Poipu Point - Walk away from ownership?

pseda · Oct 22, 2011

I have requested to see a copy of the insurance policy at the resort. I've been told that the request has been submitted and they will get back to me. I also asked if we were going to drop this insurance and look for another. I was told that this wasn't being considered. Amazing!!!

dwojo · Oct 22, 2011

craigrow said:
I get that people are upset about the large assessment at the Point at Poipu. Admittedly I'm new to the timeshare world and no expert, but I don't see how anyone can blame Diamond. Here's how I understand things went down.

Somebody, Sunterra I think but definitely not Diamond, built the resort. It is poor design and construction that seems to be the root cause of the water intrusion problems.

Diamond was voted in by the HOA as the new management company. I keep reading "Diamond bought the point" but that's not possible as it is the deed holders who own the resort. Diamond may have purchased a number of deeds but they could not have "bought the resort."

Diamond discovered the water intrusion problem.

Diamond investigated both insurance claims and legal action but determined neither would recover significant money.

Diamond got bids for the repair work.

A winning bid was selected. It's not clear by whom but since the HOA will be on the hook for the bill they must have had at least a veto right.

The HOA, not Diamond, made a special assessment.

Diamond billed the owners for their share of the assessment.

I’m not sure what Diamond was supposed to do differently.

You could certainly argue Diamond should have investigated more thoroughly and found the problem prior to buying any deeds they own. However, that would not have made the problem go away. It only would have left the owners with the problem and no Diamond deep pockets, which are covering a significant amount of the cost. Diamond is on the hook for the special assessment just like other owners. If anyone should be upset about this it is the Diamond Hawaii trust owners that have no desire to use the Point. They’re on the hook for a share of this assessment on a resort they don’t even use.

Was Diamond supposed to pay for repairs that are the responsibility of the owners? That is clearly not a responsibility of any management company. Owners are responsible for the cost of maintenance and repair on any piece of real estate. The deed holders are the owners.

Was Diamond supposed to ignore the problem or make it magically go away?

Why isn’t anyone addressing their anger at the board for making/approving the decision to essentially re-build the resort and push a large special assessment on the owners.

Why isn’t anyone addressing their anger at the owners who let Diamond become the management company and take over their board? Hell, Diamond only owns 10% of the deeds. If just 2 in 10 deed owners were active Diamond would have zero power.

Why isn’t anyone addressing their anger at the idiots who designed and built a flawed structure?

Diamond controls the HOA so being upset with their handling of things is understandable. Had they been more forthcoming with information regarding all of the damage people might have been better prepared for the financial hit. More notice of the size of the SA would have been helpful. I don't think DRI realizes that nowadays many people just do not have the money. I myself would have liked to see a summary of all bids submitted to repair the damage so I would know that the best bid was accepted.

Pit · Oct 23, 2011

Carolinian said:
Hawaii's law, which governs timeshare HOA's, is found at Chapter 514A of the Hawaii Revised Statutes. The relevent portion, as quoted in a Kauai newspaper in an article on Point at Poipu, is:
“The resident manager or managing agent or board of directors shall keep an accurate and current list of members of the association of apartment owners and their current addresses ... The list shall be maintained at a place designated by the board of directors and a copy shall be available, at cost, to any member of the association as provided in the declaration or bylaws or rules and regulations ...”
This is even more specific as to timeshare HOA's than the general not-for-profit law.

There is also Hawaii's non-profit corp law. Note that the corporation is not required to distribute the information to association members, only to make it available for inspection/copying. Some other states require all HOA records (e.g. phone numbers, email addresses) be made available to members for a proper purpose.

§414D-302 Inspection of records by members. (a) Subject to sections 414D-301(e) and 414D-303(c), a member is entitled to inspect and copy, at a reasonable time and location specified by the corporation, any of the records of the corporation described in section 414D-301(e) if the member gives the corporation written notice or a written demand at least five business days before the date on which the member wishes to inspect and copy.

(b) A member is entitled to inspect and copy, at a reasonable time and reasonable location specified by the corporation, any of the following records of the corporation if the member meets the requirements of subsection (c) and gives the corporation written notice at least five business days before the date on which the member wishes to inspect and copy:

(1) Excerpts from any records required to be maintained under section 414D-301(a), to the extent not subject to inspection under subsection (a);

(2) Accounting records of the corporation; and

(3) Subject to sections 414D-109(b) and 414D-305, the membership list.

(c) A member may inspect and copy the records identified in subsection (b) only if:

(1) The member's demand is made in good faith and for a proper purpose;

(2) The member describes with reasonable particularity the purpose and the records the member desires to inspect; and

(3) The records are directly connected with this purpose.

(d) This section does not affect:

(1) The right of a member to inspect records:

(A) Under section 414D-109; or

(B) If the member is in litigation with the corporation to the same extent as any other litigant; or

(2) The power of a court, independently of this chapter, to compel the production of corporate records for examination. [L 2001, c 105, pt of §1; am L 2002, c 130, §68]

JudyS · Oct 23, 2011

craigrow said:
I get that people are upset about the large assessment at the Point at Poipu. Admittedly I'm new to the timeshare world and no expert, but I don't see how anyone can blame Diamond....

I think a major issue here is just the amount of the Special Assessment. Owners are finding it hard to believe that such a huge amount per unit is needed, and therefore suspect DRI is "ripping them off" in some way.

I don't own at this resort, and I really don't know if the amount requested (almost $300,000 per condo) is necessary or not. It seems like a huge amount to fix a condo, but I don't know how big these condos are.

Which brings me to a question that I've asked before: Anyone know the square footage of these units?

Here's an option I haven't seen before. Given the state of the economy and the drop in tourism, I wouldn't be surprised if there were some hotels in the area that were for sale. Maybe DRI could buy another hotel (or a couple of them), move the timeshare to the new hotel, and demolish this property? Of course that would be expensive--but $65 million goes a long way, even in Hawaii.

T_R_Oglodyte · Oct 23, 2011

JudyS said:
Which brings me to a question th

IIRC most of the units are about 1600 sf.

BTW - don't underestimate the differences in costs and difficulty working in Hawai'i as compared with the mainland 48 states. My wife has family who were very successful contractors in the Pacific NW - they've won numerous awards in the Streets of Dreams competitions and are quite highly regarded. The patriarch, who started the business moved to Hawa'i almost ten years ago, with the goal of expanding the business and retiring after it was established. They started up with a set of clients already in hand - people for whom they had built houses in the Northwest who wanted them to build another house for them on Hawai'i.

We visited with them on one of our trips, and he spent a lot of time talking about how much more it cost to do construction in Hawai'i. As we were driving, he was pointing out ordinary houses - simple two to three bedroom, ~1500 sf single family homes in ordinary communities - not ocean front or anythng like that. Places where the residents of the islands live. They were listing for $350,000 to $400,000 dollars. He had done due some checking around before he reached the islands, and figured that if worse came to worse and his mainland clientele dried up he could easily provide ordinary single family housing at prices lower than that. He got his tail handed to him, and a couple of years later they were back in the mainland having jettisoned those plans.

Using that as a reference point, a price of $300,000 per unit seems like it might be on the high side, but not completely out of the question.

Carolinian · Oct 23, 2011

pseda said:
I have requested to see a copy of the insurance policy at the resort. I've been told that the request has been submitted and they will get back to me. I also asked if we were going to drop this insurance and look for another. I was told that this wasn't being considered. Amazing!!!

State law, at least in most states, gives you an absolute right to inspect and copy such documents, but the resort does not have to sent them to you. To enforce your right to inspect and copy, you have to physically go to the resort. But since this management is willfully violating the law as to owners legal rights to inspect and copy membership lists, how much else they will stonewall on remains to be seen.

JudyS · Oct 23, 2011

T_R_Oglodyte said:
IIRC most of the units are about 1600 sf.

Thanks, Steve. So, the repair costs quoted are about $185 per square foot. That still sounds high to me, but this *is* Hawaii we are talking about.

Carolinian · Oct 23, 2011

A regular poster on another timeshare BBS checked the MLS listings for completed sales of similar condos on the island of Kauai and found the average sale price for the past year to be $147,000. When it is proposed to spend over twice that on just repairs, it does raise eyebrows.

Also, one member at this resort posted info from minutes of the HOA BOD meeting when the repairs were agreed to and contracts approved. Most of the meeting was in executive session, which means not in the minutes. Why this lack of transparency? This is not the sort of thing a board normally goes into executive session on, which hides the details from members. To me, this is a huge red flag that something in the whole arrangement may not be kosher. I served on an HOA board myself during a major hurricane recovery rebuild, and we never went into executive session on any aspect of that. I Skyped a friend who served on another HOA board that dealt with a major rebuild from the same hurricane and asked if they had held executive sessions on anything during their rebuild, and his response was ''No, we did not have anything to hide''.

JudyS said:
I think a major issue here is just the amount of the Special Assessment. Owners are finding it hard to believe that such a huge amount per unit is needed, and therefore suspect DRI is "ripping them off" in some way.

I don't own at this resort, and I really don't know if the amount requested (almost $300,000 per condo) is necessary or not. It seems like a huge amount to fix a condo, but I don't know how big these condos are.

Which brings me to a question that I've asked before: Anyone know the square footage of these units?

Here's an option I haven't seen before. Given the state of the economy and the drop in tourism, I wouldn't be surprised if there were some hotels in the area that were for sale. Maybe DRI could buy another hotel (or a couple of them), move the timeshare to the new hotel, and demolish this property? Of course that would be expensive--but $65 million goes a long way, even in Hawaii.

Carolinian · Oct 23, 2011

You really cannot stop DRI from getting the weeks foreclosed. When it goes to sale at the courthouse door, there are not likely to be any other bidders standing there except DRI. An independent HOA would bid in the amount of their lien and make DRI pay at least that much, but will a puppet HOA, controlled by the developer do that???????????????? If DRI bids $1 per week, will the HOA even enter any counter bid?

When an HOA is foreclosing, and the HOA is controlled by a developer still in active sales, there is too often some funny business involved in the process. I have seen it with foreclosures by developer-controlled HOA's on the OBX.

Poobah said:
I was "lucky enough" to go through this same thing as an owner at Morritts in Grand Cayman after Ivan. The posts on this board are deja vu and in the end David Morritt did whatever he wanted to do. In fact, to the best of my knowledge, he never disclosed how much he got from the arbitration with Lloyds of London.

The situation is a little different in that Morritts is a "right to use" situation, not an ownership situation, nor was the special assessment near the level of this one. But, David and DRI are out of the same mold: Public Relations is not their long suit!

One of the similarities I see is asssessing the current owners/trust for defaulted special assessment fees. This is fine, as long as the HOA gets the defaulted units, and gets the sale proceeds to compensate the owners/trust for their investment.

If the idea is that the owners/trust are going to provide funding to make up for the defaults and then DRI gets the interval to sell and take the profit, this is simply wrong. I think even David Morritt gave in on this point.

If DRI gets the defaulted units and the proceeds of the sales they should be totally responsible for anteing up the delenquent/defaulted fees. Defaulted/delenquent fees should not be part of the Special Assessment to the owners/trust.

Even SunTerra paid the HOA any delinquent/defaulted fees, because they got the units back and re-sold them.:whoopie:

Cheers,

Paul

T_R_Oglodyte · Oct 23, 2011

Carolinian said:
A regular poster on another timeshare BBS checked the MLS listings for completed sales of similar condos on the island of Kauai and found the average sale price for the past year to be $147,000. When it is proposed to spend over twice that on just repairs, it does raise eyebrows.

$147,000 is totally absurd. $147,000 won't even get you a 1000 sf, one-bedroom house in a working class, non-tourist neighborhood on Kauai, sold as is and with termites. Perhaps one can get an 1500 sf condo somewhere on Kaua'i for $147,000. It won't be waterfront, it won't be in Poipu, and it won't be built to anywhere near the same standards.

When we were there a month ago, comparable condos in the Poipu Kai development (there are where Point at Poipu is located) were listing for $500,000 to $800,000. Granted those were listings, but I don't think reputable real estate agents were telling people to put listings at three to five times actual market value.

A few miles down the road, at Koloa Landing, two-bedroom condos are moving, albeit slowly, with a minimum list price of $900,000 - that's list so I'm sure that actual sales are less. And those aren't even ocean front units - they're about half a mile inland from Po'ipu Beach.

T_R_Oglodyte · Oct 23, 2011

Carolinian said:
You really cannot stop DRI from getting the weeks foreclosed. When it goes to sale at the courthouse door, there are not likely to be any other bidders standing there except DRI. An independent HOA would bid in the amount of their lien and make DRI pay at least that much, but will a puppet HOA, controlled by the developer do that???????????????? If DRI bids $1 per week, will the HOA even enter any counter bid?

When an HOA is foreclosing, and the HOA is controlled by a developer still in active sales, there is too often some funny business involved in the process. I have seen it with foreclosures by developer-controlled HOA's on the OBX.

Doesn't that depend on who is doing the foreclosing? If it's a foreclosure for failure to pay taxes, when the county forecloses all claims and liens are wiped out.

But if it's the resort foreclosing for non-payment of dues, can't the require that fees be brought current as part of the deal? (Of course, I'm assuming that they would actually apply such a condition with DRI.)

And if the foreclosure is by DRI because deedholders have are in arrears on their loans (Sunterra/DRI has actually used mortgages to secure loans) then the resort could still insist that the new owner bring the account current before restoring reservation rights.

Carolinian · Oct 23, 2011

T_R_Oglodyte said:
Doesn't that depend on who is doing the foreclosing? If it's a foreclosure for failure to pay taxes, when the county forecloses all claims and liens are wiped out.

But if it's the resort foreclosing for non-payment of dues, can't the require that fees be brought current as part of the deal? (Of course, I'm assuming that they would actually apply such a condition with DRI.)

And if the foreclosure is by DRI because deedholders have are in arrears on their loans (Sunterra/DRI has actually used mortgages to secure loans) then the resort could still insist that the new owner bring the account current before restoring reservation rights.

Hawaii may or may not have some odd provisions, but having handled timeshare foreclosures myself, the deeded interest is sold free and clear of any liens. Where the foreclosing entity should protect itself for past due amounts is to bid in the amount of its liens so the property does not go any cheaper than that. In every timeshare foreclosure I ever handled, that is precisely what the HOA did, but then that was member-controlled HOA situations.

Carolinian · Oct 23, 2011

T_R_Oglodyte said:
Doesn't that depend on who is doing the foreclosing? If it's a foreclosure for failure to pay taxes, when the county forecloses all claims and liens are wiped out.

But if it's the resort foreclosing for non-payment of dues, can't the require that fees be brought current as part of the deal? (Of course, I'm assuming that they would actually apply such a condition with DRI.)

And if the foreclosure is by DRI because deedholders have are in arrears on their loans (Sunterra/DRI has actually used mortgages to secure loans) then the resort could still insist that the new owner bring the account current before restoring reservation rights.

Since you have been participating in the same thread on www.timeshareforums.com , I am surprised you did not respond to his point there.

JudyS · Oct 23, 2011

T_R_Oglodyte said:
... $147,000 won't even get you a 1000 sf, one-bedroom house in a working class, non-tourist neighborhood on Kauai, sold as is and with termites. Perhaps one can get an 1500 sf condo somewhere on Kaua'i for $147,000. It won't be waterfront, it won't be in Poipu, and it won't be built to anywhere near the same standards.

When we were there a month ago, comparable condos in the Poipu Kai development (there are where Point at Poipu is located) were listing for $500,000 to $800,000....

That is very interesting. I really had no idea how much condos were going for on Kaua'i. (I live near Detroit, where nice houses are selling for under ten thousand dollars.

)

If comparable whole ownership condos are selling for $500,000 and up, then spending $300,000 per condo to repair makes more sense. Also, there goes my idea that DRI could just buy a different resort on Kaua'i, in better repair, for under $65 million!

However, if comparable condos are worth $500,000 plus, then here's another idea. Maybe some of these timeshares could be converted to whole ownership condos. Timeshare owners who can't or won't pay the special assessment turn their deeds in. For every 52 deeds turned in, a whole ownership condo is created and sold for $500,000 or more. This covers the $300,000 repair cost for that condo, with $200,000 per converted condo left to help pay for the repairs to the rest of the resort, or to pacify DRI and get them to agree to the plan.

artringwald · Oct 23, 2011

Water Intrusion Meeting Presentation

FYI. The presentation for the meetings is now available if you log into the HOA web site: http://www.diamondresortshoa.com/specialassessment.aspx

billstellar · Oct 23, 2011

Schedule of payments

I am a newbie to TUG and have read all of the P@P postings on the special assessment. (What a way to spend a Saturday .)
Anyway we own a deeded week and the reality of condos has been forcefully rammed down our throats and I am thankful in the sense that we were considering a condo for retirement and that thought has now vanished.
We are not impressed with the non-business-like approach of DRI when it comes to working and communicating with the owners. However, it is clear that the HOA should be acting in the owner's interest and it is not - at least in this case.
The report on the meeting the other day (thanks for that) showed that the assessment of $5893.32 per unit portion is to be expended over 6 years and the schedule is 1 building in the first year and 2 each other year (if we give the lobby etc the weight of a building which I presume is overweigting it.) So the first phase cost $535.76 of assessment total, and each of the others $1071.52 of the total. If this money came from a bank it would provide the money in phases and so the HOA should have arranged that for the collection. This year we should only pay $535.76 per unit for phase 1, and then we should pay $1071.52 for the next 5 years for the following phases. This would make it bearable for small (coming to retirement) owners like me.
So my First question is: To whom do we collectively speak to have the assessment payments restructured in this way, or in some modified way which spreads the pain over at least 5 years? The Chairman's assertion that some have already paid is not only arrogant it is unfeeling and Dicksonian - shame on him.
My Second question is : How can the HOA not react to the obvious despair of members who love P&P but cannot see how to get out of the bind they are in? The HOA is surely the employer of DRI.
My Third question is : Can the HOA be instrumental in getting the management of our property to be more reasonable when it comes to the issue of buybacks? As someone said the "voice of the people" must surely influence the operation of our resort, and the HOA is supposed to be our voice. Even the selling of property is based on draconian regulations.

The organization is like a Gorgon, there is no one place to go with concerns, choose a (snake)head and it is the wrong one. I for one need constructive direction on where to direct my desires and wishes for both management issues and for help and relief (with this particular schedule of payments.)
Anyone with the constructive answers to my questions please post or email me directly billrobertson@eastlink.ca. I, like many owners, need a solution to this onerous, and apparently unnecessary, payment schedule issue. Surely an email campaign to the correct person could assist us.
As an aside I am glad I joined TUG and read these posts.

Carolinian · Oct 23, 2011

Maybe the logistics of that would be a bit easier with a floating week resort, but probably not since each week is deeded as a specific unit and week even if it floats. It would also take a supermajority and perhaps unanimous vote of the owners of all units and weeks at the resort to allow for such a program. The logistics would be a nightmare.

JudyS said:
That is very interesting. I really had no idea how much condos were going for on Kaua'i. (I live near Detroit, where nice houses are selling for under ten thousand dollars. )

If comparable whole ownership condos are selling for $500,000 and up, then spending $300,000 per condo to repair makes more sense. Also, there goes my idea that DRI could just buy a different resort on Kaua'i, in better repair, for under $65 million!

However, if comparable condos are worth $500,000 plus, then here's another idea. Maybe some of these timeshares could be converted to whole ownership condos. Timeshare owners who can't or won't pay the special assessment turn their deeds in. For every 52 deeds turned in, a whole ownership condo is created and sold for $500,000 or more. This covers the $300,000 repair cost for that condo, with $200,000 per converted condo left to help pay for the repairs to the rest of the resort, or to pacify DRI and get them to agree to the plan.

lv_maui · Oct 23, 2011

One more

I know that I promised no more posts but I found this on a complaints board that I found interesting and applicable

*13th of Oct, 2011 by* *Frontal Labotomy 0 Votes
Well this is a 'turn-up' for the books.
It appears that many members of the British DRI Protesters group - http://drip.enjin.com - have emailed Stephen Cloobeck regarding the exhorbitant maintenance fees and their inability to pay. Cloobeck has emailed them back to tell them that " I will revoke your membership. You will be able to reinstate at any time in the future. My apologies for your stress. My offices will send out the paperwork. Wish you would contacted me sooner".
It makes me wonder if this has all come about because the protesters group has pushed the BBC into featuring Diamond Resorts on its programme 'Rip Off Britain' in November ?????

JudyS · Oct 23, 2011

I suggested that perhaps some owners could deed back their units, which would then be sold as whole-ownership condos, and Carolinian said:

Carolinian said:
Maybe the logistics of that would be a bit easier with a floating week resort, but probably not since each week is deeded as a specific unit and week even if it floats. It would also take a supermajority and perhaps unanimous vote of the owners of all units and weeks at the resort to allow for such a program. The logistics would be a nightmare.

I hadn't realized this resort was deeded as fixed week instead of float. That would make such a plan much more complicated.

I don't know how Hawaii timeshare laws work or what the condo docs say at Point at Poipu, so I don't know if my plan would be feasible there or not. If there are a lot of owners who want to walk away, it might be worth their while to look into this at least a little. Many of the other things suggested here, such as suing DRI, are even more risky and expensive, and may have a lower chance of success.

I definitely agree with you, Steve (Carolinian), that timeshares laws in many states are very inflexible. This makes it difficult for HOAs to dissolve, shed units, change ownership terms, or do just about ANYTHING to adapt to changing conditions. I see this as a major problem, and something timeshare owners should work to change.

On a lighter note, regarding The Point at Poipu:
"We can rebuild it. We have the technology. We have the capability to build the world's first bionic resort. Better than it was before. Better... stronger... faster... The sixty-five million dollar timeshare!”

lv_maui · Oct 23, 2011

JudyS said:
I suggested that perhaps some owners could deed back their units, which would then be sold as whole-ownership condos, and Carolinian said:

I hadn't realized this resort was deeded as fixed week instead of float. That would make such a plan much more complicated.

The resort is a mix of many things, both float week float unit, float week fixed unit, view categories, etc.

I think your plan, conceptually, would work to get 51 weeks of float float owners together with many caveats.

Carolinian · Oct 24, 2011

While some states have grafted things on, timeshare law is much more consistent between states than many areas of the law. This is because all states have adopted the Uniform Condominium Act and that applies to all timeshares organized after its adoption in the particular state. For timeshares organized earlier, they fall under two different variations of statutoty frameworks, as state condominium laws prior to the Uniform Condominium Act were based on either the HUD Model Act or the Puerto Rico condominium law, the larger group being under the former.

From other posts, the weeks at this resort do float on a functional basis, but like many floating week resorts, the deed references a specific week and unit you own for inventory and legal purposes, and therein lies the rub.

JudyS said:
I suggested that perhaps some owners could deed back their units, which would then be sold as whole-ownership condos, and Carolinian said:

I hadn't realized this resort was deeded as fixed week instead of float. That would make such a plan much more complicated.

I don't know how Hawaii timeshare laws work or what the condo docs say at Point at Poipu, so I don't know if my plan would be feasible there or not. If there are a lot of owners who want to walk away, it might be worth their while to look into this at least a little. Many of the other things suggested here, such as suing DRI, are even more risky and expensive, and may have a lower chance of success.

I definitely agree with you, Steve (Carolinian), that timeshares laws in many states are very inflexible. This makes it difficult for HOAs to dissolve, shed units, change ownership terms, or do just about ANYTHING to adapt to changing conditions. I see this as a major problem, and something timeshare owners should work to change.

On a lighter note, regarding The Point at Poipu:
"We can rebuild it. We have the technology. We have the capability to build the world's first bionic resort. Better than it was before. Better... stronger... faster... The sixty-five million dollar timeshare!”

Carolinian · Oct 24, 2011

If you want to put some heat to DRI over the way they are handling things at Point at Poipu, then I would have some members contact the BBC. Perhaps they could work that in to the story for November. Once you get it on the BBC, it should be easier to get some US media coverage.

lv_maui said:
I know that I promised no more posts but I found this on a complaints board that I found interesting and applicable

*13th of Oct, 2011 by* *Frontal Labotomy 0 Votes
Well this is a 'turn-up' for the books.
It appears that many members of the British DRI Protesters group - http://drip.enjin.com - have emailed Stephen Cloobeck regarding the exhorbitant maintenance fees and their inability to pay. Cloobeck has emailed them back to tell them that " I will revoke your membership. You will be able to reinstate at any time in the future. My apologies for your stress. My offices will send out the paperwork. Wish you would contacted me sooner".
It makes me wonder if this has all come about because the protesters group has pushed the BBC into featuring Diamond Resorts on its programme 'Rip Off Britain' in November ?????

craigrow · Oct 24, 2011

Thanks for the good discussion on my earlier post. I'm sorry not to have responded earlier. The moderators moved it and it took me a while to find it. Anyway...

lvMaui:

I don't know who built the resort, I just know it wasn't Diamond, which is the point.
"Diamond took over management from Sunterra's mgmt company." This is interesting. Did they pay Sunterra for that contract? Is this what people are referring to when they say "Diamond purchased the Point?" Anyway, if Sunterra had the right to do that without board approval then the ultimate responsibility still falls to the board as they gave Sunterra a contract which allowed them to sell the contract without board approval, just dumb if you ask me. Likely the board had to approve this transfer. Also, these contracts are not usually in perpetuity. Presumably the board has a mechanism to fire Diamond if they're unhappy. Again, Diamond only owns about 10% of the units.
"It is very important to understand that no deeded owners vote them in. NOT AT ALL. I think this is the biggest error in the post." Please re-read my original post as I never said the owners voted in Diamond. Clearly the HOA acted on their behalf, as the owners elected them to do.
"Diamond did not discover the water instrusion problem. It has been a problem for many years." Fine, you're making my point. The problem was not created by Diamond, and would have existed with or without their involvement. They're simply a messenger and the situation would likely be worse without their involvement.
"The HOA who has 2 employees on the Board, the mother of Linda Riddle and 2 non DRI owners voted in the Special Assessment. DRI voted in the SA. The HOA is controled by the HOA" Sorry, I'm not getting your point here. One thing I'd like to know, presumably this is in meeting minutes somewhere, what was the vote on the special assessment. Clearly the Diamond folks voted for it. What about the other HOA board members? What is unanimous? If so, you really don't have an argument about Diamond controlling the board.

Diamond's stonewalling with the member list is the most damning thing I've read. Unfortunately suing for that information would be suing the HOA. Suing a community which you're a member of is kinda like cutting off your own limbs. Still, it should be a relatively quick and painless suit. A homeowner in the HOA where I own my home did exactly that about a year ago. The total cost was about $10K. The HOA was forced to cover the legal fees as their violation was so egregious. Their violation, failure to let members see records of the association.

The discussion on foreclosures is also interesting. Again, I'm no expert but I don't see how a property gets foreclosed on by a special assessment or how that would end up with Diamond owning the deed.

A foreclosure is a legal proceeding where a creditor takes possession of a property which was used as collateral. In this case there is no creditor. Unless the HOA has some special contract with deed holders I expect the most they could do is place a lien on the deed.

I suppose the HOA might be able to get a court to sell the property and give them the proceeds. That seems unlikely and, given the deeds have about $0 of value on the re-sale market, not likely to help matters.

It seems more likely the HOA would ask the court to forcibly collect the dues via wage garnishment or the like. Any funds collected would go to the HOA and the deed, and responsibility for future maintenance fees, would stay with the deed owner.

The fees are a matter between the HOA and the deed owner. Diamond is but a messenger so I really don't see a scenario where Diamond ends up with ownership unless they buy the deeds. I don't see Diamond, or anyone else, buying any Poipu deed until the current owner pays the special assessment.

Finally, since someone asked about how a resort closure would impact DRI trust members...the trust documents clearly state that, if a property is removed from the trust, or becomes unusable, for any reason, DRI is responsible for replacing that property with something equivalent. In the case where the resort is a financial loss, however, I expect the trust (owners) would be on the hook for the cost of the replacement resort.

T_R_Oglodyte · Oct 24, 2011

craigrow said:
"Diamond took over management from Sunterra's mgmt company." This is interesting. Did they pay Sunterra for that contract? Is this what people are referring to when they say "Diamond purchased the Point?"

Yes. Sunterra was spiraling toward another bankruptcy filing (its second). Diamond purchased Sunterra, becoming the corporate successor. Typically, in any kind of acquisition all existing contracts pass through to the acquiring company. For example, if you are the owner of a lawn-care business and you sell your company to Lawns-R-Us, all of your existing contracts pass through to Lawns-R-Us unless the contract includes a provision allowing the contract to be terminated if one of the parties is acquired by someone else. I don't know if such a clause exists in the management contract for the resort; I doubt it.

craigrow said:
Anyway, if Sunterra had the right to do that without board approval then the ultimate responsibility still falls to the board as they gave Sunterra a contract which allowed them to sell the contract without board approval, just dumb if you ask me. Likely the board had to approve this transfer.

As noted above, Sunterra didn't sell the contract. Sunterra was acquired by DRI, and DRI became the successor in interest to Sunterra. It's the same thing that happened when Sunterra acquired Marc Resorts, who was the manager on-site before Sunterra and was acquired by Sunterra.

This is much ado about nothing. If there were a legal problem about the change in ownership, DRI would simply have allowed Sunterra to continue as a legal entity, the only difference being that Diamond would now own all of the shares of Sunterra stock instead of the previous owners.

craigrow said:
Also, these contracts are not usually in perpetuity. Presumably the board has a mechanism to fire Diamond if they're unhappy. Again, Diamond only owns about 10% of the units.

Terminating the management contract requires a majority vote of all ownership interests at the resort. That's not 50% of the votes counted at meeting with quorum. That's an absolute 50% of deeds. Thus failure of any owner to vote or return a proxy is the same as a vote to retain the management company.

The Hawaii Collection owns about 35% of the deeds at the resort. The Collection's votes are cast by the Manager for the Collection, which happens to be DRI. So collectively DRI controls about 40% to 45% of the votes at the resort. The only way to break that grip would be for the members of Board of Directors of the Trust to take over the Trust's voting. Since the Trust Board, like the resort Board, is the thrall of DRI, getting that to happen would require voting out the existing Board of the Trust at a future annual meeting of the Trust.

craigrow said:
A foreclosure is a legal proceeding where a creditor takes possession of a property which was used as collateral. In this case there is no creditor. Unless the HOA has some special contract with deed holders I expect the most they could do is place a lien on the deed.

I suppose the HOA might be able to get a court to sell the property and give them the proceeds. That seems unlikely and, given the deeds have about $0 of value on the re-sale market, not likely to help matters.

It seems more likely the HOA would ask the court to forcibly collect the dues via wage garnishment or the like. Any funds collected would go to the HOA and the deed, and responsibility for future maintenance fees, would stay with the deed owner.

The timeshare program documents allows the HOA to foreclose on property for non-payment of fees and assessments.

craigrow said:
The fees are a matter between the HOA and the deed owner. Diamond is but a messenger so I really don't see a scenario where Diamond ends up with ownership unless they buy the deeds. I don't see Diamond, or anyone else, buying any Poipu deed until the current owner pays the special assessment.

The scenario would be that the HOA forecloses on a bunch of deeds for non-payment. Of course, holding a bunch of deeds doesn't do the HOA much good, because that means those are ownership interests that aren't contributing funds to resort operations. So after foreclosure the Board will need to remarket those foreclosed units to get them back into revenue. To do that, they would almost certainly turn to DRI, who already has a sales operation on premises and is set up to market and sell timeshare property.

Now add in that the HOA Board is essentially the thrall of DRI - whatever deal is cut between the HOA and DRI to sell those foreclosed deeds is going be a sweet deal for DRI. No way DRI is going to pick up those deeds and pay the arrears. Instead most likely the deal will be structured so that DRI first gets a cut of the sales price as a commission. Then arrears are paid out of any money remaining after DRI collects its commission. And if there's money left over after that I suspect that DRI will want to pocket that as well.

craigrow said:
Finally, since someone asked about how a resort closure would impact DRI trust members...the trust documents clearly state that, if a property is removed from the trust, or becomes unusable, for any reason, DRI is responsible for replacing that property with something equivalent. In the case where the resort is a financial loss, however, I expect the trust (owners) would be on the hook for the cost of the replacement resort.

Not exactly correct. Per §5.4B of the Disclosure Statement for the Hawaii Collection (version as of July 11, 2008) the mandatory replacement provision is triggered in situations in which the loss of inventory is not at a resort that that has it's own association separate from the Collection.

lv_maui · Oct 24, 2011

Point of clarification:

First Manager was Aston Hotels and REsort. Osaumu Kanecko of Koar which is Sunterra had a relationship with them.
Second, when Sunterra acquired Marc, then made Marc manager.
Third, when Sunterra went through the BK, they sold Marc and created Resort Management International Hawaii to manage
Fourth, when Diamond acquired Sunterra, they became the mangers of RMIH

Marc was never the manager onsite until Sunterra bought them.

T_R_Oglodyte said:
As noted above, Sunterra didn't sell the contract. Sunterra was acquired by DRI, and DRI became the successor in interest to Sunterra. It's the same thing that happened when Sunterra acquired Marc Resorts, who was the manager on-site before Sunterra and was acquired by Sunterra.
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