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Reacquiring Inventory
THE CHALLENGE: Inevitably, legacy HOAs will need to reacquire
inventory from owners who are no longer using their week or paying
maintenance fees. This is most commonly accomplished through
foreclosure, deed in lieu of foreclosure, or some other type of hardship
deed-back program.
HOAs are cautioned against accepting a deed back directly from
an owner without first verifying the status of title and ensuring that
the transfer documents are accurate. It can be difficult for the HOA to
later correct any deficiencies, because relinquishing owners are often
uncooperative in assisting with the resolution once the transfer has
been completed and they are relieved of their ownership obligations.
Depending on the nature of the deficiency, the HOA could be forced to
seek court intervention to ultimately obtain clear title.
THE SOLUTION: Establish a comprehensive, proactive default-
management strategy. It is important for the HOA to work with
experienced professionals to ensure all required deed-back documen-
tation is correctly prepared, executed, and recorded; and, upon
completion of the transaction, the HOA is vested with clean and
insurable title to the interval reacquired. A default-management strategy
can be most effectively executed when the solution to challenge No. 1
is followed, and the HOA has accurate, up-to-date records.
Why? Having current ownership information makes it more likely
the HOA’s hardship deed-back program will be successful (because
an owner can be contacted and informed about the program), which
is often a less-expensive option than foreclosing (especially in states
where judicial foreclosures are required).
Should a foreclosure proceeding be necessary, however, having
current ownership information also expedites the foreclosure process
by eliminating the need to perform due diligence to locate the owner.
In some cases, it can reduce the overall cost by avoiding the need to
provide notice via publication in a newspaper to an owner who cannot
otherwise be located.
Distributing Inventory
THE CHALLENGE: Without a successful strategy to distribute
reacquired inventory, a legacy HOA is forced to hold the inventory on
its books with no one to pay the corresponding annual assessments.
Without dues-paying members for such reacquired inventory, the
HOA is unable to create a revenue stream to help keep it solvent and
provide capital for resort repairs and refurbishments.
THE SOLUTION: While a successful distribution strategy depends
on the specific attributes of the resort, there are a variety of options,
including:
n Short-term rental of HOA–owned inventory to the general
public. This strategy works well if the resort is located in a popular
tourist destination; although, the seasonality of travel in particular
locations can make it impracticable to rent inventory during certain
times of the year.
n Directly reselling HOA–owned
inventory to new or existing
owners. Some legacy resorts with a
loyal ownership base have success-
fully used an auction method of selling
reacquired inventory to owners. An
HOA attempting to resell its own
inventory should expect to have a
relatively low volume of sales, due to
lack of a sufficient marketing and sales
operation to generate viable leads and
create unique sales opportunities ap-
pealing to new owners. Sales volume
can often be increased through the
leveraging of management company–
sponsored resale programs.
n Reselling the legacy product
with a points overlay, allowing
for the sale and marketing of
a more flexible product. Interval
International’s Club Interval Gold®
is a program that appeals to many
HOAs because of its flexibility.
n Bulk sale of HOA–owned
inventory to an unaffiliated
timeshare developer. There are
developers interested in expanding
their club or trust product by adding
a new resort or location, or who
are otherwise in need of inventory
to support their ongoing sales and
marketing operation. HOAs that have
successfully used this distribution
strategy find it appealing because the
developer typically wants to acquire
a significant amount of inventory, and, in some instances, may help
fund the HOA’s reacquisition of additional inventory to ensure that more
legacy inventory can be contributed to the developer’s club or trust
product in the future.
There are many examples of HOAs that are successfully executing
these strategies. The commonality among them is that they all have
comprehensive inventory and default-management strategies in place
at the outset, tailored to the specific attributes of the resort. Enlisting
the assistance of experienced professionals who have worked with
resorts in similar circumstances is a tremendous benefit to the HOA,
and often results in increased efficiency and cost savings.
Amy Bellman is vice president and division counsel of Fidelity
National Timeshare, an Interval Affiliate Advantage partner,
specializing in providing customized title and escrow solu-
tions to all segments of the vacation ownership industry.
Fidelity NationalTimeshare has experience working with both
legacy and nonbranded HOAs and developers on executing a
variety of inventory reacquisition and distribution strategies.
APRIL – JUNE 2017 RESORTDEVELOPER.COM VACATION INDUSTRY REVIEW
Keeping Ownership Information Updated
THE CHALLENGE: Resorts are often ill-equipped to handle inquiries
from owners seeking assistance in transferring title to their timeshare
due to normal life-changing events such as marriage, divorce, death
of a co-owner, or adding new owners to the title (often adult children
or grandchildren). Without knowing how to easily accomplish such
transfers, owners may become frustrated and cease using the resort
or paying annual assessments.
In addition to imposing an immediate financial hardship on the
HOA, these types of accounts often present problems when the HOA
later attempts to foreclose or otherwise take back ownership. It can
be difficult to locate the owner. Or, if the owner is deceased, a pro-
bate proceeding may be necessary, which can be time-consuming
and expensive.
THE SOLUTION: First, have a system in place to verify and update
owner information. This could involve training front-desk employees to
report and document owner communications suggesting a change in
status. In addition, routine owner mailings provide an opportunity for
HOAs to affirmatively ask owners if they have had a change in status
requiring an ownership update.
Second, it is imperative to have a procedure for assisting owners
with any needed ownership updates or transfers. If a formal title transfer
is needed, this type of assistance is often facilitated by the HOA
through its relationship with a title partner or attorney who can work
directly with the owner to ensure the proper transfer documents are
prepared, executed, and recorded. Having clean, updated ownership
records makes it easier for the HOA to engage with owners and also
provides the HOA with maximum flexibility and efficiency, should it
pursue reacquisition in the future.
LEGACY MATTERS
For some time now, a popular topic
within the vacation ownership indus-
try has been the unique challenges
facing legacy resorts and nonbranded
properties. While each resort’s situ-
ation is different, the more common
problems include: an aging ownership
base that no longer uses the resort
and may desire to exit ownership; a
high default rate, causing a lack of
funds to complete repairs and refur-
bishments; and no sales channel for
a legacy product that is often less
flexible (for example, single-site, fixed-
week, or fixed-units) than today’s vast
array of points-based offerings.
The following are some common
challenges and the strategies em-
ployed by legacy HOAs to combat
these problems.
Three Challenges
for Legacy Resorts
and Strategies
to Overcome Them
Enlisting the
assistance of
experienced
professionals
who have
worked
with resorts
in similar
circumstances
is a
tremendous
benefit to
the HOA, and
often results
in increased
efficiency and
cost savings.
BY AMY BELLMAN