Assessments

[e.bram]

Mel:
LLC stands for LIMITED liability compamy. What is your defination of limited? And why do you think that type of entity was ceated?

 

[e.bram]

To paraphrase a fpmous quote. "contracts are like eggs, made to be broken". And a lot must be, the courts seem to be busy all the time.

 

[Mel]

Mel:
LLC stands for LIMITED liability compamy. What is your defination of limited? And why do you think that type of entity was ceated?

It was created to LIMIT the personal liability of an individual (or partners) who owns a business. The idea of the LLC was created because not all small companies need to incorporate, but should be able to gain from certain benefits of a corporation. But for anyone considering this approach, there are several factors that should be taken into account:

1 - Not all states give the LLC separate legal status from the owner/members.

2 - Where will you register your LLC? If you register in a state other than the location of your timeshare, your LLC will also need to register to do business as a "foreign entity" in the state where the timeshare is located. (And will likely incur fees to both that state and the "home" state each year).

3 - If you want joint ownership of the LLC with a spouse, you will need to file a tax return for the LLC, and K-1 forms for both spouses. Alternately you can include the "income" on a schedule C, but then your spouse will have no rights to use the timeshare (or trade it through your exchange company).

There's also the issue of transferring the membership to your LLC, and getting the resort to recognize the LLC as the owner. Most resorts have a process by which membership is transferred, and it is quite possible that the resort could require that the original member guarantee and debt of the LLC (much like a co-signer on a loan) which would defeat the purpose of the LLC.

Seems like a lot of work, and cost in order to avoid liability for maintenance fees in the future. And there is no guarantee that is will effectively shield you anyway.

When are you going to tell us about your experience tranferring your timeshares into you LLC?

 

[e.bram]

Mel:
suppose you were buying TSes with the idea of renting or reselling them. Would they they then qualify for being held in an LLC. Some HOAs allows point trusts(w/o personal guarentee) to hold title to hte deeds. How could they exclude anyone wanting to do the same?

 

[Mel]

If you purchase the TS for the purpose of renting or selling them, you are engaged in a legitimate business. Putting them into an LLC for personal use is not a legitimate business use. If you default on your fees with personal use, the courts are more likely to hold you personally liable.

As for an HOA allowing a unit to be placed into a point trust, if you're talking about the developers that hold the timeshares in trust in exchange for an alotment of points, again that would be different. The trusts are not controlled by the beneficiaries of the trusts. Also, you would need to read the full points trust contract - I bet there is in fact a guarantee from whoever controls the trust. If not, it may be because the developer still controls the HOA, and the developer also controls the points trust, and doesn't care if there is guarantee (because it is more likely for the developer to lose control of the HOA than of the trust).

 

[e.bram]

Mel:
For the amount of money involved in MFs(even afew years worth), I don't think that the HOA would persue the claim, considering the legal expense involved in the complex ligitagation you indicate, necessary to break the limitation of liability vail. And the worse case senario is you lose which is the same if paid to begin with.

 

[AwayWeGo]

Worst Case Can Be Even Worse Than That.

And the worse case senario is you lose which is the same if paid to begin with.

The same amount that you were trying to dodge plus interest & collection costs & attorney fees & court expenses -- not to mention potential hits against credit rating scores.

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

 

[e.bram]

AwayWeGo;
What attorney fees, I would go in to court "pro se". Collect costs and fees are not awarded unless written contract exists(none does), and the courts usually encourage(arm twist) settlement for less than the claimed amount. In my case I pay cash and own everything I have or want to have free and clear, so I don't need or use credit, although I doubt one dispute would do much damage to my credit rating(whatever it is?).

 

[Mel]

I'm not sure where you get the idea that attorney fees for the HOA wouldn't be charged to you. Your membership in the HOA is governed by a set of documents recorded in the county as part of the timeshare plan. As an owner you are bound by those document and they are referred to in your deed. They constitute a contract, and in most cases they do include provisions for collecting back fees plus any costs associated with collecting those fees.

And as for you credit rating, it is used now for far more than just securing credit. Do you have insurance? Will you ever need to seek employment? Your credit rating is likely to come into play in both situations, and a lawsuit of this nature could be far more than a small ding. If you have be forced to honor an obligations to the HOA, what other obligations are you likely to not honor?

 

[e.bram]

If it so easy to collect MFs and attorney fees why are HOAs complaining about delinquent owners. should not matter a blt, the HOA s you say are collecting MFs plus. They should encourage bailers, if they get the MFs and can rent out the units as well. Why are so many units HOA owned?
ps: I'm a boss and don't have to worry about getting a job. I am also a big insurance customer and are always solicited by insurance agencies to switch to them. I also get Xmas presents from them even though I don't drink.
pps; Lawyers hate it when I show up pro se.

 

[theo]

And who else...?

Lawyers hate it when I show up....

Do you find that it's only lawyers who feel this way? :ignore:

 

[e.bram]

theo:
Actually the plaintiffs are not happy either> who else would care?

 

[Mel]

If it so easy to collect MFs and attorney fees why are HOAs complaining about delinquent owners. should not matter a blt, the HOA s you say are collecting MFs plus. They should encourage bailers, if they get the MFs and can rent out the units as well. Why are so many units HOA owned?

It is a cashflow issue. If you don't pay your fees, the HOA has to rent out your unit. In most cases, they legally have to credit the rental minus reasonable fees to your account, so the HOA isn't making money off delinquent owners. Plus, they have to float your account until they can rent your unit. Those lawyer fees being collected are paid to the lawyers, so again, no monetary benefit to the HOA.

Why are so many units HOA owned? Maybe because people like you suggest that people should just walk away from their obligations. In some cases the HOA weeks are the final few weeks the developer didn't sell, and doesn't want to be bothered with. In others it is weeks that were deeded to the HOA either by willing owners, or through forclosure.

Since you're in business for yourself - what do you do if a client doesn't pay the bills?

 

[e.bram]

I am in a cash(now also credit cards) business.

 

[brigechols]

Do you find that it's only lawyers who feel this way? :ignore:

That's a good one!:rofl:

 

[kagnew64]

Special assessments

When it comes to hijacking a thread yo'all are the best. Rosebud5; I only have
owned one TS for about ten years. We have had two special assessments. The
first one four or five years ago was to rebuild our beaches in Puerto Vallarta and
Cancun. This year it was to change out furniture, add WiFi, and make other general improvements. Total special assessments in ten years--$1500.00
Was it worth the money? I will find out when the up-grades are finished.

 

[Mel]

When it comes to hijacking a thread yo'all are the best. Rosebud5; I only have
owned one TS for about ten years. We have had two special assessments. The
first one four or five years ago was to rebuild our beaches in Puerto Vallarta and
Cancun. This year it was to change out furniture, add WiFi, and make other general improvements. Total special assessments in ten years--$1500.00
Was it worth the money? I will find out when the up-grades are finished.

Rebuilding the beaches may have been a reasonable use of a Special Assessment - if there is not a history of erosion in the area over time. Otherwise, this should have been part of the reserve

Changing our the furniture should definitely have been part of the reserves, but many resorts don't include it in the reserves as a way of keeping annual fees down.

Wifi and other upgrades, if they increase the value of the units/resort are reasonable to do with a special assessment. The way I look at it, if it is something the would increase the value of the resort or your home, if might be fair game. Is it a capital improvement - is it something the IRS would consider as adding to your basis?

 

[kagnew64]

Special assessments

Mel, I totally agree with you. The beach erosion was a domino effect as I understand it. A property far up the coast built a jetty to save their beach. That jetty changed the current and the adjacent property built a jetty to save
their beach, etc. Club Regina was the last property, then, before the entrance to the marine terminal and marina. Club Regina and/or Westin hotel built two
jetties and trucked in sand to double the width of their beaches. As soon as they had finished, hurricane Kenna passed the mouth of the bay and sucked most of the sand out to sea. They have replaced the sand and have a decent beach.
The question of reserve monies for improvements is a sticky subject and I don't
know all of the answers. From what I have been told CR and Westin had a management agreement whereby most of the maintenance money would go to
the Westin and they would keep the property in good repair. Two or so years ago CR sued Westin and won a monetary settlement plus the right to keep more
of the maintenance money.
Westin has now erected the infamous fence through the common garden/pool
area. Hopefully all of this will be resolved soon and the fence removed.
Now that CR is keeping more of the maintenance money it is collecting, I hope
they can modernize the furnishings. Last trip we noticed all new linens, but
attributed it to Westin taking back theirs.
If anyone knows more about this situation and how it pertains to the special
assessment, please post.

 

[djs]

I'm going to use Massachusetts procedures in my response as that's what I'm most familiar with. To file an LLC it costs $500 (State fees), then EVERY year an "annual report" must be filed which also costs $500. So in 10 years, one will have paid Massachusetts $5,000 in formation/annual fees. I don't know about the rest of you, but to me paying $5,000 to avoid $1,000 in special assessment fees AND walking away from a timeshare just doesn't seem like a great investment.

Sure, one can form their LLC in another State...but if I were to do that, I would then need to pay for a representative in that state as pretty much every state requires what's known as a "Resident Agent and that's probably going to cost a few hundred dollars each year.

And none of that even begins to address what's been brought up previously about a corporation being formed for fraudulent purposes.

 

[JudyS]

The discussion about LLC is way off-topic from the Original Poster's question, and in my opinion, belongs in a different thread.

Rosebud5, I own a lot of timeshares, and do worry about special assessments. There are two main factors that I look at regarding assessments. First, is the board owner controlled? If not, then they may not act in the owners' interests. Many management companies get extra money if there is a special assessment, since they get to charge for supervising the renovations. So, if the owners are not in control, the management company may do unnecessary renovations to bring in money. I'm not an expert on the Sheraton Vistana, but I suspect that is what happened there. (By the way, I stayed in an "unrenovated" Sheraton Vistana unit a year ago,a nd I thought it was perfectly fine, with no need for major repairs at all. And I'm quite picky on resorts.)

Secondly, I look at the physical condition of the resort. (if I can't go see it in person, I ask owners, and read the resort's reviews.) Does the resort need major repairs? If so, that's a big red flag. On the other hand, if the resort was recently renovated, that's very reassuring

I also call up the resort and talk to the management people there. I ask flat-out what repairs they think need to be done, and whether they know of any special assessments in the works. I suspect this wouldn't work at large resorts, but at small, owner-controlled resorts, I've generally gotten useful answers.