade value, depleted ownership value (which is amplified by the fact that SCI is offering dirt cheep repo weeks in the newsletter), and now our maintenance fees are on par with 4 and 5 star resorts?   Once they realize they're ownership has been reduced to junk bond status (thank you BOD), they're going to stop paying.
What were they thinking?


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## UWSurfer (Oct 17, 2010)

Did you read the newsletter which explained all this?  I'm unfortunately out of town at Indian Palms Intervals this week so I don't have mine handy but there were several factors involved including major structural work on the slopes and foundations of at least two buildings as well as dealing with ADA requirements, refurbishments and required reserves. 

While I'm less than thrilled by the increases, I certainly understand why they need to do this and can only hope that this otherwise well run and thrifty resort is able to reduce it's fee's in a few years, but this is largely dictated by construction costs which couldn't be avoided.

Would you prefer to loose two of the four buildings?


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## skimble (Oct 18, 2010)

UWSurfer said:


> Did you read the newsletter which explained all this?  I'm unfortunately out of town at Indian Palms Intervals this week so I don't have mine handy but there were several factors involved including major structural work on the slopes and foundations of at least two buildings as well as dealing with ADA requirements, refurbishments and required reserves.
> 
> While I'm less than thrilled by the increases, I certainly understand why they need to do this and can only hope that this otherwise well run and thrifty resort is able to reduce it's fee's in a few years, but this is largely dictated by construction costs which couldn't be avoided.
> 
> Would you prefer to loose two of the four buildings?



Most resorts are struck by some major expense at some point in time or another.  And, when it happens, you simply explain the situation and implement a special assessment.  
I would MUCH rather pay $300 in a special assessment and keep my maintenance fees lower.  
Like I said before, the value of our ownership is hinged on the level of our maintenance fees.   Increasing our normal operating expenses (our maintenance fees) by $100 in a single year is a death wish.  
The foundation is an unexpected incurrence, and it should be treated as such.    People understand this sort of thing.  
I Guaranty you this increase in our maintenance fees will not go away.  Fees never go down, only up.  
IMHO, I think this is an excuse for VRI and SCI management to build up their operating expenses for what they anticipate to be tough times ahead.  We all know inflation is coming on strong.  Shoring up the foundation would cost less than $300/ownership interval.  This is an easy thing to ask the owners for.  Putting it into our maintenance fees is like a temporary government tax... there's no such thing.  So, given the choice of a special assessment or an addition to our annual maintenance fees, why did they choose to include it in our fees?  I'm sure they would lead you to believe that a special assessment would be an undo hardship for people in these tough times.  However, giving people the choice to pay this fee in small incriments over a span of a year (much the way they spread out maintenance fee payments, avoiding the shock of the massive fee increases over the past 5 years) it would be minimized.   
I don't know many details about the finances of SCI, but they had the money set aside for the refurbishment prior to starting.  Do you know why they stopped half way?  
I've talked with Lisa Fransiconi about the finances there about a year ag, and she mentioned the challenges with increasing costs of supplies. 
I'm wary of what I see from the outside.... 
I see VRI assessing Points owners at WCR an additional assessment for the administration of Points.  I see VRI expanding their VRIety system with very little west coast coastal prime inventory to work with.  I'm seeing a system with RCI/VRI that requires me to request a spacebank directly through VRI if I choose to bank, as opposed to banking the summer interval that I stood in line at 5:30 am to get.  (This tells me they're playing with guaranteed deposits.)  
I'm looking at RCI Points and I see TONS of SCI inventory available... and I ask myself... how do they work that?  How are they taking a resort that has LOW value for the weeks and get people to buy into that system?  Yet, people who trade into SCI can pick it up for a pitance.  In fact, with the new maintenance fee, I can now purchase points from RCI at 2 cents/point and get a summer interval at SCI for about $400 for a studio or about $600 for a Crest.  There's something wrong with this.  If you know RCI Points, this discrepency will make sense.  
I'm also seeing tons of inventory in Points that allow people to check in on ANY day of the week.  How is this possible when all intervals were sold with a Sunday checkin?   
I'm seeing housekeeping services that have been expanded over the past few years.  Management would have you believe that it makes Sunday cleanup go faster.  I highly doubt that.  Is the mess in your room greater on Saturday than it is on Wednesday?    I believe this service is there to make the turnover for the Points operation-- the M-F checkin more readily available.  
AND... with VRI, and it's whole VRIety scam, there's Platinum VRIety where you can get upgrades and get free weeks.  Where does this inventory come from?   Where do they get the inventory for the Monday checkin?  Who is paying for those intervals?  How do they balance the books for all the odd check-in times?  I already know the administration for VRI is a costly thing... they've passed those costs along at WCR.  
From the outside... I see a lot of extra costs.... and fishy things.  
When things don't seem logical from the outside, there's often a reason.  (I also thought it odd that so many people in CA could afford houses that were well beyond their means 10 years ago.)    Sorry for the long post... long reply... 
The addition of $100 to our fees seems to be paying for more than just the foundation.  And... I assure you, that fee increase will NOT be rescinded.


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## teepeeca (Oct 18, 2010)

*special assments vs increased mx fees*

NOBODY that I know "really likes" a special assessment.  And, they aren't "too enthusiatic" about a major jump in annual maintenance fees.

However, sometimes, unforseen events require one, or the other, to be instituted.  Realistically, in the circumstances of SCI, I think a special assessment would be in order.  It would be a "ONE TIME" fee, explained by the HOA, as necessary.

A "jump" in annual mx fees, however, would/could/should be looked upon, by the owners, as fees that "not only are going up substantially" this year, BUT, will continue to (either) stay the same after the increase, or continue to increase every year.

(I think) the last scenario will cause owners to think about "bailing-out"---NOT paying the annual fees, and letting their timeshares to go into a default mode.  NOT GOOD for everybody.

Owners at SCI should 'immediately" contact the HOA board, and let "their" voices be heard !!!

Tony


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## JudyS (Oct 18, 2010)

skimble said:


> ...  I'm seeing a system with RCI/VRI that requires me to request a spacebank directly through VRI if I choose to bank, as opposed to banking the summer interval that I stood in line at 5:30 am to get. ...


 Wait a minute -- I own at SCI, and I hadn't heard anything about not being able to deposit the week I've booked. Is this a new SCI rule, or is this something you're afraid will happen, but that hasn't happened yet?

I just read my letter from SCI yesterday, and wasn't happy about the 20% increase. However, the fees at SCI are still similar to what I pay at Aquamarine Villas in Oceanside ($560 plus taxes for 2010 -- not sure what 2011 will cost) and Winners' Circle in Solana Beach ($630 plus taxes for 2010 -- haven't been told what 2011 will be.)  

And, the nice thing about SCI is that Orange County doesn't charge me any real estate taxes even though my SCI cost me about $1000 to purchase -- they consider that too small to bother with. San Diego County is charging me $60-$70 a year in property taxes on my Winners' Circle weeks, even though none of them cost me more than $500 to buy.

I'm not sure what the deal is with SCI having lots of RCI Points inventory -- Winners' Circle has tons of inventory in RCI Points, too.


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## dougp26364 (Oct 18, 2010)

Sometimes the governing documents make it impossible to have a SA without a vote from owners approving the SA. If that's the case, there's additional expenses involved in getting the word out as to why the SA is necessary, selling the owners on the SA and then getting owners to vote. Even then it might not pass. Increasing MF's in most cases doesn't require owner approval or a vote. 

What's sad is that the HOA/BOD didn't adaquately plan for the future. Rather than several incremental increases, owners are facing one huge increase to make up past deficits and current/future needs.

I feel you pain. One of our ownerships didn't manage finances all that well either. To many years they bragged about no MF increase, only to have to go through two votes to get an SA approved and slowly increase MF's to make up for a deficit in cash reserve funding.


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## UWSurfer (Oct 18, 2010)

Skimble,

I don't know the answers to many of the questions you posed, but I can offer a bit of a perspective.   My impression of the resort when I bought in a few years ago was that it nearing a turning point. 

From what I could tell the place had been converted to timeshares approximately 20 years earlier and many of those who owned were original owners.  I constantly heard stories of people who came back year after year, raising their families with their annual vacation at SCI.  It also struck me that MF's were very low and the board was cheap.   As an owner I appreciated that but there have been issues looming for years including a catch 22 where construction to the resort triggers ADA compliance issues and those requirements were going to be very expensive.   So a dance was going on where to keep from increasing MF's, they opted not to do construction and the delay just kept kicking the can down the road until it rusted.

The fee increases in the past couple years were rather insignificant and while you point out it's a 20% increase, it's about $120, or $10 a month.   We have management and staff at the resort who have also been there a long time who do a great job in running the place and also from what I can are very creative in renting out unused inventory to travelers and businesses who have work sites nearby.    This may help to explain the size of house keeping.  I know when I've stayed here using RCI from another property I've been charged a house keeping fee for stays less than a week.

It's a challenging time for timeshares.  There is already a built in default factor and yes, many more may opt to get out due to the increases.  We also have a significant aging owner base who would be leaving anyways.    I watched a couple of $1 high season breaker weeks go unbid on Ebay last week which two years ago would have gone for $800 - $1000.   

SA vs MF...yes I agree it may be more appropriate but I suspect this jump is also the result of having such low fees for so long and the realities of what it's going to cost to bring things up to standards.


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## skimble (Oct 19, 2010)

UWSurfer said:


> Skimble,
> 
> I don't know the answers to many of the questions you posed, but I can offer a bit of a perspective.   My impression of the resort when I bought in a few years ago was that it nearing a turning point.
> 
> ...



As timeshare owners, we constantly compare maintenance fees to mitigate or rationalize the fees we pay.  That doesn't make it right.  We are at the mercy of our management companies.  VRI has been praised as one of the most scrupulous on TUG.  We like to think our BOD has decision-making power; that's not the case.  The BOD get their information handed to them, and they don't have tools at their disposal to test for reliability.  
I went to an owners meeting where RCI presented info about comparable maintenance fees for coastal CA resorts, saying my resort was lower than average (not SCI.)  When the board was presented with the new budget proposal with a 7% increase, it seemed logical that we should have to pay this--bringing ourselves in alignment with other resorts.  The board bought it.  
Do the fees match the expenses?  Are they a frugal, conscientious operation working to keep fees down?  
Last year, all Grand Pacific resorts took a 2.6% salary increase.  The worst recession in decades, and they took a raise??  That tells you something about how removed management can be from their accountability toward keeping costs down.    
Aquamarine Villas was mentioned earlier-- they are a smaller complex.  By virtue of their size, they're going to incur higher fees.  
Winner's Circle was mentioned-- they're Gold Crown.  They put complimentary mouthwash and disposable sewing kits in both bathrooms.  They also clean or exchange towels and remove trash every day.  And, they had a hefty SA about 3 years ago to replace the clubhouse.  THIS should stand testimony to the fact that VRI operates like this.  Since WCR is VRI managed, it might also imply that the BOD does not have to go to the owners to get a vote on a SA.  They didn't solicit a vote with the WCR SA.

I too have noticed the price of SCI weeks going down.  I attribute that to our hefty increase in fees last year.  Fees have made significant jumps in the past 2 years.  But again, this coincides with the VRIety induction and RCI's litany of SCI Points inventory.


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## skimble (Oct 19, 2010)

JudyS said:


> Wait a minute -- I own at SCI, and I hadn't heard anything about not being able to deposit the week I've booked. Is this a new SCI rule, or is this something you're afraid will happen, but that hasn't happened yet?
> 
> I just read my letter from SCI yesterday, and wasn't happy about the 20% increase. However, the fees at SCI are still similar to what I pay at Aquamarine Villas in Oceanside ($560 plus taxes for 2010 -- not sure what 2011 will cost) and Winners' Circle in Solana Beach ($630 plus taxes for 2010 -- haven't been told what 2011 will be.)
> 
> ...




Double check your taxes.  I purchased one for less than $1K, and I still pay about $25 each year in taxes.  
As for the rule about deposits of SCI weeks-- I deposited a summer week.  After pending for 4 weeks, it bounced.  I got a letter from RCI saying that I needed to contact VRI to get get them to deposit my week.  Having had this experience before through another resort, I'm pretty sure RCI gets guaranteed deposits.  They know in advanced the approximate number of resort week that will be deposited through them.  In an effort to secure "maximum trade value,"  VRI deposits weeks early with RCI.  When an owner wants to deposit their week, they must do it through VRI.  Instead of giving you the week you initially reserved, they give you a banked week that they conveniently deposited 6 months ago (typically off season.)  And, when you question it, they explain to you the added benefit of trade value you'll get.


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## JudyS (Oct 19, 2010)

skimble said:


> Double check your taxes.  I purchased one for less than $1K, and I still pay about $25 each year in taxes.


 I actually was quite worried about why I wasn't getting tax bills for SCI, so last summer I spent about an hour on the phone with the Orange County tax people. After being bounced around from department to department, I was told my SCI week had been "purged from the tax rolls" because my tax bill was less than $10 a year. Therefore, I owe no no taxes on my SCI unit. 

San Diego County, on the other hand, has a special property tax of $20 per year for timeshares, so San Diego timeshares never have free taxes, even if they are assessed as having zero value.

My guess is, your SCI week was assessed as being worth more than what you paid. That happened with one of my Winners' Circle weeks. I paid less than $500, but it was assessed at $4000 value, so I pay $70 in taxes. You could try fighting your tax assessment, but I'm not sure it's worth it.



skimble said:


> As for the rule about deposits of SCI weeks-- I deposited a summer week.  After pending for 4 weeks, it bounced.  I got a letter from RCI saying that I needed to contact VRI to get get them to deposit my week.  Having had this experience before through another resort, I'm pretty sure RCI gets guaranteed deposits.  They know in advanced the approximate number of resort week that will be deposited through them.  In an effort to secure "maximum trade value,"  VRI deposits weeks early with RCI.  When an owner wants to deposit their week, they must do it through VRI.  Instead of giving you the week you initially reserved, they give you a banked week that they conveniently deposited 6 months ago (typically off season.)  And, when you question it, they explain to you the added benefit of trade value you'll get.


So, you haven't actually asked SCI why your deposit didn't go through? You are just assuming they won't let you deposit a summer week? There are lots of reasons why RCI might have denied the deposit. I just had a week (not at SCI) get denied by II because the unit number had been written down wrong. I've never heard anything before about SCI not allowing deposits of summer weeks.  

I'm not happy about the increase in SCI fees, either, but I don't think your hostility towards SCI is justified. For example, in your original post, you said that "SCI is offering dirt cheep repo weeks in the newsletter."  Yet, you just said that you paid less than $1000 for your SCI week that floats during summer. The repossessed weeks SCI is offering start at $800 for an off-season studio. If you paid less than $1000 for a peak season week, than how is $800 for an off-season week "dirt cheap"?


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## T_R_Oglodyte (Oct 19, 2010)

skimble said:


> Double check your taxes.  I purchased one for less than $1K, and I still pay about $25 each year in taxes.
> As for the rule about deposits of SCI weeks-- I deposited a summer week.  After pending for 4 weeks, it bounced.  I got a letter from RCI saying that I needed to contact VRI to get get them to deposit my week.  Having had this experience before through another resort, I'm pretty sure RCI gets guaranteed deposits.  They know in advanced the approximate number of resort week that will be deposited through them.  In an effort to secure "maximum trade value,"  VRI deposits weeks early with RCI.  When an owner wants to deposit their week, they must do it through VRI.  Instead of giving you the week you initially reserved, they give you a banked week that they conveniently deposited 6 months ago (typically off season.)  And, when you question it, they explain to you the added benefit of trade value you'll get.


If what you're describing is accurate, it sounds as if SCI has switched to a bulk banking program.  Am I understanding you correctly?


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## jkrich (Oct 19, 2010)

I deposited my 2011 summer week using the same process as prior years.  My only contact with VRI was to make the reservation and pay maintenance fees.  The deposit was made by telephone call with RCI and was for the specific week I reserved. 

I haven't seen any articles in the quarterly newsletters addressing a change in deposit procedures, so I believe SCI still allows deposit of the week reserved.

I'm sure the price of my SCI week has decreased dramatically, but that's true of all of my weeks given the current timeshare market.  I'm not sure how you can reasonably isolate the impact of increased fees on pricing as opposed to general market conditions.

Jerry


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## timeos2 (Oct 19, 2010)

*SA's are not a good standard operating procedure. Long term collections much better*



UWSurfer said:


> Skimble,
> 
> SA vs MF...yes I agree it may be more appropriate but I suspect this jump is also the result of having such low fees for so long and the realities of what it's going to cost to bring things up to standards.



Great point. In reality the higher fee may represent a long term need to get the reserve contribution at the resort to the level required especially if to date those numbers were too low. The need to look ahead doesn't end when the current upgrades/repairs/replacement work is completed and paid for.  Immediately the BOD should make sure that the next round of work - usually within 5-7 years at most resorts - will be funded from those ongoing collections rather than yet another need for either a large jump in annual fees OR a Special Assessment.  

It appears the current Board is taking the proper steps to get the work done now as well as the broader view of future needs for the resort. Increases always hurt but so does a run down, out of date resort.  It is up to the owners and their elected Board to deal with the situation and one way or another the owners will pay.


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## skimble (Oct 19, 2010)

JudyS said:


> I'm not happy about the increase in SCI fees, either, but I don't think your hostility towards SCI is justified. For example, in your original post, you said that "SCI is offering dirt cheep repo weeks in the newsletter."  Yet, you just said that you paid less than $1000 for your SCI week that floats during summer. The repossessed weeks SCI is offering start at $800 for an off-season studio. If you paid less than $1000 for a peak season week, than how is $800 for an off-season week "dirt cheap"?



The $800 high Studio week includes all closing costs, as does the $1100 Crest high season.  When you subtract $500 for closing costs, this brings the actual price to $300 and $600 respectively.  VRI charges $100 for transfer, and $400 is a reasonable going rate for escrow.


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## skimble (Oct 19, 2010)

timeos2 said:


> Great point. In reality the higher fee may represent a long term need to get the reserve contribution at the resort to the level required especially if to date those numbers were too low. The need to look ahead doesn't end when the current upgrades/repairs/replacement work is completed and paid for.  Immediately the BOD should make sure that the next round of work - usually within 5-7 years at most resorts - will be funded from those ongoing collections rather than yet another need for either a large jump in annual fees OR a Special Assessment.
> 
> It appears the current Board is taking the proper steps to get the work done now as well as the broader view of future needs for the resort. Increases always hurt but so does a run down, out of date resort.  It is up to the owners and their elected Board to deal with the situation and one way or another the owners will pay.



SCI has traditionally managed its finances responsibly. Capital reserves have been in place for future repairs.  They've been doing it the right, responsible way.  There's never been a concern about their fiscal responsibility. 
I'm skeptical of sudden change.... if nothing else, this economy has exposed fraud and greed in ways nobody could have imagined.  Because of the diffused accountability in timesharing-- from top to bottom-- we're totally susceptible and vulnerable to mismanagement and inscrutiny.   It happens, no doubt.  Is it happening here?  I don't know.  
Increases hurt... yes.  But I question the validity, and I object to them choosing to do this over a special assessment.  Special Assessments are temporary, fee increases have staying power. 
On the Points side, I see tons of flexible availability for all seasons.  How do they do this?  Were there really that many owners who paid $3K to convert their weeks?  I honestly don't know where they get this inventory... and I honestly don't know how they can have people check in on any day of the week when it's a Sunday-checkin resort.  Where do they get the $$ for all this?  I know the administration of Points is costly for VRI.  And, all of this coincides with the massive increases we've seen in fees over the past 3 years.


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## JudyS (Oct 19, 2010)

skimble said:


> The $800 high Studio week includes all closing costs, as does the $1100 Crest high season.  When you subtract $500 for closing costs, this brings the actual price to $300 and $600 respectively.  VRI charges $100 for transfer, and $400 is a reasonable going rate for escrow.


That's a good point, but I think I paid around $1000 total for my Breaker high season week, and that was about three years ago, when timeshares cost more.


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## jbercu (Nov 1, 2010)

skimble said:


> I would MUCH rather pay $300 in a special assessment and keep my maintenance fees lower.
> Like I said before, the value of our ownership is hinged on the level of our maintenance fees.   Increasing our normal operating expenses (our maintenance fees) by $100 in a single year is a death wish.
> The foundation is an unexpected incurrence, and it should be treated as such.    People understand this sort of thing.



IMHO!

I am sorry to hear that SCI is suffering from the VRI Virus.  I don’t know much about the resort, and have not visited, but I recognize the symptoms of the virus. 
First symptom is unforeseen foundation repairs and ADA compliance expenses. It is sometimes followed by roof repairs and remodel.  The Board is persuaded to react not by passing a special assessment which is limited in California to 5% of the annual Budget unless approved by a vote of the members.  Instead, the Board increases the MF by 20% which is the maximum allowed in California without a vote of the members.  This of course causes an increase in delinquency.  If you are lucky, the Board will accept deed back in lieu of foreclosure.  If not, it will take longer for the association to get control of the defaulted units.  Then comes the VRI Spiral.  The more the MF is raised on the remaining owners, the more defaulting owners the resort will have.  Also, the more the MF is raised, the easier it will be for RCI Points converted units owners to walk away.  When the resort is finally in great condition paid for by the remaining owners a sales office will appear on the property.  As of now, the VRI choice for the sales organization is http://www.themvpservice.com/resort-services/resale.html  .  If you look at the bottom of the link page you may recognize the name Joe Takacs as the former president of VRI.  This organization will sell the units that the association owns by wrapping the worthless unit ownership with a great RCI Points package.  The units sold will not return any money to the association; however the association will be happy to have once again paying owners.
I have no antidote for the VRI Virus or the VRI Spiral, but I have some advice on how you can follow the progress of the disease.

Since the MF are increased for Capital projects that were not anticipated, the $100 increase should show up as deposits to the reserve account and not the operating account.  The first step is to compare the 2010 budget to the 2011 budget and note the portion of the MF that goes to the Reserve Account VS the Operating Account.  I doubt that you will see a $100 increase in the Reserve Account contribution.  Then, you can follow each year as more and more of the increasing MF goes to the operating account and less and less to the Reserve Account.
And just one more note about the validity of foundation problems and ADA compliance.  California has been blessed with great weather and magnificent scenery.  However, it has also been cursed with many overlapping earthquake fault lines and an abundance of Clay soil.  It is hard to find a 30+ year old building that does not have some foundation damage.  The 2 main factors to consider are how extensive the damage is and if it has to be repaired, what is the most effective and inexpensive way since it will most likely happen again.  
Thirty + year old buildings in California could not have possibly been built with the current ADA standards incorporated in them.  Many resorts, including VRI managed resorts deal with ADA compliance especially during remodel, and it generally does not require a special assessment.

You can PM me for special insight on SCI background.


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