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MVC Trust Proposed 2016 Maintenance Fee

AlmostRetired

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Under Trust Association Admin expenses, there is another expense line item - "Component Services". This line item is the additional expenses that the Trust pays to the HOAs to compensate them for the extra housekeeping, maintenance, front desk time, etc that results from the 1+ night option. For 2016 this is projected to be a little over $1 million, so it represents only about $.003 of the 2016 Trust MF. This is the category that is increasing by over 50% from 2015, presumably to cover the increased usage of the 1+ option due to the new tiers expanding access to that benefit.

What this means is the extra cost of the 1+ night option is covered in the Trust Admin Expenses, and does not have to be covered by the $185/$225/$250 Club Membership Dues.

I was not confused but I also did not realize the amount paid to the HOA for 1 + was so little. The fact is the week owners who can trade for legacy points and take advantage of th 1 + do not pay any of that cost because the cost is covered in the MF of DC points only. I would guess few people got to the higher tiers by pure DC point purchases. If you owned 3500 DC points with no legacy weeks, would you want to cover the cost of legacy week owners who use it for 1+. I would think most people would find covering the cost of a benefit of someone else unfair. I do not own DC points so it is not unfair to me but because it doesn't impact me doesn't make it fair. I was just suggesting that the fees can be used to offset that cost paid right now by DC point MF's only. The fee is shared by all.

I pay the 175 fee (soon to be 185) for my legacy week for the right to trade for DC points. I have never traded for points but that right has a value to me and a cost. I pay it. When I stop seeing the value I won't pay it. I know this may not be a popular thought but I see nothing wrong with charging higher fees for better privileges.
 

dioxide45

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The fact is the week owners who can trade for legacy points and take advantage of th 1 + do not pay any of that cost because the cost is covered in the MF of DC points only.

I don't know if this is really the case. I think the HOAs are also paying a pretty hefty price for 1+ nights from enrolled owners electing points. All of the resorts saw pretty steep increases in costs for housekeeping and front desk charges on their annual financial statements. So I think the HOAs (weeks owners) are paying the price for those that elect DC points and use short stays. Now, it does mean that all weeks owners are paying the fee for only those that are actually using points. Not really fare I suppose, but it is the way it is.
 

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There have been a lot of recent changes and added benefits in the DC program. Just to be clear, I can see where that could cause some significant increases in the annual DC membership fees (assuming that these hefty increases don't continue to escalate year after year).

However, the same rationale does not apply to the resort maintenance fees. Those are totally out of control and I see the HOA Boards behaving like we currently have the inflation of the 1970's.
 

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I don't know if this is really the case. I think the HOAs are also paying a pretty hefty price for 1+ nights from enrolled owners electing points. All of the resorts saw pretty steep increases in costs for housekeeping and front desk charges on their annual financial statements. So I think the HOAs (weeks owners) are paying the price for those that elect DC points and use short stays. Now, it does mean that all weeks owners are paying the fee for only those that are actually using points. Not really fare I suppose, but it is the way it is.

I am going to send an email to my HOA and ask about the impact of the 1 + on the MF.
 

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I think you misunderstand the nature of trust ownership. Trust point owners do in fact own a small piece of each resort. It is true that MVCI acts as a middleman but that does not change the nature of the ownership.

It is also true that Trust maintenance fees include items over and above the individual resort fees. But here we are talking about increases in those fees, not the absolute level.

Certainly that is the way it is sold. If you actually own a piece of each resort, do you get a deed for each little piece? All real estate ownership is deeded in the US.

My view is MVC owns the weeks and then re-slices the pool into access points. the result is you have access to any of the resorts in the pool, within the limits of the Club agreement, but I could be wrong.

Could anybody point out the relevant terms and conditions of the MVC incorporation papers and the sales agreements for points?
 

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Certainly that is the way it is sold. If you actually own a piece of each resort, do you get a deed for each little piece? All real estate ownership is deeded in the US.

My view is MVC owns the weeks and then re-slices the pool into access points. the result is you have access to any of the resorts in the pool, within the limits of the Club agreement, but I could be wrong.

Could anybody point out the relevant terms and conditions of the MVC incorporation papers and the sales agreements for points?

From the "Multisite Public Offering Statement":
1. c. Legal Structure of the Multisite Timeshare Plan.
Developer either has or will transfer title (or will cause a third party to transfer title) to certain Submission Property to the Trustee to be committed to the Trust as Trust Property. The Trustee will hold legal and equitable title to the Trust Property for the use and benefit of the Beneficiaries of the Trust in accordance with the Trust Agreement and Sections 721.08(2)(c)3. and 4., Florida Statutes...

...Owners of interests will be the Beneficiaries of the Trust and will receive, at closing, a deed conveying an interest in the Trust. Each interest constitutes a Florida timeshare estate under Chapter 721, Florida Statutes, and thereby is considered a Florida real property interest...

...Because a Beneficiary does not directly own a specific interest in any single Accommodation, a Beneficiary owns an interest in the entire Trust Property...

d. Form of Ownership Interests.
Developer is selling Interests in the Trust which has been established as a Florida land trust. Pursuant to Florida law, the Trust has been structured in a manner that each Interest constitutes a timeshare estate under Section 721.08, Florida Statutes. Furthermore, pursuant to Chapter 721, a timeshare estate constitutes an interest in real property. Interests in the Trust are being sold subject to the Trust Plan. Each purchaser of an Interest will be a Beneficiary of the Trust...

3. c. Points.
For administrative convenience in the operation of the Trust Plan and to assist in the determination of the respective rights of Beneficiaries to enjoy the benefits of ownership of Interests in the Trust Plan, Developer and the Board established a reservation system that utilizes Point allocations for the reservation of all Use Periods. Developer will ascribe Points to each Interest and, upon conveyance of an Interest, the number of Points ascribed to the Interest will be noted on the deed for such Interest. Each use Year, the Association Delegee will credit each Beneficiary in the reservation system with the number of Points reflected on the deed(s) conveying the Beneficiary's Interests to the Beneficiary...

In the Trust Agreement, I also found this language:

(c) No Legal or Equitable Title.
The interest of a Beneficiary under this Trust Agreement shall consist of the rights set forth in this trust Agreement. No Beneficiary shall have any right of partition as to any Trust Property or any Interest, other than as may be permitted by Developer. A Beneficiary shall not have any right, title, or interest in or to any portion of the legal and equitable title to the Trust Property...

So they way I read all this as a layman is that the Trust owns legal title to all of the Trust Property. Each owner is a Beneficiary of the Trust and owns an Interest in the entire body of Trust Property through the deed to the Trust, but we do not have legal ownership of the specific underlying Trust Properties. Because these Trust interests are considered a timeshare estate under Florida law, they are considered a real property interest and deeded as such. But, as the paragraph from the Trust Agreement says, the Beneficiaries do not have any direct rights or interests in the title of the actual Trust Property. Each Beneficial Interest is then assigned a point allocation for reservation purposes.
 
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GregT

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Certainly that is the way it is sold. If you actually own a piece of each resort, do you get a deed for each little piece? All real estate ownership is deeded in the US.

Here is what a recorded deed for Trust Points looks like.

Best,

Greg
 

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Ralph Sir Edward

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Here is what a recorded deed for Trust Points looks like.

Best,

Greg

Thanks, Greg and Jim.

My curiosity is how points will be "Viking Funeral-ed" if the economy got really bad again. How would the Trust function under stress of defaults, and what would the individual's legal responsibilities be in a default situation.

Intellectual curiosity only...
 

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Thanks, Greg and Jim.

My curiosity is how points will be "Viking Funeral-ed" if the economy got really bad again. How would the Trust function under stress of defaults, and what would the individual's legal responsibilities be in a default situation.

Intellectual curiosity only...

Hmm...your comment on defaults made me go back and look at the Trust budget and compare it to the Barony Beach Club budget and I saw something very, very odd...

In the 2016 trust budget, bad debt expense was $3.1 million out of a total expense base of $183 million (1.7%) and in 2015, bad debts were $2.3 million out of total expenses of $141 million (1.6%).

But at Barony, in 2015, bad debts were only $61,000 out of $15,475,950 in expenses (0.39%). No 2016 budget yet for Barony, but in 2014 bad debt expense was higher than 2015, but still only 0.64% of total expenses.

Any idea why the Trust would have such a higher provision for bad debts? I assume in both cases this is for maintenance fee payments only and that MVW Corporate would cover bad debt expense for purchases gone south.
 

Ralph Sir Edward

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Hmm...your comment on defaults made me go back and look at the Trust budget and compare it to the Barony Beach Club budget and I saw something very, very odd...

In the 2016 trust budget, bad debt expense was $3.1 million out of a total expense base of $183 million (1.7%) and in 2015, bad debts were $2.3 million out of total expenses of $141 million (1.6%).

But at Barony, in 2015, bad debts were only $61,000 out of $15,475,950 in expenses (0.39%). No 2016 budget yet for Barony, but in 2014 bad debt expense was higher than 2015, but still only 0.64% of total expenses.

Any idea why the Trust would have such a higher provision for bad debts? I assume in both cases this is for maintenance fee payments only and that MVW Corporate would cover bad debt expense for purchases gone south.

I expect the trust has a higher level of new (debt-leveraged) purchases that Barony has. It's not like you can get a second mortgage on a used Timeshare....
 

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As someone who is Chairman's Club I personally have a problem with a $250 a year fee as opposed to $185 or $225. I get nothing special from the membership. I enrolled my weeks strictly for the possibility of having flexibility. I have to have a separate II account for my non Marriott weeks and in my Marriott weeks none of my units are lock offs. I'd like to know what I am getting for the extra 25/65 dollars!

A member with 2,000 points should have less activity than a member with 20,000 points. The lower fee reflects the cost of the lower activity.

Someone at Chairman likely owns multiple weeks and thus has a combination of multiple exchanges for Marriott reward points, Interval Marriott trades or Destination point reservations and pays no additional fees for those services (except for the $65 paid as membership).
 

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I expect the trust has a higher level of new (debt-leveraged) purchases that Barony has. It's not like you can get a second mortgage on a used Timeshare....

My assumption is that the bad debts shown for both Barony and the Trust were not from purchase money, but are from defaults on maintenance fees only.

In their 2014 10-K, Marriott says their default rate on new purchases was 3.9%. But they also say they set aside a reserve for bad debts on the books of the MVW corporation to account for a certain non payment percentage. So any default on debt-based purchases would be accounted for on the corporate balance sheet, not on the revenue/expense statements for the various HOAs and the Trust Association, which is totally separate from MVW corporate.

The 10-K also says that in 2014, about 42% of customers financed their purchase, so for the $548 million in North American sales, that could mean about $230 million of new consumer debt assuming the purchase size is the same whether the customer pays by cash or credit. Based on that, the expectation of bad debt from purchases might be closer to $9 million than the $3 million shown on the Trust budget.

For those reasons, I think the bad debt numbers shown on the Trust budget and the Barony budget are for defaults on maintenance fees only, so I still don't understand why Trust owners would be so much more likely to not pay their MF than Barony owners.
 
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Ralph Sir Edward

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My assumption is that the bad debts shown for both Barony and the Trust were not from purchase money, but are from defaults on maintenance fees only.

In their 2014 10-K, Marriott says their default rate on new purchases was 3.9%. But they also say they set aside a reserve for bad debts on the books of the MVW corporation to account for a certain non payment percentage. So any default on debt-based purchases would be accounted for on the corporate balance sheet, not on the revenue/expense statements for the various HOAs and the Trust Association, which is totally separate from MVW corporate.

The 10-K also says that in 2014, about 42% of customers financed their purchase, so for the $548 million in North American sales, that could mean about $230 million of new consumer debt assuming the purchase size is the same whether the customer pays by cash or credit. Based on that, the expectation of bad debt from purchases might be closer to $9 million than the $3 million shown on the Trust budget.

For those reasons, I think the bad debt numbers shown on the Trust budget and the Barony budget are for defaults on maintenance fees only, so I still don't understand why Trust owners would be so much more likely to not pay their MF than Barony owners.

I think that goes back to the Vacation Club concept. You cannot evade your ownership of a directly owned timeshare easily. That's why the "Viking Funeral" concept was created.

However, my reading of the Vacation Club docs allow default without recourse, as the points owners do not own the underlying weeks directly. (Of course, this would have to be settled in a court of law, as the combined terms are rather weasel-worded). And, of course, IANAL...
 

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I think that goes back to the Vacation Club concept. You cannot evade your ownership of a directly owned timeshare easily. That's why the "Viking Funeral" concept was created.

However, my reading of the Vacation Club docs allow default without recourse, as the points owners do not own the underlying weeks directly. (Of course, this would have to be settled in a court of law, as the combined terms are rather weasel-worded). And, of course, IANAL...

As I thought about it more, I think that the purchase debt may actually have an impact on the disparity between Trust and Barony bad debt expense as you first suggested, even though the actual bad debt expenses shown on the HOA and Trust budgets is related only to the maintenance fee.

If someone defaults on their purchase loan, they are also likely to default on their maintenance fees. So since long-sold out resorts like Barony likely have little purchase debt left, the only defaults they have to deal with are owners who can't/decide they won't continue to pay the $1190 maintenance fee. But in the Trust, there is still a lot of purchase debt outstanding, so there are probably more defaults and these folks also opt not to pay their maintenance fee - which serves to inflate the number of people defaulting on the MF compared to an established resort like Barony. Marriott Vacations Worldwide corporate incurs the bad debt cost for the purchase money, but then the Trust Association has to bear the bad debt expense of the associated maintenance fee.
 

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I think that goes back to the Vacation Club concept. You cannot evade your ownership of a directly owned timeshare easily. That's why the "Viking Funeral" concept was created.

However, my reading of the Vacation Club docs allow default without recourse, as the points owners do not own the underlying weeks directly. (Of course, this would have to be settled in a court of law, as the combined terms are rather weasel-worded). And, of course, IANAL...

I don't understand this. If the only parameter that defines recourse for timeshares is whether you're dealing with a Weeks-based deeded system or a Points/Trust-based deeded system, how is it that non-Marriott timeshare companies who offer only a Points/Trust system haven't suffered from rampant defaults by Owners/Members if, as you say, they can suffer no consequence? If that was the case Disney, for one, wouldn't still be in the timeshare business and they'd certainly not be as successful as they are and always have been.

MVW Points Owners don't own Weeks in the same way as Weeks Owners do, but they own deeded interests in the Trust which is composed of like Weeks (as well as fractional non-MVCI intervals.) Owners/Members who default on Points purchases and MF's are subject to similar if not the same foreclosure proceedings as Weeks Owners who default, as far as I know.

MVW's Points/Trust-based timeshare system isn't at all the same thing as what's normally referred to on TUG as a "Viking Ship" because alongside the purchase of Points buyers enter into a contractual agreement with MVW to perform as stipulated. Of course there's recourse for non-performance!
 

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Suzanne.....heard about the 18% increase in flood insurance on local public radio today. Apparently the feds are no longer subsidizing however are limiting insurance companies to only 18% increases each year until they get where they need to be. Example shared today was a home that went from $3000 a year increasing 18% each year to $40,000. Yes $40,000 a year!! Some think some beach towns will be ghost towns in the next 5-10 years. This will no doubt have an impact on maintenance fees moving forward.
 

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They are limiting it to 18% increases per year so we don't all go jump off the bridge at the same time! There may be a big sale on coastal properties within the next few years.
 

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They are limiting it to 18% increases per year so we don't all go jump off the bridge at the same time! There may be a big sale on coastal properties within the next few years.

If we all jumped off the bridge at the same time, that would just raise the water levels and make things worse. :D
 

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I wrote to the liaison for the HOA asking about the costs associated with the DC program 1+ stays and what impact if any it has on MF's.

"The Destination checkouts are tracked. We get reimbursed the checkout/clean cost by the Destinations Trust for every additional checkout/clean."

Nothing new here. I was curious and looking for a validation that it is not in my MF.
 

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Forgot to include that - the membership dues are shown as follows:

Owner and Select: $185
Executive and Presidential: $225
Chairman: $250

I'll edit the top post to add that. Thanks for the reminder.

With Club Dues invoices currently being sent the Points FAQ has been updated to reflect these 2016 amounts. Thanks, Jim!
 

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With Club Dues invoices currently being sent the Points FAQ has been updated to reflect these 2016 amounts. Thanks, Jim!

Shouldn't the FAQ also be updated to reflect the 2016 maintenance fee of $0.5025? It still lists the 2015 fee of $0.475.
 

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Shouldn't the FAQ also be updated to reflect the 2016 maintenance fee of $0.5025? It still lists the 2015 fee of $0.475.

Yep, working on the MF thread now and will get to the FAQ. :)
 

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Interesting wrinkle

But stock price should not affect maintenance fees at all. The Association Boards set them. (I do realize Marriott controls many of these Boards.) And Marriott itself pays the fees on many many units. The maintenance fees are spent to maintain the property.

I came upon this thread when it was already fairly mature, but I found the above quote on the first page. For me it portrayed yet another underlying problem with the Destination Club format.

At the older resorts that are predominately held by legacy owners (mostly sold out) the Association Board eventually comes to be dominated by owners, not the developer/manager. Owners then have a high level of say in MF increases, especially the reserves and elective costs.

I don't think this will ever happen with resorts dominated by the trust. The managers of the Trust will always hold a significant and dominant majority of the seats on the board. Sure they have a fiduciary responsibility to the owners of the trust, but one has to question their loyalties. Is their loyalty really going to be in favor of the trust owners, or to their employer? :shrug:
 

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At the older resorts that are predominately held by legacy owners (mostly sold out) the Association Board eventually comes to be dominated by owners, not the developer/manager.

Is this true at most mature Marriott resorts? Do owners with no ties to Marriott control most of the boards?

I know in our previous ownership, Diamond Resorts, Diamond employees or those with close ties to Diamond held a majority of the seats on the board even though the resorts were long sold out and theoretically controlled by owners.

When I received the voting proxy for our Marriott Barony ownership earlier this year, I was surprised to see that none of the five candidates for the two open board seats had any obvious ties to Marriott. That was so different than my experience over the previous 16 years as a Diamond owner. In that program, there would be 20, 30, or more candidates for a couple of open positions, with two or three being Diamond employees. The winners would always be the Diamond employees.
 

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As long as the developer/manager owns weeks, they can vote those weeks. The key is to get the owners to vote their proxies when they receive them. As the developer owns fewer and fewer weeks, the opportunity to get control of the board increases, but the owners have to vote. You can be sure the developer is voting their ownership weeks.
 
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