Kirk Wankel’s 2nd Affidavit Reveals Discrepancy in Calculating Cancellation Fee
Paragraph 17 of Wankel's Affidavit, Cancellation Fees Paid to Northmont, states in part, “The Cancellation Fee is made up of three costs. The first is the cancellation cost which is calculated based on the present value of the future management fees owing for the remainder of the Vacation Interval to a maximum of 20 years......”
The only problem being that the cancellation fee as layed out in Page 1 of Freedom To Choose, Reason to Stay letter of April 12, 2013 was not calculated on the basis of present value of future management fees, it was calculated on the basis of a larger figure - total management fees for 20 years (20 x $117.92 = $2,358.40). If the cancellation fee had been based on the present value, which by definition is the discounted value of the future flow of funds (in this case management fees), the cancellation fee would be significantly less. Instead of a cancellation fee of $3,167.51, the cancellation fee, based on a discount rate of 7%, would be $2002.91. Here is how the calculation would look: (See Reason To Choose letter for comparison)
20 year example Two Bedroom Annual
Years remaining.........................................................................20
Current management fee (excluding GST)...............................$117.92
Present value of $117.92 for 20 years discounted @ 7%........$1,249.25
Deficit recovery, administration and trustee fee......................$658.28
Combined cancellation fee (excluding GST)..........................$1,907.53
GST @5%............................................................................$95.38
Total cancellation fee including GST....................................$2,002.91
So based on his 2nd Affidavit, and based on their own assumptions, they are overstating the Cancellation fee by $3,167.51 - $2,002.91 = $1,164.60. In other words, they have over-charged those who have paid the cancellation fee and they are over-billing those who might pay to get out.
Which is the proper way to calculate a cancellation fee? Is it the total cumulated amount of the future management fees that they used in the calculation, or is it the discounted present value amount which he says he used? No question it is the 20-year discounted present value amount. Actuaries and financial analysts, when measuring the present value of a future flow of funds, will always discount the funds received in the future because of the time value of money. It boils down to a simple matter that people would rather have, say $117.92 today, than $117.92 twenty years in the future.
There are really two issues here. Firstly, those who are disputing paying the renovation fee and the cancellation fee for reasons of numerous breaches of contract and misrepresentations, say there should be no cancellation fee. Secondly, those who have agreed to pay the cancellation fee and walk away, may have paid too much. These people should look at whether they should either get a refund, or have the total amount returned because of misrepresentation.
