ziravan
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- Joined
- Apr 4, 2014
I don’t think that I’m mischaracterizing it at all. This deal is far better for DVD than members.I think you are mischaracterizing the Developer Guarantee regarding payment of dues by DVD on points that it owns. Here is the wording of the Developer Guarantee from BLT's 2017 Annual Notice:
DVD has agreed to guarantee to each Purchaser and Owner that they will only be required to pay an assessment for operating expenses of $3.3680 per Vacation Point through December 31, 2017, exclusive of ad valorem taxes which are billed separately. In consideration of this guarantee and pursuant to Florida law, DVD will be excused from the payment of its share of the expenses which otherwise would have been assessed against its unsold Ownership Interests during the term of the guarantee. As a consequence of this exemption, during the term of this guarantee, existing Owners and current Purchasers will not be specially assessed with regard to Common Expenses, except as hereinafter provided, if Common Expenses exceed the guarantee per Vacation Point amount and DVD will pay any difference between actual expenses and assessments collected from all Owners and income from other sources.There is also a Developer Guarantee to cover Capital Reserves expenditures.
its not that DVD only pays "if they [sic] calculated dues wrong." Instead, DVD has guaranteed that it will make up any shortfall in each Association's budget if revenues do not satisfy expenditures.
Since Member Owners account for no more than 98% of an Association's total points, there is an inherent "shortfall" in each budget for which DVD is liable. In addition, when Member Owners fail to pay dues, such as in foreclosure situations, the Developer Guarantee can make up for this lost revenue.
If DVD did not make this guarantee, it would be billed the exact same amount as any other Member Owner for the points that it owns. However, it would also mean that if there were any shortfalls in an Association's operating expenses or capital reserves, then Member Owners could be hit with a special assessment to cover any shortfalls.
If DVD paid dues on their points, that would likely cost them far more than a guarantee where they have operational control of the parameters in play.
Must be nice.
Members would likely have a far better guarantee if DVD had to pay dues like the rest of us. As the largest dues payer, then they’d have a vested interest in keeping dues down without triggering assessments.
As it stands, this deal advantages DVD to overestimate dues in order to prevent a shortfall that they would have to guarantee.
By the terms of this deal, DVD is exempted on the front end while having complete control over having any obligation on the back end. I don’t think this guarantee has member’s interests at heart coming or going. By cutting themselves out of paying dues, DVD removes any financial incentives they would otherwise have to keep dues down. Moreover, to protect against having to make up a shortfall, this deal encourages DVD to “aim high” when setting dues that, as the largest point holder, they nevertheless won’t have to pay.
Florida law allows this. I concede this is a trade off in requiring developers to hold points in inventory; the law also gives them the opportunity to avoid dues on points they must keep by law. The purpose of the holdover is to be able to take rooms out of service as need be and you can’t recoup dues on rooms not in service.
I get it. But it’s still an arrangement that benefits the developer. My concern isn’t that they’re getting a special deal; it’s that the deal that they’re getting not only removes incentives to keep dues low, it actually encourages them to set dues on the high side.
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