A lawsuit is the last straw
I couldn't agree more that the HOA boards and timeshare developers need to be transparent. Unfortunately, they haven't been this way at the Westin St. John, and from what I understand many other timeshares both inside and outside of Starwood as well.
Several things have a lot to do with the falling value of Timeshares. Currently, I am only speaking from experience at the Westin St. John. In the by-laws, there is an amendment that basically allows the developer to maintain a majority control of the Board until such time as the developer sells their very last unit. That means that the board of directors will be composed of a majority of Starwood employees and not timeshare owners until their last unit is sold. Guess what? That will never happen, because Starwood will personally hold onto at least one unit to maintain control.
As it stands now, the 2 board members who happen to be villa owners were hand-picked by Starwood and effectively act as puppets for them. Currently, the Virgin Grand Villas at the Westin St. John are approximately 90% owner occupied, yet Starwood maintains control of the Board (3 of the 5 board members are Starwood employees). I should mention that an amendment of the by-laws requires an approval of 2/3 of all owners. I truly doubt that 2/3 of the owners voted in favor of this. This rule about control of the Board was not in the original by-laws set up by Virgin Grand Villas in 1989.
Additionally, under the current by-laws (I doubt this changed from the original set) major upgrades to the villas require a 2/3 approval from the owners. Back in 2006, this was put to a vote, and the owners overwhelmingly voted "No". In 2007, it was put to a vote again, but there weren't enough votes, so there wasn't a quorum. In 2008, the board of directors went around their own by-laws to approve the upgrades. Instead of having a line item on the maintenance bill that said "Assessment for Upgrades" (this would have been the case if the owners voted "yes"), the Operating Assessment (i.e. - Maintenance Fees) went up substantially between 2008 and 2009 (over a 50% increase). It went up even further in 2010, because the developer withdrew his operating subsidy.
Additionally, a bad debt reserve had to be added in 2010 because of so many defaults in 2009. Even if the MF's never went up in 2009, defaults would have gone up with the downturn in the economy. Now couple that with the substantial increase in MF's and the rate of default has gone up exponentially. To add insult to injury, the fees increased even further in 2010 because of the good paying owners had to effectively subsidize those that didn't pay. The upgrade costs will continue through 2011 and in theory should go down, but I don't believe it. They are supposed to replace the roofs once the upgrades are done.
Starwood uses the excuse that the good paying owners effectively have to pay the cost of running the place because it operates like a condominium. They claim to be locking out those owners that don't pay MF's and that they would return the money to the association if they rented those units out. Well guess what, Starwood won't show us where the money is going. They won't release the owner's list to us either under the premise of privacy. BTW, the names are public records and can be found in the Recorder of the Deeds office in St. Thomas as well as the Tax Accessor's Office in St. John. I should mention that the original by-laws call for the owner's to have access to all detail financials and to the owner's list.
I could go on forever, but if we had a board that would work with the owner's to go over the budget, we might be able to control costs. However, they are keeping everything quiet and running the timeshare like a dictatorship where we have to simply accept outrageously higher MF's year after year. In order to increase the value of our timeshare, we need to take control of our board and most likely hire a new management company. This was done successfully at Bluebeard's Castle in St. Thomas and their MF's have gone down significantly. Furthermore, a South Carolina law firm came in on contingency and got approx $16 million in damages for them, which were used for much-needed refurbishments.
Unless Starwood is willing to work with the owners of Virgin Grand Villas, we will have no choice but to sue to change the by-laws and to get the ownership records (if we have to, we'll get the records on our own but it will be a very difficult task) and detailed accounting information. Once the case is under way, a judge will order discovery and a forensic accountant will come in and review the records. If there is any sign of wrong-doing, Starwood could get in big trouble, being a public-traded company subject to the regulations of the FTC and SEC. Look what happened to Enron and Bernard Madoff.
The bottom line is that a lawsuit has a lot to do with falling values of the timeshares. The values are so low because they are unsellable. Hopefully we can correct some of these issues by pressure from politicians and these government agencies. However, if that doesn't do the trick we will have no choice but to sue. Once the owners have control of the board and have the ability to hire their own management company, costs will go down, bringing MF's down and hence increase the value of the timeshares.
In theory you are correct, a lawsuit has little to do with the falling values of timeshares. Unfortunately, it may be the last mechanism available for the owners to take control of it and increase the value of them.
I couldn't agree more! Just like our government (promise I won't take sides and talk politics), the HOA boards and timeshare developers need to be transparent. A small percentage of owners posting on TUG about potential lawsuits has VERY LITTLE to do with the falling values of timeshares. If you want to lay blame you need to look at Starwood and the HOAs. If my salary could go up at the rate that my MFs are going up, with no apparent end in sight, I would not worry too much about the increase in MFs.
