Assessments

[rosebud5]

At some point in the future, if I'm not scared away, I would like to buy 3-4 consecutive weeks on the beach in Florida, during the months of January - February. I have a location in mind. A small resort, owned by a small management group. Given we are very close to retirement and live in the cold north, spending a month or so in Florida during winter is very appealing to us.

What scares me are special assessments. I obviously would ask before I bought anything, but are assessments written into the purchase contract. How are assessments determined and how often can they be assessed. Short of a hurricane or other natural disasters, I'm curious if some of the management companies are abusive and how does a buyer protect himself/herself?

 

[DeniseM]

Assessments are not written into the purchase contracts. Unless, of course, there is a current assessment due, and then the seller may ask you to pay it into escrow. Or the seller may pay it, or you may agree to pay the assessment when you take possession. If there is a current assessment, the seller is required to disclose that info. If you use a reputable closing/escrow company, any assessments should be also be revealed in closing. If the seller did not disclose an assessment, that would be grounds for you to withdraw from the purchase. Of course, the seller is not responsible for any new assessments that occur after you take possession.

The need for an assessment is determined by the board of directors, which in theory represents the owners. Some states have law regulating assessments, but based the reaction from the state to complaints regarding Starwood's recent high assessments at Sheraton Vistana Resort in Orlando, I wouldn't expect any protection in Florida.

There is no real way to protect yourself, but to put an assessment off as long as possible, you could buy at a brand new resort, or buy at a resort that had just had a special assessment.

 

[rosebud5]

What options do you have if the assessment is too high? Also, other than damge due to things like hurricanes, etc., why are assessments needed. Is it to paint the rooms, buy new furniture or could it be to ensure that the management company doesn't lose money because rooms are empty.

The few I have read about seem to be large resorts. BTW: Dont you run into the same dilema when you buy a condo outright?

For those that have more experience with TS, am I overly worrying about assessments?

 

[DeniseM]

What options do you have if the assessment is too high?

You don't really have any options - as an owner, you are obligated to pay it or be turned over to collections and lose the use of your TS.

Also, other than damge due to things like hurricanes, etc., why are assessments needed. Is it to paint the rooms, buy new furniture or could it be to ensure that the management company doesn't lose money because rooms are empty.

The assessment may be because of something like a hurricane, but more often it's use to renovate, remodel, and/or redecorate an aging resort. I'm not sure what you mean by the 2nd statement about rooms being empty. TS owners have to pay their maintenance fees whether or not they use their ownership.

The few I have read about seem to be large resorts. BTW: Dont you run into the same dilema when you buy a condo outright?

Not so much, because when you buy a condo outright, management is not responsible for the interior and such things as remodeling, redecorating, painting, and replacing carpet, furniture, and appliances.

For those that have more experience with TS, am I overly worrying about assessments?

I think it is something you need to look into, especially if you are looking at older resorts on the beach.

 

[AwayWeGo]

What's So Special About A Special Assessment ?

What options do you have if the assessment is too high? Also, other than damge due to things like hurricanes, etc., why are assessments needed. Is it to paint the rooms, buy new furniture or could it be to ensure that the management company doesn't lose money because rooms are empty.

The few I have read about seem to be large resorts. BTW: Dont you run into the same dilema when you buy a condo outright?

For those that have more experience with TS, am I overly worrying about assessments?

Click here for some recent TUG-BBS commentary about maintenance fees as viewed by timeshare companies on the 1 hand & on the other hand as viewed by independent timeshare homeowner associations.

If the timeshare company, while it still controls the HOA-BOD, shorts the Reserve Fund too severely for too many years, then it's not only possible but likely that the independent, owner-controlled HOA-BOD that takes over once the company-controlled HOA-BOD is voted out will find that there's not enough money in the Reserve Fund to pay for badly needed resort maintenance & renovations & upgrades. In that case, the HOA-BOD has no choice but to swallow hard & impose a Special Assessment. They may have no choice -- their mandatory responsibility as stewards of the property may dictate imposing a Special Assessment if no other means is available & sufficient to keep up the property, as the HOA-BOD is obligated to do.

If a Special Assessment is "too high," that's tough. Every owner has to pay, no ifs & no ands & no buts.

If a Special Assessment is too low -- i.e., doesn't generate enough cash to pay for what absolutely needs to be paid for -- then it might just lead to another follow-up Special Assessment & another & another. The HOA-BOD mustn't use Special Assessments simply as band-aids on budget shortfalls. If the HOA-BOD resorts to a Special Assessment, then to do its job the assessment has to be accompanied by a solid, realistic, detailed plan for getting the timeshare on a solid financial footing & keeping it that way.

For painting rooms & buying furniture, etc., the regular maintenance budget should be used, along with planned-for reserve-funded periodic major renovations.

Mox nix if units at the timeshare are empty. Each unit is owned by somebody -- regular, walking-around timeshare owners in some if not most cases. The timeshare company owns the units it hasn't sold yet -- maybe a few, maybe lots & lots, depending on how good the company is at selling timeshares & how long the company has been at it. Come annual fee time, each owner of each unit has to pony up -- individuals & timeshare companies alike. Same goes for Special Assessments.

I don't know if our experience is typical. We bought our 1st timeshare (resale) right after a special assessment had been completed. We sold it right before another, larger special assessment was laid on. We bought back in again after that larger assessment was completed. All that was due to sheer blind luck rather than to any special shrewdness on our part.

Meanwhile, at our other (resale) timeshare right across the street, we got nicked early in our ownership for 1 of those too-small Special Assessments that didn't do the job. The HOA-BOD muddled along for a few years, then bit the bullet last year & hit everybody with a substantial Special Assessment (i.e., just short of a year's maintenance fees). No fun to pay, but acceptable if it gets the timeshare on solid financial ground & keeps it there.

Our dinky (resale) points timeshare in the USA heartland hit everybody with a middling Special Assessment -- more like a nuisance fee than a big hit. Meanwhile, annual fees out there have been soaring way out of proportion. I don't know what's up with that.

Our fixed-week 2BR el cheapo timeshare in a far-off distant land overseas, which we bought in 2003 or so, has not hit us with a Special Assessment & fees have not risen dramatically.

I try not to worry too much about Special Assessments. Nobody likes'm. But sometimes they're a necessary evil. What's really evil, though, is a Special Assessment that merely kicks the can down the road instead of permanently solving the timeshare resort's financial problem that led to the Special Assessment.

-- Alan Cole, McLean (Fairfax County), Virginia, USA.​

 

[Idahodude]

Possibly the best way to protect yourself against assessments due to things other than natural disasters is to purchase a resort with good management who does the following things:

1. Puts money aside for renovations as part of your maintenance fees.
2. Otherwise, tries to keep costs as low as possible.
3. Does a good job with ongoing maintenance to keep the resorts as close to "like new" as possible.
4. Possibly has a few other resorts in other locations so that they won't go under without major assessments if something happens at the resort you've purchased at.

That said, there's no way to completely protect yourself from special assessments, just as there's no way to completely protect yourself from having to make repairs on your home due to neglect, poor maintenance, or natural disasters. Certainly, insurance can protect from some things, but then if they occur, your insurance rates go up.

 

[hsimpson]

Mid-year Special Assessments?

I am considering trying to sell my timeshare sometime this year since we (my wife and I) don't expect to be using it much anymore due to health reasons.
Since we just paid maintenance fees in December, I felt that I have plenty of time to consider various options before the next fees are due, but one of the places I talked to warned against mid-year special assessments that could be levied.
So my 2 questions are:
Can this happen (theoretically)? and
Are there any examples of this actually happening?
I thought special assessments were always billed together with maintenance fees. Am I mistaken?

 

[aliikai2]

Any resort can have a special assessment

after the BOD has voted and in some cases the ownerships also needs to approve. So, can it happen mid year? Yes, I don't keep track of examples, but I have read where it does occur.
My question to you, is what difference will this make ? If you price the unit correctly, it will sell. If they have a Special assessment before you close escrow, you will need to pay it, if it announced after it is in the new owners names, it will be their problem.

I get concerned when I read

but one of the places I talked to warned against mid-year special assessments that could be levied.

Are you getting advise from a company that charges to list you unit for sale?

If you would like to know the value of a week , email me, I will research it and give you a real sales value.

And I won't charge you for my help.

fwiw,

Greg

I am considering trying to sell my timeshare sometime this year since we (my wife and I) don't expect to be using it much anymore due to health reasons.
Since we just paid maintenance fees in December, I felt that I have plenty of time to consider various options before the next fees are due, but one of the places I talked to warned against mid-year special assessments that could be levied.
So my 2 questions are:
Can this happen (theoretically)? and
Are there any examples of this actually happening?
I thought special assessments were always billed together with maintenance fees. Am I mistaken?

 

[Mel]

At some point in the future, if I'm not scared away, I would like to buy 3-4 consecutive weeks on the beach in Florida, during the months of January - February. I have a location in mind. A small resort, owned by a small management group. Given we are very close to retirement and live in the cold north, spending a month or so in Florida during winter is very appealing to us.

What scares me are special assessments. I obviously would ask before I bought anything, but are assessments written into the purchase contract. How are assessments determined and how often can they be assessed. Short of a hurricane or other natural disasters, I'm curious if some of the management companies are abusive and how does a buyer protect himself/herself?

Think of your own home, and how you maintain it. Some maintenance is done on a regular basis - you replace light bulbs as they burn out, replace fuses if you still have a fuse box, do your weekly (or monthly or whatever schedule you use) cleaning. But some maintenance is done far less frequently. Your hot water heater has a leak, and needs to be replaced... The paint is chipping... the driveway needs to be resurfaced... or maybe you need to replace the roof. Those are costly maintenance items, something you generally plan and save for, because you know you will eventually need to pay for them. Or I should say, many of us save for them. Other people finance them when the bill comes due, and pay for them over several years on the back end, often using a home equity line or otherwise using the home as collateral. But the HOA can't do that with your timeshare, because the HOA (at least in good times) doesn't own anything. Instead, all owners should be funding the reserve account, so that the money is in the account when the roof needs replacing. If not, the HOA plans a special assessment.

As already mentioned, sometimes this is because the developer controlled HOA purposely kept fees low, and didn't fund the reserve account. Sometimes, the HOA just isn't paying attention. In a few cases, an SA may be to upgrade the resort - add features that will improve the resort, but were not part of the original plan. Kind of like adding a deck or sunroom to your home. Again, with your home you can finance this improvement, but the HOA doesn't have that option.

Finally, you will have those natural disaster situation. If you're looking at a beach resort, ask about insurance. The HOA should have insurance to cover the costs of rebuilding after a hurricane. If the insurance isn't adequate.... you guessed -time for SA.

The best plan for avoiding a special assessment is to research the management at any resort you are considering. A single SA isn't necessarily a bad sign, and a lack of SA isn't always a good sign. Look for a well-maintained resort with reasonable fees, but not unusually low. Ask about the reserve fund, and insurance (if you can get hold of an annual report, you should be able to find this information). If there was a recent SA, find out about the HOA - was it recently taken over from the developer, prior to the SA, and does the new HOA have a plan in place to control costs?

Ask other owners here about the resort - not opinions, so much as facts. Many owners, even knowledgeable TUG members, have high opinions of their own, so opinions may or may not be helpful, but hard facts are.

 

[Carl D]

Don't most reputable places budget for these items? I know they can't budget for every possible situation, but I'm looking at my DVC budget and it looks pretty thorough.

 

[rickandcindy23]

I don't own at the Resort on Cocoa Beach, but I have been tempted to buy because it is managed by VRI, and VRI is very good at advising the BOD to keep a reserve and not ever do SA's. I would feel good about owning there. BUT there are lots of great management companies out there that do the same thing.

I say this because we own six weeks at Foxrun, and if they had a SA of even $600, it would be devastating to our budget. Compare this to Vistana resort, which assessed owners aroun $2K for a week. Ouch. Foxrun is a resort that was getting old, and the units were looking it, so the board, wise people that they are, planned for a slower refurbishment of units, increased our fees gradually (some would say they are too high now), and now they are remodeling kitchens and replacing furniture that was in sore need, etc. I would rather be boiled slowly with higher fees than have to suffer the sudden shock of special assessments.

Remember, it isn't the management company that makes these decisions, once the developer is gone, it is the owners, and being on the board is a huge responsibility.

 

[theo]

A few thoughts...

At some point in the future, if I'm not scared away, I would like to buy 3-4 consecutive weeks on the beach in Florida, during the months of January - February. I have a location in mind. A small resort, owned by a small management group. Given we are very close to retirement and live in the cold north, spending a month or so in Florida during winter is very appealing to us.

When was Virginia moved to "the cold north"? Last I knew, VA was well south of the Mason-Dixon line...

Seriously, there is some sound input among some of the input provided above, but you should perhaps be realisitic and accept and acknowledge that any coastal Florida location (your specified area of interest) is potentially prone to hurricanes. Charley in 2005, for just one example, inflicted millions of dollars in damages --- several resorts in and around Pompano Beach alone were closed down outright for several years (with owners still paying annual fees) and then still subsequently hit with substantial special assessments. Insurance isn't the whole answer for repairs either when there is a huge deductible involved; the shortfall has to come from somewhere --- guess where?

You make reference to an unidentified "small management group". An important piece of information you'd be well advised to determine and confirm before purchasing several consecutive "beach" weeks is whether this "small management group" has historically maintained adequate reserves. if not, then you're rolling loaded dice if / when storm damage inevitably occurs. Just food for thought...

 

[e.bram]

Another reason to put your Tses in a corp, LLC or trust.Then you can easily bail(as in parachute, not boat).

 

[timeos2]

Follow the laws. Follow the docs. Follow the rules.

Another reason to put your Tses in a corp, LLC or trust.Then you can easily bail(as in parachute, not boat).

And an important time to note that if you create a corporation, LLC or Trust simply to avoid legitimate fees/cost it is likely to be considered fraudulent and you will be "protected" from nothing but even more costs and legal hassles. Take a look at the numerous requests for proof that the suggestion has been successfully used and is really an answer to find zero replies or examples.

Assume that if you buy you are taking on a legally binding commitment and will have to deal with it until you properly transfer it to another willing owner. That is the way SOC (Shared Occupancy Community) law has been written and enforced now for decades. While it evolved mostly from condominiums, timeshares are also treated with the same rules, regulations and laws despite the 1/52 ownership vs full time occupancy. Flaunt them at your own risk.

 

[e.bram]

timeos2:
According to you we should abolish all limited liability entities. The only reason for their existance is to avoid personal liability. Governments know this when they allow their existance(one of the major legal advances). I don't understand your point of view, except to throw ownership concepts back to the middle ages.

 

[Mel]

ebram,

LLC's exist to limit liability, yes. But they act as a buffer between a business and its owners - the business should be liable, but not necessarily the owners on a personal level.

What you are suggesting with the timeshares is purposely setting up an entity to own your timeshares. But is the purpose of that entity to do some sort of business with those timeshares, or is it solely for the purpose of avoiding responsibility for any associated obligations, such as maintenance fees or taxes.

Most TUG members probably do not want to deal with filing an extra tax return every year for their trust or LLC (and if they pay someone else to do it, it kind of defeats the whole purpose). Further, I'm not sure how effective your plan would be at avoiding the obligation to pay. I suspect any good HOA would still go after you to try to recover the fees. Even if a court did eventually rule that you are not liable for those fees, you end up sinking your trust. Do you plan on an individual trust for each ownership? If not, what happens when youstop paying one resort and the HOA decides to try to seize the trust's assets - including your other timeshares?

Several of us have asked repeatedly - if you think this is such a great plan, why haven't you implemented it yourself?

 

[e.bram]

It seems to me all the naysayers are BOD members wanting to keep the money spigots on even as they mismanage the TS.
Suppose the TS buyer thinks he might want to rent or flip his(her) TS then a limited liability entity would be OK(legit)?

ps:I know Timeos2 is and [deleted]

[e.bram - Please attack the issues and not other posters - you have been warned before - DeniseM Moderator]

 

[T_R_Oglodyte]

timeos2:
According to you we should abolish all limited liability entities. The only reason for their existance is to avoid personal liability. Governments know this when they allow their existance(one of the major legal advances). I don't understand your point of view, except to throw ownership concepts back to the middle ages.

You have often proclaimed how people should go do their own legal research so they can be as knowledgeable as lawyers.

You might want to do a bit of legal research on the nature of liability limitations for corporations, the conditions and precedents under which corporate veils of liability can be pierced, the differences in personal liability for owners between a corporation and a LLC and a parntership.

You might be surprised to learn that if a legal entity is set up with the intent of creating fraud, the action can and will be reversed by a court and the owners made personally liable. Further, should that happen the owners will often have joint and several liability, meaning that any single can end up bearing the entire liability for the entire group.

++++++++

Despite what you so clearly want to believe, the concept of limited liability did not arise because courts decided a mechanism was needed to allow people to avoid paying their debts.

Rather it was created so that several people could get together and create an entity to conduct business activity that could stand on its own as an independent concern.

Without the existence of limited liability corporations, business activities that were larger than what one person could handle could only be conducted as a partnership. There are many issues involved with running a partnership among individuals that make partnerships unwieldy instruments to conduct larger commercial activities, such as what happens when a partner dies or drops out, how are the other partners protected if one partner goes bankrupt, how does a partnership remove a member who isn't performing or who is obstructing operations of the partnership.

++++++

Courts developed the concept of corporations to address those significant limitations of partnerships. The notion was to create a new type of entity that could stand, with it's own assets and it's own liabilities. That is, an entity with an existence under law the same as an individual.

That is the purpose for which limited liability was established. Not to enable people to evade debts, but to allow corporations to exist as independent entities under the law capable of conducting commercial activities without the operating limitations inherent to partnerships.

+++++

Over the years the nature of corporate and business has changed and evolved. But I think if you do a even a modest bit of legal research you will find that one constant is that if a limited liability entity is created with the specific intent of shirking a mandatory legal obligation (whether that be paying bills, cleaning up contaminated property, making pension payments) the courts will allow the limited liability veil to be pierced.

++++++++

It's simply nonsense to think that the only reason the concept of limited liability entities was established was to make it possible for people to walk away from their legal obligations.

 

[e.bram]

If what you say is true then how can you legally have sole ownership of a corp or LLC?(which I know you can)
The cost for an action to pierce a corp vail would be an order of magnitude greater than the possible debt obligation of an individual to a TS, unless he(she) had many in which case they could invoke the business intent which you maintain is a requirement to form a legitamate impenetratable corp.

ps: How could LegalZoom stay in business?

 

[T_R_Oglodyte]

If what you say is true then how can you legally have sole ownership of a corp or LLC?(which I know you can)
The cost for an action to pierce a corp vail would be an order of magnitude greater than the possible debt obligation of an individual to a TS, unless he(she) had many in which case they could invoke the business intent which you maintain is a requirement to form a legitamate impenetratable corp.

It's very simple and straightforward. If youere unclear on the concepts I suggest to you take your own advice and go do some legal research.

+++++

This is a note to readers new to TUG who might be stumbling into this thread. I'm adding this comment because what I might post here makes absolutely no difference to e.bram.

e.bram likes to post his "legal advice" here. This is just one in a long series of "conclusions" he has reached and touted that push, and sometimes exceed, the bounds of credibility. (Another fine one was when e.bram, in all seriousness, suggested that people should own timeshares as "tenants in common" because that would make it easier to get rid of the timeshare when someone wanted out.)

 

[DeniseM]

Is e.bram an attorney?

 

[e.bram]

T_R_Oglodyte's advise roll over and play dead. I am from New York. We don't do that here.

ps: I never recommended TIC for ownership. always corp, LLc or trust. You must have me confused.with someone else or you are just confused.

 

[DeniseM]

T_R_Oglodyte's advise roll over and play dead. I am from New York. We don't do that here.

So you are sharing your own personal experience with setting up an LLC or trust for your timeshares. Can you please walk us through it?

 

[T_R_Oglodyte]

T_R_Oglodyte's advise roll over and play dead. I am from New York. We don't do that here.

ps: I never recommended TIC for ownership, only corp, LLC or trust. You must have me confused withe somebody else or you are just confused.

I'm confused??? I beg your pardon!

One minute of search is all it takes: http://www.tugbbs.com/forums/showthread.php?p=608414.:

With TSes the spouse is better off with tenants in common anyway.

To which I responded:

Why so? I see zero advantages of having title in common tenancy.

prompting this reply from e.bram:

The most the suviving spouse could get stuck for is 1/2.

The absurdity of those statements is discussed subsequently in the thread. I guess the absurdity is so manifest that even e.bram wants to pretend he never made those statements.

++++++

I'm not sure what New York has to do with anything. I guess that's another difference between e.bram and me. I don't believe that where a person lives has any bearing on the logic (or lack thereof) of what a person posts.

 

[Mel]

It seems to me all the naysayers are BOD members wanting to keep the money spigots on even as they mismanage the TS.
Suppose the TS buyer thinks he might want to rent or flip his(her) TS then a limited liability entity would be OK(legit)?

ps:I know Timeos2 is and [deleted]

Way off base. Most of us who argue against your craxzy ideas are not in fact BOD members. We are simply owners who understand that when we sign a contract to purchase a piece of real estate, that we also incur certain obligations.

By your reasoning, I should place my home in an LLC and rent from it, so I can bail on the property taxes when I decide they have risen too high. You accuse BOD members of mismanagement, when in fact the BOD members here have done their best to gain control of their resorts after years of developer mismanagement. Yes, the fees at some resorts rise too high because of mismanagement, but allowing owners to walk away doesn't solve the problem. If you don't like the way your resort is managed, and think they are wasting money, perhaps you should attend the BOD meetings, or maybe even run for a seat on the BOD. See if you can do a better job.

I don't care for the picture you paint of New Yorkers. I would guess that most New Yorkers have a sense of responsibility, and don't in fact walk away from their legal obligations.

BTW, where exactly do you get your "legal expertise." Is there any case law to justify your assertion that an LLC would protect you from an obligation to pay TS fees? Have you tried this yourself?