How does a Home Owners Association Stop Sales to LLCs?

[nasoj1]

What would be the cautionary tale about ownership? Is there anything that could be done to avoid ownership in resort that has a lot of defaults.

 

[VacationForever]

Many timeshare resorts have disallowed any trasfers to LLCs altogether.

 

[Tia]

Have you approached SPM about this? I know they use Palmetto Marketing as a dealer for weeks at other SPM managed resorts. It's hard to find weeks outside of Palmetto for these resorts, Palmetto appears to be the dominant market maker and prices are higher.

SPM? Hmmm how long has SPM if I have that right been the management company? SPM I think is directly related to Palmetto

 

[Fayeoctober]

SPM has been the management company since I believe the start of 2010. I am not sure what the company was prior to that or if there even was a company.

With regard to my comment about whether SPM bears any responsibility for sales to LLCs, I did just notice the following - I am guess these transactions may have taken place two or three years ago - there were five sales to the same LLC that particular year. Since there is a transfer fee from the resort, I imagine SPM sees the transactions prior to their occurring? Shouldn't someone there have noticed this and if so, didn't they have a responsibility to let the board know about it?

Part of the problem here, is our HOA was tightly controlled up until less than two years ago. The President of the Board had been in that position for more than 30 years and was one of the original developers. While she was in office, we were told that she frequently kept the rest of the HOA in the dark, so I don't know what occurred then. We have been told she is "judgement proof" but it seems like SPM had some responsibility to the rest of the HOA.

 

[Fayeoctober]

sptung - Your posts indicates that "Many timeshare resorts have disallowed any transfers to LLCs altogether."

Can you name some of these timeshare resorts? While this will solve only a portion of our resort's delinquency problem, it is a start.

Also if anyone else can name specific resorts where such a provision was adopted but was not in the by-laws, this would be greatly appeciated.

 

[VacationForever]

sptung - Your posts indicates that "Many timeshare resorts have disallowed any transfers to LLCs altogether."

Can you name some of these timeshare resorts? While this will solve only a portion of our resort's delinquency problem, it is a start.

Also if anyone else can name specific resorts where such a provision was adopted but was not in the by-laws, this would be greatly appeciated.

You can search on TUG. This was reported in many past threads as to which resorts have rejected such transfers, as transferring timeshares to LLCs/Viking Ships is a known practice where many "Timeshare Exit" companies do just that when they accept payments to get timeshare owners' names out of the timeshare.

 

[Fayeoctober]

I am a TUG member and I have tried to do a search to find out the names of specific resorts. Other than the one in California that instituted the lawsuit about three years ago, I can't find what I am looking for.

I am hoping that someone will help me since that was my original question. I agree this has been a very interesting and helpful discussion but what I am looking for are

NAMES OF RESORTS THAT HAVE BEEN SUCCESSFUL IN PROHIBITING SALES TO VIKING SHIP TYPE LLCS? ALSO THE STATE IN WHICH THEY ARE LOCATED

If the by-laws included this prohibition, please indicate because I can't use those.

By the way, my husband is going to suggest to the rest of the HOA that they institute a policy where voluntary deed-backs will be allowed for those owners who are up to date in the payment of all their fees. He is planning to suggest that these owners will need to pay the maintenance fees in advance for the upcoming year as well as the transfer cost in order to lessen the burden on the rest of the owners. I think that the prepayment of the maintenance fee as well as the transfer cost is likely to be less than the owner would have to pay to the LLC as an "upfront" fee.

 

[amycurl]

I think that's a very smart policy to institute. That keeps the MFs flowing for long enough to have the resale company that the HOA has engaged to sell it (hopefully.)

If your usage (not just ownership) goes down in the off-season, you can also reduce fees by closing a building or two during the height of the off-season and moving those who are arriving into other buildings. It can save on utilities, maintenance, and housekeeping.

 

[rickandcindy23]

By the way, my husband is going to suggest to the rest of the HOA that they institute a policy where voluntary deed-backs will be allowed for those owners who are up to date in the payment of all their fees. He is planning to suggest that these owners will need to pay the maintenance fees in advance for the upcoming year as well as the transfer cost in order to lessen the burden on the rest of the owners. I think that the prepayment of the maintenance fee as well as the transfer cost is likely to be less than the owner would have to pay to the LLC as an "upfront" fee.

Any board member can call an owner after the management company receives the transfer paperwork to an LLC. Ask the former owner if they paid money to get out of the timeshare, or if someone purchased it. If they paid money, certainly this LLC has no intention of selling the week to a new owner.

I think sometimes a deed is filed without any transfer paperwork coming into the resort. The resort just discovers a week is no longer getting fees from the owner, and when billed, the owner says, "I got rid of the week because you wouldn't let me out of it." Well, sorry, but you now owe back fees because you didn't notify us of the transfer.

Spinnaker Resorts charges a few years of fees ahead to affect transfer, along with a hefty transfer fee. I know this is true for at least the Branson Spinnaker.

I think at Val Chatelle it's 3 years of fees, so less than $1,800 to get out of a week. You must also be up to date on your fees. We have no avenue for selling the weeks. We just hope a lot of people will find other ways to sell or give away their ownerships. The best thing in the world for us will be the end of the timeshare. There is a sunset clause.

 

[MSchleicher]

Are the unused weeks being rented out to offset the loss? If not, can the HOA approve a policy that allows unconfirmed weeks to be rented?

 

[Fayeoctober]

The resort has rented out the weeks whose owners are delinquent but the majority of the weeks are not in the prime rental season so those go unrented.

 

[SJS]

Solution to LLCs and abandoned titles

I'm an HOA board member (and former president) of a timeshare in Whistler, Canada. We're wholly owner-owned (no developer now) and fee-simple, not points, which has proved to be beneficial. We didn't know we had delinquent titles as much as 14 years old (deceased owners), and several Viking Ships. We fired the management company and formed our first -ever HOA board of directors in 2011. We immediately put a deed-back program in place and went to court to take back all abandoned titles; most cost about $2500 Canadian each, but the Viking ships ran up to $7,500. The market for an individual week (1/51st) or fractional (1/8th, 1/10th, 1/4) title is virtually non-existent. But we found a robust market for selling an entire unit to one individual. Owners in five of our fractional units agreed to sell and each of the five sold for between $650,000 and $750,000 Canadian (and one just resold for $900,000). Each sale cleared a delinquent share in that unit, gave each owner in the unit a good return on their money (some rebought a share in one of our remaining units), and we've recouped over $110,000 Canadian for about $50,000 in legal fees. We've also resold ten of our deedback titles to other owners. This may be an avenue for you to explore; if we'd merely carried abandoned titles for rent as some suggest (not much income in the off season) we would never have been able to do the whole-unit sales. P.S. Our deeds require HOA approval before a sale, and we now have a mandatory sale document which contains an automatic deedback upon default, so no legal fees in the future if a title is abandoned, just a $50 filing fee.

 

[Kapolei]

People that no longer want to own or use a timeshare should not be on the hook to forever pay for those that do. All timeshares should be required to have simplified means for people to liquidate their interests. If it is a non-viable entity, then there should be a method for owners to call for the sale of land and buildings and the shutting down of the timeshare. A requirement that the association has to take deeds back that are unwanted would go a long way in protecting the interests of those that want out.

I am sure their are a lot of people in this forum that know a lot more about the history of this industry than me. As it stands, I am very reluctant to own any property in any one of these schemes. "Vacation ownership" should not be unlimited future liability.

....

 

[ronparise]

Peakrunner - your idea is very interesting.

j1ceasar - our timeshare was never built as a hotel. I think two buildings were built originally as condos - one stayed that way and the other became a timeshare. The buildings that followed were all built as timeshares.

Our management company has arranged for a company called MVP to do resales for existing owners and when we get foreclosed units or voluntarily deeded back units into our possession, MVP will be tasked to sell them. They will try to sell the less desirable weeks as "points." Unfortunately the commission that I think we have agreed to paying MVP will probably eat up all the sale proceeds but we will then have more dues paying members.

However, the major problem is the weeks that aren't turned in - in other words weeks that are only obtainable through a foreclosure. A while ago I tried to research North Carolina law and it appeared foreclosures could be done through a non-judicial process. However, it seems like this non-judiicial process may cost as much as a judicial process - in other words the $1,500 per unit. I would like to see us start with weeks 24 to possibly 38 where the cost of the foreclosure may be worth at least the value of the week.

I want to thank Rick and Cindy for their advice about telling the management company not to allow any transfers to LLCs. I am not sure I can get the Board to agree to this but I think a proposal not to allow the same LLC to purchase more than one unit in a calendar year might make it through. I can't think of any valid reason that a legitimate LLC would buy two units? I have found a number of instances where the same LLC owes the same amount of money for two different weeks - so that means they purchased more than one timeshare in the same year.

With regard to the issue I just mentioned, do you think we have any recourse against our management company for allowing two sales to the same LLC - in other words should they have known that these transactions were likely "shams?"

are there individuals that own two weeks or more?.. if you think they might have a legitimate reason than its possible an LLC might have the same legitimate reason

I understand how the management company will be able to just not recognize that a sale has happened and refuse to recognize it and continue to send the bills to the previous owner, But they are still a previous owner. You might as well send the bill to me as to the previous owner It seems to me that you will have about as much chance of collecting

It seems to me that you have 2 problems 1) its too expensive to foreclose when someone falls behind, and 2) even if te hoa did accept deed backs or did go through the foreclosure process they dont know what to do with them

So attempt to prevent the transfer to an LLC.. it doesnt seem to me you gain anything, You still have a non performing interval and if you want to keep the place open the remaining owners are going to have to pay higher fees

The base problem is that some of your weeks are worthless. If we assume the number is 50% than the other 50% of the owners are going to have to accept a 100% increase in their mf

and if they arent willing to do that then the owners of the best weeks are going to default too


To answer the the question posed in the title of the original post: How does a Home Owners Association Stop Sales to LLCs? The answer is to add value to the blue weeks so that your blue week owners have something of value to sell

Cant do that and the red week owners arent willing to pick up the slack... Its time to explore options to close the place down... Have you considered bankruptcy?

 

[Marathoner]

I'm an HOA board member (and former president) of a timeshare in Whistler, Canada. The market for an individual week (1/51st) or fractional (1/8th, 1/10th, 1/4) title is virtually non-existent. But we found a robust market for selling an entire unit to one individual. Owners in five of our fractional units agreed to sell and each of the five sold for between $650,000 and $750,000 Canadian (and one just resold for $900,000). Each sale cleared a delinquent share in that unit, gave each owner in the unit a good return on their money (some rebought a share in one of our remaining units), and we've recouped over $110,000 Canadian for about $50,000 in legal fees.

I agree that buying a full year share will be attractive to many people. The problem is that maintenance fees will be the weekly fee multiplied by 52 weeks. Ski area timeshares (you mentioned Whistler) tend to require above average maintenance fees. It seems to me that nobody would be willing to pay something like $50,000 a year in maintenance fees just to own a whole unit.

 

[missyrcrews]

there is no reason the HOA cant resort to listing ads in the resale market just like they expect their owners who want out to do so!

We extend offers to all HOAs and offer assistance in workign with them to get their unused inventory listed for sale and for rent on TUG.

marketing to your existing owners, as well as the current resale market does NOT require an active sales staff IMO. The goal is to replace a delinquent interval with a paying owner....there should be little to no fees involved for these to a buyer as the resort is in many cases not really in a position to demand much of anything and would be best served by making it as easy as possible for someone to take over an unused deed!

At my resort, every Monday evening there's a little wine and cheese social. Those present are invited to put their name in a hat, and there is a drawing for a free timeshare week. Granted, they aren't the prime 6 weeks of the summer season. But they tend to be nice shoulder season weeks. During the prime weeks when attendance at the social is greater, they give away two of those weeks. (These are weeks that the resort owns because the owners didn't keep up with the fees.) The resort would rather see these weeks used and maintenance fees paid than try to sit on them hoping to sell them. That's how I got my October week...which trades well enough to let me go somewhere in the summer most years!

All of that is to say that there are ways to get "languishing" weeks into the hands of someone who will enjoy/use/pay for them. Good luck as you folks figure out what to do to cut loose those LLC's!

 

[dioxide45]

I agree that buying a full year share will be attractive to many people. The problem is that maintenance fees will be the weekly fee multiplied by 52 weeks. Ski area timeshares (you mentioned Whistler) tend to require above average maintenance fees. It seems to me that nobody would be willing to pay something like $50,000 a year in maintenance fees just to own a whole unit.

I am not sure that is the case. A whole ownership doesn't cost as much to maintain. It would be the responsibility of the owner to pay to refurbish their own condo. There would also be no weekly maid service. Those are probably the two highest expense items in a timeshare budget. So the MF on a while ownership would have to be a lot less than just 52 X the weekly MF.

 

[raygo123]

are there individuals that own two weeks or more?.. if you think they might have a legitimate reason than its possible an LLC might have the same legitimate reason

I understand how the management company will be able to just not recognize that a sale has happened and refuse to recognize it and continue to send the bills to the previous owner, But they are still a previous owner. You might as well send the bill to me as to the previous owner It seems to me that you will have about as much chance of collecting

It seems to me that you have 2 problems 1) its too expensive to foreclose when someone falls behind, and 2) even if te hoa did accept deed backs or did go through the foreclosure process they dont know what to do with them

So attempt to prevent the transfer to an LLC.. it doesnt seem to me you gain anything, You still have a non performing interval and if you want to keep the place open the remaining owners are going to have to pay higher fees

The base problem is that some of your weeks are worthless. If we assume the number is 50% than the other 50% of the owners are going to have to accept a 100% increase in their mf

and if they arent willing to do that then the owners of the best weeks are going to default too


To answer the the question posed in the title of the original post: How does a Home Owners Association Stop Sales to LLCs? The answer is to add value to the blue weeks so that your blue week owners have something of value to sell

Cant do that and the red week owners arent willing to pick up the slack... Its time to explore options to close the place down... Have you considered bankruptcy?

What I don't understand is the lack of knowledge of property rights. unless it is in the original documents how can they not accept the transfer?

Sent from my Nexus 7 using Tapatalk

 

[comicbookman]

What I don't understand is the lack of knowledge of property rights. unless it is in the original documents how can they not accept the transfer?

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Because their position is the transfer is fraudulent and nothing requires them to accept fraud.

 

[ronparise]

What I don't understand is the lack of knowledge of property rights. unless it is in the original documents how can they not accept the transfer?

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Thats my feeling as well, and the point I was trying to make up thread

The hoa can refuse to recognize the transfer, but that doesnt mean it didnt happen.. And they can continue to send the bills to the old owner, but that doesnt mean it will get paid

They can of course sue and make the case that it was a fraudulent transfer, but that costs money and there is no guarantee of a satisfactory outcome

They would do better I think to bite the bullet and foreclose.... I see a special assessment coming

Perhaps one of the lawyers here can weigh in

 

[Fayeoctober]

Thank you so much for all the responses. A couple points I feel I need to make. We had a special assessment of almost $1,300 that began two years ago with the final payment due in a couple weeks. This was for needed exterior work on our buildings - a lot of it was because of safety issues. Consequently even thinking about a special assessment for foreclosures is likely to draw the wrath of all the owners.

I did make a mistake when I mentioned the number of units. It is actually about 115.

Finally, several people mentioned possibly closing some of the buildings down in the winter months. While for instance about 1/3 of our Week 1 units are in significant arrears as are a significant number of Week 6, etc., I don't know if owners who are paid up, would like being moved to other buildings, even if those buildings might be more desirable. I don't know how the whole RCI issue would work in terms of the points program, and it still seems we have to continue to provide power to those units that are closed. In terms of laundry, etc. if the units are going to remain vacant for certain weeks, I assume laundry isn't being furnished.

I would love to hear from a lawyer or have someone tell me about any legal referrals that wouldn't be too expensive.

All the HOA members (5) saw the list of weeks in arrears of more than $1K at the last meeting. I don't know if my husband is the only one who seems to be very concerned about this or what? Even my husband is getting a little tired of all the comments I have been making.

 

[SJS]

I am not sure that is the case. A whole ownership doesn't cost as much to maintain. It would be the responsibility of the owner to pay to refurbish their own condo. There would also be no weekly maid service. Those are probably the two highest expense items in a timeshare budget. So the MF on a while ownership would have to be a lot less than just 52 X the weekly MF.

Dioxide45 is right. While a week's owners' maintenance fees average about $875 per year, a one-owner unit pays only for the common areas maintenance (garage, hot tub, patio, landscaping, snow removal, etc) and utilities, so pays about $3,600 per year.

 

[AllanThompson]

Sales to LLC's

Without any specific knowledge of the legalities it seems to me:
1. These LLC's probably charge a fee for taking the timeshares. An HOA would be better off to research and then give owneres a way out that involved a smaller fee to turn over their timeshare. The HOA would then have the timeshare for resale or rental. This would prevent the need for foreclosing from the LLC and associated costs. Some will object, saying that people "have to" pay their fees. But fact is you really can not enforce this responsibility and trying to do so is a losing strategy. Better let someone out without a legal problem.
2. Foreclosing on LLC's could cost $. Is there an entty involved with an LLC that would be able to simply sign over the ownership to the HOA? If they have no intention of using, selling or renting, why would they be unwilling to shrug off the responsability?
Is this common sense or am I missing something?

 

[TUGBrian]

many of these LLCs refuse contact with the resorts, and some others actually reach out to the resort and deliberately hold the unused weeks hostage demanding a hefty sum paid by the resort to willingly give them back.

some folks in this industry are real scumbags.

 

[bankr63]

What about ROFR

As a go forward position, would a resort be able to institute ROFR instead? I know this is usually used by high-end resorts to keep resale values up, but could it be a way for HOA to block sales to the VS LLCs?

If they don't want the new owner, they can exercise ROFR and take the deed themselves, paying the original owner basically nothing (as the owner actually paid the VS, not the reverse). I doubt this would create a flood of owners taking this path; they would still have to pay the VS significant $$ to take the ownership. This would not affect normal sales, just those to VS.

Yes, I realize that the HOA is now "stuck" with the interval, but can possibly offset the costs by renting while they attempt to sell. The point would be to stop the asset from being stuck in LLC limbo.