First Lawsuit filed against Viking Ship LLCs / PCCs

[timeos2]

You got it. The threat of a special assessment is the only way to get owners to vote to do the right thing. This is why deedbacks are so important. It shows exactly why certain actions need to be taken. If the timeshare plan is unfair and low season owners are subsidizing high season owners, then high season owners will always vote to continue the subsidy.

Then the non-subsidized owners need to band together to get the change made. They would then hold an ownership of value as would the prime, formerly subsidized owners. Sending that ownership into a limbo of non-recoverable unknown ownership costing thousands to undo isn't helping reach that goal. It is assuring it will never occur. It is a black hole of death vs an active and effective move by the owners to correct the unfair and unsustainable situation that exists. Again, do the work needed rather than take the easy way out that hurts everyone involved.

If the high season owners refuse then the low guys can follow up with non-payment. Cost them nothing and in the end the proper result occurs. No PCC, Viking ship or other scam required. Exactly as the documents provide for. Following the rules not breaking them.

 

[BocaBum99]

Then the non-subsidized owners need to band together to get the change made. They would then hold an ownership of value as would the prime, formerly subsidized owners. Sending that ownership into a limbo of non-recoverable unknown ownership costing thousands to undo isn't helping reach that goal. It is assuring it will never occur. It is a black hole of death vs an active and effective move by the owners to correct the unfair and unsustainable situation that exists. Again, do the work needed rather than take the easy way out that hurts everyone involved.

If the high season owners refuse then the low guys can follow up with non-payment. Cost them nothing and in the end the proper result occurs. No PCC, Viking ship or other scam required. Exactly as the documents provide for. Following the rules not breaking them.

Right. That would be impossible and you know it. Stop pitching ideas that you know can't possibly work.

 

[BocaBum99]

A minor 167 Page Document http://www.bhcspgh.com/babbpropertypro/uca80.pdf

A quick scan says only eminent domain trumps the Act

Can the Bankruptcy Code be used to Trump the 80% Requirement of the Condominium Act ?

That is what ARDA-ROC is working on. Bankruptcy legislation that would allow a judge to void all contracts and do the right thing.

There is 2 parts to this, though. First, you need the legislation. Second, you need a financial crisis that suggests bankruptcy is needed. That would be the non performing intervals.

 

[kwilson]

O.K., I haven't read all 9 pages of this thread. But, if the resorts wanted to prove the owners knew of the fraudulent intent of the PCCs, a giant leap in that direction would be proof the owner is a member of TUG. I just searched TUG for PCC, post card company and got 460 hits. It would be pretty difficult for a member to miss all of them.

 

[timeos2]

They didn't add new amenities, just cleaned up what was already there..No matter how much you shine a 'poop' it is still a 'poop'....Add an indoor waterpark, movie theater, rock climbing wall, better childrens programs, popcorn machines in each room, etc.....Changing pillow cases and painting walls isn't exactly enough...

Making it stand out and giving people a REASON to go there is the HOA BOD's job, instead of sitting around just making it more cookie cutter. Only when the HOA BOD do their job will you see values go through the roof. Sure it's a hard job, but if they don't want to do the work they shouldn't be on the BOD

They could open the 5th Disney park in the center and it wouldn't help. There are too many units for demand, period. But that doesn't mean they are really worthless or only worth a $1. To many (a large majority it seems) they see a value in having a nice property in an area they enjoy that makes the annual fee a value to them. They aren't willing to pay much for the buy in as that money is lost. They take the value out of the use and see the cost as the annual fee (hopefully at or below the cost to rent). Add in the human desire to have some certainty (own the week you want rather than have to worry about it time) and the fact that a Yugo works fine for some but others want and will pay for a Rolls Royce.

You''d never get a super majority to vote to disband a huge resort like Vistana as there is a value. But the resale may forever be low as too much inventory means lower price. The HOA isn't at fault the greedy developer that built 5-10 times more than the market could absorb is. Now the informed use that to their advantage to own / rent a great place (which the HOA DID correctly create for their owners) for a price they feel is a value to them. Nothing wrong with that and it will likely limp along that way for decades.

And think how proud they will be if it ever increases in average value to $500/week. An unprecedented 500% increase in value under the watch of the BOD! Those guys are good! Even Apple can't boast of a return like that.

 

[timeos2]

That is what ARDA-ROC is working on. Bankruptcy legislation that would allow a judge to void all contracts and do the right thing.

There is 2 parts to this, though. First, you need the legislation. Second, you need a financial crisis that suggests bankruptcy is needed. That would be the non performing intervals.

They would non-perform equally well in the hands of an individual owner as a PCC/Viking scam.

 

[timeos2]

Right. That would be impossible and you know it. Stop pitching ideas that you know can't possibly work.

It has worked by at least one resort that tackled it. It has failed at others I know of, but at least they tried (right Cindy?). It is doable within the existing laws so it is a possibility whereas the idea that an Association could be FORCED to accept any ownership back on demand isn't. So who is really touting the unworkable idea?

 

[buzglyd]

I think something that's important to point out is many are calling these failed business.

In most cases (once the developer is gone) these aren't businesses at all. They are condos with owners just like the ones we live in. They are just smaller fractions of those condos.

There isn't money to add fancy new amenities. You can't use the reserve fund for operating costs. Most states require by law that HOAs have reserves.

The condo docs were written back in the 70s before anyone could foresee this all happening.

 

[VegasBella]

They could open the 5th Disney park in the center and it wouldn't help. There are too many units for demand, period.

In another thread it was claimed (and relatively backed up) that the average timeshare owner is a babyboomer with an income of about $70k/yr.

Seems to me that one of the main problems of this industry is that they haven't reached all the potential markets for their product. I would not necessarily say an area is overbuilt if the main market being served is the middleclass babyboomers.

 

[timeos2]

In another thread it was claimed (and relatively backed up) that the average timeshare owner is a babyboomer with an income of about $70k/yr.

Seems to me that one of the main problems of this industry is that they haven't reached all the potential markets for their product. I would not necessarily say an area is overbuilt if the main market being served is the middleclass babyboomers.

There can be little doubt that many developers - especially Hilton, Marriott, Wastegate, Wyndham and others- believe that. And with every new unit the demand is reduced more. That is why making Developers in active sales be the buyer of last resort is a viable way to stop the madness.

 

[vacationhopeful]

In another thread it was claimed (and relatively backed up) that the average timeshare owner is a babyboomer with an income of about $70k/yr.

Seems to me that one of the main problems of this industry is that they haven't reached all the potential markets for their product. I would not necessarily say an area is overbuilt if the main market being served is the middleclass babyboomers.

Babyboomers are over 50 now and MOST have temp jobs or contract jobs (if they have a job), paying an arm & leg for health care benefits, seen their home value colapse AND now have their adult child with their families moving back in. Many women are currently single (divoriced, never married, widowed) who did not have job opportunities or education during their PRIME working years.

Yes, the average timeshare owner is a babyboomer - but they are the ones that most likely are married and with INCOME over $70K. That is NOT YOUR AVERAGE boomer - that is a small elite subclass. And getting smaller every day.

 

[benyu2010]

Unless the whole industry to put their acts together and reshape the business into a more balanced and substantiated model, timeshare remains a niche business and would not adopt by mass of populus. There are about 6 millions timeshare owners in US, approximately 1.7% of the population. It's near saturated for a niche product with fractional cost and resale value.

I'm baffled how you conclude that large untapped potential market for sales of timeshare. The developer mostly rely on high-commision, high pressure. and rip-off one at a time, armed with ironclad real estate contract until they run out the ideas, and majority of sales pitches have been set with existing owners speaks for itself.

In another thread it was claimed (and relatively backed up) that the average timeshare owner is a babyboomer with an income of about $70k/yr.

Seems to me that one of the main problems of this industry is that they haven't reached all the potential markets for their product. I would not necessarily say an area is overbuilt if the main market being served is the middleclass babyboomers.

Secondly, it is amusing the post gone 10+page without details of complain and argument was mostly based on individual and personal experience of the timeshare industry. Every system or brand, or business operates diffirently and draw your arguments based on a peek-a-bow of single or limited part with little coomon ot relevancy of whole picture. PCC operates on the rear end mostly the same way as developer on the front end. The difference is they don't have big pockets and solid legal team to make their acts more legit.

Unethical, mostly, illegal, borderline, but it does provide a viable service most of time for distressed sellers. I live in relatively large upscale community and most residents are baby boomers. They approach issues differently than me most of time, as they value time, convenience and tend to be trustful, less motivated to go through the complicated process to fix a small problem. If money can solve it, it is not likely a big issue; if $2,000 can solve it, it is a non-issue (at least to many baby boomers). Instead of injecting your opinionated and thinly veiled morale and ethic on the sideline, I argue you come up with practical, economic and and timely solution than despising who down to the path of PCC. Or just like Ron helps (pay or being paid) sellers out at reasonable price in fair arm's length deal...

P.S. $70K is not much to get around these days for a family, especially in coastal cities.

 

[JudyS]

Some of the owners here feel that allowing deedbacks hurts other timeshare owners. (John & Denise are the biggest proponents of this view.) I feel exactly the opposite -- I think allowing deedbacks would help most timeshare owners, not just the ones that are unhappy with their ownerships.

My reasoning is this: There are currently many (maybe millions) of very unhappy timeshare owners. They are very vocal about their unhappiness. Every article I read about timeshares says what a terrible deal they are. Complaint boards on the internet are jammed with unhappy owners who can't get out of their timeshares.

This negative view of timeshares hurts all timeshare owners, even ones who like their ownerships. It creates a self-fulfilling prophecy where few people will buy resale timeshares, so more and more owners can't find buyers and default, leaving HOAs with less money to run the resorts. It makes it harder to rent out weeks, because timeshare is synonymous with "scam" to much of the general public. It makes it difficult or impossible for avid timeshare owners (like we here on TUG) to adjust their timeshare holdings, leaving them stuck with a week at Resort A when they now want a week at Resort B. And these are just the problems for people who want to keep owning timeshares.

True, the presence of trapped owners makes it easier to buy a timeshare at a low cost. But even that has its drawbacks for those who love timeshares. I have passed up on many nice ownerships because I wasn't sure I'd ever be able to unload them if they no longer fit my needs. I'll bet most other Tuggers have also passed on ownerships they wanted, because of a fear of getting trapped.

Requiring resorts to take deedbacks would go a loooong way towards fixing this problems. It would make timesharing better for all owners, both those who want out and those who want to stay. (So would forbidding timeshares to report MF delinquencies to credit agencies, which would have largely the same effect.)

Sure, some weaker resorts might go under if they took deedbacks. So what? There are plenty of other, nicer, better value resorts to own at instead.

I support a modified version of Boca's plan:

...

At the end of the day, deedbacks is the only solution. We all know it. Many of us just won't admit it.

Okay. I have another proposed law or amendment. Make it illegal for any timeshare developer or HOA to report negatively to credit agencies for deficiencies on maintenance fees. Then, default is a viable option.

What I propose is a combination of these two ideas: either resorts accept deedbacks, or they can't report negatively to credit agencies for deficiencies on maintenance fees. In other words, resorts that didn't take deedbacks wouldn't be allowed to report MF delinquencies to credit agencies.

There are two reasons why I think credit reporting should be allowed if a resort also takes deedbacks, rather than just forbidding all credit reporting for unpaid MFs:
1) Some owners are just ornery. They might refuse to pay MFs, and also refuse to do a deedback, because they were angry that they didn't get voted on the HOA board or something. Resorts need recourse in cases where a delinquent owner won't sign the deedback papers.
2) The legislation would probably be more politically viable if resorts were given a choice, rather than just being forbidden to report to credit agencies.

Timeos didn't like the idea of forbidding resorts to report unpaid MFs, saying:

And , of course, the same would apply to all condominium developments, homeowners HOA's, car loans, home loans, boat loans - why should anyone that fails to pay on an obligation be reported in a negative way for doing so?

The difference is that in most cases, owners of these other things are allowed to make their own decisions regarding disposal of their property. They can repair their car or junk it. They can sell their house, repair it, add a swimming pool or not, tear it down, etc. In the case of timeshares, individual owners have little say. Other owners decide to add an expensive swimming pool, and each owner has to pay, whether they wanted that pool or not. (They are some similarities between timeshare HOAs and condo HOAs, but condo fees are generally a small proportion of the cost of maintaining a home, whereas timeshares HOAs get *all* the say on fees. And, only a few people want to give away a no-mortgage condo just to get out of HOA fees.)

As for having developers (rather than HOAs) be responsible for taking back deeds, that makes sense, if the developer is still in the picture. In many of the most troubled resorts, though, they are not.

Now, this doesn't mean I blame all HOA Boards who run low-value timeshares. If you had a 40-year old car, you'd probably junk it, not repair it. It's not the HOA Board's fault that many older timeshares just aren't worth repairing. But current law makes it hard to "junk" a timeshare. Forcing deedbacks (and/or prohibiting negative credit reporting) would make it easier to get rid of old, non-viable timeshares. It would speed their bankruptcy and dissolution (especially if the new bankruptcy laws proposed by the ARDA-ROC go through.) Dissolution of non-viable timeshares would benefit most owners at these non-viable resorts (who would no longer have to pay fees, and might get some value from the underlying real estate) and would benefit timeshare owners as a whole, by reducing the number of miserable, trapped owners who "talk down" timeshare.

The "no credit agency reporting" rule could be done through fairly simple legislation. It doesn't matter what a bunch of 40-year-old condo docs say. They don't trump state law on credit reporting. And I doubt most of the condo docs even mention credit reporting.

Many current timeshare owners desperately need a way out. And without the PCCs, the only way out for many owners will be death or ruined credit, as Boca notes. I don't buy Denise's argument that owners should be shackled to their timeshares for life. Sure, people should live up to their obligations, but not if they took on that obligation under false pretenses. No one told these owners that their ownerships would be worthless and that they wouldn't even be able to give them away. To the contrary, many were told their ownerships would increase in value.

I don't usually try to speculate on other TUG members' reasons for their views. However, I feel that Denise's views and John's views are so contrary to the interests of most timeshare owners that they require some explaining.

John, as far as I can tell, you are very attached to a particular Cape Cod resort where you are on the board. I wouldn't say that this resort is in its death throes, as Boca implied. However, the resort required some very creative ideas to keep it going -- wasn't it merged with another resort that closed? And, hasn't your resort come up with a points system to sell off-season weeks? If all resorts had such innovative and dedicated boards, there would rarely be a problem. However, most boards are just not capable of this sort of creativity. This isn't intended to butter you up, it's just a fact. A lot of owner-controlled resorts have trouble finding board volunteers who even know basic accounting. Resorts need solutions that don't require creative and innovative board members, because there aren't enough of those board members to go around.

Denise, your view of delinquencies is based on your experience with Starwood, correct? They had huge fee increases a few years back. Starwood said the fee increases were due to owner delinquencies, but I don't believe them. First of all, why was Starwood having huge owner delinquencies when the other high-end chains (Marriott, Disney) were not? Secondly, even if Starwood did have huge owner delinquencies, why couldn't they just rent out the unowned units to recover the MFs? It's not like Starwood is some small, owner-controlled resort with no rental program -- they're one of the world's biggest hotel chains! At the time of the fee increases, there was a lot of speculation on the Starwood TUG forum that Starwood was raising MFs to make up for lost revenue in their timeshare sales. I think that is a lot more plausible than owner delinquencies causing the increases.

In many cases, developers raise MFs simply because they can. It's free money for them. Developers can charge whatever they want, and the owners have to pay up. Owners can't deed back their units. Owners can't refuse to pay, or they'll have their credit ruined. If resorts had to take deedbacks and/or couldn't report to credit agencies, it wouldn't make the problem of developer-inflated MFs worse -- it would fix it.

 

[Carolinian]

HOA's are not businesses at all. They are non-profit corporations. Indeed, if they are wound up, the law requires all assets of the HOA to be distributed to other non-profits and cannot be distributed to members or officers.

I think something that's important to point out is many are calling these failed business.

In most cases (once the developer is gone) these aren't businesses at all. They are condos with owners just like the ones we live in. They are just smaller fractions of those condos.

There isn't money to add fancy new amenities. You can't use the reserve fund for operating costs. Most states require by law that HOAs have reserves.

The condo docs were written back in the 70s before anyone could foresee this all happening.

 

[JudyS]

George,

Okay. Let's say you own a Blue week in Minnesota. Week 3. Maintenance fees are $900 for a 2br unit. Red weeks in the summer have the same $900 assessment. You look at rentals in the area, they go for $100 per week for January. Please tell me your plan to get someone to take this unit that does not involve a scam.

Just give me your theory for how you would approach the problem and come up with a target buyer......

Good question, although I personally would like to see John and Denise answer this, since they are the most vocal opponents of deedbacks.

 

[TUGBrian]

perhaps some sort of creative rule that limits maint fees to average rental prices for the week in question.

ie if the resort is regularly renting out intervals for below the annual MF (or hiring someone to do rentals that is renting them out for sub MF)...this does nothing but crush the owners of those weeks.

 

[Bwolf]

HOA's are not businesses at all. They are non-profit corporations. Indeed, if they are wound up, the law requires all assets of the HOA to be distributed to other non-profits and cannot be distributed to members or officers.

I'm confused by this statement. I believe one of my timeshares, completely run by the owners (thru a HOA), if closed by vote of the owners, would pay any debts and distribute the remaining assets to each owner according to an established formula.

So, what am I missing in your statement?

 

[Carolinian]

ARDA-ROC is a developer front and does not have the interests of timeshare owners or HOA's in mind. This proposal is consistent with their usual support for developer dictatorship over member democracy. ARDA-ROC, for example, supports denying members access to the HOA membership lists so they can run a campaign to oppose the status quo, and their reason for that is that the status quo that members want to change are developer flunkies who usually have massive conflicts of interest even serving on the board in the first place.

ARDA-ROC is a false front. It is really just ARDA, and they are for only one group, and that is the developers. The developers would like to eliminate competition from member-run resorts.

That is what ARDA-ROC is working on. Bankruptcy legislation that would allow a judge to void all contracts and do the right thing.

There is 2 parts to this, though. First, you need the legislation. Second, you need a financial crisis that suggests bankruptcy is needed. That would be the non performing intervals.

 

[JudyS]

They didn't add new amenities, just cleaned up what was already there..No matter how much you shine a 'poop' it is still a 'poop'....Add an indoor waterpark, movie theater, rock climbing wall, better childrens programs, popcorn machines in each room, etc.....Changing pillow cases and painting walls isn't exactly enough.....

The Sheraton Vistana Resort is certainly not "poop." It has some of the best amenities of any timeshare in the world. Around a dozen swimming pools, free minigolf, many planned activities, huge tennis courts, a cafe with free computer access, you name it. The $1 resale prices there have nothing to do with lack of amenities.

I actually think the Sheraton Vistana Resort is a perfect example of how fear of being trapped into endless MFs has destroyed the value of many timeshares. Pretty regularly, someone will come along here on TUG and say how nice the Sheraton Vistana Resort is, that they would like to be guaranteed a week there each year, and that they are thinking of buying there. The pretty much instant response here is that they shouldn't buy because they may be trapped into Starwood's high fees and possible future special assessments. (I recently talked about buying at the Sheraton Vistana Resort and got this exact response.) If resorts couldn't "shackle" owners to ever-increasing MFs, this argument against buying at the Sheraton Vistana Resort (and many other resorts) would disappear.

 

[ronparise]

That bold line is the disagreement. You cannot tie the hands of the HOA by making it a requirement to accept a deed into the Association name.

IF it is in the best interest of the owners to do so they need to have the ability to do so. If it isn't they need the flexibility to say no. They cannot be the guarantee of a sale.

Why should they be? Without taking ownership they already have a claim to the use of the ownership as well as a receivable from the owner of record. They can (and should) rent it to recover as much of the fee as possible. They can even let it sit as delinquent indefinitely and bundle a group of those ownerships together as a RTU offering - again recovering fees without the obligation of deeded ownership and the cost of a foreclosure. They can always decide to offer a deed in leu of future fees if that makes financial sense. They just shouldn't be forced to do it.

If the supplied broker / outlet cannot sell it what options would the Association have for it that they don't already hold without owning it? None.

Who cares if it's a PCC or dead Viking ship that holds the actual title? As long as they can rent or otherwise utilize the use time to raise the annual fee the owners are better off and at zero additional overhead to them.



Of course they do - why not? But that also means the fees usually have to be current before a transfer can be made. In some cases the fees due may exceed what the broker can obtain. What if this owner can't make up the difference?

The key is Associations must have the ability to look at each case and react appropriately. The minute an option is made mandatory or removed it limits the ability to act in the best interests of the Owners which is the charge to every HOA and Board. As long as the wording "must accept ownerships" - regardless of what may follow (if no sale can be made, if owner has allergies, if the moon is over Miami) - isn't included we are in sync. A critical and primary obligation to the Owners from every Association is a method to sell if needed. But not to guarantee a sale. Never. That is not a option that can be considered by a well run HOA. Accepting it would mean eventual collapse of the resort no matter how well run or how nice it may be. The greedy would eventually kill it regardless by forcing ownerships onto less and less of a base.

The sale is already guaranteed. Its called foreclosure
I suppose they can leave it in the deadbeats name and rent it out each year. but I suspect they will take it back in foreclosure sooner or later anyway, Why not sooner with a deed in lieu,

The alternative is to just write off the mf as something they dont want and raise the mf for the rest of the owners

 

[Carolinian]

I'm confused by this statement. I believe one of my timeshares, completely run by the owners (thru a HOA), if closed by vote of the owners, would pay any debts and distribute the remaining assets to each owner according to an established formula.

So, what am I missing in your statement?

The interests of the deeded owners would be divided among the owners, and each week would get the same amount, whether a deep off season week or the most prime high season week availible. Those interests belong to the members individually, not to the HOA, and so are distributed from the sale price of the resorts.

Some weeks are almost certain to be owned by the HOA itself, as well as cash and other assets. This is what is required to be given to another non-profit. If, for example 20% of the weeks at the resort have been foreclosed or deeded back, the value attributable to those weeks could not be distributed to the members but must be given to another non-profit. This is an aspect of non-profit corporations law.

 

[Bwolf]

The interests of the deeded owners would be divided among the owners, and each week would get the same amount, whether a deep off season week or the most prime high season week availible. Those interests belong to the members individually, not to the HOA, and so are distributed from the sale price of the resorts.

Some weeks are almost certain to be owned by the HOA itself, as well as cash and other assets. This is what is required to be given to another non-profit. If, for example 20% of the weeks at the resort have been foreclosed or deeded back, the value attributable to those weeks could not be distributed to the members but must be given to another non-profit. This is an aspect of non-profit corporations law.

OK. Thanks.

 

[Ridewithme38]

Could we limit MF increase to 'Cost of living +/- x%' I'd feel safer in my indentured servitude if i knew they couldn't just charge anything they wanted.

 

[JudyS]

This is exactly how seasonal resorts should be sold. In my neck of the woods, there are basically two seasons -- summer, and ski season -- both about 15 weeks long. The other 20ish weeks are pretty really undesirable (30 to 45 degrees outside, with no snow). The annual MF's should be divided by 30, and either the resorts get shuttered the other 20 weeks, or a small subset of units could be available as rentals with limited amenities, and the rental proceeds could be rebated to owners.

But unless that was envisioned when the subdivision documents were recorded, the allocation of maintenance fees cannot be changed without amending those documents which would take a super majority in agreement, you have already defined a simple majority (30 Week owners in the viable seasons) that would experience a 40% increase and would be opposed.

Actually, if resorts were required to take deedbacks and/or were forbidden to report delinquent MFs to credit bureaus, what Elan proposes could be accomplished with no vote at all. The owners of the low-value weeks would simply stop paying fees on their weeks. They would lose their voting rights (and possibly return their deeds to the HOA). Then, the owners of high season weeks would be in control of the resort and could decide what they wanted to do -- close the resort in the off-season, pay higher MFs to keep it open year-round, dissolve it entirely, try to add indoor amenities to attract visitors in the off-season, or whatever.

There might be some low-season owners who wanted to stay with the resort, but no problem. If the resort closed in the off-season, they could be given association-owned shoulder season weeks instead. There might even be peak-season weeks to give these owners, since peak-season owners sometimes want to deedback due to job loss, divorce, or death of the original owner.

 

[DeniseM]

Good question, although I personally would like to see John and Denise answer this, since they are the most vocal opponents of deedbacks.

I don't have a problem with deedbacks - to the developer. Under current law, the HOA's are simply not equipped to handle a flood of deedbacks, and remember that YOU AND I will pay the maintenance fees until they can sell them. The HOA is YOU and ME, and 5 owners selected to represent us. I am dumbfounded by the posts that want to punish the HOA - THAT'S US!!

It is wrong to put the burden on responsible owners, when the developers created these conditions in the first place.

Pass laws that made the developers responsible for an effective exit plan for owners, and everyone will be happy.