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A Response to the DRAFT of the BDO Survey for CHCR Members

by Walter Palmer

Reading these documents prior to reading this letter would be helpful!

Court documents prepared by BDO for the court appearance on July 2nd can be found here

Copy of response to BDO documents by GoFundMe Group can be found here

To say that I am profoundly disappointed by this draft of a survey of the owners is quite beyond understatement. I find that I’m astounded by it, actually.

I’ll try to work through some points, here, but this draft raises so many problematic points that weren’t even in play when I sent a very long letter last week that I am at a loss as to where to begin and the impracticality, by sheer volume of work, of tackling the issues in any detail. I’ll offer a few very brief critiques so that you have a beginning of understanding as to how I, and what I suspect will be very many owners, fear that you are greatly uncomprehending of what needs to be accomplished in order to resolve the ‘CHCR mess’ fairly and equitably.

Let me say this at the beginning: nothing that binds a respondent to a consequential choice (committing to relinquish ownership, and paying an upfront fee of between approximately $1,100 and $2,300 per interval) can be construed as a survey intended to determine what the owners really want. The Court Order, at 5 (b), describing the job of the Administrator, reads:

“subject to Court approval, plan and propose a procedure to ascertain the interests of the Members going forward with respect to the Resort, whereby Members of the Applicant will be able to indicate, among other things, whether they wish to terminate their relationship with the Resort or continue their relationship with the Resort if a satisfactory restructuring solution can be developed”.

Well, (and noting that the order says “interests” and not merely “desires” or “wishes”) how can a survey fairly determine interests if it simultaneously, by the action of responding, creates an effect that alters those interests? The ‘exit fee’ goes to the kitty and materially affects the viability of the resort in the fewer hands that remain. That’s not a survey exercise; it’s a coercive action that seems difficult to distinguish from a tactical move that favours an outcome. It advantages those who opt to leave immediately by relieving them of the obligation to pay one year’s maintenance fees without disclosing how else they might find the option objectionable in the longer term. For instance, the draft wording says:

“You will receive further information on precisely how to exit and the implications of exiting after the survey is completed and a final exit plan is approved by the Court.”

Once the owners who have registered their desire to exit and they have paid a substantial exit fee, and then the ‘plan’ is submitted to the Court, and after the Court has approved the plan, then … then these people find out the implications of their choice? The meaning of the word ‘survey’ is not really open to much argument; it generally relates to investigation for the purpose of description. It would be fair, in the way that we understand surveys, to ask: “How many of you would like to exit if it meant paying an upfront fee of $X,000, and if we are not able to tell you about any other consequences of such a choice?” Dumb question, but it still, at least it takes the form of investigating for the purposes of understanding and describing. “Pay $X,000 and we’ll commit to letting you exit, but we won’t tell you what the other consequences are—either for you or the people who opt to stay—sign here,” is not really a ‘survey’ question.

Unlike an insolvency, the commercial viability and continued operation or the liquidated assets of the Resort are not the interests that are being served here. The resort does not exist by itself except in the physical form of land and buildings that have no rights, no obligations, and no servable interests. The interests here are solely the interests of each individual owner; and the obligations of those owners are not to the resort or its viability or continued operation but rather are obligations to each other. Knowing only that the current arrangement is not financially sustainable, this restructuring is for the sole purpose of re-figuring those obligations in the context of an analysis of those individual interests. The process should not make any assumption that either the continued operation of the co-ownership, on the one hand, or its dissolution and distribution of assets, on the other, is more favourable. Nothing is more favourable in terms of outcome than safeguarding the interests—wants, certainly, but also as combined with financial equity—of each individual owner … no matter what that owner generally favours. To play want against balance of equity is to misconstrue what constitutes natural justice in a legal process that is acknowledged to be unique. Since there is no exact precedent for what is being attempted here, there is an opportunity to do something that comprehends this or any similar co-ownership and the difficulties that may arise out of that co-ownership in a way that guides co-ownership, both in processes of formation and dissolution.

This mooted ‘survey’, if enacted, would, solely through that act of enacting, immediately create two classes of owner with entirely different rights and prospects.

This mooted ‘survey’ is coercive in that it compels owners to take blind risks in terms of their financial prospects at the same time that those offering the survey will be the ones who then decide those outcomes. It’s not even ‘pay to get out’; it’s ‘pay to let us decide your larger fate in the context of allowing you the potentially relatively minor privilege of getting out now as opposed to later—how much later is up for grabs.’ To me—and presumably many other owners—this survey seems patently nonsensical and wrong. I dislike using such language but, with respect, it’s very hard for me to characterize this ‘survey’ proposal in any way other way. It’s just not a survey. And even if we thought that a neutral opinion/wish-gathering were not what is called for at this stage (and it is), and if we further thought that we needed immediate commitment on a general action item (and we don’t) this is not a fair or just action. Everything that has been laid out here is wrong … and wrong again.

A stated rationale for this approach is that surveying that contemplates various outcomes that are contingent upon the results of the selfsame survey is not feasible—that it implies iterative surveying that could go on forever. I question that hypothesis. It is quite possible—and it might actually save an enormous amount of time and confusion, and avoid guesswork—to present a ‘matrix survey’ that asks owners to select their preference within a selection of choices as to leaving and staying, and under what conditions. Having received response to that survey, hard numbers could be attached to a certain selection of options and those options could be put out for a necessary firm commitment.

But … on the basis of the case that I laid out in me letter of June 16, I fundamentally do not accept that, among any such options, ‘exiting’ should cost an owner any money at all, unless the estimated value of the resort (as a physical asset that could be sold as is for simple real estate value or as a viable business) is negative, net of all liabilities and costs associated with dissolution. My interval ownership is a share value of equity that should be neither increased nor diminished by substituting a new arrangement whereby our equal obligations to each other remain equal but in a different form that makes financial sense. No winners, no losers. No one’s equity appropriated in order to augment the viability of a certain outcome, argued to be preferable … and known to be favourable to other owners, in terms of their equity share.

Another point: You say, “If you do not reply to the survey, the Administrator will have to assume that you are voting to STAY in the resort. The Administrator CANNOT assume that owners want to break a legal contract.” Well, in general, non-response to a survey is not considered as supporting one response or the other. Further, if one was to make assumptions about non-response, and recognizing that financial non-viability of the resort is the precipitating event here, one would be better advised to assume that non-respondents are looking for escape as a far more reasonable choice. And, your claim that the administrator cannot assume that an owner would want to break a legal contract, while that would normally be true, we have evidence that 25% of owners have already expressed their willingness or necessity in breaking a legal contract. But that’s not the most important reason that your assumption is wrong. The owners, through their Board, have selected you to make a proposal to the Court that allows, specifically, for the breaking of an existing contract and coming up with a new one. So, yes, the Administrator can certainly assume that if two legal options are on offer—legally stay with a new contract, or legally leave with a new contract—in both cases owners are allowed to favour neither and no assumptions should be made about which one they thereby do favour. In fact, in the defence of owners who might wish to refuse to respond, the two options on offer do not at all properly reference each other as rational choice. It’s a little bit like, “Are you walking to school or taking your lunch?” To which the appropriate answer is, “What?” Neither of the survey options is a survey question; they commit owners to actions; the actions change the character of the equity matters that are being decided. It’s nonsensical.

The very last sentence of your draft ‘survey’ document reads: “The results of the survey will help to inform all owners, the boards of directors, the Administrator and the Court as to what the next steps should be.” This most assuredly is not what this ‘survey’ will accomplish.

I urge you to read the letter referred to above, and if this process is indeed supposed to be open and conducted on the basis of recognizing the views of the owners, I would like some acknowledgement that you are receiving and reading and incorporating the views of those owners who have taken the trouble to contact you.

Right now, we get most of our info from member Facebook pages. This is not satisfactory.

I would like to see communication from BDO that effectively says, “Owners, this is what each of you has; these are your obligations to each other; your obligations to each other are eroding what each of you has; these are the ways that we could reconfigure your obligations to each other; in each case, you keep what you have, but in a different mode or form; which would you like?”

Walt Palmer

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