$5,893.32 special assessment for Diamond's Point at Poipu

[Carolinian Super Moderator Find all posts View Profile Close Carolinian]

DRI is wearing more hats here than simply as an owner. DRI is the (secondary) developer, still engaged in sales on property. DRI is the management. DRI controls the HOA board. That is a lot more than a simple owner!

And that's the nub. The offer was not being made by the resort Association but by DRI.

As regards ownership at the resort, DRI is simply an owner like others. So DRI's operation of surrender program is pretty much the same as if pseda was interested in acquiring more units and created a "pseda voluntary surrender offer" in which he/she would consider accepting deeds from anyone who was willing to surrender a deed to him/her, provided all fees were current, there were no other encumbrances on the deed, and the deedholder paid the transfer fee.

pseda would be under no obligation to offer that program to all comers (with the proviso that pseda not discrminate against protected groups in the implementation of the "pseda voluntary surrender program"), and pseda would certainly be free to cease or restart that program at any time that pseda wished.

*****

If a legal decision were reached that the HOA and DRI were so intertwined as to be the same legal entity, then the analysis might be different. But for the moment they are separate legal entities, so DRI's is as free to stop and start the program as pseda himself/herself would be if they were operating their own deed acceptance program.

[T. R. Oglodyte Moderator Find all posts View Profile Close T. R. Oglodyte]

DRI is wearing more hats here than simply as an owner. DRI is the (secondary) developer, still engaged in sales on property. DRI is the management. DRI controls the HOA board. That is a lot more than a simple owner!

Totally agree, and that's why I caveated my post as I did. The reality is that if someone were starting legal action, it would start from the situation that they are separate legal entities and the plaintiff would need to first get a favorable ruling that the HOA and DRI were so intertwined as to be the same entity before being able to proceed very far on that basis.

If DRI's legal counsel is any good, I would expect them to have some stiff defenses ready for that question. That's certainly not to say it can't be done, but when people are thinking about legal option they can't start from the presumption that the DRI and the HOA are one and the same. That is a question that first must be established, and if that can't be carried, virtually the entire basis for involving DRI in the situation collapses as well.

[Carolinian Super Moderator Find all posts View Profile Close Carolinian]

DRI may well have liabilities in its individual roles, particularly in its management role, that are not at all dependent on connecting it with its other roles. Also as to the board, they may have individual liability for their actions or inactions as board members that have nothing to do with their connection to DRI, and they are probably well covered for that liability by directors liability insurance.

[MadOwner Junior Member Find all posts View Profile Close MadOwner]

UPDATE: The owners group CDOPP Home Page WILL be taking up the fight against DRI. Please give them time to update their contact list and to get organized. This group is open to ALL individuals impacted by the recent assessment (deeded owners and points). They are currently working on communication for all those who have registered with the site. We need ALL deeded owners with voting rights to get rid of DRI.

[Hiitsgina Junior Member Find all posts View Profile Close Hiitsgina]

I'm a deeded owner...you can count on my support.

[MadOwner Junior Member Find all posts View Profile Close MadOwner]

I'm a deeded owner...you can count on my support.

Please register with CDOPP Home Page by clicking the link if you haven't done so already.

[DontGetMeStarted Junior Member Find all posts View Profile Close DontGetMeStarted]

SF Meeting?

Did anyone attend the SF meeting? Was the same information more or less imparted? Any new developments?

Yes, through Google.



I attended the meeting today and just a couple of quick notes I have.
1) The insurance claim was supposedly denied for three exclusions (construction defect/faulty workmanship exclusion, gradual deterioration/wear and tear exclusion, and dry rot exclusion).
2) The Board decided it was not worth it to sue, and claimed that no competent plaintiffs attorney would do so on a contingency basis.
3) They claimed it would cost 2x this amount to demolish and rebuild the units.
4) They claimed that it was a chemical reaction from the pressure treated wood, salt in the air/sea water, and non stainless steel materials that has led to the corrosion of the nails/connectors.
5) Our reserve fund paid out about 1.8 million dollars to analysts/attorneys in assessing the situation and we currently have only about 2 million in the reserve fund.
6) The schedule of work is as follows: 2012 - building 4; 2013 - building 6, then 2; 2014 - building 3, then 8; 2015 - building 9, then 5; 2016 - building 7, then 1; 2017 - building 10, then Lobby, then shop = only one building will be out of service at a time. If you own a fixed/fixed week (as we do) you will be put in another unit if yours is being serviced, they will "attempt" to put you in a similar view category
7) 9 general contractors were invited to bid, 7 elected to attend a mandatory pre-bid meeting in April of 2011, 4 elected to submit bids and Layton Construction (a Kauai based firm) was chosen for their bid -- which was also the lowest bid
8) Deeded owners make up 63% of inventory, the Collective makes up about 35% of inventory, and Developer is about 2% of inventory and have been assessed their portion of the 65Million accordingly ($41,456,853 to deeded owners, $22,972,175 to trust points owners, and $1,393,771 to developer).
9) The breakdown of the $65 million is as follows:
56.8 million (about 51.5 in actual costs, plus a reserve of 5 million for overages)
2.3 million in consultant fees
3.8 million (assuming a delinquency rate of 10%)
989,000 in credit card surcharges (we are all paying this despite whether or not we are charging our fees or paying by check)
1.7 million in administrative costs (this really irked me -- it is the cost of Diamond's running of the project - don't they already get paid a salary?)
Total: $65,822,529 = $5893.32/interval
10) I asked what if if they have more defaults then 10% will we be assessed a further surcharge - they said yes. What if there are less than 10% will their be a refund he said yes.
11) Total cost to Diamond = $7,313,113 ($1,393,771 in unsold inventory deeds and $5,919,342 in unsold inventory points)
12) If you bought after discovery was made, they claimed you were told of it in section 4.1 of your disclosure agreement!
13) They claimed we were notified in meeting minutes, on the website and other ways prior to this bill going out - a claim many of us dispute.
14) They were actually rather rude during the meeting. Frank Goeckel (not sure of the spelling) said he was talking to us with respect - he wasn't he was rude and condescending. When someone said no he wasn't, he replied "Then I don't have to talk to you any longer."
15) When someone asked if they could surrender their deed to Diamond, and Frank said no, they asked if they could sell it to someone else, he said, "You can try." I can't really put into words here the tone he used, but it was sarcastic.
16) When people tried to explain it was difficult for some to pay this bill, he stated, "Some people have already paid it."
17) They claimed Hawaii law precludes them from releasing a list of owners (I'm pretty sure that is not correct). I don't doubt their lawyers told them not to, but deeds are recorded in the county of Kauai and a matter of public record. When a man said that the state REQUIRES the release but the Dept. of Real Estate said they could not enforce it (it had to be done by civil suit) they replied "Do what you think you need to do."
18) They stated that of the 5 member board, only 2 are Diamond employees.
19) They said that the two year statute of limitations on warranty of construction would run from time of occupancy - so building 4 and 2 would expire before the project is even done. But they said that they are trying to get warranties on the supplies for 20 years.
20) They are taking the payment plan under advisement and may possibly reconsider it -- but with the caveat that even if changes are made, you would have to be paid in full to occupy or make a reservation for that year.
All in all, I was actually glad to see owners turn out, but unhappy with the condescending and rude nature of Frank and Elizabeth Brennan -- who both made snide remarks. Admittedly they were in a hostile crowd with a lot of angry people but they were both pretty rude. Linda Riddle did the bulk of the presentation but maintained her composure and was polite, if a bit overwhelmed.

My regret was when they insisted it was illegal to provide the owner list, I should have challenged that because deeds are recorded with the county as public record. Even if they don't disclose the info of points owners, they should with deed owners, perhaps even with an opportunity for an opt out provision. Also, they are changing the exterior structure of the buildings. I took some photos of the new plan (with a yellow top floor, and brown bottom floor) and of some of the corroded materials on display. I put them on the new Facebook page.

[DontGetMeStarted Junior Member Find all posts View Profile Close DontGetMeStarted]

A Course of Action

A clear course of action seem straightforward.

1. Elect only owners to the board; that is no DRI employees.
2. Conduct a thorough evaluation of the project costs: $65 mil sounds way out of line (~$300k per unit).
3. Work out a payment plan that spreads the SA over a longer period of time.
4. Determine what loan possibilities exist for this property.
5. Use our Facebook page as an organizing tool:

https://www.facebook.com/pages/Point...48027451960608

[Carolinian Super Moderator Find all posts View Profile Close Carolinian]

A clear course of action seem straightforward.

1. Elect only owners to the board; that is no DRI employees.
2. Conduct a thorough evaluation of the project costs: $65 mil sounds way out of line (~$300k per unit).
3. Work out a payment plan that spreads the SA over a longer period of time.
4. Determine what loan possibilities exist for this property.
5. Use our Facebook page as an organizing tool:

https://www.facebook.com/pages/Point...48027451960608

Now you need to organize the owners to accomplish that.

Once you get control, you might want to look into amending the governing instruments to make officers, directors, employees of the management company and their immediate family ineligible to run for the board.

[JLB Please excuse me, I'm a Dick. Not a moron just a Dick Find all posts View Profile Close JLB]

There is no way this is going to be a pleasant experience, and I feel for ya, but, what goes around comes around and you should treat them exactly the way they treat you.

Make it as hard, or as easy, as they do.

Let's say 50% say, "No."

[T. R. Oglodyte Moderator Find all posts View Profile Close T. R. Oglodyte]

A clear course of action seem straightforward.

1. Elect only owners to the board; that is no DRI employees.
2. Conduct a thorough evaluation of the project costs: $65 mil sounds way out of line (~$300k per unit).
3. Work out a payment plan that spreads the SA over a longer period of time.
4. Determine what loan possibilities exist for this property.
5. Use our Facebook page as an organizing tool:

https://www.facebook.com/pages/Point...48027451960608

Just to point out a couple of items.

Doing a through and competent revetting and reexamination of a project of this size and complexity is about a $500,000 project. Since the capital reserve funds have already been expended, implementing your second point will likely require a special assessment in itself. From a practical standpoint, going back to the owners and saying - oh, here's a special assessment on top of the existing one isn't going to fly.

Spreading the SA over a longer period of time will increase the cost of the project. It's less efficient for a contractor to stretch out a project, and if you ask the contractor to assume the risk of changes in the prices of materials and labor, the longer a project stretches the greater the contingency the contractor needs to have. I wouldn't be the least surprised that if you make this a five-year project the project costs would increase by about 30% to 50% - maybe more if the contractor has to carry the full risk of changes in materials and labor.

The issue of loan possibilities is straighforward. What do you propose that the HOA put up as collateral to secure a loan that would be attractive to a bank? If you can't put up collateral no one is going to extend tens of millions of dollars in credit.


******

There are a lot of people justifiably upset and angry. But for people to organize effectively, responses need to be well thought and grounded. If you get people excited and start marching them off in some direction, only to have to stop and say, "Ooops, this isn't going to work after all", support is going to fade quickly.

Sorry to be blunt, but right now what I see is a bunch of corporals running around trying to collectively plan a battle. What is needed is to find an experienced commander who can develop a realistic battle plan.

[timeos2 Senior Member Find all posts View Profile Close timeos2]

Sorry to be blunt, but right now what I see is a bunch of corporals running around trying to collectively plan a battle. What is needed is to find an experienced commander who can develop a realistic battle plan.

THE point made perfectly. As it stands the efforts being made and the complaints posted seem to be accomplishing exactly nothing.

Without a genuine leader and proper financing available this movement to change anything at the resort is doomed to failure.

[Brogers92026 Member Find all posts View Profile Close Brogers92026]

"Originally Posted by waimea'smom
Yes, through Google.



"4) They claimed that it was a chemical reaction from the pressure treated wood, salt in the air/sea water, and non stainless steel materials that has led to the corrosion of the nails/connectors."

Pressure treated lumber is notorious for causing corrosion and failure of the fasteners. The old stuff was called CCA (it had Copper, chromium and arsenic in it) and it caused regular steel (nails, screws, brackets) to corrode quickly. If there was moisture and warmth, the reaction happens more quickly. In the US there was a concern about the toxicity of the arsenic. So, in 2004, the CCA was outlawed and replaced with something else that isn't quite as toxic -- alkaline copper quaternary (ACQ). According to a fastener manufacturer, it is twice as corrosive a the previous stuff. So, I hope for the sake of the property owners that the rebuilders use the properly protected fasteners and barriers.

It may be very possible that the original builders were not aware of the corrosiveness of the pressure treated wood. When it first came out a couple of decades ago, it was not generally known what a time-bomb this was. But this probably falls into the category of "construction defect" for which there was an insurance exclusion.

I wonder if Diamond had the opportunity to get insurance that did not have the exclusion but chose to take a policy with the exclusion because of the lower premium cost.

[T. R. Oglodyte Moderator Find all posts View Profile Close T. R. Oglodyte]

It may be very possible that the original builders were not aware of the corrosiveness of the pressure treated wood. When it first came out a couple of decades ago, it was not generally known what a time-bomb this was. But this probably falls into the category of "construction defect" for which there was an insurance exclusion.

I wonder if Diamond had the opportunity to get insurance that did not have the exclusion but chose to take a policy with the exclusion because of the lower premium cost.

In my experience it is extremely rare for a building owner to take out a policy of their own to ensure themselves against construction defects. Further I would imagine the premiums on such a policy would be extremely high because the insurer would be putting themselves on the hook for being directly liable for the activities of someone who is not a policy holder. I'm not saying that insurance companies don't offer such policies; just that when they do they charge a higher premium because they are less able to control the risk.

What is very common, though, is for building owners to receive coverage as an additional named insured on the contractors liability policy. In fact, construction contracts usually contain explicit language requiring a contractor to have insurance coverages with specified minimum amounts of coverage, maximum allowable deductibles, and to provide a certificate of coverage that names the building owner as an additional insured.

Those policies normally provide coverage when the contractor liable Therefore they provide coverage only for the period in which claims are allowed under the statute of repose, which in Hawaii is ten years. Since it's well past ten years since the buildings were constructed there is no longer any contractor liability and hence no coverage for construction defect.

*******

Also since Diamond didn't come on the scene until about five years ago and didn't purchase the resorts (only about the 10% of deeds that Sunterra was holding in its inventory, they would have no reason to even consider obtaining insurance for construction defect, were it available.

[Kpaul Junior Member Find all posts View Profile Close Kpaul]

Just to point out a couple of items.

Doing a through and competent revetting and reexamination of a project of this size and complexity is about a $500,000 project. Since the capital reserve funds have already been expended, implementing your second point will likely require a special assessment in itself. From a practical standpoint, going back to the owners and saying - oh, here's a special assessment on top of the existing one isn't going to fly.

Spreading the SA over a longer period of time will increase the cost of the project. It's less efficient for a contractor to stretch out a project, and if you ask the contractor to assume the risk of changes in the prices of materials and labor, the longer a project stretches the greater the contingency the contractor needs to have. I wouldn't be the least surprised that if you make this a five-year project the project costs would increase by about 30% to 50% - maybe more if the contractor has to carry the full risk of changes in materials and labor.

The issue of loan possibilities is straighforward. What do you propose that the HOA put up as collateral to secure a loan that would be attractive to a bank? If you can't put up collateral no one is going to extend tens of millions of dollars in credit.


******

There are a lot of people justifiably upset and angry. But for people to organize effectively, responses need to be well thought and grounded. If you get people excited and start marching them off in some direction, only to have to stop and say, "Ooops, this isn't going to work after all", support is going to fade quickly.

Sorry to be blunt, but right now what I see is a bunch of corporals running around trying to collectively plan a battle. What is needed is to find an experienced commander who can develop a realistic battle plan.

T.R. You have a wealth of information and a timeshare guru on this board. I don't know how you can find the time to stay active on the board.

Did you make a mistake when you quoted a $500,000 project?
I'm not really sure what you are referring to on the $500K.

As a contractor and a developer I can tell you that the contractor can easily reduce the risk of price increases on material. They get a commitment from the supplier for a period of time. They can also purchase the material and store it if they are worried about the price spiking. It's done all the time on large construction projects (and smaller ones).

Labor can't be controlled too much, but hey we are talking about Hawaii where the labor is readily available, affordable and tradesmen are willing to come from the mainland to work in such a nice place. Plenty of contractors are out of work right now and would jump at the chance to work in Hawaii for a period of time.

You could easily reduce the risk of a 30%-50% increase in cost due to building it over a 5 year period. A simple solution is to award one contract for the first two buildings and then put the rest out to competitive bid before awarding it to the existing contractor. That will keep his pencil sharp.

The bank loan is probably not an option for another reason, interest and fees.
This will just add to the cost of construction. Why get a loan when you can collect it from the owners, "interest free" and charge a special management fee built into the $65 million.

I hope the organized battle plan comes to fruition and maybe we will see some changes.

Las Vegas corrupt thieves - or brilliant scam artists - I have my opinion!