LIHU‘E — The Point at Po‘ipu’s timeshare management company said Monday that complaints about rising maintenance fees are based on a “fundamental misunderstanding” of the business, promising a lawsuit against the most vociferous owners within a week. Diamond Resorts International
LIHU‘E — The Point at Po‘ipu’s timeshare management company said Monday that complaints about rising maintenance fees are based on a “fundamental misunderstanding” of the business, promising a lawsuit against the most vociferous owners within a week.
Diamond Resorts International Executive Vice President and General Counsel Elizabeth Brennan and Vice President of Association Administration Linda Riddle responded to allegations from the Concerned Deeded Owners at The Point at Po‘ipu on the eve of today’s annual elections for a pair of governing boards.
Brennan said the few members of the concerned owners group who aired their views in the Sunday Business story titled “Timeshare owners still disgruntled” are not “representative of the ownership of this resort and their satisfaction level.”
The owners’ true high level of satisfaction is evident through comment cards and the Gold Crown Resort designation awarded to The Point at Po‘ipu by vacation exchange company Resort Condominiums International after a 12-month compilation of assessments including resort quality, service delivery and overall experience, she said.
While maintenance fees did rise 19.8 percent from 2008 to 2009, they have not gone up at all this year, Riddle said, noting that the not-for-profit company seeks to maintain a “zero balance” between expenses and revenues each year.
The DRI executives said the Vacation Owners Association and the Association of Apartment Owners boards of directors, which approve in-unit and common-area expenditures, respectively, hold up to a dozen budget meetings annually to go through projected costs and gains “line item by line item by line item.”
Older properties generally require more maintenance, employees are given standard-of-living pay increases, and an administration fee increase for the company’s independent management body was a decade overdue and covers human resources, legal costs, billing and customer service, they said.
Maintenance fees also went up after the expiration of developer subsidies — designed to entice owners to buy with the promise of low initial fees that go up over time like an adjustable rate home mortgage. The company has also sought to increase its reserve balance in recent years to cover potentially expensive repairs and maintenance.
In a document it is distributing to its owners, DRI compares its annual fees to other Kaua‘i resorts like the Marriott, Westin Princeville, Lawa‘i Beach Resort, Wyndham Makai Club Cottages and Cliffs at Princeville. The Point at Po‘ipu charges $1,408 annually for a two-bedroom unit, right in the middle of the pack, according to the document.
Brennan said The Point at Po‘ipu’s fees are “not out of line.” She added that the timeshare industry is the country’s most regulated — behind gambling and utilities — because of the potential for abuse. She said DRI’s operations are closely scrutinized and above board.
Elections
The property’s 219 units, each available for 51 weeks per year, create 11,169 “intervals,” each of which comes with its own vote for both the VOA and AOAO boards of directors, the DRI executives said.
Of those intervals, almost 6 percent are owned by the developer and around 24 percent by an intermediary trust that votes in a block based on the decision of its independent corporate board, leaving some 70 percent of the votes controlled by traditional deeded owners, Brennan said.
Riddle said the company has heard complaints directly from about 10 owners out of around 10,000.
While both five-member boards have three “developer representatives” despite holding a small minority of intervals, Riddle said traditional deeded owners can change that during annual elections — which are to be held today.
“If they aren’t happy, they could vote us out,” she said. “They have the power to do that.”
DRI has the authority to appoint one member to each board, leaving four spots up for grabs. The VOA board, with staggered two-year terms, will be potentially replacing one developer rep and both deeded owner representatives, while the AOAO board, with three-year staggered terms, will be potentially replacing one developer rep and one deeded owner.
Riddle said the voter turnout is typically 35 to 40 percent, a number that has climbed in recent years as DRI has implemented outreach programs that include an election services company to facilitate voting by proxy, e-mail blasts and Internet voting.
Minority
If the developer and the trust cast all of their votes — 30 percent — together, that would be enough to provide a plurality that will carry the day over the wishes of a small fraction of deeded owners that participate in the democratic process.
Richard Batchelder, president of the CDOPP, said last week that the number of deeded owners concerned with DRI’s management has risen from 250 to 500, and a letter from the concerned owners said “thousands” of owners would agree if the owner list was released so they could be contacted.
While Section 514A-83.3 of the Hawai‘i Revised Statutes requires the board of directors to provide an ownership list to any owner for the use of soliciting votes, Section 514E, which covers timeshares specifically and not condominium property regimes in general, is “silent on the issue,” Brennan said via e-mail.
The board voted in executive session recently to deny the request for the list because the concerned owners have implemented “harassment,” “scare tactics” and “false information” in their campaign, the DRI executives said.
Subsection 82 of 514A requires CPR boards representing at least 100 units to have at least nine directors, but also carves out an exemption for organizations where 65 percent of members vote either by mail or at an annual meeting.
Brennan and Riddle said the proscription elsewhere in 514A against directors voting on an issue in which they have a conflict of interest could apply to developer reps and deeded owners alike, and said they do not believe there are conflicts of interest when the boards vote on budgets that include fees that impact the company’s bottom line.
Lawsuit
In a cease-and-desist letter sent to the CDOPP on Friday, Brennan threatened Batchelder, Vice President Roger Veach, Treasurer and Donations Coordinator Linda Fleming and Secretary Myra Orta with a lawsuit that would include claims for fraud, defamation, trade name infringement and civil conspiracy, among others.
On Monday, Brennan said the lawsuit would be filed within seven days and would include a claim for the loss of revenue suffered when prospective owners declined to buy with DRI in light of the weekend allegations.
Brennan said the group does not constitute a homeowners’ association as defined by law, and demanded proof, including documentation to support the claim of non-profit status and bank information for the account opened to receive donations.
She said she expected the Office of the Attorney General and Internal Revenue Service to get involved and potentially pursue criminal charges against the group for a variety of fraudulent activities.
Riddle said questions about a lack of communication with owners are unfounded, as the company set up a phone number specifically for The Point at Po‘ipu owners — 800-332-3120 — and information on the resort’s operation is available at www.diamondresortshoa.com.
For more information on the concerned deeded owners, visit www.poipuowners.org.
• Michael Levine, assistant news editor, can be reached at 245-3681 (ext. 252) or mlevine@kauaipubco.com.
