Legacy Owners - Does MVW have reps on your property's HOA boards?

[rcdcowner557]

Is your property made up of multiple HOAs or does one HOA control both the fractional owners and whole ownership. Generally in these types of situations we would see a master HOA then a separate HOA for whole owners and a third HOA for the fractional owners.

Exactly. The Master HOA is controlled by the whole owners, whose attitude is "send the bills for everything to the Club HOA." It is up to the Club HOA to control expenses. We never paid attention until the whole owner HOA asked us to pay for even more than we were paying for. I was like "Why would we ever do that? Moreover, we can't do that even if we want to because assessments are allocated according to the governing documents." Their response was "Who cares? We have never paid attention to that!" This led to legal review at both the Club HOA level and the Master HOA level (separate attorneys - COA attorney loyal to COA; Master attorney loyal to the Master). The attorneys agreed that the allocations were not allowed by the governing documents. What is ever worse is that the onsite staff said the allocations did not even make sense from an operations perspective. Research revealed that the developer had been playing fast and loose and had struck a deal with the whole owners that they then buried. The bulk of the original fractional owners sued long ago and were bought out; those of us who are left are not concerned for ourselves. For my part, I feel responsibility for not asking questions for the first few years I was on the board. Totally guilty of negligently rubberstamping Management's proposed budgets. That is why I feel some duty to report what I witnessed, but again, if nobody cares, then nobody cares, and that actually makes me feel better about my mindless rubberstamping!

 

[rcdcowner557]

It sounds like that's the issue to me - the fractional owners/their HOA are paying for a bunch of stuff that all owners are using, but the whole owners aren't being charged for it.

From MVW perspective that makes sense. The whole owners presumably control the management contract for the building, as they'd be the majority. Given the size of investment they'd also be relatively likely to vote. If they felt over-charged they could change managers, costing MVW a fee stream.

But by subsidizing the services on the backs of the fractional owners (mostly trust owners where it's very diluted) they can keep the management contract at no cost to MVW.

BINGO - You get it!!!

 

[rcdcowner557]

It sounds like that's the issue to me - the fractional owners/their HOA are paying for a bunch of stuff that all owners are using, but the whole owners aren't being charged for it.

From MVW perspective that makes sense. The whole owners presumably control the management contract for the building, as they'd be the majority. Given the size of investment they'd also be relatively likely to vote. If they felt over-charged they could change managers, costing MVW a fee stream.

But by subsidizing the services on the backs of the fractional owners (mostly trust owners where it's very diluted) they can keep the management contract at no cost to MVW.

BINGO! You get it!!!

 

[wuv pooh]

Exactly. The Master HOA is controlled by the whole owners, whose attitude is "send the bills for everything to the Club HOA." It is up to the Club HOA to control expenses. We never paid attention until the whole owner HOA asked us to pay for even more than we were paying for. I was like "Why would we ever do that? Moreover, we can't do that even if we want to because assessments are allocated according to the governing documents." Their response was "Who cares? We have never paid attention to that!" This led to legal review at both the Club HOA level and the Master HOA level (separate attorneys - COA attorney loyal to COA; Master attorney loyal to the Master). The attorneys agreed that the allocations were not allowed by the governing documents. What is ever worse is that the onsite staff said the allocations did not even make sense from an operations perspective. Research revealed that the developer had been playing fast and loose and had struck a deal with the whole owners that they then buried. The bulk of the original fractional owners sued long ago and were bought out; those of us who are left are not concerned for ourselves. For my part, I feel responsibility for not asking questions for the first few years I was on the board. Totally guilty of negligently rubberstamping Management's proposed budgets. That is why I feel some duty to report what I witnessed, but again, if nobody cares, then nobody cares, and that actually makes me feel better about my mindless rubberstamping!

The story just does not make sense to me. If it were my resort/board there are 3 options:

1. A wrist band is provided to fractional owners so they can use the amenities that they pay for. Full owners cannot use them.
2. We cancel the amenities because the charging mechanism is unjust. Take the ball and go home.
3. Full owners pay towards the amenities and we argue about how much is "fair".

In no instance does what you are describing seem legal or logical. Don't know how you would be in this situation, but maybe it is a legacy of how the resort was originally sold.

 

[rcdcowner557]

I will comfortably state that it isn't that the BI owners do not care, it is that the T&C as detailed in the offering memorandum each and every MVC Trust Point owner signed at time of purchase place control for everything in basically the unfettered discretion of MRHC, the manager of the MVC Trust Owners Association.

The Board of Directors is supposed to overseeing the manager. If there is a conflict of interest, the onus flips to the manager to prove that the transactions are not totally crazy. I suspect many transactions between the manager and the trust are crazy indeed. Moral hazard of easy self-dealing that no business could resist. It reminds me of some in-house clients I had who came to me in the legal department to clear a great idea they had. It was indeed a great and lucrative idea - unfortunately it was price-fixing and against the law. Who knows what is going on with the MVC Trust, but were I a member, I would explore challenging the unfettered discretion concept in a class action. I would look at whether the transactions occurring between MVW and the Trust are, in fact, commercially reasonable. I have given you one specific example where they aren't. Every property will be different, and it would not surprise me if they had some grift going on at all of them. I am shocked and dismayed at what I witnessed. What at first we thought was an oversight turned out to be part of the business plan. All the Ritz Carlton Club properties that had a majority of non-developer units sold, and thus the power to fire MVW, did, in fact fire MVW. The only way MVW keeps any contract at a property with owners like us is to control the board through the Trust and self-deal.

 

[rcdcowner557]

The story just does not make sense to me. If it were my resort/board there are 3 options:

1. A wrist band is provided to fractional owners so they can use the amenities that they pay for. Full owners cannot use them.
2. We cancel the amenities because the charging mechanism is unjust. Take the ball and go home.
3. Full owners pay towards the amenities and we argue about how much is "fair".

In no instance does what you are describing seem legal or logical. Don't know how you would be in this situation, but maybe it is a legacy of how the resort was originally sold.

MVW has made a deal with the whole owners to give them access to everything at the fractional owners' expense. The True Owners were putting an end to it and notified the Management Company of as much. The Management Company then stacked our board with its representatives through the Trust's vast majority ownership of the 25 fractionally-owned units, and our now MVW-controlled HOA board for the fractional units just passed a budget yesterday perpetuating the illegal practice. No individual owner is going to take on the lawsuit because it is not worth it to any of us; none of us overly cares. However, it is plain wrong vis-a-vis the Trust beneficiaries, and this is precisely why class action attorneys exist.

 

[Hindsite]

It sounds like those who have responded are happy to pay MVW whatever they ask with absolutely no check on what they can charge or what they can even charge for. Fascinating, but again, all good from here.

You are still missing the point about the unique situation of your location, and that few of us here are paying for the costs you refer to.

Of the 700k or so owners across the Abound related brands, less than half and possibly less than 30% are Trust point owners, who would pick up a tiny amount of the cost you refer to. There are much, much bigger issues that drive Trust point maint fees than costs such as yours.

Rest assured that MVC owners at other resorts do care and do have checks built into their HOA. The management company can't just charge what they want or for anything.

By all means seek out fellow owners at your location and ensure that they are adequately informed.

 

[rcdcowner557]

You are still missing the point about the unique situation of your location, and that few of us here are paying for the costs you refer to.

Of the 700k or so owners across the Abound related brands, less than half and possibly less than 30% are Trust point owners, who would pick up a tiny amount of the cost you refer to. There are much, much bigger issues that drive Trust point maint fees than costs such as yours.

Rest assured that MVC owners at other resorts do care and do have checks built into their HOA. The management company can't just charge what they want or for anything.

By all means seek out fellow owners at your location and ensure that they are adequately informed.

My post was addressed to a narrow audience - see the title of this thread. Anyone whose board is controlled by MVW needs to be on guard. I was trying to get a sense of how widespread the self-dealing might be. It only works where MVW controls the board of the HOA. In our case, they never paid us any attention until we started asking questions and told them that the improper assessments would not be approved this year. They then took control right quick and perpetuated the inequitable assessments that do not conform to the CCRs against advice of counsel. It was shockingly brazen.

 

[Hindsite]

My post was addressed to a narrow audience - see the title of this thread. Anyone whose board is controlled by MVW needs to be on guard. I

The title of your thread covers around two thirds of owners, so is not narrow, even though the issue you have is. Read further into these threads and you'll find plenty of other shockingly brazen things that go on.

I only know of one of the boards that aren't controlled by MVW, and yes all need to be vigilant, as is covered time and again in this forum. That doesn't mean that the specific issues that you reference are happening at all HOAs. As with all in life, some are better than others, some work through the issues and some get into a mess.

 

[rcdcowner557]

The title of your thread covers around two thirds of owners, so is not narrow, even though the issue you have is. Read further into these threads and you'll find plenty of other shockingly brazen things that go on.

I only know of one of the boards that aren't controlled by MVW, and yes all need to be vigilant, as is covered time and again in this forum. That doesn't mean that the specific issues that you reference are happening at all HOAs. As with all in life, some are better than others, some work through the issues and some get into a mess.

You only know of one board that is not controlled by MVW? Yikes. Enough said. That pretty much answers my question. Thank you.

 

[bizaro86]

You only know of one board that is not controlled by MVW? Yikes. Enough said. That pretty much answers my question. Thank you.

Yeah. While this specific issue is pretty niche as not many resort have whole owners, the misalignment of incentives combined with manager controlled boards is a huge issue. It will play out differently at other resorts but the same underlying issue exists.

 

[pedro47]

The 15 fractional owners each own 13 weeks or more correct? Wishing you a Happy Holiday and good luck in this matter.

 

[WBP]

And the breach of fiduciary duty is pretty clear at our property where the Trust representatives on our BOD ignored advice of outside counsel to pass a budget that does not conform to the governing documents. They agreed to perpetuate allocations that two outside counsel opined were not allowed by our governing documents. They know none of us are going to sue, and they know the beneficiaries have no way of finding out this is going on. Not exactly the stewards I'd want in charge of any Trust of which I was a beneficiary.

There is long history of unscrupulous activity by MVC (and RCC, RCDC) at The Ritz-Carlton Club and Residences, San Francisco, and actions by the RCDC, San Francisco owners.

Have a close read of this (attached) November 2012 SEC Filing by Marriott Vacations Worlwide, regarding:

"As previously disclosed in the Company’s Quarterly Report on Form 10Q for the quarter ended September 7, 2012, certain subsidiaries of the Company are defendants in a lawsuit in the Superior Court of California, County of San Francisco. The plaintiffs in the lawsuit, 11 residential unit owners at The RitzCarlton Club and Residences, San Francisco, a project within the Company’s Luxury segment, questioned the adequacy of disclosures made prior to 2008, when the Company’s business was part of Marriott International, Inc., regarding bonds issued for that project under California’s MelloRoos Community Facilities Act of 1982 and their payment obligations with respect to such bonds. In June 2012, the trial judge issued a tentative decision on phase one of the proceedings in favor of the plaintiffs."

That single mis-step cost Marriott Vacations Worldwide, between $25M and $40M in 2012.

 

[WBP]

There is long history of unscrupulous activity by MVC (and RCC, RCDC) at The Ritz-Carlton Club and Residences, San Francisco, and actions by the RCDC, San Francisco owners.

Have a close read of this (attached) November 2012 SEC Filing by Marriott Vacations Worldwide, regarding:

"As previously disclosed in the Company’s Quarterly Report on Form 10Q for the quarter ended September 7, 2012, certain subsidiaries of the Company are defendants in a lawsuit in the Superior Court of California, County of San Francisco. The plaintiffs in the lawsuit, 11 residential unit owners at The RitzCarlton Club and Residences, San Francisco, a project within the Company’s Luxury segment, questioned the adequacy of disclosures made prior to 2008, when the Company’s business was part of Marriott International, Inc., regarding bonds issued for that project under California’s MelloRoos Community Facilities Act of 1982 and their payment obligations with respect to such bonds. In June 2012, the trial judge issued a tentative decision on phase one of the proceedings in favor of the plaintiffs."

That single mis-step cost Marriott Vacations Worldwide, between $25M and $40M in 2012.

There was a very contentious meeting of The Ritz-Carlton Club and Residences, San Francisco owners and members, at which MVC sent their then Frank Goeckel to listen to the owners and members. What transpired, was hardly that. That meeting was ugly (I’ll limit my comments at that).

 

[rcdcowner557]

There was a very contentious meeting of The Ritz-Carlton Club and Residences, San Francisco owners and members, at which MVC sent their then Frank Goeckel to listen to the owners and members. What transpired, was hardly that. That meeting was ugly (I’ll limit my comments at that).

Check out the current litigation between the COA and the Master Association (search California Superior Court, San Francisco County, currently active cases for "690 Market"). It is quite the circus. MVW and Marriott International should also be defendants, but of course the MVW-dominated board won't allow that. What is even worse is that MVW and MAR are refusing to go on record with their statements that the current allocations are neither equitable nor in line with the actual operations of the building. They won't go on record with those statement because the whole owners say that it was MVW and Marriott International (via one Nathan Guikema) who orchestrated the non-conforming allocations. MVW and Marriott International have refused to even respond to that allegation and keep repeating the company line that the allocations are set by the Master Board and they have nothing to do with it. I am not sure why the whole owners have not officially brought in MVW and Marriott International. Again, the whole litigation is a circus, and the real culprit is MVW. They have pit the whole owners against the club owners and just ducked when we believe they did, in fact, orchestrate the whole thing. Reviewing old meeting minutes is useless as they have all been sanitized. They kept trying to do that this year, and we just refused to approve the meeting minutes, insisting that they keep recordings of all the meetings. Shockingly, a key recording has mysteriously gone "missing." They stacked the board a few months ago and now a whole slew of meeting minutes will undoubtedly be approved that bear no resemblance to what actually transpired in the many meetings we've had over the past year. Dismaying to say the least. Not what I would expect from the Marriott brand, but it is what it is and will work itself out.

 

[daviator]

Check out the current litigation between the COA and the Master Association (search California Superior Court, San Francisco County, currently active cases for "690 Market"). It is quite the circus. MVW and Marriott International should also be defendants, but of course the MVW-dominated board won't allow that. What is even worse is that MVW and MAR are refusing to go on record with their statements that the current allocations are neither equitable nor in line with the actual operations of the building. They won't go on record with those statement because the whole owners say that it was MVW and Marriott International (via one Nathan Guikema) who orchestrated the non-conforming allocations. MVW and Marriott International have refused to even respond to that allegation and keep repeating the company line that the allocations are set by the Master Board and they have nothing to do with it. I am not sure why the whole owners have not officially brought in MVW and Marriott International. Again, the whole litigation is a circus, and the real culprit is MVW. They have pit the whole owners against the club owners and just ducked when we believe they did, in fact, orchestrate the whole thing. Reviewing old meeting minutes is useless as they have all been sanitized. They kept trying to do that this year, and we just refused to approve the meeting minutes, insisting that they keep recordings of all the meetings. Shockingly, a key recording has mysteriously gone "missing." They stacked the board a few months ago and now a whole slew of meeting minutes will undoubtedly be approved that bear no resemblance to what actually transpired in the many meetings we've had over the past year. Dismaying to say the least. Not what I would expect from the Marriott brand, but it is what it is and will work itself out.

Pretty much every MVC property has a board dominated by MVC-appointed members. That will only get worse as, over time, more and more inventory is conveyed to the Abound trust and owners have fewer and fewer votes in the board elections. At the resorts I own, there are typically two directors who are owners but all the others are from MVC. I don't know if the owner-directors resist the worst impulses of the MVC directors, but even if they do, their resistance would be futile. I would not be shocked to know that there are financial decisions made which benefit MVC and are to the detriment of owners. And of course, it's in MVC's interest to keep the MF's increasing (which increases their own revenue) to the highest level that owners will be willing to pay.

Most properties do not have the complicated layers of ownership that exist at the RCC, and I don't think its possible to shift costs between trust owners and weeks owners, since the trust is just a large owner of weeks. But I imagine there are HOAs which are paying expenses which should be borne by MVC, things like that. Power corrupts.

 

[rcdcowner557]

Pretty much every MVC property has a board dominated by MVC-appointed members. That will only get worse as, over time, more and more inventory is conveyed to the Abound trust and owners have fewer and fewer votes in the board elections. At the resorts I own, there are typically two directors who are owners but all the others are from MVC. I don't know if the owner-directors resist the worst impulses of the MVC directors, but even if they do, their resistance would be futile. I would not be shocked to know that there are financial decisions made which benefit MVC and are to the detriment of owners. And of course, it's in MVC's interest to keep the MF's increasing (which increases their own revenue) to the highest level that owners will be willing to pay.

Most properties do not have the complicated layers of ownership that exist at the RCC, and I don't think its possible to shift costs between trust owners and weeks owners, since the trust is just a large owner of weeks. But I imagine there are HOAs which are paying expenses which should be borne by MVC, things like that. Power corrupts.

Were I one to trade in individual stocks (I'm not), I would short VAC. This might work in the short term, but it will catch up with them long term. In the interim, as long as it works for anyone and they feel they are getting their money's worth, good for them. These things definitely make sense for various groups; they key, as others have pointed out, is don't buy new development. Buy resale, just like in cars and new condos in Manhattan these days. Seeing the baths that buyers of new condos have taken in Manhattan over the past many years leaves me scratching my head as to why anyone would buy direct from the developer.

 

[rcdcowner557]

Were I one to trade in individual stocks (I'm not), I would short VAC. This might work in the short term, but it will catch up with them long term. In the interim, as long as it works for anyone and they feel they are getting their money's worth, good for them. These things definitely make sense for various groups; they key, as others have pointed out, is don't buy new development. Buy resale, just like in cars and new condos in Manhattan these days. Seeing the baths that buyers of new condos have taken in Manhattan over the past many years leaves me scratching my head as to why anyone would buy direct from the developer.

So it turns out that there is interesting class action activity along the lines of what I outline here already in progress at the Fairmont-affiliated fractionally owned units at Ghirardelli Square in SF. I suspect it is only a matter of time before the class action attorneys come for the other big developer/operators (I mean, WTF re KBV property?). Where the developer/management company uses its majority ownership in a property to control the board and approve fat budgets (or award itself the management contract), it needs to take extra care to make sure any budgets approved by its stacked board can be defended against what is commercially reasonable on the open market. It looks like the Ghirardelli Square property is in its second round of class action litigation. The developer should have learned its lesson the first time. Particularly sneaky for developer/managing agent to use its majority ownership to amend the documents without following the express procedures the governing documents lay out to protect individual owners from this overreach.