In 2006 I purchased deeded timeshare property at the Embassy Vacation Resort Poipu Point on the island of Kauai, Hawaii. The resort was managed by the Embassy under the Sunterra Corporation. Soon thereafter Diamond Resorts International (DRI) somehow took control of the resort without my vote or approval. My understanding when I purchased the property was that timeshare resorts are owned by the individual deeded owners who contract with a management company for the day to day operations. Apparently DRI believes they own the resort and by packing the board of director positions with DRI employees and relatives of corporate officers, have been able to approve dramatic increases in management fees payable to DRI.
In 2006 the management fees were $662,035. For 2012 the management fees are $1,965, 506. This fee is in addition to all the operation and administrative fees for running the operations of the resort.in reviewing the books it is surprising that many expenses like insurance has decreased, but the overall cost of operations has increased dramatically. How much has your salary or social security increased during that time?
Over the last five years the DRI sales force has been aggressively trying to convince deeded owners to give up their deeded rights and, for a significant additional fee, join the DRI club or points based system. They even called me at my home to say they would send an agent to our home to complete the transaction.
I was advised by a DRI Sales Agent that eventually, all deeded property interests will be converted into the points based club system because deeded owners will not be able to afford the increased costs. The increases in annual fees over the last five years appears to reflect this assertion.
Because of the dramatic increases in management fees and a recent significant additional assessments on deeded owners, there is no market value for these units. This hostage situation has caused many deeded owners to give up and face foreclosure on property that they paid a significant amount for. What happens to the foreclosed properties? I believe that DRI is acquiring the foreclosed properties at little cost and transferring the interest into their "Club" system.
As I was told by a DRI Sales Representative, as more and more property is moved into the club system, there is less availability for the original deeded property owners.in essence, DRI is extracting the intrinsic value of the ocean front Hawaii property at the expense of the deeded owners. Once DRI has forced all the original deeded owners to give up their property, by joining the club or through foreclosure, DRI will own the resort and the property value associated with it. Hopefully our elected representatives and government officials employed to protect the interests of the citizens will take note, investigate DRI, and take appropriate action to protect the citizens from the large and powerful Corporations that are taking advantage of the small consumers.
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