THANKS MIKE JOHNSON

posted 01-25-2001 05:31            

This may be the result of failure to collect adequate funds for things that should have been anticipated (i.e. too low an annual maintenance fee in the first place). Or sometimes external factors such as unusual storm damage may cause unanticipated expenses. Special Assessments may also take place when the owners, through their Homeowners Association (HOA), decide to upgrade or improve the property beyond what the current maintenance fee was intended to cover (add new swimming pool, build or expand a clubhouse, upgrade appliances, etc.).

Or in some cases, there are shortfalls because a developer or management company fails to provide funds that should have gone into the HOA's accounts. I own at a place where the developer declared bankruptcy, owing quite a lot in back maintenance for the unsold units -- the HOA, of course, was left holding the bag. Special assessments and several years of increased maintenance fees were needed to get the place back on good footing.

posted 01-25-2001 05:32            

Occasionally, a resort may find that the reserve fund is not sufficient for needed improvements. The choices are to borrow from a financial institution, defer making the improvements or assess owners a "one-time" fee for the needed funds. The governing documents which you should have received from the developer (or as the result of the title search if you bought a resale) almost certainly allow such a special assessment when necessary.

Some resorts have to make special assessments (and they may become more than one-time assessments) due to poor long range financial budgeting. Occasionally, an unforeseen expenditure, such as repairs to uninsured storm or damage, will necessitate a special assessment.

posted 01-25-2001 05:33            

Last year a few of the FF resorts were hit with special assessment. With Westwind, it was a pretty big amount. Some owners felt that it wasn't quite necessary to replace some of the items that they did. At Patriot's Place, their special assessment was only $20. It was for new television. You would think that the reserve fund has enough for that.

I'm assumming you're asking this because I mentioned that either Foxrun or the other was being hit with a special assessment? Both those were being managed by FF till the owners booted FF out and went with VRI.

posted 01-25-2001 05:37            

How can two people post almost identical detailed responses to this question within a minute of each other, right down to the examples and number of paragraphs?

posted 01-25-2001 08:20            

quote:

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Originally posted by Dave M:
Okay, Doug....

How can two people post almost identical detailed responses to this question within a minute of each other, right down to the examples and number of paragraphs?

Pretty scary!

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I noticed that too. As they say, great minds run in the same gutter ...

And Marina was only a minute behind!

posted 01-25-2001 11:25            

You almost certainly signed a document that either spells out your commitment or makes reference to another document where such commitment is spelled out. Essentially you have signed on to a cost sharing arrangement that is virtually identical to the ownership situations discussed herein.

If you can't locate those documents, call the person or company who manages your property and ask where you can find written information about your ongoing financial obligations in connection with your week.

As an added note to this discussion:
Many people think, "What have I gotten myself into?" when the term "special assessment" is mentioned. In fact, it's to your advantage (and to the owners' advantage in most situations) to have such a special assessment if it is needed. Although it's an unwelcome surprise, the alternative may well be that the resort will not be kept up as it should be, which may result in all sorts of bad things happening:

• Your ability to trade your week for weeks at other resorts may be lessened, because II or RCI may downgrade your resort.
  
• Resale values will go down.
  
• Annual maintenance fees will likely go higher than they should to substitute extra annual maintenance cost for property replacements that should be made.
  
• Some owners may abandon their units and stop paying fees.
  
• If some units are abandoned, fees may go up for others or the property may fall into an even worse state of repair.
  
• ....Add your own doomsday prediction....
  

posted 01-25-2001 15:51            

These are the things owners should be concerned with and your HOA officers should be watching. At the very least they should compare previous budgets to proposed budgets and be given valid reasons for major variances. Personally, I think all owners should be sent a proposed budget and agenda before each annual (quarterly?) meeting and then be sent the minutes of the meeting if they weren't able to attend.

I'm certianly no expert here but I have belonged to three HOAs and served on the board of one for several years. Even with a good management company the owners/HOA have to be actively involved. The truth is it's a thankless job but if owners aren't willing to participate to some extent then, IMHO, they don't have much right to scream when they get hit with the old special assessment.

posted 01-25-2001 16:53            

If you are an owner, and you don't pay a special assessment, you lose use of your interval week, even if you keep up your maintenence. The resort will consider you delinquent. You are required to pay, even if you don't agree with it.

If a resort is in dire need of a repair or upgrade that your reserve does not cover AND members don't agree to a special assessment, what can happen? Well, first, the repair or upgrade wouldn't be done (assessment wouldn't be proposed unless there was not sufficient reserve). Because it wasn't done, if it was something really necessary, like to fix a deficiency, then the exchange company could disaffiliate (drop) the resort. Yes, this does happen. And when it does, you can't use the exchange company for your week anymore. You have to either use your week or try to exchange with a smaller company if they will accept it. Its not a pretty scenario.

posted 01-26-2001 06:31            

I have been president of the homeowner's association where I live Massachusetts for the past seven years. Prior to that, I was president of another such association in Oregon for four years. I read every article I find on HOA's, including things to look for when buying a townhome, condominium or other home where regular maintenance fees will be paid. Every such article I have seen recommends strongly that the prospective buyer ask for and examine the HOA's financial stements, paying particular attention to the reserve for capital additions. The intent is to ask questions about the HOA's long term plans for replacing assets and how it plans to pay for such changes.

In the eleven years I have been president of these two HOAs, exactly three out of approximately 300 (yes, 300!) purchasers have asked to see financial statements or asked questions about our reserve account policies.

It's sad that people who make the biggest purchase of their lives don't do as much research on the economics of that purchase as they do when they research past Consumer Reports articles for an appliance purchase or compare prices per ounce at a grocery store!

posted 01-27-2001 07:28            

quote:

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Originally posted by SDH:
Why should an owner have to ask for all the financial information? Shouldn't the HOA be required to issue an annual report with a financial statement and bduget and a nice annual letter to all timeshare owners in good standing, just like a proxy to shareholders?

This should be provided to the owners - and usually is when they are voting on an annual budget, or doing other business at their annual meeting. In many cases this will show both the total amounts and the per-unit amounts. This is not, however, provided to prospective purchasers (they are the ones that need to ask).

Every board of every organization (non-profit or otherwise) I've ever been on has issued an annual report with the prior year's financials and the coming year's budget. Yet, I seem to have to pull teeth sometimes to get timeshare HOAs to disclose their financials and budgets and adequacy of reserves.

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