Can a LLC purchase a time share? [merged]

[DeniseM]

It is 2016 - and you could only find a case from 2012? What does that tell you?

 

[theo]

Howzzat now? You're comparing apples to french fries...

Linda Space would not agree with this kind of thinking.

"In May 2012, Ms. Space notified the Association of the sale. The Association refused to acknowledge the sale. The Association stated that they would continue to bill Ms. Space for maintenance costs and for owner assessments. The Association would also not acknowledge the ownership, and not convey the benefits of ownership, to the buyer of the property found by Ms. Space."

http://www.courthousenews.com/2013/04/05/56403.htm

So she sued the Christie Lodge to force them to recognize the sale, and the HOA backed down and accepted the transfer, because what they were attempting was illegal.

Every case is different, of course, and this one did not involve an LLC, but it does illustrate how timeshare HOAs can't reject a legal timeshare transfer based on their opinion of the buyer. LLCs are legal entities that may hold property. <snip>

In the (completely irrelevant) CO case cited here, a stunningly inept and entirely capricious HOA arbitrarily "based this denial upon the assumption that the proposed buyer would not be personally using the unit, only renting it to others" (a very important detail that you've conveniently just ignored).

That grossly incompetent HOA clearly overstepped its' bounds and its' authority in that (completely irrelevant) CO case. The new buyer was a real person (not just a faceless LLC of indeterminate intent) and the HOA clearly had no factual basis or right to make a transfer acceptance determination based upon a (presumed, unsubstantiated, but nonetheless entirely lawful) intended use (i.e., rental) by a new, real valid individual owner. That small minded HOA was apparently upset that Ms. Space unloaded her unwanted week for a buck --- as was of course always her prerogative.

Sorry, but your very strange conclusion that this bizarre case relates in any way to a HOA rejecting a faceless LLC is, with all due respect, entirely without merit.

 

[CO skier]

The new buyer was a real person (not a LLC)

makes no difference, because they are both, equally legal entities entitled to own property.

the HOA quite simply had / has absolutely no basis or right to make a transfer acceptance determination based upon the (presumed) intended use of a new, valid owner.

At least you understand that part.

 

[theo]

<snip> At least you understand that part.

I do indeed understand. I also actively and so far successfully help to block any and all attempts to transfer to a faceless LLC as a BoD member at my resort and will continue to do so. If there is to be future litigation initiated by a faceless LLC (we always first ask for the corporate veil to be voluntarily dropped), we're locked and loaded, ready and waiting. Truth to tell however, such transfer attempts are not common at our place, presumably because weeks seem to have at least some value.

 

[Beefnot]

It is 2016 - and you could only find a case from 2012? What does that tell you?

Quite possibly, just that there have been few cases in the state of Colorado where this issue has arisen.

makes no difference, because they are both, equally legal entities entitled to own property.


At least you understand that part.

Ha, very nice counterpunches. And with that, he drops the mic...

 

[DeniseM]

Summary:

- Some resorts will approve a transfer to an LLC.

- Some resorts will not approve a transfer to an LLC.

- You usually won't know if they will accept the transfer, until the final step of the transfer process.

- If the resort refuses the transfer, you can sue them.

Seems like a great strategy!

 

[comicbookman]

1) Yes, because in this case if the buyer had been a bona fide LLC (as the OPs would be) the result would have been the same, because what the Christie Lodge was attempting was illegal, regardless of what legal entity Linda Space would have transferred the property to.

2) I don't know. It just depends on how many people, who want to sell a timeshare to a LLC or hold a timeshare in a bona fide LLC, are willing to sue the timeshare HOA for attempting something illegal. There is no question that many HOAs are thinking, "Who will ever sue us over this?", but they are on shaky legal ground if they do get sued, as Ms. Space proved.

You have no basis for saying what the HOA was doing would be illegal with regard to an LLC. In fact the complaint makes a point of saying that Mrs. Space was selling to an individual. The HOA has a duty to protect it's members. It has a reasonable suspicion that an LLC is being used as a Viking ship, it has a duty to refuse to accept the transfer. In the Space case it is clear the HOA did not present any evidence of a reasonable suspicion. The HOA's actions were not deemed illegal. They were attacked as not being reasonable and for not following their own rules.

 

[Beefnot]

You have no basis for saying what the HOA was doing would be illegal with regard to an LLC. In fact the complaint makes a point of saying that Mrs. Space was selling to an individual. The HOA has a duty to protect it's members. It has a reasonable suspicion that an LLC is being used as a Viking ship, it has a duty to refuse to accept the transfer. In the Space case it is clear the HOA did not present any evidence of a reasonable suspicion. The HOA's actions were not deemed illegal. They were attacked as not being reasonable and for not following their own rules.

Perhaps you didn't read his posts closely. We'll chalk it up to that.

 

[Beefnot]

Summary:

- Some resorts will approve a transfer to an LLC.

- Some resorts will not approve a transfer to an LLC.

- You usually won't know if they will accept the transfer, until the final step of the transfer process.

- If the resort refuses the transfer, you can sue them.

Seems like a great strategy!

Pretty much sums it up, yes. I surely wouldn't pursue that strategy. I'd likely give up right after they rejected the transfer. On a side note, I don't have an LLC, but I recently had two transfers rejected because I have too many ownerships within that system. So I just gave up rather than sue.

 

[CO skier]

The Christie Lodge certainly learned their lesson and realize that they can't deny transfers to legitimate LLCs:

"At the Christie Lodge, putting
processes in place to confirm that
buyers are legitimate has yielded
results, according to Lee. “We have
to treat ABC LLC as a legitimate
buyer unless we have reason not to,”
he explained. “We’ve put processes in
place to request buyer information. If
it’s an LLC we want to know who the
principal is, we want to talk to that
person, and we want them to accept
personal responsibility that mainte-
nance fees will be paid — otherwise
we are not going to recognize the
transaction. For a period, we were
not accepting 10 to 20 purchases
from these companies a month. Now
it’s down to zero because postcard
companies realize the transaction
must be to a bona-fide buyer.”



Can't post the link. Google "ballard spahr postcard companies viking ship llc" to read the whole article.

 

[comicbookman]

Perhaps you didn't read his posts closely. We'll chalk it up to that.

what part? I read the linked article. It is not relevant to the current discussion. The HOA in the space case was acting in an arbitrary fashion by denying to register a sale to an individual based solely on the sale price.

 

[DeniseM]

Two more:

-If you win the lawsuit - the resort will probably have to pay your legal fees, and transfer the timeshare to your LLC.

-If you lose the lawsuit - you will lose a lot of money, and the timeshare deed will be in limbo. To undo it, you will have to file an new "correction deed" with the County Recorder's Office, and you will need the cooperation of the seller, because you will be putting it back in their name.

 

[comicbookman]

The Christie Lodge certainly learned their lesson and realize that they can't deny transfers to legitimate LLCs:

"At the Christie Lodge, putting
processes in place to confirm that
buyers are legitimate has yielded
results, according to Lee. “We have
to treat ABC LLC as a legitimate
buyer unless we have reason not to,”
he explained. “We’ve put processes in
place to request buyer information. If
it’s an LLC we want to know who the
principal is, we want to talk to that
person, and we want them to accept
personal responsibility that mainte-
nance fees will be paid — otherwise
we are not going to recognize the
transaction. For a period, we were
not accepting 10 to 20 purchases
from these companies a month. Now
it’s down to zero because postcard
companies realize the transaction
must be to a bona-fide buyer.”



Can't post the link. Google "ballard spahr postcard companies viking ship llc" to read the whole article.

That is a reasonable standard. It gives a consistent way of measuring whether a transfer to an LLC is legitimate or not.

 

[DeniseM]

So, is the OP, hammerhammer, a "legitimate LCC," when his stated purpose is to transfer a deed to a LLC so he can abandon it at will?

 

[CO skier]

In the (completely irrelevant) CO case cited here, a stunningly inept and entirely capricious HOA arbitrarily "based this denial upon the assumption that the proposed buyer would not be personally using the unit, only renting it to others" (a very important detail that you've conveniently just ignored).

That grossly incompetent HOA clearly overstepped its' bounds and its' authority in that (completely irrelevant) CO case. The new buyer was a real person (not just a faceless LLC of indeterminate intent) and the HOA clearly had no factual basis or right to make a transfer acceptance determination based upon a (presumed, unsubstantiated, but nonetheless entirely lawful) intended use (i.e., rental) by a new, real valid individual owner. That small minded HOA was apparently upset that Ms. Space unloaded her unwanted week for a buck --- as was of course always her prerogative. They didn't even bother to adhere to their own rules and procedures. Duh!

Sorry, but your very strange conclusion that this bizarre case relates in any way to a HOA rejecting a faceless LLC is, with all due respect, entirely without merit.

... and now the "typographical" revisionist history has begun.

 

[CO skier]

So, is the OP, hammerhammer, a "legitimate LCC," when his stated purpose is to transfer a deed to a LLC so he can abandon it at will?

If it were the Christie Lodge, and he supplied the requested personal information, the answer would be yes, because it would be a bona fide LLC, not a Viking Ship.

 

[DeniseM]

So, what you are really saying is that as long as he lies about his true intentions, his deed would most likely pass the criteria that the BOD has set up.

But if he tells the truth, (that he wants to be able to abandon the deed at will) it probably won't.

Correct?

 

[raygo123]

raygo123 - You simply don't understand how it works.

With out the approval of the HOA's title office, the deed will not transfer to the LLC in the resort's records.

If the deed does not transfer in the HOA's records, the LLC:

- cannot make reservations
- cannot use the timeshare
- cannot pay maintenance fees
- cannot deposit the week with an exchange company.

Why? Because in the HOA's records - it will still be in the previous owner's name, and they will not acknowledge the LLC as the owner.

It doesn't matter if it has been recorded with the county, because the county does not get involved in timeshare title disputes - period.

This is not speculation - we have had frustrated sellers report this multiple times. Some of them paid a Viking Ship big bucks to dump their timeshare, and then they were shocked when the HOA would not accept the deed transfer, and the original owner was still 100% responsible.

Others were trying to transfer their deed to a legitimate buyer who wanted to deed the timeshare to an LLC, and the resort refused, because of the LLC.

It is already happening - saying "they can't do that," is meaningless.

Everything you said is true. If the deed was transfered and recorded, it is sold. Government always trumps a HOA. The difference comes in as to why it was transfered. Key words, in good faith. A transfer to avoid consequences is fraud. Now, the HOA can go after those individuals personally. And I would hope that they are held responsible to the full extent of the law.

I just received the 2016 CWA budget for Wyndham.
Bad debt is estimated at $3,648,162. Up $ 700,000 from last year. On my points, that is $65.00/yr. That's more than what Wyndham charges in management, and reservation and inventory management.

So, go get em Theo, it will be a challenge.



Sent from my Nexus 7 using Tapatalk

 

[CO skier]

So what you are really saying is that as long as he lies about his true intentions, his deed would most likely pass the criteria that the BOD has set up.

But if he tells the truth, (that he wants to be able to abandon the deed at will) it probably won't.

Correct?

No, I am just answering the original question.

1) LLCs may purchase timeshares.

2) Timeshare HOAs cannot deny transfers to bona fide LLCs (or individuals, or trusts or any other legal entities), simply because they are LLCs (or other legal entities).

That is all that I am saying, and backing it up with a few (relevant) facts along the way.

 

[DeniseM]

Nope - you posted this:

If it were the Christie Lodge, and he supplied the requested personal information, the answer would be yes, because it would be a bona fide LLC, not a Viking Ship.

But I can see that you don't like the question.

An individual who is deeding a timeshare to an LLC in order to be able to easily abandon the deed in the future, will not pass the resort's criteria if they tell the truth about their intentions.

They would have to lie.

Therefore, they are not a "bona fide LLC," either.

 

[theo]

<snip>
So, go get em Theo, it will be a challenge.

Truth to tell, it has not been an insurmountable challenge --- at least so far...

We try our best to get any would-be LLC buyer to just voluntarily drop the whole "corporate veil" routine and instead put forth a real name and identity and face to overtly accept personal responsibility for the legal and financial obligations associated with the ownership. In essence, we routinely practice that which the Christie Lodge in CO apparently had to learn the hard way (losing in court); i.e. we exercise due diligence and vet the buyer and the buyer's intentions as best and as reasonably and objectively as we can as a matter of routine practice. At our relatively small independent resort, that's fortunately an achievable objective. So far, so good.

Also, as previously stated, our "transfer rejection" actions are probably made easier (and maybe more infrequent) by the fact that most weeks at our relatively small facility have at least some inherent value, for use and / or "trade", as a result of which a legitimate LLC of legitimate intent is perhaps more likely and inclined to relent and just drop the whole "let's hide ourselves behind the corporate veil" routine. I dunno, that's just a personal working theory. A LLC can indeed lawfully own real property, but we try our level best to actively and energetically discourage any and all use of that option. Self-serving perhaps, but we actively seek accountability.

Yes, we may get sued someday if / when we reject a suspicious transfer to a litigious would-be LLC owner with deep pockets, willing to undertake a legal battle.
We believe that we're up to (and up for) any such legal challenge (quite unlike the irrelevant Christie Lodge / arbitrary HOA case cited earlier in this thread) and that we'll be locked, loaded and ready after prior answers to fundamental questions have been discovered (and documented) to not have been forthcoming, or were provided but found (and documented) to be neither credible nor verifiable. In short, we like our chances if legally challenged and we are quite comfortable with our position and our practices. In the meantime, our delinquency rate being consistently less than 3% keeps maintenance fee increases firmly in check and the other owners happy.

 

[DeniseM]

theo - Are you dealing with a lot of Viking Ship Companies?

 

[theo]

theo - Are you dealing with a lot of Viking Ship Companies?

No, but I attribute that good fortune to the fact that most weeks at our small resort have at least some inherent value, either for use, rental, or for "trade" purposes. Additionally, there is a resale agent on site two days per week to sell (or accept new listings from owners) and to try to "move" our (relatively few) HOA-owned weeks. In short, I like to believe that there is truly little or no reason for any owner who wants "out" of our place to ever have to seek out (or pay) a Viking Ship LLC.

 

[Beefnot]

what part? I read the linked article. It is not relevant to the current discussion. The HOA in the space case was acting in an arbitrary fashion by denying to register a sale to an individual based solely on the sale price.

You said that CO skier had no basis. Not to rehash, but to rehash:

http://www.courthousenews.com/2013/04/05/56403.htm

<snip>

Every case is different, of course, and this one did not involve an LLC, but it does illustrate how timeshare HOAs can't reject a legal timeshare transfer based on their opinion of the buyer. LLCs are legal entities that may hold property.

1) Yes, because in this case if the buyer had been a bona fide LLC (as the OPs would be) the result would have been the same, because what the Christie Lodge was attempting was illegal, regardless of what legal entity Linda Space would have transferred the property to.

makes no difference, because they are both, equally legal entities entitled to own property.

FROM THE LINKED ARTICLE:

The Association based this denial upon the assumption that the proposed buyer of the unit would not be personally using the unit, only renting it to others. This was despite the fact that Ms. Space and many other timeshare owners had not personally used their units in years and there is no declaration that prevents a timeshare owner from renting timeshare weeks. In fact it is believed that many other timeshare unit owners rent their timeshare weeks when not using them."
The Association claimed that the eBay bidder was "suspect," Space says. The claims that the rule it used to block the sale is ambiguous and arbitrary and unfairly allows the Association to block any sale that it "does not like."

"The restriction under Rule K would label the transfer of any timeshare to an individual or entity who has not used the timeshare interest as suspect," the complaint states. "The rule defines a suspect transfer as 'a conveyance of a timeshare interest to a natural person or an entity ... who has not used the timeshare interest.' The restriction does nothing to prohibit fraudulent conveyances since fraudulent conveyance commonly occurs when an owner seeks to transfer ownership to a family member so that the owner can be relieved of the responsibilities of ownership but still be allowed to use the property. The family member would have used the timeshare interest and would be agreeable under Rule K. By labeling suspect those who have never used the property, the restriction encompasses all but those closest to the owner, thus actually encouraging transactions that are not at arm's length and discouraging arm's length-transactions and promoting transfers to 'insiders' and transactions where debtor 'remains in control' as defined by CRS 38-8-105.

Whether or not you agree with the conclusion, or whether even a judge would as well, the assertion that CO skier had no basis for his argument is wrong. Within the article and within his reasoning, there is basis that what the HOA did would be illegal if it treated the LLC with similar prejudice. And subsequent posts further underscore the point.

 

[Saintsfanfl]

Everything you said is true. If the deed was transfered and recorded, it is sold. Government always trumps a HOA.

It's not that simple or that accurate.

First, a deed doesn't have to be recorded to be valid. Who is this "government"? The recording office? The recording office doesn't have to validate anything on the documents. The flip side to no recorded deed is a deed recorded that is not valid or possibly referencing property that doesn't even exist. The recorded deed may be a valid document or complete rubbish. The real legal transfer occurs before the deed is recorded.

Second, timeshare closing documents or deeds almost always reference governing timeshare docs. Sure you may be able to legally own a very specific piece of real estate but without the ability to ever use it due to the governing of the timeshare what is the point? Owning that specific piece of property does not in any way trump timeshare management. They may not always have a solid traditional real estate legal basis for doing everything they do but does it matter?

Whether the HOA is right or wrong there needs to be additional real estate laws more clearly governing timeshares. There is no justice in an HOA not having the ability to protect owner interests.