The Lochanhully Woodland Club (Update 1)

The TCA has recieved a letter from a consumers detailing the events which are happening at the above club. The letter below is a full extract from the corrispondance.

Dear Fellow Owners,

Thank you for taking the time to read this very important letter. This is perhaps the most difficult letter I have had to write as your Chairman as we approach this year’s AGM, with the future of Lochanhully very much in the balance and at the forefront of your thoughts.

Initial Response to July Letter:

In July, I wrote to you seeking your opinions with regards to the MRL proposal to change MRL fixed week fixed lodge timeshare clubs to points based holiday clubs.  Since then, six of the other eight MRL Clubs have voted to proceed with this proposal.  The MRL proposal has created an opportunity for club members with the financial means to finally dispose of their obligation under the existing contract in perpetuity. The relevant exit fee is four times the annual management charge.

Since my letter, the Lochanhully Committee have heard from approximately 300 Lochanhully Members out of a possible 2,000+. Of those writing, 62.5% were in support of the Lochanhully Committee putting the MRL proposal to a vote of Lochanhully Members as soon as possible and approximately 37.5% set out reasons why they thought that the MRL proposal as currently put, was unacceptable and, at times, articulated that MRL should make a better offer, particularly given that MRL gains a great deal from the proposal and will exercise complete control of the Club after the conversion to a points based holiday club.  Clearly, therefore, it is important to have this discussion as a key item on the agenda at the upcoming Annual General Meeting on 22 October 2014.

Importance of Independent Advice:

Many of you have commended the Lochanhully Committee for trying to be fair to all owners by seeking independent legal advice. Your Committee’s desire has been to ensure that all Lochanhully Owners are generically aware of the pros and cons of the MRL proposals in order to avoid unintended adverse consequences for both those who want to exit the Club as well as those wishing to continue enjoying their time at Lochanhully. Of course, the personal circumstances of each Lochanhully Member will differ, but at least you have the information and can make an informed decision.

This extra scrutiny and time has allowed us to ensure the widest possible debate and transparency for owners rather than rushing to an irreversible decision that would leave us open to the threat of a legal challenge for the Lochanhully Club if it proceeded without full disclosure to all owners. The one other MRL Club that has not already accepted the MRL proposal is also the only other Club that sought independent legal advice rather than relying on MRL’s legal advice.  Some of you will now be aware that some of the early adopters of the MRL proposal who have now been challenged by Members who felt disenfranchised since (i) no independent legal advice was sought for Members (ii) little information about the pros and cons was provided to the Members and (iii) MRL itself, as a Founder Member, wields significant voting power to drive the changes through irrespective of the votes of other Members.

As a result of the consultation with Club Members, the Lochanhully Club did not participate in the first wave of the MRL proposal, but can participate in the future if Members are in favour of proceeding on that basis. For the avoidance of doubt and as said in my July letter, It was always made clear by MRL that this project could move in more than one wave with some MRL Clubs moving faster than others. At the very least, this has provided Lochanhully Club with the opportunity to learn from those travelling the road ahead of us.

Responding to your Questions:

As mentioned above, around 300 owners have responded to my letter as sent out in July. We have been working through questions and preparing a “Frequently Asked Questions and Responses” sheet that will be available at the Annual General Meeting on 22 October 2014, and will also be published on the website no later than 18 October: www.lochanhully.co.uk (you should already have the log on details, but these can be provided through Owner Services on 01479 815350). For those without direct access to the internet I am sure you have some family or friends who can assist.

Considering Alternatives:

Many of you have asked if there are alternatives to the MRL proposal. We are aware that there is a chance that European Legislation may be passed to afford protection to timeshare owners in the short term, but the timing is uncertain.

It is clear that MRL’s proposal is significantly driven by MRL’s own concerns about their commercial viability as a going concern. This means that the interests of Club Members are not the key determinant of the decision to convert to a points based system. As such, MRL is conflicted, but can use the votes as Founder Member to drive their preferred outcome, which would be irreversible once done.

One point that is very clear from the feedback we have received in that all members would like the existing contract in perpetuity to be extinguished.  There is a divide between:

Those who can afford the MRL exit charge and just “want out” and are prepared to pay their way

Those that think the MRL terms are not fair, or that the MRL exit charge is too high

Accordingly, we have tried to seek alternatives to the MRL proposal that (i) allow an early and affordable exit for Members who want to leave and (ii) create an affordable and sustainable structure for those who want to stay.

In addition to the termination of the contract in perpetuity on the death of the last surviving member, I  would put forward as initial suggestions for further exploration and debate at the AGM:

**The Quota would be used to limit exits in any year and notice periods or fees used to protect cash flow. In all cases assets (lodge weeks) would belong to the Club to use as it sees fit.

If any of the alternatives above were adopted, thought would need to be given to what would be done with the weeks that are returned to the Club following expiry of the relevant notice periods. Some thoughts of how to create new income streams are below:

Introduce a “try before you buy” scheme: Prospective members to pay a deposit of £1000 and annual management fees + £150 to cover administration. The deposit is fully returnable at the end of 3 years if members wish to leave or convert to full membership for a longer fixed term period.   The benefit to owners is they receive deposit back after three years if they wish to walk away.

Introduce a “five year fixed contract”:  Members Pay 5 years fee upfront + £150 to cover administration fees. Members can walk away in 5 years. The benefit to the Owner is that they have the benefit of a fixed cost holiday with no increases and no management fee. The benefit to the club is that it receives advanced management fees for 5 years, guaranteeing income and also retaining an asset at end of 5 years.

Introduce a “ten year fixed contract”:  Members Pay 10 years fee upfront +£150 administration fee. Members can walk away in 10 years. The benefit to the Owner is that they have the benefit of a fixed cost holiday with no increases and no management fee. The benefit to the club is that it receives advanced management fees for 10 years, guaranteeing income and also retaining an asset at end of 10  years.

Outright purchase of full membership that can be terminated on the same basis as original members

Continue with a scheme that allows for rental of club weeks on an ad hoc basis.

The key to making any alternative proposal work is to reconfigure the offering so that there is a possibility of Members opting for short term arrangements where their costs are measurable and people are able to keep up with their fees rather than building up debts.  Any new alternative would involve a new marketing campaign and amendments to the existing relationship with MRL, all of which would require the patience and support of Members and obtaining further legal advice.  The target clients would be existing members who may want to take up extra weeks and friends, family and current exchangers and renters.  Reconfiguring the club and contracts as above would take no less than eighteen months. Financial modelling would need to be done, but it would seem, on a rudimentary analysis, that any uptake on the four options above would reduce the non-payment burden, reducing fees over time and reducing likelihood of further non-payment creating a virtuous circle. If the alternative proposals ultimately did not succeed ultimate, the resultant assets could be sold for the benefit of those Members left including MRL rather than assets all going to MRL with no financial upside to other Owners as currently proposed.

By creating exits, we address the most significant concern that members have. The options above do not change the foundation of fixed week fixed lodge that many owners would still prefer. It also allows members to continue to enjoy the benefits exchange options via eg RCI as they require fixed weeks. This would not be possible under the MRL proposal.  Overall, the Lochanhully Club would be differentiated and structured in a way that deals with most Members’ needs.

So to sum up folks, you bought your timeshare without guidance from a Committee and you will have to make your mind up using the information we have provided and work out what best suits your needs following our discussion at the AGM where we intend to get a sense of what you, as Members, would like to see happen next. European legislation to better protect timeshare owners may take some time, which means we have to rely on practical options we explore independently using expert advice. I am not here to push you down a particular path, but I am here to ensure that people’s rights are protected and I look forward to the discussion at the AGM. 

Yours truly,

Kenny Griffith

Chairman of the Owners’ Committee – Lochanhully Woodland Club

For more information regarding this article or assistance in any other timeshare related issues please contact the TCA on 01908 881058 or email: info@TimeshareConsumerAssociation.org.uk