By Carmen Di Giovanni

Barrier Island Station is a legacy timeshare resort in the Town of Duck, on the northern Outer Banks of North Carolina. The resort consists of seven buildings on 24 acres of prime real estate extending from Currituck Sound to the Atlantic Ocean.

The buildings are 35 to 40 years old, multi-level, and have no elevators. Occupancy is highly seasonal, as reflected in the delinquency statistics. Our percentage of fee-paying owners in 2010 was 90 percent. The 2023 budget for fee-paying owners is 58 percent, and we are on track to miss the budget by at least one percentage point.

The resort was developer-controlled until the end of 2014. Maintenance fees were kept artificially low, and no capital reserve account was funded. The board of directors’ top three priorities are focused on addressing these facts.

Declining owner participation

We have watched the number of fee-paying owners decline steadily since 2010, with three abnormal drops in 2015, 2017, and 2020, years when the board levied special assessments of $1,290, $200, and $2,200 respectively. About 40 percent of the owners who went delinquent in the 14-year measurement period did so following the three special assessments. Increasing maintenance fees and special assessments clearly are taking a toll on owner participation, but other reasons are worth noting. They include:

• An aging owner base. The generation which originally purchased intervals is aging or dying. Frequently their children, who may have spent many enjoyable years at Barrier Island Station, have no interest in taking over the deeds. Additionally, the threat of lien or foreclosure actions frequently has little impact on older owners who no longer use credit to make large dollar-capital purchases.
• A deed-back program. Recognizing that owners wanted to exit, we created an orderly exit option—a program to take back about 1 percent of our total deeds annually for a cost of $2,995 per deed. The fee covers transfer and administrative costs, and provides working capital to the association until we can develop ways to monetize the units. The association now owns about 10 percent of all deeds.
• A deteriorating physical plant. During the almost three decades of developer control, the buildings and their contents were allowed to deteriorate, slowly but inexorably. Hurricanes and nor’easters battered the resort. Being in an area with significant storm activity accelerated the aging of the buildings. Over time the building envelopes deteriorated so that wind-driven rain penetrated the siding and window and door openings, causing damage to the interiors. Promised interior refurbishments were continuously deferred.

In 2014 we undertook a two-year project to replace all siding, decks, windows, and doors. The funds to accomplish this project came from a special assessment, as the developer-controlled board did not breserve funds for known future expenditures.

Additionally, promised periodic replacement of furniture, fixtures, and soft goods was suspended due to lack of funds. While the board was developing plans for a major interior upgrade, we were hit with two totally unexpected events in 2019. First the recreation center failed a structural inspection and was condemned by the Town of Duck. Then the sprinkler systems in two buildings failed their annual inspection, so we had to replace them or risk having the buildings condemned and razed.

Funds for all these efforts were provided by another special assessment, but the scope of the interior refurbishment project was reduced by half to pay for the new recreation center and sprinkler systems. As a result, we are only now replacing original carpeting in some buildings.

Many owners say they are simply walking away because of these issues.

Outdated bylaws

In 2021 we undertook to revise our bylaws, which had not been updated since 1997. Voting rules made nominating and electing new board members difficult, annual meeting dates and locations were codified to make owners’ attendance difficult, and no provisions were included to enable the board to use current technologies to conduct official business.

Once adopted, the proposed bylaws will allow the Board to stream the annual meeting and allow owners to vote from home without having to name a proxy. The amendment rules will be liberalized so the process won’t be onerous, and will allow the board to respond to changes in technology and evolving operational considerations.

The 1997 bylaws authorized the Board to reserve funds for capital expenditures, but did not require the board to do so, and the board did not. The proposed bylaws, currently out for approval by the owners, were written to require the board to deposit 15 percent of the annual maintenance-fee assessment into a capital-reserve account. To make this palatable to owners, the 15 percent will be phased in across five years. The goal is to never again levy a special assessment.

Conclusion

Deeded seasonal legacy timeshare resorts present significant challenges well beyond the scope of normal operations. Creative and anticipatory thinking is absolutely necessary to stave off or blunt the negative events which are certain to materialize. An active, involved board is required, and when we advertise for director nominations, we clearly state that significant personal time is mandatory.

Keeping owners informed is critical. Our owners receive a monthly status report of actions and occurrences, which we send by email and post on the resort’s website. The news may not always be good, but averting surprises is paramount to retaining owner support.

Carmen Di Giovanni is vice-president and treasurer of Barrier Island Station Interval Ownership Association, Inc., in Duck, NC.