# Help.  Delinquent Maintenance Fees.



## Resort Guy (Jun 29, 2011)

I work for a small resort that tries to do the best for our owners.  We're not high pressure sales people or developers.  Like many other resorts, we are experiencing a rise in delinquent owners and I would appreciate input from the Tug community regarding your ideas and what you would want your resort to do in this situation.

Recently, we have eliminated the management company that ran operations, cut staff to the bare bones, reduced expenses greatly and are considering closing in the off season.  These actions have addressed the expense side of the balance sheet, but do not produce income for the association.  

We are left with the following options.  If this were your resort would you want the board of directors to....

*a.  Offer delinquent owners reduced settlement or one-time waiver of past due fees if they pay for the next years fees*. (This retains owners who, prior to the recession, were paying owners in good standing, but it may upset those owners who have consistently paid on time. However, those owners who have paid on time are already carrying the load for non-paying owners.  In this case, those non-paying owners have not received any benefits without payment because their usage has already been blocked for non-payment.  The idea here is to help owners stay current rather than try to gain new owners is such a horrible sales market)

*b.  Send delinquent owners to collections immediately*.  (This has been done in the past and tends to only add further financial burden to owners who already cannot pay.  Generally, we only see 10% of those accounts paid in full.)   

*c.  Allow owners to give their units back to the association for a fee*.  (We currently allow any owner who is current to give their week back to the association for a nominal closing fee which is used to cover recording and deed prep costs.  This is currently not an option for those owners who have an outstanding balance) 

*d.  ???????*   (Please tell me what your resort does or what you feel would be in the best interest of the ownership in your opinion.)


I look forward to hearing your opinions.  Thanks to Tug for the great job in keeping folks informed!


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## Ridewithme38 (Jun 29, 2011)

Fix up the resort and add amenities so owners don't feel they are getting no value for their MF's

Cutting down on staff and activities is going to do nothing but drive more owners out

In the end...People walk away for two reasons...One, they just can't afford it anymore...there's nothing you can do about that, unless you hire them to work at the resort

But the second major reason is, they don't feel they are getting value for their money at the resort...if your charging a guy 1,500-2,500 for a week in a 1br....you NEED to have lots of ammenities to make that worth it...What seperates you from the best western on the corner that rents for $99 a night?  What programs do you have for families? Couples? Retires?

Do you offer a rental program to members? Contract a local Real estate agency and start publicly offering a rental program for those that can't/don't want to use their week...You'll find members will use that before going delinquent


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## rickandcindy23 (Jun 29, 2011)

*Thank you for sharing your frustrations here.  We have the same frustrations.*

d. Educate, educate, educate. Give owners information about alternate exchange companies, make sure you are dual-affiliated, and let them know what opportunities are out there for exchanges with their weeks. 

Everyone goes on vacation.  That's the truth of it.  Our niece just filed bankruptcy and walked away from her timeshare, a very red week in Colorado, then she rented a hotel in Orlando in May for $90 per night and thought the hotel was a bargain for her family of four.   I told her she was nuts.  Her week would have been worth 22 points in RCI, for $480 in fees.  Even with $89 RCI annual fee, $179 exchange, and her TPU's (only 12 for that week), she could have had the Hilton on I-Drive, 2 bedroom, for much less than the week cost in the hotel.  She had NO idea.  

I write the newsletter for our small resort, and I recently wrote a newsletter that will arrive in owners' mailboxes within a few days.  I gave owners real information, info they could use.  I did searches and found exchanges all over the country for less than our blue weeks get in the new Points Lite system.  Most of our owners can get 2-3 weeks of vacations for one maintenance fee, and not just last-minute trips, either.

Also:

e. Let owners know the ramifications of walking away from this debt.


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## LUVourMarriotts (Jun 29, 2011)

Of your options, I like C the best, B a little, and I hate A.  I guess I'm sick of all of the hand-outs.  Everybody gets something for free, except the people that pay their bills.  I know its a tough time for a lot of people.  Unfortunately, people are suffering.  But as you said, if you were to do A, you are pissing off everyone that has paid.

We always see all of these mortgage breaks, tax exceptions, etc for people that can't pay their bills.  The alternative may be worse, and I get that.  But for someone who has always paid bills, and I know I am lucky, it gets annoying after a while.

One thing that I thought was really cool, was we received a letter from Chase offering us a "no closing cost mortgage rate reduction".  The letter stated that we have been left out from all of the breaks because we pay our bills, so now its time for them to give something back to us.  I was impressed by that.


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## ace2000 (Jun 29, 2011)

If you have a worthy product, you should be able to take the weeks back and sell or give them to someone else.   I have a couple of weeks at resorts that are using this strategy.

If you want to play hard-nose, I think you'll face a losing battle.


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## am1 (Jun 29, 2011)

Offer a discount for people who pay their fees early.  

Offer additional weeks for owners to use if they pay a certain amount.

If the off season is that bad then close the resort for that time.  

Charge a fee for the feedback.  Closing plus 1 years fees.  

When the resort gets back on its feet create a reserve large enough that it gives the deeds value.


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## Ridewithme38 (Jun 29, 2011)

am1 said:


> When the resort gets back on its feet create a reserve large enough that it gives the deeds value.



Newbie question...How does large reserves give a deed value? Wouldn't the increased MF's required for raising the reserves actually hurt resale value?


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## am1 (Jun 29, 2011)

In the short term yes.  In the long term a large reserve means fees will not have to jump up that much when expenses rise and no need for SA's.  

If each week has $5k in reserves then that is more valuable than each week having $1k in reserves.  

You are right getting there is the hard part.  

If owners are paying $800/week with only 75% of owners paying now then when they get additional owners to start paying keep it at $800 a week.  Those extra payments will not be all profit for the HOA as there are variable costs but a lot could be put aside for the future.  

Or the resort is in desperate need of the additional cash for much needed improvements now.


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## bdmauk (Jun 29, 2011)

couldn't agree more with some of the above comments.  

reward those who do pay and pay early, not those who don't (multi-year discounts, early pay discounts)   

closing in the off season is definitely a consideration.  your resort should know how many guests each day it takes to break even.  

have they explored nightly/weekend rentals and not just weeklong stays?    

how about partnering with other resorts for exchanges/rentals?

if i were an owner and couldn't afford my timeshare/maintenance fees, i would definitely be interested in a resort deedback.  that is probably the easiest way out. no more expense for me, resort can resale and have new owner capable of paying the maintenance fees.  sounds like a win-win.


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## am1 (Jun 29, 2011)

mfs due quarterly.  Monthly maybe too expensive and a lot of paperwork.  

Are you able to rearrange rooms so that owners can stay in the same units for consecutive weeks.  That can add value for people using it more as a home than a place to vacation.  Even better if you can get the deeds attached together.  

If it is fixed week allow owners to switch weeks when available with other owners or the HOA.


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## timeos2 (Jun 29, 2011)

Create a system that rewards those who pay on time and in full - and be diligent in pressing delinquents as hard as possible. Apply late fees exactly on a set, published schedule - do not hesitate to send those that don't pay to foreclosure.  Above all be consistent - owners want to know that all are being treated fairly & exactly the same.  Once that is established and the rules enforced on time and consistently the collection rates will stabilize and improve. Also having value for those fees is a must.  Don't cut back too much or you will be forcing those that want to pay to question the value. Make sure there is a value back for the money paid. Good luck!


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## vacationhopeful (Jun 29, 2011)

One of my resorts has the MOST pleasant lady CALL/Phone the delinquents and ask for money. VISA/MasterCard/American Express are all accepted. If the owner plays in small payments until paid, they get to use their week. I subspect there is even a little horse trading - If you don't have it paid off by your week 17, but you do by Week 34 - we could get you a stay after that this year.

They did a TRADE your WEEK and/or UNIT size for another week for $250 several years ago. I did that.  

Post in the newsletter a LEASE another week (and listed the weeks and units numbers) for MFs for 3 years. Then you can either buy ($1500 more) or walk away from it. USE or DEPOSIT or RENT. I did that.  Yes, and the one I leased gets 61 TPUs from RCI .... 

And I fully agree with the RickandCindy post - *educate the owners on HOW to trade*. Most regulars here have family and friends who marvel at all the places we go and the low cost we pay. Yes, I have friends who could NOT master the idea of planning a trip more than 10 days before leaving. They thought some Genie would solved their fun vacationing issues by just buying a TS - of course the sales staff TOLD them that they would be their personal vacation consultant. Then, they have tried to give me their ownerships for free ... instead, I make them LEARN to use it.


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## Passepartout (Jun 29, 2011)

If you have vacancies, offer to rent additional weeks to paid-up owners for just a MF- or perhaps even less.

Jim Ricks


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## slip (Jun 29, 2011)

I like C best also. They should be charged a higher fee than those that are current but it can't be too high that they won't be able to pay it. Current owners could be offered these weeks for free or for the transfer fees. That could bring some MF money back to the resort quickly.

It's hard to sit here and judge what was done and what could be done without the whole picture.Those cutbacks that were made may have had to be done but the owners paying on time are the ones hurt and that will never look good to those owners.


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## ronparise (Jun 29, 2011)

I would develop a plan to make the association controlled weeks easy to rent or sell...(I know easier said than done)

Once convinced you can either rent or sell the stuff, start taking them  back . Give weeks to any paying owner that wants one, then give them away on ebay, rent them etc etc. but as quickly as possible move weeks into the hands of people that will use them

This assumes of course that you have something of value to sell


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## Mel (Jun 29, 2011)

rickandcindy23 said:


> d. Educate, educate, educate. Give owners information about alternate exchange companies, make sure you are dual-affiliated, and let them know what opportunities are out there for exchanges with their weeks.


Education as part of a multi-pronged approach.

Do the owners who are delinquent know they could have deeded the weeks back?  Even if they did know, some might not have taken that option because they see two options that both cost (I don't know the relative costs): pay $x and keep your week, or pay $y and don't keep your week.  If they "invested" a significant chunk of money to purchase, they might not be willing to just walk away AND pay a fee.

Are there owners interested in the weeks of those in default?

If so, are those owners willing to pay the fee (and maybe the past due fees) for them in exchange for ownership of the week?  This would have the resort acting as a facilitator, rather than the HOA purchasing the weeks, and then having to sell them.  Seems like it could be a winner for all involved.

If you are serious about closing the resort seasonally, what are the ramifications of doing so?  Are the weeks floating, or assigned with the deeds?  In either case, if opening seasonally might be a permanent solution, you might consider amending the Declarations the way we did at Tropical Breeze (this would obviously require a vote of the entire membership, but if you're at this point, you might be able to make it happen):

We renumbered and reassigned unit numbers when we did this, originally thinking we would reduce the number of units, and as a result would have increased the interest of each owner.  In the end, we added a unit, and sold the HOA inventory as a block to another developer.  The undivided interest of the "owned" weeks stayed the same (because the pertained to a unit week plus an equal interest of the common areas).  The "new" inventory was then sold as a slightly smaller undivided interest, such that all interests added up to 100%.

A similar process might be taken to reassign owners of weeks when you plan to be closed.  The biggest problem I see with "unowned" or HOA ownerd interests would come when it is time to disolve as a timeshare.  The HOA is a non-profit entity, and would likely have to donate its share of the sales proceeds, rather than divide them among the existing owners (unless the HOA sold those shares to individual owners just before selling the resort).


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## Wonka (Jun 30, 2011)

If your resort is in demand, why not ask the owner's to allow the association to rent the units without any fees applying the full amount to dues?  The owner's would need to understand that the rental may not satisfy the full obligation.


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## dioxide45 (Jun 30, 2011)

Passepartout said:


> If you have vacancies, offer to rent additional weeks to paid-up owners for just a MF- or perhaps even less.
> 
> Jim Ricks





Wonka said:


> If your resort is in demand, why not ask the owner's to allow the association to rent the units without any fees applying the full amount to dues?  The owner's would need to understand that the rental may not satisfy the full obligation.



The problem is that you really want to be able to sell those weeks, preferably to current owners. If they can rent them for less than MF, what is the incentive to buy them?

To the OP. Is the resort allowing the delinquent owners use of their weeks, either at home resort or via exchange? If so, that is the first thing that has to stop.


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## pgnewarkboy (Jul 1, 2011)

Based on what you say, you are an employee - not an owner of the resort.  I am sure you would like to keep your job but I think it is time to start looking for something else- again, based on what you are saying.

Apparently, the resort is strapped for cash at a time when cash is hard to come by.   Many of the ideas suggested by the group sound good and might work.  

I am more pessimistic about the situation than the rest.  If the resort can find a buyer they should consider selling.  Diamond Resorts International is a possible option. They seem to still be interested in buying some resorts.  I am not recommending them and don't know if they would give a good deal or not.  Other resort chains should also be contacted.


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## LUVourMarriotts (Jul 1, 2011)

Maybe you can talk Obama into a Timeshare MF relief fund.  He just released a new mortgage relief fund.  Up to $50k of relief that does not need to be paid back.  But only if you are already behind.


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## Dori (Jul 1, 2011)

One of the methods our home resort used for a few years was their "Lease Program", whereby owners could make use of a delinquent week for as many years as they wished, as long as they paid the MF's on the week. When the time came that they didn't want it, they just stopped paying the MF.

One time a large corporation owned several weeks. They turned them all back to the resort, who in turn offered them to owners to purchase for $1. This was back in the early 90's. That's how we bought our second week.

Unfortunately, with an aging resort, and a growing number of delinquent weeks, we voted unanimously to sell the resort entirely. As far as I know, we will close the doors by this December.

Hopefully you can try some methods offered here by the most knowlegeable group of TS owners on the planet. Good luck!

Dori


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## Mel (Jul 2, 2011)

pgnewarkboy said:


> I am more pessimistic about the situation than the rest.  If the resort can find a buyer they should consider selling.  Diamond Resorts International is a possible option. They seem to still be interested in buying some resorts.  I am not recommending them and don't know if they would give a good deal or not.  Other resort chains should also be contacted.


If resort chains are interested, they may be interested in purchasing the delinquent weeks through the HOA - much as was done at Tropical Breeze.  If that was done, the maintanance fees might be stabilized, and there might even be a new infusion of cash to bring the resort back up to a standard where it is definitely worth owning.

In our case, we were forced into the situation because of severe hurricane damage, but it has worked well for us.  Ultimately this is one of the problems with an aging ownership base, which is probably pretty common among some of the older resorts.


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## bilfbr245 (Jul 2, 2011)

*Capping the Number of Deedbacks*

I like the idea of having a specific maximum for the number of units that the resort will hold at any given time from deedbacks.   This number picked would be selected to limit the resort's risk that it would be stuck with too many deedbacks which it could not deal with.  As units are sold or disposed off from this amount, new deedbacks could be accepted on a first come first served basis.  Units could also be rented by the resort while they are in this deedback pool if possible.   With decent attention to marketing, there might be good turnover.  On the other hand, if you find you simply can't give the units away,  that would be quite valuable information, and might suggest that there is a bigger underlying problem.


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## JudyS (Jul 3, 2011)

Dori said:


> ...
> Unfortunately, with an aging resort, and a growing number of delinquent weeks, we voted unanimously to sell the resort entirely. As far as I know, we will close the doors by this December....


That is VERY interesting! There have been a number of discussions here on TUG about financially troubled resorts just closing, with some very experienced Tuggers stating that this is nearly impossible, because it is so hard to get owners to vote on anything. When you say "we voted unanimously to sell the resort" do you mean the OWNERS voted unanimously, or that the BOARD voted unanimously? I'm also wondering of this was a Canadian resort, or US, or somewhere else. It seems to me that resorts in Canada close far, far more often than US resorts do--I'm guessing the laws make it easier to close/sell a resort in Canada than in the US.



pgnewarkboy said:


> Based on what you say, you are an employee - not an owner of the resort.  I am sure you would like to keep your job but I think it is time to start looking for something else- again, based on what you are saying....


Well, as I was saying to Dori, closing a resort, at least in the US, seems quite hard to do. And, Resort Guy seems like a very valuable employee. Hardly any jobs are safe in this economy, but I wouldn't go scaring Resort Guy too much! His resort will probably need him for at least a couple of years yet (unless they are on the verge of a complete bankruptcy.)


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## JudyS (Jul 3, 2011)

There are a lot of good suggestions on this thread. I strongly agree with the suggestion to educate your owners on how to get the best trades. The question is, do YOU (or anyone else at the resort) know how to get the best trades for your week? I realize that you are not saying the name of the resort so as not to seem like an ad, but you could probably give some general information such as whether this is a fancy resort or a plain one (I'm guessing plain), where it's located (I'm guessing somewhere seasonal such as Cape Cod or a ski area), and whether there is strong demand ANY time of year, or whether weeks sit empty even in summer (or whenever peak season is.) This would help us figure out how the weeks can best be used.

Also, are these fixed weeks, or floating? It's much more complicated to close off-season if you have fixed weeks, although I'd bet most off-season owners would be happy being given a higher season week (perhaps just for the next few years, not as a permanent measure) instead.

How aggressively is the resort trying to rent out weeks? Where are you listing your rentals? 

I would be very careful about undercutting MFs, except for off-season rentals. In other words, it's fine to rent off-season weeks for less than the MFs, but renting peak season weeks for less than MFs would anger many of your current owners. For the same reason, I would not use Choice A (giving delinquent owners a break on their fees) unless you asked the membership about this first, and maybe even had them vote on it. 

I think allowing delinquent owners to deed back would be OK, except that it would again anger current owners if they are charged a fee to deedback, and delinquent owners can deedback for free. What I would suggest is first contacting delinquent owners and offering them a one-time deal on a deedback -- maybe the fee charged to current owners plus a couple hundred dollars. Definitely accept credit cards. If that still leaves you with a lot of delinquent owners, you can send them to collections (but make sure to THREATEN to do so first. That will bring in some more deeds and fees from owners who don't want their credit dinged.) Eventually, you can offer "free" deedbacks to very delinquent owners, but keep your current owners informed of what you are doing, and explain that free deedbacks are only offered as a last resort (to avoid the expense of foreclosure) AFTER delinquent owners have been sent to collections and have taken a serious hit to their credit ratings. Possibly, these very delinquent owners should just be offered the option of a "deed in lieu of foreclosure." A "deed in lieu of foreclosure" is a MAJOR hit to one's credit rating, so the current owners won't feel like the delinquent owners are getting away "unpunished." 

The suggestion to try to sell many weeks, or maybe the whole resort, to one of the clubs is an interesting one, but it's a pretty drastic measure. Also, if the resort is in that much trouble, I'm not sure any of the better clubs would be interested. A less drastic approach is to hire a management company with experience with financially troubled resorts. I think VRI is the biggie here, but Trading Places would also be good (and maybe cheaper.) Both VRI and Trading Places have their own exchange options that they can provide to resorts they manage, which helps add value to the resort. There are also some smaller companies that might work--anyone here want to comment on SPM?


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## bilfbr245 (Jul 3, 2011)

Dori, I am interested in the fact your resort got a unanimous vote to close.  Some on this board have expressed doubt that getting such a supermajority to vote on anything would be possible, or felt that it  would be so difficult as to be virtually impossible.  I would be interested in knowing more about what kind of process you went through to get the unanimous vote, and how difficult it was.


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## Dori (Jul 4, 2011)

Bilfbr245, several newsletters went out to owners,outlining the choices we faced. Jacking up MF's by $100 certainly shook everyone up. This, along with RCI's TPU system, whereby people could see exactly what their unit is worth, made many eager to sell. The age of our resort would necessitate major maintenance expenses in the near future. Because of our location in Ontario, there are many blue weeks (no snow and no sun), and these weeks offer a measly 9 TPU's. The prospect of having to combine weeks to get one mediocre trade is not appealing, no financially sound. 

With so many owners reneging on their MF's, due to hardship, age/death, and just plain dissatisfaction, there really didn't seem to be any other solution. A letter to vote was sent out to all members in April. A general meeting was called for June. I don't know the exact numbers, but I think it was close to 100% in favour of selling. 

I haven't heard anything since the BOD's private meeting at the end of June. We were in the throes of a postal strike, so letters to owners with any updates have been delayed, but i anticipate something soon.

Dori


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## LannyPC (Jul 4, 2011)

Assuming the delinquent owner is willing to answer (one post in the B,S, &R board says that some delinquent owners don't answer mail, let phone calls go to voicemail, or hang up when contacted), send out, either via e-mail or snail mail, surveys/questionnaires asking them for their input as to why they're delinquent and what it would take for them to keep their account up-to-date.  Then say in the mailing that this input would be discussed at the next board meeting.

Also, word it in a non-condmenatory way.  For instance,

 "We have noticed that you have not paid your maintenance fees for 2011.  We understand that times are tough right now and, because of that, vacations costs are being trimmed from many people's budgets.  However, it is important to realize that you signed a contract and are legally obligated to pay maintenance fees.  We are trying to work out an amicable solution as opposed to sending out collection agencies or other legal means to receive these fees.  In order to work out a solution, we would appreciate it if you could fill out the attached questionnaire and return it as quickly as possible.  If you return it within the next 7 days, we will waive any late fees and interest on your maintenance fees.  Your input will be discussed at the next board meeting so that problems like these can be avoided in the future.  Thnank you for your attention to this matter."


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## bilfbr245 (Jul 4, 2011)

Thank you Dori.  I think that the experience of your resort supports the contention that with good communication, the super-majorities needed for dissolution of timeshare legal status and liquidation or sale of the underlying real estate can be acheived in appropriate cases.  As noted earlier, I think that this will be an important but sometimes painful step in the process of unwinding the vast oversupply that has crippled timeshare resales.  It no longer matters what the intrinsic economic value of a timeshare is, because there are thousands available for a dollar.  And many hesitate to buy even for a dollar because they fear that they will be stuck forever if they do. The market is devastated.  No one is willing to pay anything close to intrinsic value.  When the vast oversupply is slowly unwound by a sufficient number of uneconomic timeshare resorts being liquidated or sold, I think that market forces will again be able to operate and restore the liquidity of the market.  The ironic thing too is that often a liquidation can be a win win for everyone, because the underlying real estate is often much more valuable than timeshare units locked in a frozen illiquid market plagued by dramatic oversupply.


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## bobby (Jul 4, 2011)

Some resorts let owners use the facilities at the resort at all times. For instance, if the resort owns a mud season at a ski resort that has been deeded back or foreclosed on, market the week to local residents and they can use the swimming pool and fitness room. Some places, like Florida in early September when it is still hot, might have trouble reselling weeks but this could help them move.


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## LannyPC (Jul 5, 2011)

Resort Guy said:


> I work for a small resort that tries to do the best for our owners.  We're not high pressure sales people or developers.  Like many other resorts, we are experiencing a rise in delinquent owners and I would appreciate input from the Tug community regarding your ideas and what you would want your resort to do in this situation.
> 
> Recently, we have eliminated the management company that ran operations, cut staff to the bare bones, reduced expenses greatly and are considering closing in the off season.  These actions have addressed the expense side of the balance sheet, but do not produce income for the association.
> 
> ...



As I mentioned in a previous post, it's difficult, if not impossible, to even communicate with these delinquent owners.  But if communication can be established, have you asked why they're deliberately defaulting?  It could be one or more of the following reasons and, for argument's sake, let's say the MFs are $800.

1) The owner has fallen on hard times (not uncommon these days) and has absolutely no room in his budget for MFs or vacation expenses unless he forgoes paying for rent and groceries, etc.

2) He feels that $800 is excessive and that  $550-600 would be more manageable or more sensible.

3) "I don't care if the fees are only $100  I'm not using it anymore, I'm not paying anymore.  What you sold me was a lemon and not all that the salesman made it out to be!"

Have any of the delinquent owners provided reasons such as these?


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