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| With regard to... Dereliction |
--By Jerry Sikes, RRP/CHA
"Last week the House and Senate did what they do best - they went
on vacation, or as they euphemistically call it, a 'district work period"… the whole lot of them - particularly
those who 'serve' in the Senate could well be charged with dereliction of duty." -Oliver North- July 1, 2002
It is always surprising to me how many owners of a timeshare interest are derelict in their
duty and merrily go on their way just enjoying the benefits while assuming that all is well. It is even more surprising
how many owners of a timeshare interest have no clue that they had any duty, obligation or responsibility. It is
not at all surprising that when bad things happen, in respect to that timeshare interest ownership, those owners
are quick to plead ignorance, point fingers at others and fail to acknowledge their own neglect..
Recent statistics concerning the readership of the Timeshare Beat indicates that 86% (of 1.9 million) are consumers
and I would assume this category includes timeshare interest owners. That being the case, I am going to use this
'bully pulpit' in an attempt to curb this pattern of dereliction.
The legal documents of the most common forms of timesharing provides for the establishment of a Home Owners Association
(HOA) or a Property Owners Association (POA) that is charged with the duty and responsibility to operate the resort
property and the improvements therein. Those legal documents are often referred to as covenants, conditions and
restrictions or CC&R's. The individual documents will always include a Declaration of Dedication, Articles
of Incorporation, and By-Laws. They may also include a set of Rules and Regulations, which are established by the
board of directors. For purposes of reference I will be using the legal documents for Scottsdale Camelback Resort.
If you are the owner of a timeshare interest you can follow along with those references or you can get out your
own set of CC&R's and see if similar covenants, conditions and restrictions exist. What did you say? You don't
have a set of documents. Most jurisdictions require that those documents are provided at the time of purchase of
a timeshare interest and that you sign a document indicating that you received, read and understood them. Did you
misplace them? OK, you can follow along with us anyway; however, add to your to-do-list to obtain another set from
your home resort. Remember, just having a set does not qualify you for a gold star, you must become acquainted
with what they contain and what your personal responsibility is regarding it.
Let's Begin
Before we start I must officially state for the record that I am not an attorney and any statements contained in
this document is not to be considered as legal advice. All readers are advised that the statements contained are
the opinion of the writer formed after many years of actual experience with such matters. The reader is advised
that before coming to a final decision on any issue contained herein, you may want to seek legal advice. That said...
Generally the definition section of the Declaration would contain something like the following -
"II. (C) "Association" is the Scottsdale/Camelback Resort Association Inc., an Arizona non-profit
corporation, its successors and assigns, action on behalf of the Interval Interest Owners in accordance with this
Declaration, the Articles and By-Laws for the purpose of administering the Scottsdale/Camelback Resort."
"III. Section 3.03. Acceptance by Grantee. Each grantee or purchaser of an Interval Interest shall,
by acceptance of a deed conveying title thereto, or the execution of a contract for the purchase thereof, whether
from the Declarant or a subsequent owner of such Interval Interest, accept such deed or contract upon and subject
to each and all of the covenants, conditions, restrictions, limitations, reservations, liens, charges and other
provisions of this Declaration and to the jurisdiction. Rights, powers, privileges and immunities of the Declaration
and the Association."
"V. Section 5.02. Membership. Each Interval Interest Owner shall by reason of ownership of an Interval
Interest become a member of the Association."
Section 5.03. Binding Effect of Documents. Every member shall be bound by the By-Laws, the Articles, this Declaration,
the management agreement and all Rules adopted by the Association and/or the management firm.
Section 5.04. Voting Members. Each Interval Interest Owner shall be entitled to one vote per Interval Interest
owned. Voting rights shall be exercised as provided in the By-Laws of the Association."
The 'Articles' would contain something similar to the following -
"Third: Purposes. The general purpose for which this Association is formed is to act as the Association
for the operation and maintenance of the Scottsdale/Camelback Resort ... For the benefit of the owners thereof
and for all other lawful purposes for which a nonprofit corporation may be organized. The character of affairs
which the Association intends to conduct is management of the Scottsdale/Camelback Resort."
The 'By-Laws would contain something similar to the this -
"Article II - Membership - (A.) Members. Each Interval Interest Owner, and only an Interval Interest Owner,
shall by reason of ownership on an Interval Interest become a member of the Association. "
"Article III - Meeting of Members -
B. Annual Meeting. The annual meeting of members shall be held not less frequently than annually at a day and time
fixed by the Board of Directors. The first annual meeting shall be held not later than one year after the close
of escrow on the sale of the first Interval Interest.
D. Notice. Written notice of each annual meeting signed by such person as the directors shall designate, together
with a list of the order of business to be considered and a biographical sketch of each member of the Association
who has announced his intention to stand for election to the Board of Directors, shall be given to each member
entitled to vote thereat.
G. Voting - At all meetings every member entitled to vote shall have the right to vote in person or by proxy the
number of memberships standing in his own name on the membership records of the Association. Except as the Declaration,
the Articles or these By-Laws otherwise provide, all business shall be conducted by vote of a majority of the members
present and voting in person or by proxy."
H. Quorum. Except as the Declaration, the Articles of these By-Laws otherwise provide, the presence in person or
by proxy of the holders of one-third of the membership entitled to vote at any meeting shall constitute a quorum
for the transaction of business. No business shall be conducted in the absence of a quorum."
"Article IV - Directors - C. After the first meeting of members of the Association, one (1) or (2) directors
shall be elected at each annual meeting of members... All directors shall hold office for three (3) years and until
their respective successors are elected. Commencing with the first meeting of members, at least one (1) member
of the Board of Directors shall be elected by the vote of members other than Declarant."
OK, so what does this mean in layman's terms?
It's very simple! If there is an association of owners at your timeshare resort you are a member of the HOA
or POA. You are legally obligated to all that is contained in the CC&R's and when there is an associations
meeting called and all the members of the association received a notice of it, you have the right to vote in person
or by proxy on any issue placed on the agenda. The most common thing that comes before a meeting of owners is the
election of Directors. Any other business, which requires a vote of the membership, must have been placed on the
agenda that was included in the official notice of the meeting. In order for any such meeting to be legal there
must be a certain number of members present.
In the beginning the Developer appoints the members of the board of directors. The SCR documents provide that at
least one (1) member of the board to be elected by the members other than the developer at the first annual meeting.
Even if the developer allows more that one director to be elected by the member's control of the association may
not be relinquished.
The Declaration will most often state something like the following:
"V. - Section 5.05 - Control of Association by Declarant. During the period that Declarant's fractional
interest in the Common Area exceeds one fifth (1/5) the Declarant shall have the right to disapprove any action
approved by an Independent Majority. From and after said period, actions, requiring an approval by membership of
the Association must be approved by the required percentage of all votes cast at a meeting or otherwise and approved
by an Independent Majority.
In layman's terms this means that the developer has the power to veto any action until 80% of the interval interest
have been conveyed to others. However, at that point control will revert to the owners other than the developer
and the developers veto power is terminated. When this occurs the association truly becomes a representative organization.
That is if the interval interest owners are not derelict in their duty. What are owner's duties you ask?
1] Make sure that the HOA/POA has your correct address, phone number and e-mail address if you have one..
Without this information the association cannot communicate with you and such communication is vital. The most
important of these being [a] notice of the annual meeting or any special meetings, which could be called, and [b]
receipt of the association's annual audit.
The By-Laws will most often state something like the following:
"Article III - Meetings of Members. D. Notice. Notice shall be given to each member entitled to vote
either personally or by first class mail, charges prepaid, addressed to such member at his address appearing on
the books of the Association or given by him to the Association for the purpose of notice. If a member gives no
address, notice shall be deemed to have been given to him if sent by mail addressed to the Residence Unit associated
with such member's Interval Interest."
"Article VIII. Miscellaneous - D. Annual Report and Account. The Board of Directors shall cause an annual
report and account (including balance sheet, income statement and such other information as the Declaration requires
to be annually sent to the members of the Association) to be sent to the members not later than one hundred twenty
(120) days after the close of the fiscal or calendar year."
2] Make sure that you remain current with all assessments and other charges due the association because
an owner in default has relinquished all rights.
The Declaration will most often state something like the following:
VI. Assessments - Section 6.10. Suspension of Rights. Unless and until all assessments and charger of an
Interval Interest owner have been brought current, the Association shall not be required to permit an Interval
Interest owner in default or his permittee to occupy or use a Residence Unit, to use or enjoy the Common Area or
to exercise any rights or privileges of membership in the Association, including voting rights."
3] Stay informed of all issues concerning the HOA/POA. An owner achieves this by reading fully all communication
forms provided by the association. These could include all notices, a quarterly newsletter, the annual report,
monthly financial statements if available, full minutes of all board meetings and/or membership meetings, e-mail
messages and web sites. If any of these communications are not fully understood contact the resort general manager
and ask for written clarification. If this information is not forthcoming, communicate with the Associations President
and Chairman of the Board.
4] If possible volunteer to serve the association in some capacity. Most HOA/POA's have several committees
that advise the board on specific issues. Such committee membership is a good way to determine if you may want
to stand for election to the Board at some date in the future. If you live far from your home resort such activity
may not be feasible, however, whenever you are actually at the resort ask to meet with the resort manager and obtain
an update on all facets of the resort operation.
5] When the opportunity presents itself exercise your right to vote. If you are unable to attend the noticed
meeting, either regular or special, be sure that you have provided your proxy.
The By-Laws will most often state something like the following:
"Article III - Member Meetings - J. Proxies. Every person entitled to vote or execute consents shall
have the right to do so either in person or by an agent or agents authorized by a written proxy executed by such
person or his duly authorized agent and filed with the Secretary of the Association. No such proxy shall be valid
after the expiration of eighteen (18) months from the date of its execution, unless the member executing it specified
therein the length of time for which such proxy is to continue in force, when in no case shall exceed seven (7)
years from the date of execution."
There are several things you need to know about proxies
[A] All proxies have a shelve life. Because most HOA/POA's have been incorporated within the state Corporation
Commission the state law or statute will have specific language concerning how long a proxy is good for. In the
state of Arizona a proxy cannot exceed 23 months and state law is generally considered to dominate.
[B] All proxies must be officially filed with the Associations Secretary. If there is any question concerning
the validity of the proxy, the one on file with the association is generally the one that will be accepted unless
it has been revoked in person or by written notice.
[C] Proxies come in several forms and for several specific purposes.
(1) Many HOA/POA's will solicit an attendance proxy to insure the presents of a quorum for all meetings of the
membership. This proxy is used for that specific purpose and no other.
(2) Most HOA/POA's will send out a directive proxy prior to its annual meeting. This type of proxy allows the member
to appoint the Associations Secretary as their agent for a specific meeting and direct that that agent vote in
a specific manner on the issues contained in that meetings agenda. Most often this proxy is used in the election
of members to the board of directors. Remember the official notice for an annual meeting is required to provide
a biographical sketch of each member that had announced his intention to stand for election to the Board of Directors.
This type of proxy is also used to direct the Secretary (as agent) to vote on other agenda items with a specific
YES or No. Typically if such items are to come before those assembled the association will send out an advisory
which will contain a brief statement as to the effect of a YES vote on the issue, the effect of a No vote and the
recommendation of the Board. Often the owner will receive a similar advisory from an owner or group of owners who
have taken a position on the issue that differs with the board. All owners are advised to consider such agenda
items fully and if necessary seek additional advice from a knowledgeable source such as their own attorney or CPA.
(3) Some times the proxy will be in the form of a ballot. Most often this occurs when the HOA/POA is attempting
to deal with an issue without calling a meeting.
The By-Laws will most often state something like the following:
"Article III - Member Meetings - K. Action Without Meeting. Business may be conducted without a meeting
if (1) approvals by written ballot setting forth the proposed action and providing an opportunity to indicate approval
or disapproval and return the ballot within specific time are distributed to all members of the Association, (2)
returned ballots comply with the quorum requirements, and (3) approvals constitute a majority or the percentage
which would be required at a meeting.
(4) In some instances a proxy will allow the member to provide consent for the agent to vote on issues without
a directive from the owner. Most often such proxies will contain language similar to the following.
"I hereby appoint the Associations Secretary as my official agent and direct that he cast my vote as approved
by a majority vote of the board of directors on said issue."
Such a directive insures that the Association Secretary proceeds as an elected official under the direction of
a majority of the board rather than as an individual.
(5) Any owner may provide his proxy to an agent other than the Associations Secretary. In such instances all of
the same rules or conditions will apply.
(6) Any owner can revoke a previously executed proxy at any time they choose either in person or via a written
replacement proxy or simple cancellation notice.
Once control of the Association has gone from the Developer to the members other than the developer and the
majority of the Board of Directors have been elected by members other than the developer, those board members have
a legal duty to set aside their own personal agenda and to act in what they, in their majority, consider to be
the best interest of all the association members. These elected representatives are the only members who have such
a duty. Individual members of an association may receive proxy solicitations from other members, or those representing
other members, for the purpose of forwarding their own agenda and have no legal obligation to consider the interest
of others. Prior to executing such a proxy please make sure that the agenda of those solicitating your proxy is
the same as your own.
FINAL THOUGHT
The individual/family that has acquired a timeshare plan has always done so by making a considerable financial
commitment not unlike the purchase of an automobile. In most instances that car comes with some kind of warrantee
in case something goes wrong. Again, in most instances, if the owner of said car fails to do certain things and
something goes wrong, those warrantees have become voided. Most of the time the actions a car owner need to take
are not a lot of trouble. Things like checking the water in the radiator, checking the engine oil, the tire pressure,
the battery, or just taking the car in for routine maintenance like tune-ups or oil changes.
As the owner of a timeshare plan you cannot simply assume that others are taking care of things in your best interest
regardless of brand name or type of plan. You must do your duty and fulfill your obligations. They are just as
simple as maintaining your car and will not take much more of your time.
For your own sake, Keep your present address current with your association - Get copies of the legal documents
and actually read them - Pay your annual assessment when billed - Stay informed on what's going on at your home
resort - Volunteer to serve if possible - Exercise your right to vote - Consider carefully before giving your proxy
to another and if you do all these simple things you can avoid being derelict in respect to your timeshare interest.
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