Defaulting on Maintenance Fees

[dioxide45]

Was that $300 a single line item, or $300 per owner? Again, just asking. I'm not gonna stiff the HOA!

Our 2011 Harbour Lake estimate operating budget shows a $43 line item for bad debt. This is where the HOA is passing those delinquent fees on to other owners.

 

[Ridewithme38]

When people complain about other owners defaulting, we aren't just speculating about it, we know exactly what it's costing us. One of my MF bills was $300 more... That's why I get hot when people casually suggest defaulting and putting the burden on others. I suspect that now that you are an owner, you will fill differently about it.

That definatly changes things....i really did always think that owners were just speculating...or at the most it was a few pennies on the dollar a year hidden beneath the average MF increases because of normal expenses

Wow, $300...i'd be steaming too! I don't know what your Normal MF's are for that resort...and its really none of my business...but geez, if it was $2100 and it went up $300 because of people dropping out...thats a 7th of it...every owner should be getting an extra day....if only it was that easy :ignore:

I know it doesn't work that way....So basicly when someone ducks out, your paying (ALOT) more for the same thing you got for less the year before

Either way, i learned something today...thats always a good thing...i'm impressed that the MF's are detailed like that and looking forward to reviewing my own when it comes...early 2012 :whoopie:

 

[dioxide45]

Either way, i learned something today...thats always a good thing...i'm impressed that the MF's are detailed like that and looking forward to reviewing my own when it comes...early 2012 :whoopie:

You need to look at the additional information that comes with your bill. It isn't broken out on the bill itself or on the payment coupon. It is part of the operating budget.

 

[timeos2]

Our 2011 Harbour Lake estimate operating budget shows a $43 line item for bad debt. This is where the HOA is passing those delinquent fees on to other owners.

Think about that. $43 per week times how many thousands of weeks - what would that pay for in needed items around your resort? Money gone - never to be recovered.

Our resorts have kept delinquencies extremely low after being burned badly by Developer run management that was far more interested in sales than collections. Once we changed management the focus was corrected but it took years - and at least one Special Assessment - to recover. Now it is one of the top three areas monitored to be sure it never again gets out of control. It is far easier and cheaper to stay on top of delinquencies than it is to bring them back to reasonable levels once they explode.

No resort has zero delinquency but keeping it as low as possible must be a stated and actively pursued goal.

 

[BocaBoy]

It was $300 to each owner for one week of ownership!

I am skeptical. What resort is that? Bad debt expense ranges from $7 to $28 per unit week at the four Marriott resorts where I own.

 

[dioxide45]

I am skeptical. What resort is that?

It is likely a small resort. They are more susceptible to this than larger ones as there are fewer owners to spread the loses over. Our Habour Lake has a $43 bad debt expense, but Grande Vista, which is huge, is only around $16.

 

[DeniseM]

I am skeptical. What resort is that? Bad debt expense ranges from $7 to $28 per unit week at the four Marriott resorts where I own.

Westin Ka'anapali Ocean Resort Villas. That year the maintenance fee was about $2,500 for a 2 bdm.

 

[e.bram]

The higher the MFs, the more people will bail. This could cause a death spiral even in a high end resort. Travel expenses are also going up, stressing people financially. The TS crowd is getting older with less money and physical ability also adding to the defaulting.

 

[sparty]

Think about that. $43 per week times how many thousands of weeks - what would that pay for in needed items around your resort? Money gone - never to be recovered.

Our resorts have kept delinquencies extremely low after being burned badly by Developer run management that was far more interested in sales than collections. Once we changed management the focus was corrected but it took years - and at least one Special Assessment - to recover. Now it is one of the top three areas monitored to be sure it never again gets out of control. It is far easier and cheaper to stay on top of delinquencies than it is to bring them back to reasonable levels once they explode.

No resort has zero delinquency but keeping it as low as possible must be a stated and actively pursued goal.

The thing that always bothers me is that if you subscribe 100% to the "bend over and take it" policy then there's no hope to say enough is enough. If enough people walk then it becomes necessary for the managing company and HOA to realize that maybe cutting some of the management related fees may be a good idea or the enterprise will cease to exist.

 

[Ridewithme38]

The thing that always bothers me is that if you subscribe 100% to the "bend over and take it" policy then there's no hope to say enough is enough. If enough people walk then it becomes necessary for the managing company and HOA to realize that maybe cutting some of the management related fees may be a good idea or the enterprise will cease to exist.

See i don't know that that is the problem...people have to find value in what they buy...weather its nice large rooms or multiple ammenities or on site programs or even nice accommodating staff...i don't think people would leave if the TS BOD/HOA keep the resort value up....well some still would, people lose jobs all the time or get into tight financial situations, they'll bail no matter what...but i think it would definatly cut down if they improved ammenities instead of cutting costs...its about value

 

[OutAndAbout]

Clearly the lien for unpaid maintenance fees does go with the title to the unit, the same as a lien for unpaid property taxes on a house.

You are right. I wasn't really thinking it through when I posted. So ya, the point is whether someone gives you their timeshare for "free" or you pay a buck on Ebay there are closing costs that you SHOULD pay like title/escrow.

I don't know about all timeshare companies, but Marriott has confirmed if weeks have their maint fees are paid/any outstandings w/o having to pay a closing company.

So Yes, in some instances you can get a timeshare from a stranger for "free"

 

[OutAndAbout]

It was $300 to each owner for one week of ownership!

I am skeptical. What resort is that? Bad debt expense ranges from $7 to $28 per unit week at the four Marriott resorts where I own.

Westin Ka'anapali Ocean Resort Villas. That year the maintenance fee was about $2,500 for a 2 bdm.

Here's the Bad Debt Expense for most of the North American & Caribbean Marriott timeshares:

Per Unit 2011 (Budgeted), US$
09.01 Aruba_OceanClub
05.00 Aruba_SurfClub
04.56 AZ_Phoenix_DesertRidge
19.81 CA_LakeTahoe_TimberLodge
13.81 CA_Newport_NewportCoast
01.25 CA_PalmDesert_DesertVillasI (NOTE: First Marriott built timeshare and no ROFR)
04.88 CA_PalmDesert_DesertVillasII
06.81 CA_PalmDesert_ShadowRidge
10.03 CO_Breckenridge_MountainValley
19.09 FL_FortLauderdale_BeachPlace
06.09 FL_MarcoIsland_CrystalShores
70.91 FL_Miami_Doral
05.00 FL_Orlando_CypressHarbour
16.18 FL_Orlando_GrandeVista
42.32 FL_Orlando_HarborLake
05.44 FL_Orlando_ImperialPalms
05.53 FL_Orlando_LakeshoreReserve
02.05 FL_Orlando_RoyalPalms
07.77 FL_Orlando_SabalPalms
05.63 FL_PalmBeach_OceanaPalms
18.96 FL_PalmBeach_OceanPointe
35.09 FL_PanamaCity_LegendsEdge
05.74 HI_Kauai_BeachClub
08.79 HI_Kauai_Kalanipuu
15.37 HI_Kauai_Waiohai
25.94 HI_Lahaina_OceanClub
21.45 HI_Oahu_KoOlina
15.57 MA_Boston_CustomHouse
12.19 MO_Branson_WillowRidge
16.27 NJ_Absecon_FairwayVillas
30.00 NV_LasVegas_GrandChateau
06.51 SC_HiltonHead_BaronyBeach
03.48 SC_HiltonHead_GrandeOcean
06.51 SC_HiltonHead_HarbourClub
13.31 SC_HiltonHead_HarbourPoint
08.71 SC_HiltonHead_HeritageClub
04.40 SC_HiltonHead_Monarch
03.22 SC_HiltonHead_SunsetPointe
13.13 SC_HiltonHead_SurfWatch
08.46 SC_MyrtleBeach_OceanWatch
39.75 StKitts_BeachClub
11.94 USVI_StThomas_FrenchmansCove
01.29 UT_ParkCity_MountainSide
02.24 UT_ParkCity_SummitWatch
09.57 VA_Williamsburg_ManorClub

 

[bjones9942]

My temper always flares a little when people think it's perfectly fine to just up and walk away from a commitment they've made. The terms 'slacker', 'dead-beat' and 'low-life' come to mind. To suggest that this is an acceptable way to terminate an agreement, well, that shows exactly what kind of person you are and how trustworthy you are not.

I'm not saying circumstances don't change. Circumstances extreme enough to warrant walking away from an obligation would better be solved by declaring bankruptcy. If things are really that bad, this is your legal 'out'. You have obligations both to the corporation with whom you have a contract, AND the rest of us who suffer from defaults.

And lest you think I'm just an uncaring total ass, here are a few more suggestions for ways to sell: eBay, Craigslist, Redweek, Classifieds here and timeshareforums. Start by listing for a buck + closing. Then try offering for $1 and YOU pay closing. As a last resort offer for $1 YOU pay closing AND you pay current year maint fees. More auctions on eBay sell when someone gets a free week out of the deal. Don't be a slacker!

 

[ocdb8r]

I'm not saying circumstances don't change. Circumstances extreme enough to warrant walking away from an obligation would better be solved by declaring bankruptcy. If things are really that bad, this is your legal 'out'. You have obligations both to the corporation with whom you have a contract, AND the rest of us who suffer from defaults.

I totally agree with the sentiment of your post, however I have to point out that default is just as much a "legal" out as is bankruptcy...in fact bankruptcy is nothing more than full scale default on all your financial obligations.

The bottom line is that in the United States it is not a crime to default on debts. Contracts provide for remedies in such cases and therefore it is completely legal and acceptable for a party to default, forcing the counterparty to exercise whatever reciprocal rights exist under the contract. Further, capitalism and US contract law contains many roots embrassing efficient default.

I know it's a fine line to draw and I am sympathetic to those who feel they are left holding the bag in these situations, however there's nothing illegal (or even immoral IMHO) about cutting your losses under a contract.

 

[dioxide45]

One problem is that many people really don't understand how the HOA works. They pay their MF to MVCI. They think that by not paying they are just stiffing the big Marriott company that can afford to absorb those costs. That is not the case, when in fact they are hurting their fellow owners by defaulting.

 

[SueDonJ]

Thanks for putting that list together, OutAndAbout - interesting stuff there.

 

[ronparise]

I totally agree with the sentiment of your post, however I have to point out that default is just as much a "legal" out as is bankruptcy...in fact bankruptcy is nothing more than full scale default on all your financial obligations.

The bottom line is that in the United States it is not a crime to default on debts. Contracts provide for remedies in such cases and therefore it is completely legal and acceptable for a party to default, forcing the counterparty to exercise whatever reciprocal rights exist under the contract. Further, capitalism and US contract law contains many roots embrassing efficient default.

I know it's a fine line to draw and I am sympathetic to those who feel they are left holding the bag in these situations, however there's nothing illegal (or even immoral IMHO) about cutting your losses under a contract.

There have been several threads in the past here on TUG relating to this issue of default, and foreclosure. This is the best summary of the legality and morality. It is not "illegal or immoral to default"

Said another way; You dont need a "good" reason to default to make it legal. You dont have to be in a position of deciding "is it cat food for my grandmother and pay her mf, or do we default and splurge on hot dogs"

The folks that cry the loudest here about defaults never seem to accept the legal argument. They always go to the "morality" of the decision.

Of course there is a negative effect on the other owners. No one suggests that there isnt.

Defaults will happen and ultimately the other owners will have to face the problem. Why more associations dont have buy back programs, rental departments and a sales staff is a mystery to me.

The root of the problem in my view is that blue week owners subsidize the red week owners by paying the same mf for an inferior product (how moral is that?)

 

[SueDonJ]

There have been several threads in the past here on TUG relating to this issue of default, and foreclosure. This is the best summary of the legality and morality. It is not "illegal or immoral to default"

Said another way; You dont need a "good" reason to default to make it legal. You dont have to be in a position of deciding "is it cat food for my grandmother and pay her mf, or do we default and splurge on hot dogs"

The folks that cry the loudest here about defaults never seem to accept the legal argument. They always go to the "morality" of the decision.

Of course there is a negative effect on the other owners. No one suggests that there isnt.

Defaults will happen and ultimately the other owners will have to face the problem. Why more associations dont have buy back programs, rental departments and a sales staff is a mystery to me.

The root of the problem in my view is that blue week owners subsidize the red week owners by paying the same mf for an inferior product (how moral is that?)

Hmmmm. Just like defaulting I wouldn't call it moral or immoral - it's legal, and that's what matters.

Regardless of what the external resale market commands for seasonal differences, Marriott developer pricing is such that a Plat week can be many thousands more than a Silver week. If seasonal demand is a legitimate reason to institute sliding scale MF's, because owners of low-demand weeks don't get the same experience in a seasonal location, then the purchase price of all weeks should be the same across the board. (Not saying that I agree with this, because I think MF should be consistent among all owners if they're all staying in the same units, but only looking for a way to not have owners of high-demand weeks pay more while coming AND going. )

 

[memereDoris]

My sister recently has undergone some hard times. She had not paid her maintenancce fee for the year and was several payments behind when she told me of the situation she was in. She hadn't bought resale and still owed plenty.

I offered to help find a solution. I called the resort and told them what was going on and asked them for some help finding a solution. They downsized her contract to something she could afford. Instead of ignoring the situation and waiting for them to foreclose, it is better for the resort to have someone else paying those maintenance fees. The resort can now resell the timeshare she originally owned. She went from a 2 bedroom lockoff to a 2 bedroom EOY in a different building. Her debt went from $40,000 down to less than $10,000. Because we dealt with it, the equity she had built up went towards the new unit.

It never hurts to call and try to make some kind of arrangement. Do not ignore your obligations, they don't just go away.

 

[ronparise]

Hmmmm. Just like defaulting I wouldn't call it moral or immoral - it's legal, and that's what matters.

Regardless of what the external resale market commands for seasonal differences, Marriott developer pricing is such that a Plat week can be many thousands more than a Silver week. If seasonal demand is a legitimate reason to institute sliding scale MF's, because owners of low-demand weeks don't get the same experience in a seasonal location, then the purchase price of all weeks should be the same across the board. (Not saying that I agree with this, because I think MF should be consistent among all owners if they're all staying in the same units, but only looking for a way to not have owners of high-demand weeks pay more while coming AND going. )

Susan

You are absolutely right the legality and the morality dont matter. I just wanted to point out how absurd is the Morality argument.

"What is ; Is" and it's a problem. In my view the associations are in the best position to deal with it. Just as suggested in the above post by memereDoris. Owners have to deal with their own problems; in my view thats all the owners through their association

 

[larryallen]

Westin Ka'anapali Ocean Resort Villas. That year the maintenance fee was about $2,500 for a 2 bdm.

Not to get off topic onto Westin but a friend/client of mine is trying to get out of her Westin KORV unit as she lost her job, yada, yada, yada. If I remember right she said the MF's went from $900 a year when she bought 5 or 6 years ago to over $2,500 this year. Yikes! There are a number of threads on the Westin board about the Maui tax problem and their huge MF increases. Apparently paying for the defaulting owners is also contributing to the problem! Scary!

 

[DeniseM]

Not to get off topic onto Westin but a friend/client of mine is trying to get out of her Westin KORV unit as she lost her job, yada, yada, yada. If I remember right she said the MF's went from $900 a year when she bought 5 or 6 years ago to over $2,500 this year. Yikes! There are a number of threads on the Westin board about the Maui tax problem and their huge MF increases. Apparently paying for the defaulting owners is also contributing to the problem! Scary!

Yes - the MF has doubled at the resort since I bought pre-construction 8 or 9 years ago, plus the County of Maui is trying to balance the budget on the back of timeshare owners who pay a special property tax rate that is MUCH higher than anyone else on Maui pays.

Larry - Starwood might take a deed-back - has she tried that?

 

[e.bram]

personal attack deleted

If inept and corrupt management cause the mfs to get to point where owning the TS does not make financial sense, I feel the legal and moral obligation to myself is to bail. If I am legally obligated to pay let the judge decide, morally I will pray for forgiveness.

In as much as the remaining owners have allowed the management to stay in place, I feel no obligation for them.

 

[OldPantry]

Susan

You are absolutely right the legality and the morality dont matter. I just wanted to point out how absurd is the Morality argument.

"What is ; Is" and it's a problem. In my view the associations are in the best position to deal with it. Just as suggested in the above post by memereDoris. Owners have to deal with their own problems; in my view thats all the owners through their association

Now just a moment. Legality is one thing, morality another. When you agree to do something, by signing a legal document, you are making a promise. Do you really think a promise has no moral content? What if you promised to pay back your parents, or a very good friend. Would your agreement have no moral content? Would it be perfectly OK to stiff them? Does the morality hinge on whether there's a "personal" connection; i.e., a friend versus an anonymous corporation? Come on, stiffing somebody because you don't want to pay (as opposed to being unable to pay; which is another thing entirely) is scummy, and people who do it should at least admit that they're scumbags.

 

[larryallen]

Who cares what bjones9942(people from WA are weird) thinks. I don't!
If inept and corrupt management cause the mfs to get to point where owning the TS does not make financial sense, I feel the legal and moral obligation to myself is to bail. If I am legally obligated to pay let the judge decide, morally I will pray for forgiveness.

In as much as the remaining owners have allowed the management to stay in place, I feel no obligation for them.

In my opinion you are confusing legal and moral. If you morally feel it's ok to bail then your morals are such that I would not want to do business with you (or play golf for money!).