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

[Swice]

I wouldn't begin to make a judgement about who is right and who is wrong. BUT I will say there is reality concerning the resort operation. Marriott could drop the management contract-- Remember all of the employees work for Marriott. They get Marriott benefits, healthcare, vacation days and even reduced rates when they travel to any Marriott timeshare or hotel on their vacation. So you can not assume they will "stay." My guess is the GM, the operations teams, head housekeepers, people who work in the offices, would all leave... and so would many of the lower level people. Someone would have to spend countess hours finding a new management partner, establish a new reservation system, and simply keep the place open during the transition. No easy task. The cynic would suggest Marriott has a property over a barrel-- and there is some validity to that... but the reality is-- it's not easy to change.

Reminds me of my homeowner's HOA in my neighborhood. I served as the original President and managed the transition from the developer to the residents. Trust me-- I spent more time and energy on my "volunteer" job that I did on my real one! I've heard every single "suggestion" known to man over the years. The latest is a movement to retreat from the city and become a "gated" neighborhood. The reality is that it will NEVER happen. The people who live here can't afford to pay for street paving, sidewalk repairs, streetlights and security system. But the current HOA just sent out a survey asking if residents would like to consider being gated to improve security. Again, reality is very real... The current HOA will spend a year studying the issue and realize that it's financially impossible.

Is Marriott management perfect? Probably not. While I'm not saying the Boards have to be puppets, there is reality to consider. Changing is not as simple as one would think, otherwise you'd see timeshares all over the country doing it every Year!!!!!

 

[SueDonJ]

Collecting a few things from this thread to try to focus my thoughts here; ignore if you wish.

- Post #80 from @davidvel has an attachment that includes several legal filings related to Manager Marriott v. GR Tahoe BOD tangles, and a copy of the Management Agreement for GR Lake Tahoe
- Post #1 from @ocdb8r contains the initial letter from Marriott to the owners
- Post #56 from @BigDawgTUG has the BOD response letter
- info provided by @LeslieDet in several posts has been particularly interesting, especially as it seems to exonerate Marriott from the worst complaints, and I'm wondering if anyone with the same expertise can challenge it

It's been said by a few in this thread that the Manager/BOD relationship is "symbiotic," that the relationship between the two needs to be a working relationship to be successful. I'd go further and say that it needs to be as far from adversarial as possible if it's to succeed, and the indications in this thread are that the relationship at GR Tahoe isn't anything but adversarial! This resort BOD with long-serving members has obviously learned that Marriott will settle without admitting guilt when sued, which is pretty much standard practice for large companies when fighting legal battles will end up hurting them more than helping them - and that's not a metric that discounts the bad publicity a company can earn just by being named in repeated and unrelated legal actions. The response letter from the board even ends with a notice that they're considering filing yet another suit against Marriott. What they haven't done is furnish anything that proves that they have won or will win any of these legal tangles because they've been legally correct and Marriott has been legally incorrect - nope, so far from what's been furnished here, they've proven only that they've learned how to work the system and how far to push Marriott for settlements.

"Failure to resolve these issues in a manner which provides adequate funding for continued operation of resort services and amenities at appropriate levels creates a substantial risk that many of the current benefits provided by Marriott Vacation Club and Marriott International to the GRCLT Members will be terminated along with the resort’s current management contract." I think this bolded statement in the initial letter to owners is the legal notice required by the governing docs to let owners know that Marriott is considering its right to sever the Management Agreement, and I think Marriott could have headed off a whole lot of animosity towards the company by stating that. (But I also know that's wishful thinking and it wouldn't be compatible with Marriott's past practices.) I don't at all think that it's a threat made only for the sake of scaring owners into demanding that the BOD comply with Marriott - nope, I think it's an indication that Marriott is halfway there already and the countdown from notice to action may have already begun. Owners might want to think about letting the BOD and/or Marriott know now whether or not it's important to them for the brand name to stay on the door, and that includes whether or not they want to continue enjoying the benefits/affiliations that come with the name.

In my opinion both Marriott and the BOD could/should have done things differently throughout this long apparent battle between them - neither of them is 100% right or wrong, and either of them could/should have done something differently so that owners wouldn't have been left in the dark until DEFCON1 was reached. But it won't be too late until the ladders go up to take down the name, so hopefully they can both be convinced to start doing things differently now.

 

[LeslieDet]

in Post #80 @davidvel provided an attachment of several legal filings related to Manager Marriott v. GR Tahoe BOD tangles; it includes a copy of the Management Agreement for GR Lake Tahoe. (Post #1) contains the initial letter from Marriott to the owners and (Post #56) has the BOD response. The info provided by @LeslieDet has been particularly interesting, especially as it seems to exonerate Marriott from the worst complaints, and I'm wondering if anyone with the same expertise can challenge it.

Please note that I have not reviewed any of the litigation that was referred to as being related to Newport Coast OT issues, but the reference I did see that I responded to stated that it was done in a representative capacity. As I stated, wage and hour violations under the California Labor Code are not something to be taken lightly. If there is litigation filed in a representative capacity, then that will apply to all employees similarly situated within the state of California. Given the statements made by the one owner that wage litigation was settled and charged to all properties, then that tells me it was not merely one worker's claims; rather, it was the class of employees.

Here is a link to one wage and hour law firm's article discussing the representative litigation known as the Private AG Act in CA. https://www.fisherphillips.com/en/news-insights/paga-pains-california-employers.html

And here is a link to the Department of Industrial Relation discussing the PAGA. https://www.dir.ca.gov/Private-Attorneys-General-Act/Private-Attorneys-General-Act.html

And here is another article from 2018 addressing the exposure to employers. https://workplacelegalpc.com/individual-liability-under-paga/

 

[WBP]

I think both sides, the MVC side and the HOA BOD side, should invoke a near-immediate "Cooling Off Period," and bring in a Mediator who can help them bring this to a satisfactory resolution.

Again, I am concerned about the flavor of current events at GRC, it looks like an impending lose-lose situation, to me, for both parties.

 

[SueDonJ]

Please note that I have not reviewed any of the litigation that was referred to as being related to Newport Coast OT issues, but the reference I did see that I responded to stated that it was done in a representative capacity. As I stated, wage and hour violations under the California Labor Code are not something to be taken lightly. If there is litigation filed in a representative capacity, then that will apply to all employees similarly situated within the state of California. Given the statements made by the one owner that wage litigation was settled and charged to all properties, then that tells me it was not merely one worker's claims; rather, it was the class of employees.

Here is a link to one wage and hour law firm's article discussing the representative litigation known as the Private AG Act in CA. https://www.fisherphillips.com/en/news-insights/paga-pains-california-employers.html

And here is a link to the Department of Industrial Relation discussing the PAGA. https://www.dir.ca.gov/Private-Attorneys-General-Act/Private-Attorneys-General-Act.html

Just in case there's a misunderstanding about my meaning, I wasn't saying that your comments appeared to exonerate Marriott against the charge that it was in violation of anything to do with labor laws. I only meant that your comments appear to exonerate Marriott from the charge that it was wrong to unilaterally collect funds from seemingly unrelated resorts to cover settlement-related costs.

 

[Arusso]

Does not look like a one time assessment because the increase is due, according to the letter, to insurance and utility costs. To verify the veracity of the statement, the Board could and should order an independent audit to verify that the shortfall reported is NOT due to past malfeasance of the Management Company. If the audit returns a clean report and the insurance and utility costs both actual and projected are also true, there is no other option for the owners but to accept the increase in MFs. If this is too onerous, as I suspect it might be for some, the TUGGERS on this post have some useful advice.

Unfortunately, this is no consolation for the owners. it is also an unfortunate reality of the TS product as forces beyond the control of the owner directly impact costs. I know here on the East Coast, major nationally known insurors have jacked up prices for 2024. The increase in property and casualty insurance is due, in large part, to the natural and man-made disasters of late. As an industry, the premium increases are apportioned to all consumers regardless of involvement. Add to this unbridled tort claims and you have the perfect storm. Furthermore, increased utility costs are, as expected, a direct function of the cost to produce energy plus a guaranteed profit for the utility. State and local utility authorities rarely deny rate increases. Good luck to the affected owners.

 

[LeslieDet]

Just in case there's a misunderstanding about my meaning, I wasn't saying that your comments appeared to exonerate Marriott against the charge that it was in violation of anything to do with labor laws. I only meant that your comments appear to exonerate Marriott from the charge that it was wrong to unilaterally collect funds from seemingly unrelated resorts to cover settlement-related costs.

There was no misunderstanding; you are correct that none of us know the facts that led to the wage and hour claim, but since there was one, under CA law, it could have been extremely costly for all properties, and the resolution of the dispute and the allocation of costs to the properties in the state is not nefarious. Indeed, it could have been quite prudent for all involved, and actually saved each HOA money.

Anyway, what is sad is how folks immediately jump to the conclusion that allocating the settlement cost among the California sites was wrong, when those folks are ignorant of the law, and quick to assume the worst. That is why there is a management company with access to and counsel from exceptional lawyers to address these issues.

 

[dandjane1]

1. Does the Mgt. Co. add 10% to each expenditure in addition to their (probably exorbitant) Mgm't. fee?
2. Each budget, owners address how reserves are to be calculated and assessed. What happened in this case??
3. Hilton's HGV is in an acquiring mode nowadays - maybe they'll scoop up the failing Marriotts(?)
4. Definitely need to hear the BOD's side of this.

 

[Panzerman45]

The advantage of renting, rather than getting involved in things that could become messy. Scores of rentals available on a dozen different timeshare sites. If you must buy, of course get a resale pennies on the dollar. It things go to crap, sell it off for a penny or give it back to the developer.

 

[Ralph Sir Edward]

Just in case there's a misunderstanding about my meaning, I wasn't saying that your comments appeared to exonerate Marriott against the charge that it was in violation of anything to do with labor laws. I only meant that your comments appear to exonerate Marriott from the charge that it was wrong to unilaterally collect funds from seemingly unrelated resorts to cover settlement-related costs.

Sue, there were two issues raised by the OP. While most people are only concerned about the MF issues, The second one about the acquisition of weeks by Marriott is equally important.

Does Marriott have the right to acquire those weeks? GRC was not developed by Marriott, so Marriot has no ROFR in the governing docs. There is no mention about Marriott having any right of acqusition in the Management agreement listed here. They could forclose on unpaid loans, but if they bill the forclosure losses on the GRC owners, the question arises about self-dealing; i.e. Marriott is demanding that the existing ownership pay Marriott for the privilege of Marriott being about to profit off the ownership of a property they didn't have to pay for.

In Marriott owned and developed properties, this is written into the governing docs to benefit Marriott. Unless there is some other agreement outside the GRC original governing docs and the maintenance agreement, this is a serious breach.

 

[LeslieDet]

Sue, there were two issues raised by the OP. While most people are only concerned about the MF issues, The second one about the acquisition of weeks by Marriott is equally important.

Does Marriott have the right to acquire those weeks? GRC was not developed by Marriott, so Marriot has no ROFR in the governing docs. There is no mention about Marriott having any right of acqusition in the Management agreement listed here. They could forclose on unpaid loans, but if they bill the forclosure losses on the GRC owners, the question arises about self-dealing; i.e. Marriott is demanding that the existing ownership pay Marriott for the privilege of Marriott being about to profit off the ownership of a property they didn't have to pay for.

In Marriott owned and developed properties, this is written into the governing docs to benefit Marriott. Unless there is some other agreement outside the GRC original governing docs and the maintenance agreement, this is a serious breach.

You're doing a whole bunch of speculating there. First of all, you don't know what was being foreclosed upon, whether it was purchase money or unpaid HOA dues (MFs). You also are not privy to the agreements in place regarding unpaid MFs. You are assuming without any evidence whatsoever that there are no contractual agreements outside of the management contract. While I am also not privy to the scope of the contractual agreements in place, I am generally familiar with corporate and the COAs/HOAs entering into a foreclosure repurchase agreements relating to MVW agreeing to purchase the ownership interests that are required to be foreclosed upon by the COAs/HOAs when the MFs are delinquent. Have you stopped to consider that GRC may have that type of agreement in place?

Another factor is when it comes to unpaid MFs, typically a COA/HOA doesn't want to cover the unpaid portion out of its own pocket, because the existing owners who are paying their MFs don't want to pony up more money to cover the shortage caused by their fellow co-owners breaching their obligation to pay. So, the COA/HOA turns to the manager to take care of it. I have not reviewed the management agreement, but it would not typically be something the manager is obligated to cover.

It seems like you are taking a really big leap when you toss out terms like "self-dealing" and you "serious breach." Why would you assume that the company would breach contracts in place? MVW isn't a company that operates without sound legal advice. It isn't a fly by night company trying to scam the properties it is managing pursuant to contractual agreements. It will be interesting to see the facts addressing the deed issue, but to jump to the immediate conclusion that it is a "serious breach" or "self-dealing" is entirely speculative on your part.

 

[SueDonJ]

Sue, there were two issues raised by the OP. While most people are only concerned about the MF issues, The second one about the acquisition of weeks by Marriott is equally important.

Does Marriott have the right to acquire those weeks? GRC was not developed by Marriott, so Marriot has no ROFR in the governing docs. There is no mention about Marriott having any right of acqusition in the Management agreement listed here. They could forclose on unpaid loans, but if they bill the forclosure losses on the GRC owners, the question arises about self-dealing; i.e. Marriott is demanding that the existing ownership pay Marriott for the privilege of Marriott being about to profit off the ownership of a property they didn't have to pay for.

In Marriott owned and developed properties, this is written into the governing docs to benefit Marriott. Unless there is some other agreement outside the GRC original governing docs and the maintenance agreement, this is a serious breach.

I think there are a lot more than just two issues raised by the letter from Marriott in the first post and the response from the BOD, and you can add to those the issues that are alluded to in the attachment containing legal filings that @davidvel provided. The only GR Tahoe governing doc that's available for review is the Management Agreement included in that attachment, but the typical Public Offering Statement for Marriott's timeshares include additional important and relevant documents that comprise hundreds of pages such as the Master Deed, Timeshare Declaration, etc. I know, this property is unique in that it's a fractional and it was developed prior to Marriott becoming the manager, but there must be other documents that apply here. Finally, opinions from several experts in this thread are at least in agreement that much more information is needed before anybody can make the definitive statement that either the BOD or Marriott are completely correct in all of their positions/statements.

As for the intervals that the BOD claims Marriott incorrectly/illegally assigned titles after acquiring them, to the detriment of the resort's coffers, the statements from Marriott and the BOD are typically not in sync but neither has provided any substantiation for their position. Plus I'm confused if these are the intervals being referred to as ROFR'd because Marriott says they're the result of foreclosures due to non-payment. Which are they, ROFR's or foreclosures, and where can the document language that supports either position be found?

One thing I find very concerning that nobody here seems to be talking about is the BOD's claim that it took ten years to discover that both GR Tahoe and the adjacent Timber Lodge were double-charged utility costs by the district. Ten years?!?! It's mind-boggling that neither Marriott nor the BOD's of both resorts were looking closely enough to catch it sooner, and I'd have to see a lot more documentation to simply agree with the GR Tahoe BOD that Marriott somehow is guilty of "gross negligence" in this situation while it is apparently faultless and due more restitution for it.

 

[travelhacker]

"Failure to resolve these issues in a manner which provides adequate funding for continued operation of resort services and amenities at appropriate levels creates a substantial risk that many of the current benefits provided by Marriott Vacation Club and Marriott International to the GRCLT Members will be terminated along with the resort’s current management contract." I think this bolded statement in the initial letter to owners is the legal notice required by the governing docs to let owners know that Marriott is considering its right to sever the Management Agreement, and I think Marriott could have headed off a whole lot of animosity towards the company by stating that. (But I also know that's wishful thinking and it wouldn't be compatible with Marriott's past practices.) I don't at all think that it's a threat made only for the sake of scaring owners into demanding that the BOD comply with Marriott - nope, I think it's an indication that Marriott is halfway there already and the countdown from notice to action may have already begun. Owners might want to think about letting the BOD and/or Marriott know now whether or not it's important to them for the brand name to stay on the door, and that includes whether or not they want to continue enjoying the benefits/affiliations that come with the name.

@SueDonJ Thanks for your input.

I noticed in an old SEC 8-K filing that the management contract with GRCLT is set on an annual basis and expires on 1/3 (The most recent 8-K with this mentioned that I could find was from 2016).

What has me nervous is that the notice was sent on December 4th -- which is 30 days out from when the contract is set to renew. It could be coincidence but it does make me nervous. Do you know what the legal requirements for notice are?

I believe @dioxide45 had asked for the 2024 budget. It is attached.

 

[igopogo]

Does Marriott have the right to acquire those weeks? GRC was not developed by Marriott, so Marriot has no ROFR in the governing docs

I can’t speak to the history, but MVC does have ROFR at Grand Residence. I have purchased three interests and have gone through ROFR each time.

 

[Ralph Sir Edward]

I think there are a lot more than just two issues raised by the letter from Marriott in the first post and the response from the BOD, and you can add to those the issues that are alluded to in the attachment containing legal filings that @davidvel provided. The only GR Tahoe governing doc that's available for review is the Management Agreement included in that attachment, but the typical Public Offering Statement for Marriott's timeshares include additional important and relevant documents that comprise hundreds of pages such as the Master Deed, Timeshare Declaration, etc. I know, this property is unique in that it's a fractional and it was developed prior to Marriott becoming the manager, but there must be other documents that apply here. Finally, opinions from several experts in this thread are at least in agreement that much more information is needed before anybody can make the definitive statement that either the BOD or Marriott are completely correct in all of their positions/statements.

As for the intervals that the BOD claims Marriott incorrectly/illegally assigned titles after acquiring them, to the detriment of the resort's coffers, the statements from Marriott and the BOD are typically not in sync but neither has provided any substantiation for their position. Plus I'm confused if these are the intervals being referred to as ROFR'd because Marriott says they're the result of foreclosures due to non-payment. Which are they, ROFR's or foreclosures, and where can the document language that supports either position be found?

One thing I find very concerning that nobody here seems to be talking about is the BOD's claim that it took ten years to discover that both GR Tahoe and the adjacent Timber Lodge were double-charged utility costs by the district. Ten years?!?! It's mind-boggling that neither Marriott nor the BOD's of both resorts were looking closely enough to catch it sooner, and I'd have to see a lot more documentation to simply agree with the GR Tahoe BOD that Marriott somehow is guilty of "gross negligence" in this situation while it is apparently faultless and due more restitution for it.

Sue, there may be more documents that apply here, but there there doesn't have to be more documents. Yes, I would like to see all relevant documents, but I have no source for them. I don't even know how many there are.

Most Marriott rights are defined in the governing document for a timeshare, which Marriott writes for its own timeshares. Marriott did not create this timeshare, another firm did. Only those rights defined in the initial governing document by that other firm can be transferred to Marriott, but there is no requirement that any of the rights have to be transferred at all. What we know is that certain rights were defined and transferred to Marriott by the management document. Does that include the right to repossess the property and keep it?

Now if Marriott proper loaned the money, they would have the right, to those intervals they loaned to. On the other hand, Marriott would have no right to back bill the timeshare for those costs. Look at how other real properties are repossessed. (Most jursidictions require a "courthouse steps" auction of the property, with the mortgage holder bidding their loan value. If outbid, teh mortgage holder get their money and the original owner gets the difference). Otherwise Marriott would be getting a valuable property for free, with the timeshare owners paying for Marriott's fiscal loss, but getting no benefit from the property.

Marriott solves this problem with their own timeshares by granting themselves every benefit they could think of in the initial governing documents. You buy, you agree to them. But as you noted, this is a unique timeshare in the Marriott portfolio. Maybe Marriott forgot these little details and treated this timeshare the same as all their others. <Shrug>, I don't know.

What I do know is that in other systems, all sort of strange and unusual benefits are granted to acquired timeshares, not because the acquiree wants to, but because they are constrained by previous governing docs. An example. HGVC only allows RCI exchange system - except - some southwest Florida affiliates that had II access. It was in their governing docs, they got to keep it, plus if they joined the HGVC points system (which they didn't have to!) they also got RCI access as well. All because of what the original governing docs said.

What does the doc chain actually show for MGR?

 

[dayooper]

I can’t speak to the history, but MVC does have ROFR at Grand Residence. I have purchased three interests and have gone through ROFR each time.

Not knowing how MVC works, but there are several HGVC resorts that were not developed by HGVC that have ROFR not held by HGVC. Valdoro in Breckinridge and MarBrisa in California both have ROFR that isn’t owned by HGVC and never exercised. All 5 HGVC South Carolina properties are still owned by Strand Capitol. They own the ROFR and are very aggressive about exercising their right. Hardly anything is allowed to pass.

 

[igopogo]

I appreciate this thread so much, it has helped me to refine my opinion and spend time thinking of the value I have from the partnership. To sum it up, quite a lot. I also believe that both parties are likely stuck posturing in extreme positions.

I do think management’s email is a last ditch effort to get an outcry from owners, not a legal notice. A legal notice would have legal language, and there would be no reason to include the BOD email address.

I will send an email to the board, in which I will recognize that I am speaking to BOD and management, stating my position:
- the partnership has great value to all parties, many will be hurt in a breakup, and it should be maintained. Perhaps including some examples.
- basing the increase on a historical metric that is only loosely tied to the actual cost to run the property needs to be revisited.
- 19.7% seems astronomical without transparency, which we don’t have at the moment.
- I don’t want to be taken for a fool, but I would rationally accept whatever number is supported by the facts
- the current year MF and partnership should not be held hostage to ongoing legal issues. Any outcome can be worked in to a future budget.
- a suggestion that the two parties could seek a neutral consultant who will give a binding one year opinion somewhere between 4.8 and 19.7% increase.

It occurs to me that a joint letter from owners might be powerful. I think if I could get at least eight owners who would like to sign, it would be more powerful than each of us signing individually. Please DM me if you are interested and we can work on a joint document. I am flexible on any point.

 

[timsi]

Sue, feel free to edit or delete my comment if it doesn't meet the required standard.

Regarding MVC severing ties with the resort, there are pros and cons for Marriott. On one hand, there is a possible inclination to assert authority firmly, setting a precedent to dissuade other boards from creating complications. On the contrary, relinquishing the connection would mean forfeiting a 10% management fee, a highly profitable recurring revenue for Marriott. Furthermore, managing the 20% inventory owned by Marriott at the resort (according to Tim), becomes a more intricate task without control over the reservation system. Additionally, considering the various services offered by Marriott at the resort, it is reasonable to assume that these contribute to the company's overall profitability, adding another layer of complexity to the decision. I am inclined to believe that there is no real treat for ending this partnership as far as Marriott is concerned and that both parties will have to work on finding common ground.

 

[ocdb8r]

No meeting minutes from October are yet published, but attached are the July meeting minutes (Finance Committee and full Board). From the Board minutes (Finco minutes contain the same info in a bit more detail):

2023 Financials
As of June 30, 2023, the Operating Fund had a deficit in the amount of($105,574)

Key drivers included:

• Deficit in Miscellaneous Revenue in the amount of ($19,471), due to sale of association owned inventory sold in December of 2022 and not in 2023. This revenue is not anticipated to be realized in 2023
• As of June, Water and Sewer reflect increased expenses in the amount of ($16,849), due to an increase in sewer rates
• A deficit in Rental Allocation in the amount of ($54,994), due to lower rental occupancy at the resort during the first two quarters of the year
• A variance in Gas expense in the amount of($58,150), due to rate increases that exceeded the budget expectations as risk was incorporated into the 2023 budget for the expense
• Overage in Insurance in the amount of ($30,256), due to policy premium increases exceeding the budget as risk was incorporated into the 2023 budget for this expense

As of June 30, 2023, the 2023 Operating Fund year-end forecast reflects a deficit of ($402,390) with overages expected in Utilities, Insurance, Rental Allocations and Misceilaneous; revenue as the year-to date trends are expected to continue in these categories. The cash flow for the

Operating Fund was reviewed and the projected cash shortfall in September of 2023 was addressed.

The Board of Directors will engage Association Counsel to review specific requirements to resolve the Operating Fund shortfall and understand if the Associations has the option to transfer funds from the Reserve account to the Operating account to meet the short-term Operating needs of the Association.

 

[SueDonJ]

Sue, there may be more documents that apply here, but there there doesn't have to be more documents. Yes, I would like to see all relevant documents, but I have no source for them. I don't even know how many there are.

Most Marriott rights are defined in the governing document for a timeshare, which Marriott writes for its own timeshares. Marriott did not create this timeshare, another firm did. Only those rights defined in the initial governing document by that other firm can be transferred to Marriott, but there is no requirement that any of the rights have to be transferred at all. What we know is that certain rights were defined and transferred to Marriott by the management document. Does that include the right to repossess the property and keep it?

Now if Marriott proper loaned the money, they would have the right, to those intervals they loaned to. On the other hand, Marriott would have no right to back bill the timeshare for those costs. Look at how other real properties are repossessed. (Most jursidictions require a "courthouse steps" auction of the property, with the mortgage holder bidding their loan value. If outbid, teh mortgage holder get their money and the original owner gets the difference). Otherwise Marriott would be getting a valuable property for free, with the timeshare owners paying for Marriott's fiscal loss, but getting no benefit from the property.

Marriott solves this problem with their own timeshares by granting themselves every benefit they could think of in the initial governing documents. You buy, you agree to them. But as you noted, this is a unique timeshare in the Marriott portfolio. Maybe Marriott forgot these little details and treated this timeshare the same as all their others. <Shrug>, I don't know.

What I do know is that in other systems, all sort of strange and unusual benefits are granted to acquired timeshares, not because the acquiree wants to, but because they are constrained by previous governing docs. An example. HGVC only allows RCI exchange system - except - some southwest Florida affiliates that had II access. It was in their governing docs, they got to keep it, plus if they joined the HGVC points system (which they didn't have to!) they also got RCI access as well. All because of what the original governing docs said.

What does the doc chain actually show for MGR?

It would shock me, I mean render me speechless for at least a day, if it were to be true that a US timeshare was developed by putting up a building, writing only a Management Agreement, then claiming that the rules for every aspect of selling, buying, transferring, operating, funding and owning intervals in that timeshare were limited to only what was written in that single document. It can't happen that way - laws/regs don't allow it to happen that way! But the easiest way to know for sure that other GR Tahoe governing docs exist is right there in the Management Agreement (which we can access thanks to @davidvel's attachment) wherein the "Declaration" and "Bylaws" documents are literally referenced.

Any owners who purchased direct from the initial or any succeeding developer would/should have been given copies of all of the governing docs. If you didn't buy direct or no longer have a copy of your docs for whatever reason, you can try contacting the Owner Modifications office to get them. They might tell you that there's a copying fee involved (which is their stated right in the docs that I have) but they'll be able to furnish you with them if they're unable to cite one good reason to not do so. (One of my Weeks was a resale-by-Marriott, effectively a direct-purchase, that was transacted via electronic and snail mail involving no face-to-face interactions. I realized when we got the paperwork after the closing that I didn't have a POS for it, which I knew should exist because they gave them to me with my other direct purchases, and this is where they sent me to get them.)

My comment about GR Tahoe being unique isn't only because it was developed by a non-Marriott entity - it's also a fractional which are few and far between in the Marriott portfolio. It wouldn't come as a surprise if the docs for fractionals differ from the typical Marriott Weeks-based timeshare docs but all of the functions are delineated somewhere. One of the rules is no doubt that whatever is written in the original docs transfers to new developers/managers/owners unless superseding laws/regs/rules/docs are written.

"What does the doc chain actually show for MGR [Tahoe]??" That's the most important question to ask and answer; any speculating based on anything other than the docs is worthless.

 

[SueDonJ]

I appreciate this thread so much, it has helped me to refine my opinion and spend time thinking of the value I have from the partnership. To sum it up, quite a lot. I also believe that both parties are likely stuck posturing in extreme positions.

I do think management’s email is a last ditch effort to get an outcry from owners, not a legal notice. A legal notice would have legal language, and there would be no reason to include the BOD email address.

I will send an email to the board, in which I will recognize that I am speaking to BOD and management, stating my position:
- the partnership has great value to all parties, many will be hurt in a breakup, and it should be maintained. Perhaps including some examples.
- basing the increase on a historical metric that is only loosely tied to the actual cost to run the property needs to be revisited.
- 19.7% seems astronomical without transparency, which we don’t have at the moment.
- I don’t want to be taken for a fool, but I would rationally accept whatever number is supported by the facts
- the current year MF and partnership should not be held hostage to ongoing legal issues. Any outcome can be worked in to a future budget.
- a suggestion that the two parties could seek a neutral consultant who will give a binding one year opinion somewhere between 4.8 and 19.7% increase.

It occurs to me that a joint letter from owners might be powerful. I think if I could get at least eight owners who would like to sign, it would be more powerful than each of us signing individually. Please DM me if you are interested and we can work on a joint document. I am flexible on any point.

In all seriousness, good luck to all you owners. This must be a very nerve-wracking situation to be facing, and I hope that you all come away from it able to still enjoy your ownerships if that's what you want. Doing something, anything, is much better than sitting back and allowing whatever is going to happen.

You're of course correct that the legal process for severing the Management Agreement may not have actually been put into motion by that single statement in the letter from Marriott. But if it's not the legal notice, I'd certainly consider it to be the precursor if things don't change.

 

[SueDonJ]

@SueDonJ Thanks for your input.

I noticed in an old SEC 8-K filing that the management contract with GRCLT is set on an annual basis and expires on 1/3 (The most recent 8-K with this mentioned that I could find was from 2016).

What has me nervous is that the notice was sent on December 4th -- which is 30 days out from when the contract is set to renew. It could be coincidence but it does make me nervous. Do you know what the legal requirements for notice are?

I believe @dioxide45 had asked for the 2024 budget. It is attached.

I've never been on the receiving side of whatever process Marriott follows to sever a mgmt agreement but this is the related text that's in the doc @davidvel furnished:

"2.3EarlyTermination. This Agreement may be terminated at any time as follows:

(a) Termination bv the Board. This Agreement may be terminated by the Board either;

(i) for cause, upon the vote or written assent of a majority of the Board; provided, that if the cause constitutes a breach of or a failure to perform any term, covenant or condition contained in the Agreement which is capable of being cured, such breach or failure to perform shall not have been cured, or commencement and diligent pursuance of all reasonable efforts to effect such cure shall not have been undertaken, within thirty (30) days following Notice of such default or breach from the Association; or

(ii) without cause, upon ninety (90) days prior notice to Manager authorized by the Consent of a Majority of Owners,

(b) Termination by Manager. Except as expressly provided in this subparagraph, Manager may terminate this Agreement, at any time, upon ninety (90) days prior Notice to the Association. In the event (i) the Association shall fail to keep, observe or perform any material covanant, agreement, term or provision of this Agreement to be kept, observed, or performed by the Association and such default shall continue for a period of thirty (30) days after Notice hereof by Manager, or (ii) the Project or any portion thereof shall be damaged or destroyed by fire or other casualty and the Association shall fail to undertake to repair, restore, rebuild or replace any such damage or destruction within ninety (90) days after receipt of insurance proceeds therefor, if such loss was insured, or within ninety (90) days after such fire or casualty, if such loss was not insured, then and in either event this Agreement, subject to the provisions of the following subparagraph (c) shall terminate at Manager's option, upon five (5) days Notice to the Association.

(c) Condemnation. If the whole of the project shall be taken or condemned in any eminent domain, condemnation, compulsory acquisition or like proceeding by any competent authority for any public or quasi-public use or purpose, or if such a portion thereof shall be taken or condemned as to make it imprudent or unreasonable, in the reasonable opinion of the Board, to use the remaining portion as a vacation resort project of the type and class immediately preceding such taking or condemnation, then in either of such events, the term of this Agreernent shall cease and terminate as of the date of such condemna.tion. To the extent (and only to the extent) any award for such taking or condemnation includes compensation to Manager for any loss of its income resulting from such taking or condemnation, such award shall be fairly and equitably apportioned between the Association and Manager as to compensate Manager for any such Ioss of income. Manager shall continue to supervise and direct the management and operation of the Project until such time as Manager shall be required to surrender possession of the Project as a consequence of such taking or condemnation."

 

[LeslieDet]

a suggestion that the two parties could seek a neutral consultant who will give a binding one year opinion somewhere between 4.8 and 19.7% increase.

Just an FYI - while that may sound great on paper, the reality of it is that a "neutral consultant" is most likely a mediator, who is most likely a lawyer offering mediation services. That takes time and money. A mediator does not make "binding" opinions. A mediator's job is to bring opposing parties to a resolution of their dispute. You are not going to get any binding result unless each side reaches a written agreement to address the issues, and the written agreement that is in place is the management contract. A mediator has no control over utility providers or insurance premiums. A manager would be a fool (and MVW legal isn't) to agree to an absolute maximum for the operating expenses over which it does not control.

As you can see from minutes of the finance committee and board that are shown in post #169, roughly $110k of the deficit is related to insurance premiums and utility bills. No one can guarantee rental revenue; I'd assume that would be something you are familiar with. As you know, it is basic math -- when the projected revenue is not generated, there is no money to cover the expenses.

I do wish you much success, and as an owner there, your BOD owes you a fiduciary duty to act in the best interests of the owners it represents. It is one thing to be a penny pincher and insist on keeping cost increases to some illusory minimum, that can be a goal, but when the time comes to pay the actual bills of the association, to demand that the manager not pay them (or insist that by paying them the manager somehow breached its duties to the HOA) is malfeasance. The BOD is irrational in thinking that unavoidable costs of providing the basics to the property in the form of utilities and insurance is some sort of management failure when those expenses exceed a budget. The BOD could even be deemed to be acting in bad faith in refusing to authorize the payment of the bills, especially when they are aware of the deficits and refuse to address them rationally presumably on "principle"; they apparently believe they know better than the property manager and think they can get away with not paying the bills to keep the heat and lights on?

The BOD was made aware by the mid-year report that there is a projected deficit of over $400k. The BOD was also advised there is an almost 29% delinquency rate with unpaid MFs. Yet, those minutes reflect that the BOD preferred to hire outside counsel (which is incurring attorneys fees not otherwise budgeted for) to address how to pay it? Incurring more costs for the HOA and creating a larger deficit in operating funds. That makes no sense. BTW - you say you don't have transparency -- but yet the mid-year meeting minutes seem pretty informative.

Anyway, just wanted to give you some insight as to what mediators can do. Best of luck to you.

 

[WBP]

Just an FYI - while that may sound great on paper, the reality of it is that a "neutral consultant" is most likely a mediator, who is most likely a lawyer offering mediation services. That takes time and money. A mediator does not make "binding" opinions. A mediator's job is to bring opposing parties to a resolution of their dispute. You are not going to get any binding result unless each side reaches a written agreement to address the issues, and the written agreement that is in place is the management contract. A mediator has no control over utility providers or insurance premiums. A manager would be a fool (and MVW legal isn't) to agree to an absolute maximum for the operating expenses over which it does not control.

As you can see from minutes of the finance committee and board that are shown in post #169, roughly $110k of the deficit is related to insurance premiums and utility bills. No one can guarantee rental revenue; I'd assume that would be something you are familiar with. As you know, it is basic math -- when the projected revenue is not generated, there is no money to cover the expenses.

I do wish you much success, and as an owner there, your BOD owes you a fiduciary duty to act in the best interests of the owners it represents. It is one thing to be a penny pincher and insist on keeping cost increases to some illusory minimum, that can be a goal, but when the time comes to pay the actual bills of the association, to demand that the manager not pay them (or insist that by paying them the manager somehow breached its duties to the HOA) is malfeasance. The BOD is irrational in thinking that unavoidable costs of providing the basics to the property in the form of utilities and insurance is some sort of management failure when those expenses exceed a budget. The BOD could even be deemed to be acting in bad faith in refusing to authorize the payment of the bills, especially when they are aware of the deficits and refuse to address them rationally presumably on "principle"; they apparently believe they know better than the property manager and think they can get away with not paying the bills to keep the heat and lights on?

The BOD was made aware by the mid-year report that there is a projected deficit of over $400k. The BOD was also advised there is an almost 29% delinquency rate with unpaid MFs. Yet, those minutes reflect that the BOD preferred to hire outside counsel (which is incurring attorneys fees not otherwise budgeted for) to address how to pay it? Incurring more costs for the HOA and creating a larger deficit in operating funds. That makes no sense. BTW - you say you don't have transparency -- but yet the mid-year meeting minutes seem pretty informative.

Anyway, just wanted to give you some insight as to what mediators can do. Best of luck to you.

Brilliant, and so well stated, Leslie. Thank you.

I agree entirely with your assessment.

While I don't dismiss the possibility that MVC may own their fair share of this dilemma, I believe the BOD has seemingly acted loony (thereby, perhaps, adding to MVCs frustration, and, MVC potentially, sinking their heels into the ground).

I agree entirely, in particular, with your assessment, Leslie, of the "fixed costs" that the Board may have little control over, other than MVC "shopping the market" for other sources of energy or insurance. I believe MVC is uniquely qualified to perform those functions.

I do believe, strongly, that MVC may have put the owners on notice, and that an adverse decision (for both parties) HOA/Unit Owners and Management Company, may be less than 30 days away. Hence, my earlier suggestion for a "Stay of Execution,".....a period to calm down, and to engage a Mediator, who I believe is necessary here.

I have two further thoughts. (1) Although several people have made reference to the "Institutional Knowledge" of LONGstanding HOA Board members, I believe having LONGstanding HOA Board members is like a double-edged sword, and, particularly, when conflict arises between a Management Company and HOA Board (and has existed for a while), the presence of these LONGstanding Board members may be a liability, and may prevent the issues before this Board from achieving resolve. Hence, I believe it is in the best interest of the HOA, for the HOA Board to form a Nominating Committee (comprised of Board and non-Board members) and to actively mine the owner base for qualified, future Board member candidates. In my opinion/experience, excellent future Board members often do not come out with a simple solicitation for future Board members and a letter/form. In my experience, the ideal process for recruiting future talent is a very active process, that takes an active, dedicated Nominating Committe to mine the owner base, and to look for talent. (2) A California attorney, who is largely responsible for salvaging the future/HOA of a Lake Tahoe timeshare, Robert M. Bone, Esq, formed an entity known as the "Timeshare Board Law Group, LLP," may be extremely helpful to the HOA Board, and may know of someone to perform/orchestrate the tasks of mediation, if not satisfy that role himself.

Perhaps, a GRC-Lake Tahoe Unit Owner will forward this entire thread to the GRC-Lake Tahoe HOA Board.

 

[timsi]

There is a curious perception held by some that the management company, which is compensated for its services, bears no responsibility, while all accountability, according their comments, rests solely on the voluntary members of the BOD. I find this perspective perplexing, particularly when the BOD seems to have done a great job over the years and it seems the resort was kept at high standards even if the amounts requested by the management company were often reduced.