[2022] MVC Trust Owners Association - Reserve Funding Waiver etc?

[dioxide45]

First, your limited vision regarding amenities and the resort looking better is questionable. You need to focus on the items for which reserves are necessary.

Perhaps, the Board of each resort should share the accumulated shortfall by category each year. With that, owners could make an informed decision. The facts are that we really don't know the cumulative unfunded reserves and that's scary. Reserve requirements are determined by professionals who know what they are doing. A vote by those only motivated to defer the inevitable need is pretty stupid. This is not prudent, and the exposure should be quantified and disclosed to the owners before they vote.

You don't get it, there is only a shortfall based on state statutory requirements. Marriott resorts perform reserve studies every few years. Those studies indicate a different level of reserves is sufficient vs what the state statutory requirement is. If a resort were underfunding reserves for 20-25 years (Harbour Lake and Grande Vista are those ages), there would certainly have been a special assessment by now?

For resorts not in Florida, how do you think they calculate necessary reserves? They don't have a similar reserve funding waiver. Are they reserving a lot more than resorts in Florida?

 

[DRH90277]

$200 -$300 sounds good. Lakeshore Reserve is about $2500. So there if we pay the required(by the state) reserves the MF's will be about $5000. ☹

If your numbers are right, you are accumulating a deferred maintenance risk for the repairs for the difference. The necessity of the future repairs does not disappear because of your vote.

It appears there is no dispute of the reserve study, so the board affirms the study and then recommends less than full funding?????? Owners then take the bait and vote for less than full funding. Perhaps, one should consider the motives and qualifications of those proposing this approach to reserves.

 

[DRH90277]

You don't get it, there is only a shortfall based on state statutory requirements. Marriott resorts perform reserve studies every few years. Those studies indicate a different level of reserves is sufficient vs what the state statutory requirement is. If a resort were underfunding reserves for 20-25 years (Harbour Lake and Grande Vista are those ages), there would certainly have been a special assessment by now?

For resorts not in Florida, how do you think they calculate necessary reserves? They don't have a similar reserve funding waiver. Are they reserving a lot more than resorts in Florida?

If you really think that the state statutory requirements are that far off, perhaps ARDA should help the industry align the studies and fix the Florida statutes. My objection is that the uninformed are being asked to ratify with no real basis for a decision.

The good news for me, I don't own anything in Florida and my exposure is probably limited to the few Florida properties owned by the Trust.

 

[jmhpsu93]

If you really think that the state statutory requirements are that far off, perhaps ARDA should help the industry align the studies and fix the Florida statutes. My objection is that the uninformed are being asked to ratify with no real basis for a decision.

The good news for me, I don't own anything in Florida and my exposure is probably limited to the few Florida properties owned by the Trust.

Do you know how well funded you are at Ocean Watch where you own, and how that compares to the Florida resorts?

I own at three Orlando locations (GV, CH, and HL) and am fine with the "under-funding of reserves" as you call it. It's not deferred maintenance; as like @dioxide45 said above those resorts are all 20-30 years old, have experienced some hurricane damage over the years, and are in great shape.

Not sure why you're dying on this hill if you have no stake in the game.

 

[dioxide45]

Here is an article that does a good job of explaining different funding methods, none of which have the reserve balance going below $0.

https://pubs.royle.com/article/Reserve+Funding+Strategies/4310805/753813/article.html

 

[SueDonJ]

Here is an article that does a good job of explaining different funding methods, none of which have the reserve balance going below $0.

https://pubs.royle.com/article/Reserve+Funding+Strategies/4310805/753813/article.html

Good article, thanks for that. Thanks also for making the repeated point that "fully-funded reserves" are specifically defined by legislation, and waiving that specific funding does not necessarily - and has not historically over decades - resulted in under-funded Marriott resorts. I don't know how many times it needs to be said but apparently, once is not enough.

>>With the passage of new legislation (Senate Bill 4-D), condominium associations and cooperatives throughout Florida are reviewing their reserve studies and funding strategies. After December 31, 2024, the ability to waive reserve funding will be limited to “non-structural” items.<<

From the article, the above would concern me if I owned in Flordia. I might send off an email to the BOD of my resort(s) asking if they are discussing the issue and if/when they intend to explain it further for owners, as a stand-alone item rather than something briefly mentioned in the packet that accompanies the annual Budget Reports. Knowing that Marriott pretty much controls the resort budgets (because Marriott determines the proposed budgets which are then voted on by the BOD,) I'd guess that the email would be forwarded out of the BOD's hands and into Marriott's, hopefully to spur Marriott on to an explanation for all affected owners.

 

[dioxide45]

Good article, thanks for that. Thanks also for making the repeated point that "fully-funded reserves" are specifically defined by legislation, and waiving that specific funding does not necessarily - and has not historically over decades - resulted in under-funded Marriott resorts. I don't know how many times it needs to be said but apparently, once is not enough.

>>With the passage of new legislation (Senate Bill 4-D), condominium associations and cooperatives throughout Florida are reviewing their reserve studies and funding strategies. After December 31, 2024, the ability to waive reserve funding will be limited to “non-structural” items.<<

From the article, the above would concern me if I owned in Flordia. I might send off an email to the BOD of my resort(s) asking if they are discussing the issue and if/when they intend to explain it further for owners, as a stand-alone item rather than something briefly mentioned in the packet that accompanies the annual Budget Reports. Knowing that Marriott pretty much controls the resort budgets (because Marriott determines the proposed budgets which are then voted on by the BOD,) I'd guess that the email would be forwarded out of the BOD's hands and into Marriott's, hopefully to spur Marriott on to an explanation for all applicable owners.

It certainly does look like it will add not only reserve costs to HOAs but also increased expenses overall. More inspections, and copies of the inspections must be physically (and on the web) provided to owners. I suspect it costs tens of thousands of dollars to do a mailing to all owners at a resort as large as Grande Vista. For buildings within three miles of the coast an inspection is required after 25 years and beyond three miles it will be 30 years. Then every 10 years thereafter. For resorts with multiple buildings, like Ocean Pointe, Grande Vista, and many others it will also mean multiple inspections, probably spread out over the years based on when a resort building was built.

Florida Enacts Major New Reforms for Condominiums and Cooperatives in Response to Champlain Towers South Collapse | JD Supra

On May 26, 2022, Florida Governor DeSantis signed Senate Bill 4 into law, imposing substantial new structural safety and reserve requirements on...

www.jdsupra.com

 

[DRH90277]

Do you know how well funded you are at Ocean Watch where you own, and how that compares to the Florida resorts?

I own at three Orlando locations (GV, CH, and HL) and am fine with the "under-funding of reserves" as you call it. It's not deferred maintenance; as like @dioxide45 said above those resorts are all 20-30 years old, have experienced some hurricane damage over the years, and are in great shape.

Not sure why you're dying on this hill if you have no stake in the game.

Fair point - I was concerned about this issue and did not realize it pertained to only Florida properties until Dioxide45 mentioned it. I do appreciate the article about a fresh approach to this in Florida.

 

[SueDonJ]

Fair point - I was concerned about this issue and did not realize it pertained to only Florida properties until Dioxide45 mentioned it. I do appreciate the article about a fresh approach to this in Florida.

It's not just Florida.* South Carolina also has fully-funded-reserves legislation, and your Ocean Watch Annual Meeting ballots will intermittently require a vote to waive or not.

*Note though, that the new legislation effective 1/1/25 that's mentioned in the article linked by @dioxide45 is specific to Florida.

 

[dioxide45]

One thing I do find odd though is we are never asked to vote to waive fully funding the reserves for our ownership at Sheraton Vistana Villages, which is also in Florida. We only get that on our Marriott proxies. The reserve amounts for SVV are lower than they are at Grande Vista and Harbour Lake.

 

[JIMinNC]

First, your limited vision regarding amenities and the resort looking better is questionable. You need to focus on the items for which reserves are necessary.

Perhaps, the Board of each resort should share the accumulated shortfall by category each year. With that, owners could make an informed decision. The facts are that we really don't know the cumulative unfunded reserves and that's scary. Reserve requirements are determined by professionals who know what they are doing. A vote by those only motivated to defer the inevitable need is pretty stupid. This is not prudent, and the exposure should be quantified and disclosed to the owners before they vote.

Every timeshare that I'm aware of in Florida does this waiver of statutory reserves every year. I know the HGVC we own there does just like MVC.

My understanding is the state of Florida has some very high statutory reserve requirements. All of these resorts have professional reserve fund consulting firms who analyze the adequacy of reserves and they pretty much universally conclude that the state requirements are excessive and actually result in over-funded reserves. The state law allows the state reserve requirements to be waived with an HOA vote, so all seem to do that annually on the basis of the recommendations from their reserve fund consultants.

EDIT: Somehow I missed all the other replies before mine. Sorry for the redundancy.

 

[dztyson]

"Crazy, crazy, crazy" and an indication that they are scared of telling us the true maintenance costs.

I'm for fully funding the reserves each year and like the idea of full reserves. The alternative to not funding reserves exposes the then current owners of weeks or points to either special assessments or increased maintenance fees to meet deferred needs. Deferring expenses to the future are much like the federal government approach, except the Vacation Club and owners can't print money.

Not to be too cynical, but could this be so that Vacation Club can brag about the low maintenance fees? If not fully funded, how does one know the amount of the accumulated deferred and unfunded expense? Do you think this deferred cost would be disclosed to those buying into Trust properties or to those buying weeks?

Please vote "NO"

One of the reasons for the issue is that many states want reserves funded to a level that many consider unjustified, and the owners must approve a waiver to fund at a lesser level. The lesser level may be more than sufficient, and it should be up to the property owners to decide, not the government. Excess reserve have led to over spending. It's important to keep a tight leash on the money to restrain management.

 

[wuv pooh]

First, your limited vision regarding amenities and the resort looking better is questionable. You need to focus on the items for which reserves are necessary.

Perhaps, the Board of each resort should share the accumulated shortfall by category each year. With that, owners could make an informed decision. The facts are that we really don't know the cumulative unfunded reserves and that's scary. Reserve requirements are determined by professionals who know what they are doing. A vote by those only motivated to defer the inevitable need is pretty stupid. This is not prudent, and the exposure should be quantified and disclosed to the owners before they vote.

Sure. I will just say my limited vision is clearer than yours after 20 years of ownership in Florida. You are arguing for full funding. That means as soon as you spend $100,000 for a new roof you immediately charge another $100,000 to the owners in order to make sure you have enough money to replace the roof again. Seems stupid to me, but if you think it is smart then vote your conscience. I am more concerned about the costs that we will have to pay as a result of the surfside collapse. A high rise condo on a swamp in Miami has no bearing on my resort, but I unfortunately have to be "protected" by the rules. I trust Marriott more than any Florida government official.

 

[davidvel]

Sure. I will just say my limited vision is clearer than yours after 20 years of ownership in Florida. You are arguing for full funding. That means as soon as you spend $100,000 for a new roof you immediately charge another $100,000 to the owners in order to make sure you have enough money to replace the roof again. Seems stupid to me, but if you think it is smart then vote your conscience. I am more concerned about the costs that we will have to pay as a result of the surfside collapse. A high rise condo on a swamp in Miami has no bearing on my resort, but I unfortunately have to be "protected" by the rules. I trust Marriott more than any Florida government official.

That is not how reserve accounts work. It is presumed that that the new roof you just paid for for $100K has a useful life of say 30-50 years, so you pay 1/30th or 1/50th into the reserve account each year. Reserves are not for fires or disasters. That is what insurance is for.

 

[wuv pooh]

That is not how reserve accounts work. It is presumed that that the new roof you just paid for for $100K has a useful life of say 30-50 years, so you pay 1/30th or 1/50th into the reserve account each year. Reserves are not for fires or disasters. That is what insurance is for.

I know, but apparently the State of Florida does not, which is why we are having this stupid debate that many do not understand. It is just cash flow. Property managers look at the average annual spend to refurbish and maintain the whole property over their life cycle, add some contingency and make an annual budget. Buildings that are younger subsidize buildings that are older, but you never have to repair everything to 100% at once so why would you want to force everyone to pay much more now to get to that position? You do not need to prepay the maintenance, just have the resources for what is needed over the next year. It has worked for 20+ years with no assessments, so I assume they know what they are doing.

 

[wuv pooh]

Since I am agitated, I will do an example Ten buildings built over 10 years with ten roofs with a life of 10 years with one replacement each year. On average you need $100k per year. To be fully funded you need the $100k for the roof you are replacing this year, plus the accumulated depreciation of the other 9 buildings so $550,000:

	Build 1	Build 2	Build 3	Build 4	Build 5	Build 6	Build 7	Build 8	Build 9	Build 10	Total
Reserve	$ -	$ -	$ -	$ -	$ -	$ -	$ -	$ -	$ -	$ 100,000	$ 100,000
Fully Funded	$ 10,000	$ 20,000	$ 30,000	$ 40,000	$ 50,000	$ 60,000	$ 70,000	$ 80,000	$ 90,000	$ 100,000	$ 550,000
	Reserve Account:	$ 100,000	+ x contingency
	Fully Funded Account:	$ 550,000

A good property manager collects more than $100,000 just in case something unexpected happens, but they do not keep $550,000. Florida law requires you to get to $550,000 over some period of time unless the owners vote for a reduced amount.

 

[DRH90277]

Since I am agitated, I will do an example Ten buildings built over 10 years with ten roofs with a life of 10 years with one replacement each year. On average you need $100k per year. To be fully funded you need the $100k for the roof you are replacing this year, plus the accumulated depreciation of the other 9 buildings so $550,000:

	Build 1	Build 2	Build 3	Build 4	Build 5	Build 6	Build 7	Build 8	Build 9	Build 10	Total
Reserve	$ -	$ -	$ -	$ -	$ -	$ -	$ -	$ -	$ -	$ 100,000	$ 100,000
Fully Funded	$ 10,000	$ 20,000	$ 30,000	$ 40,000	$ 50,000	$ 60,000	$ 70,000	$ 80,000	$ 90,000	$ 100,000	$ 550,000
	Reserve Account:	$ 100,000	+ x contingency
	Fully Funded Account:	$ 550,000

A good property manager collects more than $100,000 just in case something unexpected happens, but they do not keep $550,000. Florida law requires you to get to $550,000 over some period of time unless the owners vote for a reduced amount.

Does anyone understand this model. It might be better to do this for 1 building's roof with an anticipated 20 year life. And, how does accumulated depreciation play into this?

 

[dioxide45]

Does anyone understand this model. It might be better to do this for 1 building's roof with an anticipated 20 year life. And, how does accumulated depreciation play into this?

I think it makes more sense when you look at all expenses that have to be paid at different times. Technically if you are reserving for the roof for 35 years, you can spend some of that money on year 5 for new paint and make up that shortfal later. I think the charts in the article of post #32 show this better.