Trouble - Marriott Grand Residence Tahoe [Management Agreement in Jeopardy?]

[dioxide45]

In Florida, with the new SB-4D, being on a board carries a lot more responsibility and more risks. Perhaps more HOAs should consider paying a stipend to board members.

 

[Ken555]

For years I’ve read posts on TUG on how Marriott and others fill the board with their chosen candidates. Is this particular resort different because it’s fractional and has fewer owners, so Marriott was unable to do this?

Have any other Marriott resort disclosed the MVC MF increase recommendation and then determined to increase at a lower amount?


Sent from my iPad using Tapatalk

 

[SueDonJ]

Here is the Board's response. If allegations are true, what does it say about the Management Company's actions in other properties???

... One of the primary duties of the Board is to approve an annual budget. Beginning approximately 15 years ago, the Board and Management Company agreed that a reasonable benchmark to aid the Board in its deliberations to approve a budget for the following year was the San Francisco Consumer Price Index for August. The Board would typically approve a budget with a percentage increase, year-over-year, that was higher than the San Francisco CPI, based on the Board’s reasoned judgment of what the anticipated basic expenses of the Association for the following year would be.

As part of this deliberation process, the Management Company historically has prepared a pro forma budget for the Board to consider that included the San Francisco CPI as a comparative benchmark, but which typically included a budget recommendation by the Management Company with a year-over-year increase that was significantly higher than the benchmark. It is important to understand that the Management Company is incentivized to have a larger budget approved by the Board because under the terms of the Management Agreement, the Management Company’s fee is 10% of the Association’s basic expenses. Although the Board values the Management Company’s input in its deliberations to approve a budget, the Board historically has approved a budget that is greater than the San Francisco CPI but less than the Management Company’s recommendation, again based on the Board’s reasoned judgment of the estimated basic expenses for the following year. We believe this prudent fiscal approach to budget deliberations and approval has served and continues to serve the Association and its owners very well.

In September of this year, we discovered in the minutia of the Association’s 2022 Tax Return prepared by the Management Company that indicated the Management Company had overspent the 2022 Budget by $238,000 without ever disclosing it to the Board and without ever obtaining the prior written consent of the Board, as required by law. The Management Company has ignored our request to reimburse these funds. ...

CPI is a poor metric to use to determine budget increases for a resort like this. The amount consumers pay for groceries and other consumer goods has little bearing on the biggest expenses of a resort budget. ...

... That being said, the weakest (and scariest if this prevails across all MVC resorts) is this CPI crap. An HOA budget is not DRIVEN by the CPI, and should never be SET based upon CPI or other irrelevant metric. If insurance and utilities go up by 30%, you can't say were not going to pay that because the CPI only went up by 5%. ...

If I were an owner I'd have these (among others) questions:

- Has this "arrangement" of calculating MF's to conform to a random location's CPI (What does San Francisco have to do with GR Tahoe?!) ever been explained to the GR Tahoe owners before?

- Does the Board have a written statement on which it can rely to make the claim that Marriott as the Management Company agreed to capitulate - on either a one-time or an ongoing basis - to this specific demand made by the BOD?

- Can the BOD point to laws/regulations/governing docs language that supports its contention that the Management Company had no legal right to "overspend" the board's approved budget (which the BOD has admitted is far less than the budget submitted by the Management Company) and/or to reimburse itself by taking funds from the resort's coffers?

As an owner at other MVC resorts, I have this question:

I get pretty good annual newsletters that include MF's and budget explanations from the GM's at both of my resorts. I don't ever remember anything about the budgets being determined based on a random CPI, or even the local CPI. But the question's been raised as to whether or not something similar is happening at resorts other than GR Tahoe, so ... where/how would any of us learn that something like this might be happening with our resorts' budgets??

 

[dougp26364]

Definitely need the popcorn for this one. I’ve had my issues over the years with Marriotts increases compared to other timeshare management companies, but I’ve been generally pleased with the accommodations and resort upkeep.

There’s some serious accusations on both sides and probably some truth in each. What I see happening is MVC terminating their contract and we’ll likely never hear the outcome of any lawsuit brought by the BOD/HOA. Marriott has terminated contracts before, but not post Abound if I’m not mistaken. It will be interesting to see how it all plays out if/when Marriott terminates.

I believe this resort was sold out prior to the DC/Abound. If that’s the case it’s likely still a majority of weeks based ownership. I personally might miss the ease of booking at GR using points, but I don’t see it affecting the Trust much, if at all. For any units moved into the trust, I suspect it will work the same as it did when Sunterra/DRI/HVC lost the management contract at Gatlinburg Town Square. Those units remained available to book for Sunterra/DRI/HVC owners even though the resort has changed management companies more than once. There is also the more recent example of Elara, which went from Westgate to Hilton. Westgate owners still have their ownership and all its rights through Westgate, even though the resort is now managed by Hilton.

The biggest question IMO for Marriott owners is, does Marriott manipulate the budget to get paid more at the expense of owners. Of course, we can ask that same question about any timeshare management company. Any lawsuit not settled out of court might answer that question and that’s what I’m most interested in.

 

[davidvel]

Attached below is a PRIOR lawsuit filed by the HOA against Marriott for breach of its duties, the Management Agreement is attached to the suit for your perusal ( I am presuming it is the current version, but not sure). The case was settled, I have no knowledge of the terms.

Notably section 3.2(b) states s follows:

I read this to mean that unless the manager overbilled for the utilities, the over-expenditure claim as to these expense lacks merit, as the manager was required to to procure all necessary utilities, at the expense of the HOA.The same applies as to insurance:

The question remains, as others have noted, what/whether other expenses should have been curtailed in order to balance the budget, and the responsibility for that decision. This provision states the Board MUST furnish funds to manger for required items (utilities/insurance):

And manager has the express right to advance funds, and seek reimbursement:

 

[vol_90]

There’s some serious accusations on both sides and probably some truth in each. What I see happening is MVC terminating their contract and we’ll likely never hear the outcome of any lawsuit brought by the BOD/HOA. Marriott has terminated contracts before, but not post Abound if I’m not mistaken. It will be interesting to see how it all plays out if/when Marriott terminates.

Given its integration with the Abound program I believe termination of the contract would need to be effective January 1st, 2027 to mitigate issues with point elections and reservations. On January 1st, 2024 enrolled Grand Residence owners can start electing their 2026 quarter shares for points which would enable one to borrow and book a January 2025 reservation. Just a thought as it relates to timing of a potential contract termination. Let's hope it doesn't get to this point.

 

[davidvel]

Given its integration with the Abound program I believe termination of the contract would need to be effective January 1st, 2027 to mitigate issues with point elections and reservations. On January 1st, 2024 enrolled Grand Residence owners can start electing their 2026 quarter shares for points which would enable one to borrow and book a January 2025 reservation. Just a thought as it relates to timing of a potential contract termination. Let's hope it doesn't get to this point.

There is no integration of the Management Agreement with Marriott's Club (Abound). It was created despite the limitation against commercial use by owners. The agreement can be cancelled pursuit to its terms regardless of the existence of the Club (see agreement above.)

 

[BigDawgTUG]

Given its integration with the Abound program I believe termination of the contract would need to be effective January 1st, 2027 to mitigate issues with point elections and reservations. On January 1st, 2024 enrolled Grand Residence owners can start electing their 2026 quarter shares for points which would enable one to borrow and book a January 2025 reservation. Just a thought as it relates to timing of a potential contract termination. Let's hope it doesn't get to this point.

Just to clarify, owners may only convert weeks that are within 25 months from the election date. So, starting January 1, you can elect weeks commencing anytime before, but not after, February 2026.

 

[dioxide45]

Just to clarify, owners may only convert weeks that are within 25 months from the election date. So, starting January 1, you can elect weeks commencing anytime before, but not after, February 2026.

But it is based on a use year, isn't it? So any week in 2026. can be elected. I don't think a fixed week owner needs to wait to elect a fixed week that occurs later in 2026.

 

[Ralph Sir Edward]

There is no integration of the Management Agreement with Marriott's Club (Abound). It was created despite the limitation against commercial use by owners. The agreement can be cancelled pursuit to its terms regardless of the existence of the Club (see agreement above.)

Nor is there any agreemant to allow Marriott to integrate any ROFR or otherwise acquire any intervals for Marriott's trust or other resale.

 

[BigDawgTUG]

But it is based on a use year, isn't it? So any week in 2026. can be elected. I don't think a fixed week owner needs to wait to elect a fixed week that occurs later in 2026.

No. The election option may be requested as soon as you are within 25 months of the elected week’s check-in date. Anything with a check-in date outside of 25 months may not be converted.

 

[davidvel]

Nor is there any agreemant to allow Marriott to integrate any ROFR or otherwise acquire any intervals for Marriott's trust or other resale.

Not an agreement, but even stronger. The ROFR rights are written into the governing documents which are recorded land covenants applicable to the deeds. Once it acquires the intervals it can then transfer them to the club trust or resell them.

 

[Ralph Sir Edward]

Do you have a copy of the governing documents?

 

[vol_90]

No. The election option may be requested as soon as you are within 25 months of the elected week’s check-in date. Anything with a check-in date outside of 25 months may not be converted.

I don't how point election for Grand Residence quarter shares work so if anyone out there knows please help educate us.

I do know that for our enrolled weeks (Phuket Beach Club, Aruba Surf Club, Grand Chateau, DSV II and Canyon Villas) the ability process election of weeks online for Abound points for 2026 will happen on Jan. 1st, 2024. This includes the ability to elect the Aruba Fixed week 7 more than 25 months ahead of check in. Details of the 2025 point election made on Jan. 2nd, 2023 below:

 

[BigDawgTUG]

GRC is handled differently. You cannot convert online as you can with other MVC properties. You can either email GRC member services (subject to the within 25 months of check-in date limitation noted above) or wait until they send you an annual planner, at which time they provide you with your options and you can then elect pursuant to those instructions.

 

[TimGolobic]

I don't how point election for Grand Residence quarter shares work so if anyone out there knows please help educate us.

I do know that for our enrolled weeks (Phuket Beach Club, Aruba Surf Club, Grand Chateau, DSV II and Canyon Villas) the ability process election of weeks online for Abound points for 2026 will happen on Jan. 1st, 2024. This includes the ability to elect the Aruba Fixed week 7 more than 25 months ahead of check in. Details of the 2025 point election made on Jan. 2nd, 2023 below:

View attachment 85476

Tim enters the discussion: "Did somebody mention my name?"

I've just been lingering "illegitimately" in the background until now.

As for GRC elections, it's just a rolling 25 month window in advance of the particular week you'd like to elect. For example, today I could elect January 2026 for points, but nothing beyond that. Or I could wait several months from now and elect a bunch of weeks at once. The 25-month window is necessary since you can book 13 months in advance, and borrow points from the following year. Since I could book January 2025, I need to have access to some 2026 points if I needed to borrow.

As for the BOD response letter, it is completely level, fair and restrained. Much more diplomatic and polished compared to the scare tactics rolled out by the original MVW letter. It gave insight in to some of the legal issues. And believe me, there are many more instances of dirty laundry that could have been dumped to really torch the entire relationship. One of the tamer ones affects owners at all properties in the West Region, though you likely didn't know it. A few years ago there was a labor violation at Newport Coast, something about improper overtime hours. Marriott settled with the government and then had EVERY PROPERTY IN THE WEST REGION CONTRIBUTE TO THE SETTLEMENT even though it was isolated to Newport Coast. The GRC Board fought this. Why should any HOA pay the legal settlement for company mismanagement, let alone every HOA in the same region?

As for the GRC Board working on a budget compromise, they tried and still are trying. But guess which side is not transparent and providing full support and documentation for projected expenses? The GRC Board repeatedly asked about insurance alternatives and getting out of the standard Marriott group policy, which MVW wanted nothing to do with.

 

[TimGolobic]

I sent an email to the MGRC board via the email provided to ask the Board if it has a response to this correspondence from the management company.

In typical Marriott fashion, the email address they provide to "contact the board" actually is received and monitored by Marriott before disseminated to the BOD.

 

[davidvel]

Do you have a copy of the governing documents?

I do for MRD (Shadow Ridge).

 

[travelhacker]

Tim enters the discussion: "Did somebody mention my name?"

I've just been lingering "illegitimately" in the background until now.

As for GRC elections, it's just a rolling 25 month window in advance of the particular week you'd like to elect. For example, today I could elect January 2026 for points, but nothing beyond that. Or I could wait several months from now and elect a bunch of weeks at once. The 25-month window is necessary since you can book 13 months in advance, and borrow points from the following year. Since I could book January 2025, I need to have access to some 2026 points if I needed to borrow.

As for the BOD response letter, it is completely level, fair and restrained. Much more diplomatic and polished compared to the scare tactics rolled out by the original MVW letter. It gave insight in to some of the legal issues. And believe me, there are many more instances of dirty laundry that could have been dumped to really torch the entire relationship. One of the tamer ones affects owners at all properties in the West Region, though you likely didn't know it. A few years ago there was a labor violation at Newport Coast, something about improper overtime hours. Marriott settled with the government and then had EVERY PROPERTY IN THE WEST REGION CONTRIBUTE TO THE SETTLEMENT even though it was isolated to Newport Coast. The GRC Board fought this. Why should any HOA pay the legal settlement for company mismanagement, let alone every HOA in the same region?

As for the GRC Board working on a budget compromise, they tried and still are trying. But guess which side is not transparent and providing full support and documentation for projected expenses? The GRC Board repeatedly asked about insurance alternatives and getting out of the standard Marriott group policy, which MVW wanted nothing to do with.

Thanks for the insight!

I know the board does a fantastic job of maintaining a quality resort while keeping expenses low. A big reason why I decided to purchase ownership at the Grand Residence is because the maintenance fees for what I bought are far lower than other weeks within the Marriott system -- and I fully recognize that the board has made that possible.

There are some extraordinary issues at play (inflation, surge in labor cost, and large increase in insurance expenses). The 2023 fee increase was much lower than I expected, and so I just assumed if there was an issue, it would be increased accordingly in 2024.

I was anticipating an increase of anywhere from 8-12%. How far apart do you think the board and Marriott are on the maintenance fee issue?

I am most concerned about what the board alleges happened with those foreclosed weeks. As owners, we've been paying higher maintenance fees as a result of those delinquencies. Can you explain what happened there? In your opinion, was the association reimbursed according to the governing documents what was owed for those weeks?

All things considered, I feel like the 10% management fee provides fantastic value. It sounds like the board is accusing Marriott of increasing maintenance fees just to line their pockets, and certainly they have an incentive to do so. However, I also feel like we as an association need to face the harsh reality that the actual operating expenses have gone up significantly and 4.7% in today's environment probably isn't going to cut it.

I know you have a better pulse on things than basically anyone since you have contact with so many owners.

I would love to hear your take on things. You can also feel free to PM me. I'll also throw out that my background is in tech and would be happy to facilitate any type of communication between the board and owners, or owners in general.

 

[TimGolobic]

I was anticipating an increase of anywhere from 8-12%. How far apart do you think the board and Marriott are on the maintenance fee issue?

What I understand, Marriott is not budging on a 19.7% increase. I say put it to a vote of all owners and both sides accept the outcome and move on. Relieve the BOD from being the heavy.

All things considered, I feel like the 10% management fee provides fantastic value. It sounds like the board is accusing Marriott of increasing maintenance fees just to line their pockets, and certainly they have an incentive to do so. However, I also feel like we as an association need to face the harsh reality that the actual operating expenses have gone up significantly and 4.7% in today's environment probably isn't going to cut it.

If Marriott was more transparent on their projections, it would be better in negotiations. But they aren't.

 

[travelhacker]

What I understand, Marriott is not budging on a 19.7% increase. I say put it to a vote of all owners and both sides accept the outcome and move on. Relieve the BOD from being the heavy.

If Marriott was more transparent on their projections, it would be better in negotiations. But they aren't.

Thanks! 19.7% would be a bit of a tough pill to swallow, but it would still be significantly cheaper per week in maintenance fees than basically any Marriott resort in the US. I'd be looking at still less than $1000 per week for my 1 bedroom unit, which still provides excellent value.

 

[WBP]

I believe the benefits that Tom McCormack, Market Vice President of MVC, represents, of GRC-Lake Tahoe's affiliation with MVC are fair game. Do we MVC owners pay a premium price for ownership with Marriott, absolutely. Coud another management company manage our resorts for less money, absolutely. Do we as MVC owners derive many benefits, as a result of our MVC affiliation, absolutely, including Interval International exchange power that comes with the demand for MVC branded resorts. I also place a substantial value on our Marriott to Marriott (internal) exchange priority, within Interval International. I continue to see value in the relationship with MVC, and the exceptional job performed by the Resort Operations Teams.

My issues with MVC, are with MVC's leadership, sales and marketing, Information Technology, and Owner Services.

I just can't get myself to form any conclusion about the MVC/GRC-Lake Tahoe relationship, other than to say that it looks soured, and I believe the current situations could resolve in a lose-lose outcome for GRC-Lake Tahoe, and MVC. I hope it does not come to that.

 

[SueDonJ]

Tim enters the discussion: "Did somebody mention my name?"

I've just been lingering "illegitimately" in the background until now.

As for GRC elections, it's just a rolling 25 month window in advance of the particular week you'd like to elect. For example, today I could elect January 2026 for points, but nothing beyond that. Or I could wait several months from now and elect a bunch of weeks at once. The 25-month window is necessary since you can book 13 months in advance, and borrow points from the following year. Since I could book January 2025, I need to have access to some 2026 points if I needed to borrow.

As for the BOD response letter, it is completely level, fair and restrained. Much more diplomatic and polished compared to the scare tactics rolled out by the original MVW letter. It gave insight in to some of the legal issues. And believe me, there are many more instances of dirty laundry that could have been dumped to really torch the entire relationship. One of the tamer ones affects owners at all properties in the West Region, though you likely didn't know it. A few years ago there was a labor violation at Newport Coast, something about improper overtime hours. Marriott settled with the government and then had EVERY PROPERTY IN THE WEST REGION CONTRIBUTE TO THE SETTLEMENT even though it was isolated to Newport Coast. The GRC Board fought this. Why should any HOA pay the legal settlement for company mismanagement, let alone every HOA in the same region?

As for the GRC Board working on a budget compromise, they tried and still are trying. But guess which side is not transparent and providing full support and documentation for projected expenses? The GRC Board repeatedly asked about insurance alternatives and getting out of the standard Marriott group policy, which MVW wanted nothing to do with.

I feel like you're somebody in the grand scheme that we probably should know about and I apologize for not knowing. Do you mind sharing what makes you so knowledgeable, when other GR Tahoe owners in this thread appear to be surprised at what's happening? Do you hold a position that forces you to be aware of all the legal tangles, or, did you get an inkling somewhere and do your own deep dive, or, are you a (past or present) member of the GR Tahoe BOD or maybe have a friend who is, or, something else entirely?

Does it concern you that this BOD has been involved in so many legal tangles with Marriott, with at least some owners claiming that they've never heard anything about them?

Some of the dirty laundry you've mentioned is in the legal filings @davidvel provided in the attachment to Post #80 above. It mentions the labor disputes for specific employees who worked at Newport Coast Villas but it also mentions at least one case of a plaintiff being a former employee who'd worked at GR Tahoe. Do you know enough to more fully explain exactly how much Marriott took from the GR Tahoe coffers to cover settlements for the plaintiffs who didn't work at GR Tahoe as compared to those who did? Do you know if any of the settlements in any of the GR Tahoe-related lawsuits included an admission of guilt by Marriott?

I also have questions about the GR Tahoe BOD makeup, specifically whether any of the members on the current board have been members on any of the other boards that were in place during any of the past legal tangles? Most BOD members have term limits and some of these lawsuits appear to go back years, and I'd find it curious if any members have been seated for every instance.

Whatever your knowledge base you obviously sympathize with the BOD and ownership. I AM NOT SAYING THAT'S A BAD THING. What I will say is that with the little bit of info that has come out, it doesn't appear to me that either party - Manager Marriott or the resort BOD - is 100% at fault or not at fault. I'll also say that there aren't many timeshare topics that capture my attention the way the legalities do, but I've invested nothing in GR Tahoe so if you prefer to not answer any questions that come from disinterested parties, I wouldn't fault you for that. It won't stop me from asking the questions of whoever wants to provide answers, but it won't make me think any less of you if you choose to ignore me.

Thanks!

 

[Superchief]

I’m not sure whether to cry, cheer or just grab a bag of popcorn.

The letter from the board is compelling. It makes me wonder about the bigger MVCI picture.

I wouldn't be surprised at all if MVC has overspent or shifted funds from the reserves at several other properties that are causing 15%+ increases. I wish other BOD's used guidelines of the local CPI's because most of my resort MF increases have greatly exceeded inflation for the past few years. Ocean Pointe is the most guilty of abusing its owners.

 

[dioxide45]

I wouldn't be surprised at all if MVC has overspent or shifted funds from the reserves at several other properties that are causing 15%+ increases. I wish other BOD's used guidelines of the local CPI's because most of my resort MF increases have greatly exceeded inflation for the past few years. Ocean Pointe is the most guilty of abusing its owners.

Moving of funds from reserve to operating is something that has to be voted on and approved by the BOD. I am not aware of any state that allows movement of funds "willy nilly" between these two accounts. I think one way they can overspend operating fees is from owners that prepay or pay their maintenance fees early. End of year a lot of owners may be paying their fees in November and December. This money is now available to spend even if it is earmarked for the following calendar year.