Bluebeard's Castle News
VILLAS 1 Letter dated
July 9, 2021
Greetings To All Owners,
Finally, good news. On July 1, 2021, the Court signed an order permitting Villas I to proceed with the sale of the property in its Partition action. Let me summarize how and why we are at this stage.
Background
The Villas I Board of Directors voted in 2018 not to rebuild our hurricane destroyed condominiums. We received $13.5 million in settlements for our damaged units. Under our Declaration of Condominium, that money is required to be held in trust. The Declaration requires the Board to distribute the insurance proceeds pro-rata to unit week owners. Villas I has 1,144 owners.
However, the Declaration and the Virgin Island Code also require the Board to file for a partition of our hurricane-damaged buildings and sell them at auction. All net proceeds from our insurance recovery and for the sale of our property are required to be distributed pro-rata to all unit owners.
Villas I Complaint For Partition
The Attorney for Villas I, Maria Hodge, filed a Complaint for Partition of our buildings with the USVI Court on December 3, 2018 in an action captioned BBC Villas I vs. St. Ham Management, LLC. That matter was assigned to the courtroom of Judge Denise Francois, court docket case no. ST-2018-CV-00765.
Villas I was required by the Court to file a list of all Villas I owners (some owners are unknown, deceased, etc.) and their interest in the unit weeks. Villas I complied. One year later, the Court approved the Complaint for Partition and the listing of all owners’ interests on December 18, 2019. The Court also appointed a referee, April Newland who is an experienced USVI realtor, to issue a report that detailed all outstanding liens, which was to include property taxes owed by our owners as of 2019. The sale of the property was ordered to be by auction with the date to be determined by the referee after filing her report on outstanding liens and after Court approval to proceed.
However, the other three Associations and the LLC at BBC filed an untimely Motion to Intervene in the Villas I Partition action on December 30, 2019. That motion was filed one year after Villas I filed its Complaint for Partition and one year after the other Associations were aware of what Villas I intended. The other Associations made no attempt to intervene in the Partition action or made any objections to it during the year it was pending.
In the Motion to Intervene, the other three Associations and the LLC have made numerous claims against Villas I including (a) a failure to demolish or repair our destroyed buildings (b) that Villas I caused harm to the other Associations (c) that Villas I failed to fully pay all assessments for common area and shared use expenses and (d) that the Villas I buildings created a nuisance.
The main reason why Villas I could not proceed to dispute resolution of those claims by mediation or arbitration against the other Associations was their Motion to Intervene in our pending partition action with objections to allowing our partition sale to move forward. Their claim was that only after their claims for damages and other relief were resolved, could Villas I proceed with an auction and distribution of proceeds. Until then, we were at a stalemate.
The other Associations also filed a Petition with the USVI Commissioner of Public Works demanding that Villas I either repair or demolish our buildings. In review of the USVI statute, it does not appear that Villas I can be compelled to either repair or demolish our buildings. The USVI Government could step forward and demolish our buildings and then file a lien against Villas I for the costs of demolition. However, the government does not have the estimated $2 million to complete such a demolition.
Our attorney timely filed objections to all of these pleadings filed by the other Associations. Since December 2019, when the Court approved the filing of our Partition, our attorney has filed seven
(7) “urgent requests” on June 8, 2020, July 15, 2020, October 26, 2020, December 10, 2020, March 3, 2021, May 31, 2021, and June 30, 2021, asking the Court to deny the untimely and illegal filings and permit Villas I to proceed with an auction, dissolution, and distribution of proceeds. Finally, on July 1, 2021, the Court ordered that the Referee’s Lien Report was approved, and the Referee was authorized and “directed” to proceed and conduct the sale of our property. The Court made no reference to the objections filed by the other Associations, but simply ignored the objections and their requests for a stay of proceedings.
During this time same time period, Referee Newland had filed her report on April 8, 2020. It listed all outstanding liens which included USVI tax liens for property taxes owed by Villas I owners. We have been in contact with Referee Newland who is still “on board”. Because we need to publish notice of the auction sale for four (4) consecutive weeks, we are hopeful for an auction and sale to the highest bidder in the next several months. However, once the bidding and sale is completed, the Court will still be involved to approve the sale, the calculation of proceeds which will be net of expenses for outstanding liens, for property taxes, Condominium maintenance fees owed, the Referees fee, and the final net distribution to unit week owners. Still a ways to go, but we just cleared the highest hurdle.
The Condominium documents require mediation to resolve any disputes among the Associations. Simultaneously, while Villas I proceeds with the Partition action, we will still need to mediate numerous issues that have arisen. Among the issues that need to be resolved include the demand that Villas I pay 15.83% of all common elements and shared property use expenses since the hurricanes destroyed the resort in 2017.
The Other Associations Want Villas I To Continue To Pay 15.83% Of All Common Element Expenses Since 2017
A major claim the other Associations have made against Villas I is that we owe hundreds of thousands of dollars for various resort expenses. They want us to subsidize the expenses their owners have incurred and continue to incur in their use of the resort facilities, i.e. expenses for the
Associations think it fair and reasonable that Villas I continue to help them with the expenses their owners are responsible for, even though we are no longer on property and receive no benefits from the resort.
The other Associations demand that Villas I continue to pay 15.83% of all common element expenses for the resort until Villas I partitions its buildings, distributes proceeds to owners, and dissolves its corporate status. Apparently, in 2018 (2017 is unclear), the property manager continued to provide 15.83% of all common element expenses to the other Associations and the LLC by withdrawing funds from Villas I maintenance fees collected in 2017. When those funds were depleted, the property manager then began withdrawing funds from Villas I’s insurance proceeds recovered from the hurricane losses. Again, this subsidized the other Associations for the expenses incurred for the pool, front desk, housekeeping, etc. However, our Declaration requires these funds to be held in trust for the owners. No one authorized removal of funds from the Villas I trust account to subsidize the other Association’s expenses.
I had been removed as president by the Board when this occurred. When I discovered Villas I was continuing to pay 15.83% of all common element expenses incurred by the other Associations and their owners, I demanded that the practice be stopped. It is unclear exactly how much money was withdrawn from Villas I to subsidize the other Associations with their expenses. Estimates are perhaps four hundred to five hundred thousand dollars prior to 2019 had been withdrawn from Villas I accounts.
Note 1: The Villas I Board never approved a budget for these common element expenses or for any resort expenses after the hurricanes in 2017. The Villas I Board was not asked by the other Associations to continue to make a contribution for all expenses incurred and never discussed or voted to help pay for these expenses of the other Associations. The money was withdrawn without knowledge of the Board. I do not know who was aware of this unauthorized withdrawal of funds from Villas I. We will find out and attempt to recover these funds.
This issue will obviously have to be resolved at mediation or arbitration, not in court where the Partition has been allowed to proceed. The Operating Agreement and Shared Use Agreement signed by all Associations require that for any disputes between the Associations, the dispute must be resolved by mediation, failing which it would then proceed to arbitration. It is not a matter to be decided in court. Our attorney has previously offered to discuss and negotiate this issue with the other Associations, but they refuse to discuss anything other than make a demand for a full 15.83% contribution from Villas I owners, and refused to withdraw their claim in litigation.
Should Villas I owners be required to share in the expenses created by other owners relaxing by the pool, enjoying food and drink, delighted in having a fully staffed front desk, grounds crew, and housekeeping to meet the needs of the other Associations? Sound fair to you? Willing to let this continue??
Public Adjuster
Having had a legal practice in property damage litigation, I knew it was imperative that Villas I retain a public adjuster immediately after the hurricanes to be onsite, investigate and document with photographs our damages and loss, and be prepared to give expert testimony regarding all of the damages sustained by Villas I from the two hurricanes. This included the need to establish the separate damages caused by the second hurricane. I was able to locate a very experienced, worldwide, and highly regarded public adjuster. He was then hired by Villas I to completely investigate our loss and make a claim against our insurance company for all of our property damages. Of course, making a claim is meaningless unless you can prove your damages from a particular cause.
The public adjuster retained by Villas I was able to identify, document, and prove the separate and distinct damages from the two hurricanes. The insurance company initially claimed that both hurricanes, separated by several weeks in time, was only one occurrence and, therefore, only owed coverage of $43 million for the entire resort for one causal event. The insurance company eventually acknowledged that there were two separate occurrences which then triggered coverage of $43 million for each of the two hurricanes. Their change in available insurance coverages was greatly influenced by the work of our public adjuster and the evidence he was able to place before the insurance company executives.
The first defense of only one occurrence having failed, the insurer then claimed that all of the resort damages were caused solely by the first hurricane. It was the insurance company’s position that no new damages for any resort property was caused by the second hurricane. Therefor, the insurance company tendered its full insurance coverage policy of $43 million to BBC to be divided by the Associations as they saw fit and appropriate. A committee of the four Association Presidents was established to determine the allocation of the $43 million for damages to the four Associations and the LLC for the common elements.
During numerous meetings with the other Associations and the insurer, our Villas I public adjuster determined and proposed that $11 million would be a reasonable settlement for the loss sustained to Villas I from the first hurricane. After extensive discussions and deliberations, the Presidents and representatives of all Associations agreed. They voted that Villas I would be allocated $11 million out of the $43 million policy limits tendered for the first hurricane. Villas I agreed to that allocation and accepted that money as the fair and reasonable settlement for its provable damages incurred from the first hurricane. Not only was there no objection from the other Associations regarding the $11 million allocation to Villas I, the other Associations agreed and voted that it was a fair and reasonable allocation.
Villas I was then left on its own to negotiate, prove, and recover those damages solely caused by the second hurricane Maria. Our public adjuster was prepared to prove specific, separate, distinct, and additional damages that occurred to the Villas I buildings solely from the second hurricane. The public adjuster advised that Villas I settle for an additional $2.5 million for our damages caused solely by the second hurricane. After lengthy deliberations and threats of litigation
concerning the Villas I damages that occurred solely from the second hurricane, Villas I was forced to file suit against the insurer Island Heritage Insurance Co, case no. ST-19-CV-00529 on September 17, 2019 the last date by which we needed to file for damages to preserve our claim and collect on the second hurricane-related damages.
As alleged in the Complaint, Villas I was forced to file a Complaint for damages because Island Heritage claimed, inter alia, (a) that Villas I could not bring such a claim alone without combining with the other Associations as named plaintiffs, and (b) that Villas I sustained no damages from the second hurricane Maria. In the Complaint, we detailed how even the insurer’s own expert wrote a report and admitted that the edge of the “eyewall” of the second hurricane “passed directly over” the BBC resort where the wind forces were “most intense at the eyewall”. Villas I was also forced to obtain a documented report from a USVI licensed engineer verifying our claim that our property was destroyed based upon the engineer’s personal observations of our property both before and after hurricane Maria. Villas I alleged a breech of contract by the insurer, bad faith claim handling practices, and violations of various USVI statutes that govern the business and conduct of an insurance company for insurance related purposes. We demanded compensatory, statutory, and punitive damages, costs, attorney fees, and pre and post judgement interests.
In the end, Island Heritage conceded and paid Villas I the $2.5 million demanded for its loss from the second hurricane. That settlement made Villas I whole.
Note 1: The other Associations have since raised claims that Villas I unfairly received $11 million for its loss from the first hurricane Irma. Although our settlement left $32 million out of the $43 million insurance policy for the damages sustained by the other three Associations and the common element damages, they now claim that was inadequate. Apparently, they may attempt to “claw back” some of our $11 million in court or in future mediation or arbitration. Strange, because the three Presidents from the other Associations agreed that the split was fair and reasonable and then allocated and awarded Villas I that $11 million. We feel confident that the other Associations will look foolish if they continue to press this claim. We will also ask for attorney’s fees if we are forced to defend that claim.
Note 2: Because Villas I was the only Association that hired a public adjuster who was on site, who thoroughly documented our loss from each hurricane, and was prepared to give expert testimony to prove our $2.5 million loss from the second hurricane at trial, Villas I received a fair recovery of $2.5 million from the insurer. However, because the other Associations did not want to spend 7% of their insurance proceeds to hire a public adjuster who could fully document their loss before the resort was cleaned up, debris removed, and rebuilding begun, the other Associations did not have an expert to challenge the insurer who was claiming no damage resulted from the second hurricane. Without an expert with either personal knowledge or proper documentation and photographs of the second hurricane caused damages, and able to provide expert testimony on causation, the other Associations were in a difficult position. The other Associations “apparently” could not prove their damages from the second hurricane and the insurance company apparently knew that. If they could not prove their damages with testimony from a public adjuster who had properly documented the damages before the site was disturbed and cleaned up, they would not able to fully recover for all of their loss. So, the threat against Villas I to disgorge some of its $11 million. We do not believe that threat will be successful and will seek attorney’s fees if forced to defend ourselves.
This also demonstrates why it was prudent to pay 7% to the public adjuster. Without him we would have had no basis to recover the $2.5 million for the second hurricane.
Why The Other Associations Violate The Written Agreements Signed By All Associations
Under the Operating Agreement and the Shared Use Agreement signed by all four Associations in 2008, when the owners took control of the BBC resort property, the four Associations agreed to share expenses for the operation, management, maintenance, and use of the BBC facilities. Villas I was required to pay 15.83% of all common element expenses which was based upon Villas I possessing 15.83% of all BBC units.
The Operating Agreement contains a section titled “ Dispute Resolution” (section 34). The Agreement specifically states that “any dispute or claims” among the Associations of “any nature” regarding obligations under the Agreement requires the Associations to attempt to resolve disputes either in person or by telephonic negotiations. If the dispute cannot be resolved within thirty days, the Associations are required to submit the dispute to mediation. The Agreement also requires that any disputes or claims not resolved by mediation, “shall be resolved by mandatory, binding arbitration”. The Associations all agreed that the decision of the arbitrator “shall be binding”. Only if the arbitrator determines that the dispute or claim “is not capable of being arbitrated” can the claim then be submitted and resolved by civil litigation in USVI Courts.
The Operating Agreement clearly prohibited the other Associations from using the Court in our Complaint for Partition action to request damages, require Villas I to repair or demolish our buildings, etc. They must mediate or arbitrate any dispute with Villas I. However, the other Associations refused to withdraw their claims in our Partition action and insisted on the Court deciding whether Villas I must repair or demolish our buildings, whether the other Associations are entitled to damages from Villas I, whether Villas I must continue to pay 15.83% for all common element expenses incurred since 2017 by the other Associations even though Villas I owners have no inhabitable units, received no benefits from the property, and, particularly, have no ability to use or enjoy the facilities of the resort. With the July 1, 2021, Court order, the other Associations should now be forced to raise these issues in mediation.
Villas I Audits
The CPA who had been auditing Villas I’s financial statements and finances finally completed the audits for 2017 and 2018 this past April, more than one year late. The Board is attempting to locate another CPA on St. Thomas who can complete the audits for 2019 and 2020. We have one CPA who is currently reviewing the 2018 audit to determine if she will agree to complete the other audits.
Personally, I believe, before distribution of proceeds to owners, Villas I will need a complete and final audit of all proceeds received from our insurance claims and from the Partition and for all expenses paid from these accounts. Villas I has incurred the $945,000 fee for the public adjuster, attorneys fees for Maria Hodge, and various expenses for insurance, annual meeting notices, and mailings. Before the funds are distributed to our owners, I will prepare a report regarding the distribution and any ancillary matters.
New Director
With the resignation of Karyn Connolly from the Villas I Board, the other two directors have appointed Dan Fitzgerald as our third director. The Board is required to have at least three directors, and is authorized to fill a vacancy, as we have now done, by our Bylaws.
Conclusion
As I stated in the last report on October 5, 2020, when something “significant” occurs that requires a status report, such a report will be prepared. We now have what we needed to proceed with the auction and sale of our buildings. The next report will likely concern mediation with the other Associations on a whole host of issues.
Finally, as I have previously requested, please provide your current email addresses for purposes of receiving future status reports and communications. Because we do not have everyone’s email address, we are forced to incur unnecessary mailing expenses to those owners who have not provided a valid email address. As of this date, we have 301 owners who have not provided us with a valid email address and, therefore, we are required to incur mailing expenses to these owners. Help us save money.
Paul Kerpan President of Villas I
July 9, 2021
Greetings To All Owners,
Finally, good news. On July 1, 2021, the Court signed an order permitting Villas I to proceed with the sale of the property in its Partition action. Let me summarize how and why we are at this stage.
Background
The Villas I Board of Directors voted in 2018 not to rebuild our hurricane destroyed condominiums. We received $13.5 million in settlements for our damaged units. Under our Declaration of Condominium, that money is required to be held in trust. The Declaration requires the Board to distribute the insurance proceeds pro-rata to unit week owners. Villas I has 1,144 owners.
However, the Declaration and the Virgin Island Code also require the Board to file for a partition of our hurricane-damaged buildings and sell them at auction. All net proceeds from our insurance recovery and for the sale of our property are required to be distributed pro-rata to all unit owners.
Villas I Complaint For Partition
The Attorney for Villas I, Maria Hodge, filed a Complaint for Partition of our buildings with the USVI Court on December 3, 2018 in an action captioned BBC Villas I vs. St. Ham Management, LLC. That matter was assigned to the courtroom of Judge Denise Francois, court docket case no. ST-2018-CV-00765.
Villas I was required by the Court to file a list of all Villas I owners (some owners are unknown, deceased, etc.) and their interest in the unit weeks. Villas I complied. One year later, the Court approved the Complaint for Partition and the listing of all owners’ interests on December 18, 2019. The Court also appointed a referee, April Newland who is an experienced USVI realtor, to issue a report that detailed all outstanding liens, which was to include property taxes owed by our owners as of 2019. The sale of the property was ordered to be by auction with the date to be determined by the referee after filing her report on outstanding liens and after Court approval to proceed.
However, the other three Associations and the LLC at BBC filed an untimely Motion to Intervene in the Villas I Partition action on December 30, 2019. That motion was filed one year after Villas I filed its Complaint for Partition and one year after the other Associations were aware of what Villas I intended. The other Associations made no attempt to intervene in the Partition action or made any objections to it during the year it was pending.
In the Motion to Intervene, the other three Associations and the LLC have made numerous claims against Villas I including (a) a failure to demolish or repair our destroyed buildings (b) that Villas I caused harm to the other Associations (c) that Villas I failed to fully pay all assessments for common area and shared use expenses and (d) that the Villas I buildings created a nuisance.
The main reason why Villas I could not proceed to dispute resolution of those claims by mediation or arbitration against the other Associations was their Motion to Intervene in our pending partition action with objections to allowing our partition sale to move forward. Their claim was that only after their claims for damages and other relief were resolved, could Villas I proceed with an auction and distribution of proceeds. Until then, we were at a stalemate.
The other Associations also filed a Petition with the USVI Commissioner of Public Works demanding that Villas I either repair or demolish our buildings. In review of the USVI statute, it does not appear that Villas I can be compelled to either repair or demolish our buildings. The USVI Government could step forward and demolish our buildings and then file a lien against Villas I for the costs of demolition. However, the government does not have the estimated $2 million to complete such a demolition.
Our attorney timely filed objections to all of these pleadings filed by the other Associations. Since December 2019, when the Court approved the filing of our Partition, our attorney has filed seven
(7) “urgent requests” on June 8, 2020, July 15, 2020, October 26, 2020, December 10, 2020, March 3, 2021, May 31, 2021, and June 30, 2021, asking the Court to deny the untimely and illegal filings and permit Villas I to proceed with an auction, dissolution, and distribution of proceeds. Finally, on July 1, 2021, the Court ordered that the Referee’s Lien Report was approved, and the Referee was authorized and “directed” to proceed and conduct the sale of our property. The Court made no reference to the objections filed by the other Associations, but simply ignored the objections and their requests for a stay of proceedings.
During this time same time period, Referee Newland had filed her report on April 8, 2020. It listed all outstanding liens which included USVI tax liens for property taxes owed by Villas I owners. We have been in contact with Referee Newland who is still “on board”. Because we need to publish notice of the auction sale for four (4) consecutive weeks, we are hopeful for an auction and sale to the highest bidder in the next several months. However, once the bidding and sale is completed, the Court will still be involved to approve the sale, the calculation of proceeds which will be net of expenses for outstanding liens, for property taxes, Condominium maintenance fees owed, the Referees fee, and the final net distribution to unit week owners. Still a ways to go, but we just cleared the highest hurdle.
The Condominium documents require mediation to resolve any disputes among the Associations. Simultaneously, while Villas I proceeds with the Partition action, we will still need to mediate numerous issues that have arisen. Among the issues that need to be resolved include the demand that Villas I pay 15.83% of all common elements and shared property use expenses since the hurricanes destroyed the resort in 2017.
The Other Associations Want Villas I To Continue To Pay 15.83% Of All Common Element Expenses Since 2017
A major claim the other Associations have made against Villas I is that we owe hundreds of thousands of dollars for various resort expenses. They want us to subsidize the expenses their owners have incurred and continue to incur in their use of the resort facilities, i.e. expenses for the
Associations think it fair and reasonable that Villas I continue to help them with the expenses their owners are responsible for, even though we are no longer on property and receive no benefits from the resort.
The other Associations demand that Villas I continue to pay 15.83% of all common element expenses for the resort until Villas I partitions its buildings, distributes proceeds to owners, and dissolves its corporate status. Apparently, in 2018 (2017 is unclear), the property manager continued to provide 15.83% of all common element expenses to the other Associations and the LLC by withdrawing funds from Villas I maintenance fees collected in 2017. When those funds were depleted, the property manager then began withdrawing funds from Villas I’s insurance proceeds recovered from the hurricane losses. Again, this subsidized the other Associations for the expenses incurred for the pool, front desk, housekeeping, etc. However, our Declaration requires these funds to be held in trust for the owners. No one authorized removal of funds from the Villas I trust account to subsidize the other Association’s expenses.
I had been removed as president by the Board when this occurred. When I discovered Villas I was continuing to pay 15.83% of all common element expenses incurred by the other Associations and their owners, I demanded that the practice be stopped. It is unclear exactly how much money was withdrawn from Villas I to subsidize the other Associations with their expenses. Estimates are perhaps four hundred to five hundred thousand dollars prior to 2019 had been withdrawn from Villas I accounts.
Note 1: The Villas I Board never approved a budget for these common element expenses or for any resort expenses after the hurricanes in 2017. The Villas I Board was not asked by the other Associations to continue to make a contribution for all expenses incurred and never discussed or voted to help pay for these expenses of the other Associations. The money was withdrawn without knowledge of the Board. I do not know who was aware of this unauthorized withdrawal of funds from Villas I. We will find out and attempt to recover these funds.
This issue will obviously have to be resolved at mediation or arbitration, not in court where the Partition has been allowed to proceed. The Operating Agreement and Shared Use Agreement signed by all Associations require that for any disputes between the Associations, the dispute must be resolved by mediation, failing which it would then proceed to arbitration. It is not a matter to be decided in court. Our attorney has previously offered to discuss and negotiate this issue with the other Associations, but they refuse to discuss anything other than make a demand for a full 15.83% contribution from Villas I owners, and refused to withdraw their claim in litigation.
Should Villas I owners be required to share in the expenses created by other owners relaxing by the pool, enjoying food and drink, delighted in having a fully staffed front desk, grounds crew, and housekeeping to meet the needs of the other Associations? Sound fair to you? Willing to let this continue??
Public Adjuster
Having had a legal practice in property damage litigation, I knew it was imperative that Villas I retain a public adjuster immediately after the hurricanes to be onsite, investigate and document with photographs our damages and loss, and be prepared to give expert testimony regarding all of the damages sustained by Villas I from the two hurricanes. This included the need to establish the separate damages caused by the second hurricane. I was able to locate a very experienced, worldwide, and highly regarded public adjuster. He was then hired by Villas I to completely investigate our loss and make a claim against our insurance company for all of our property damages. Of course, making a claim is meaningless unless you can prove your damages from a particular cause.
The public adjuster retained by Villas I was able to identify, document, and prove the separate and distinct damages from the two hurricanes. The insurance company initially claimed that both hurricanes, separated by several weeks in time, was only one occurrence and, therefore, only owed coverage of $43 million for the entire resort for one causal event. The insurance company eventually acknowledged that there were two separate occurrences which then triggered coverage of $43 million for each of the two hurricanes. Their change in available insurance coverages was greatly influenced by the work of our public adjuster and the evidence he was able to place before the insurance company executives.
The first defense of only one occurrence having failed, the insurer then claimed that all of the resort damages were caused solely by the first hurricane. It was the insurance company’s position that no new damages for any resort property was caused by the second hurricane. Therefor, the insurance company tendered its full insurance coverage policy of $43 million to BBC to be divided by the Associations as they saw fit and appropriate. A committee of the four Association Presidents was established to determine the allocation of the $43 million for damages to the four Associations and the LLC for the common elements.
During numerous meetings with the other Associations and the insurer, our Villas I public adjuster determined and proposed that $11 million would be a reasonable settlement for the loss sustained to Villas I from the first hurricane. After extensive discussions and deliberations, the Presidents and representatives of all Associations agreed. They voted that Villas I would be allocated $11 million out of the $43 million policy limits tendered for the first hurricane. Villas I agreed to that allocation and accepted that money as the fair and reasonable settlement for its provable damages incurred from the first hurricane. Not only was there no objection from the other Associations regarding the $11 million allocation to Villas I, the other Associations agreed and voted that it was a fair and reasonable allocation.
Villas I was then left on its own to negotiate, prove, and recover those damages solely caused by the second hurricane Maria. Our public adjuster was prepared to prove specific, separate, distinct, and additional damages that occurred to the Villas I buildings solely from the second hurricane. The public adjuster advised that Villas I settle for an additional $2.5 million for our damages caused solely by the second hurricane. After lengthy deliberations and threats of litigation
concerning the Villas I damages that occurred solely from the second hurricane, Villas I was forced to file suit against the insurer Island Heritage Insurance Co, case no. ST-19-CV-00529 on September 17, 2019 the last date by which we needed to file for damages to preserve our claim and collect on the second hurricane-related damages.
As alleged in the Complaint, Villas I was forced to file a Complaint for damages because Island Heritage claimed, inter alia, (a) that Villas I could not bring such a claim alone without combining with the other Associations as named plaintiffs, and (b) that Villas I sustained no damages from the second hurricane Maria. In the Complaint, we detailed how even the insurer’s own expert wrote a report and admitted that the edge of the “eyewall” of the second hurricane “passed directly over” the BBC resort where the wind forces were “most intense at the eyewall”. Villas I was also forced to obtain a documented report from a USVI licensed engineer verifying our claim that our property was destroyed based upon the engineer’s personal observations of our property both before and after hurricane Maria. Villas I alleged a breech of contract by the insurer, bad faith claim handling practices, and violations of various USVI statutes that govern the business and conduct of an insurance company for insurance related purposes. We demanded compensatory, statutory, and punitive damages, costs, attorney fees, and pre and post judgement interests.
In the end, Island Heritage conceded and paid Villas I the $2.5 million demanded for its loss from the second hurricane. That settlement made Villas I whole.
Note 1: The other Associations have since raised claims that Villas I unfairly received $11 million for its loss from the first hurricane Irma. Although our settlement left $32 million out of the $43 million insurance policy for the damages sustained by the other three Associations and the common element damages, they now claim that was inadequate. Apparently, they may attempt to “claw back” some of our $11 million in court or in future mediation or arbitration. Strange, because the three Presidents from the other Associations agreed that the split was fair and reasonable and then allocated and awarded Villas I that $11 million. We feel confident that the other Associations will look foolish if they continue to press this claim. We will also ask for attorney’s fees if we are forced to defend that claim.
Note 2: Because Villas I was the only Association that hired a public adjuster who was on site, who thoroughly documented our loss from each hurricane, and was prepared to give expert testimony to prove our $2.5 million loss from the second hurricane at trial, Villas I received a fair recovery of $2.5 million from the insurer. However, because the other Associations did not want to spend 7% of their insurance proceeds to hire a public adjuster who could fully document their loss before the resort was cleaned up, debris removed, and rebuilding begun, the other Associations did not have an expert to challenge the insurer who was claiming no damage resulted from the second hurricane. Without an expert with either personal knowledge or proper documentation and photographs of the second hurricane caused damages, and able to provide expert testimony on causation, the other Associations were in a difficult position. The other Associations “apparently” could not prove their damages from the second hurricane and the insurance company apparently knew that. If they could not prove their damages with testimony from a public adjuster who had properly documented the damages before the site was disturbed and cleaned up, they would not able to fully recover for all of their loss. So, the threat against Villas I to disgorge some of its $11 million. We do not believe that threat will be successful and will seek attorney’s fees if forced to defend ourselves.
This also demonstrates why it was prudent to pay 7% to the public adjuster. Without him we would have had no basis to recover the $2.5 million for the second hurricane.
Why The Other Associations Violate The Written Agreements Signed By All Associations
Under the Operating Agreement and the Shared Use Agreement signed by all four Associations in 2008, when the owners took control of the BBC resort property, the four Associations agreed to share expenses for the operation, management, maintenance, and use of the BBC facilities. Villas I was required to pay 15.83% of all common element expenses which was based upon Villas I possessing 15.83% of all BBC units.
The Operating Agreement contains a section titled “ Dispute Resolution” (section 34). The Agreement specifically states that “any dispute or claims” among the Associations of “any nature” regarding obligations under the Agreement requires the Associations to attempt to resolve disputes either in person or by telephonic negotiations. If the dispute cannot be resolved within thirty days, the Associations are required to submit the dispute to mediation. The Agreement also requires that any disputes or claims not resolved by mediation, “shall be resolved by mandatory, binding arbitration”. The Associations all agreed that the decision of the arbitrator “shall be binding”. Only if the arbitrator determines that the dispute or claim “is not capable of being arbitrated” can the claim then be submitted and resolved by civil litigation in USVI Courts.
The Operating Agreement clearly prohibited the other Associations from using the Court in our Complaint for Partition action to request damages, require Villas I to repair or demolish our buildings, etc. They must mediate or arbitrate any dispute with Villas I. However, the other Associations refused to withdraw their claims in our Partition action and insisted on the Court deciding whether Villas I must repair or demolish our buildings, whether the other Associations are entitled to damages from Villas I, whether Villas I must continue to pay 15.83% for all common element expenses incurred since 2017 by the other Associations even though Villas I owners have no inhabitable units, received no benefits from the property, and, particularly, have no ability to use or enjoy the facilities of the resort. With the July 1, 2021, Court order, the other Associations should now be forced to raise these issues in mediation.
Villas I Audits
The CPA who had been auditing Villas I’s financial statements and finances finally completed the audits for 2017 and 2018 this past April, more than one year late. The Board is attempting to locate another CPA on St. Thomas who can complete the audits for 2019 and 2020. We have one CPA who is currently reviewing the 2018 audit to determine if she will agree to complete the other audits.
Personally, I believe, before distribution of proceeds to owners, Villas I will need a complete and final audit of all proceeds received from our insurance claims and from the Partition and for all expenses paid from these accounts. Villas I has incurred the $945,000 fee for the public adjuster, attorneys fees for Maria Hodge, and various expenses for insurance, annual meeting notices, and mailings. Before the funds are distributed to our owners, I will prepare a report regarding the distribution and any ancillary matters.
New Director
With the resignation of Karyn Connolly from the Villas I Board, the other two directors have appointed Dan Fitzgerald as our third director. The Board is required to have at least three directors, and is authorized to fill a vacancy, as we have now done, by our Bylaws.
Conclusion
As I stated in the last report on October 5, 2020, when something “significant” occurs that requires a status report, such a report will be prepared. We now have what we needed to proceed with the auction and sale of our buildings. The next report will likely concern mediation with the other Associations on a whole host of issues.
Finally, as I have previously requested, please provide your current email addresses for purposes of receiving future status reports and communications. Because we do not have everyone’s email address, we are forced to incur unnecessary mailing expenses to those owners who have not provided a valid email address. As of this date, we have 301 owners who have not provided us with a valid email address and, therefore, we are required to incur mailing expenses to these owners. Help us save money.
Paul Kerpan President of Villas I
2021 Newsletter
DEAR OWNERS,
To say the past year has been an eventful one is an understatement. Between the Covid-19 pandemic, the souring economy and unemployment due to quarantine issues, the closure of the USVI to tourists for a period of about 6-8 weeks, and travel declines of epic proportions, the financial positions of Bluebeard’s associations have deteriorated like every other business. Nonetheless, we are optimistic that tourism is back on the rise, that the Castle looks better than ever, and that the island of St. Thomas is open (partially) for business.
Let’s look at some specifics. The reconstruction of Bluebeards common area following the hurricanes has been completed. Hilltops I and II are completed with humidifiers in each unit to protect against mold by keeping a constant 55% humidity. This came about following a study by an independent agency last year that recommended this action, and the Hilltops Board agreed. Villas III’s east wing is nearing completion following the finding of mold and the necessity to gut the building and rebuild it, sealing areas that had been open causing the mold to circulate. This was NOT a result of the hurricanes, so it was not covered under the hurricane insurance settlement. Nonetheless, it had to be done in order to make the units habitable. Construction is on target for completion in early fall. Pirates Pension, damaged the least in the hurricanes, has new roofs, and has undergone replacement of aging and failing air conditioning units. Although the furnishings are not brand new, all the units have been completely inspected, any issues identified repaired, and the units repainted. The Turret has been repaired, brought up to code for tourism, and new lighting installed to make it visible at night without blinding the residents and guests. New exterior lighting, security cameras, re alarms, and other electronic improvements have been installed. In short, Bluebeards is open for business and better than ever. We have been very active in publicizing our great new resort with it’s updated and energized name, which is simply Bluebeards, and our new, refreshing brand identity. Rental bookings have been very good this season.
The Boards negotiated a new management agreement with Capital Vacations to manage the resort. And, in February, we welcomed back our new General Manager, Mikhail Shamkin. Some may remember Mikhail, who was GM about 8 years ago, and we are pleased he has returned. In addition, we entered into a rental agreement with Capital Vacations, our management company, that guarantees the Associations revenue from our vacant units. The Boards and CV worked out a contract that increases our revenues and increases CV’s ability to rent units to their customers, so it’s a win-win situation. Besides, it could expose more people to our beautiful resort and possibly engender some sales.
Restaurants at Bluebeards are beginning to open fully. Covid-19 threw a monkey wrench into the planned opening of the Gastropub on the site of the old Cabana Bar. Governmental restrictions would not allow the bar to open, so service could not be started. A small, test outing meal service was done on Valentine’s Day, and was a huge success. So once the Covid-19 restrictions are lifted, the Gastropub (to be renamed Deck With a View) will join the Pool Bar and Sunnyside Café as full- service restaurants on the grounds. The Spyglass (old Room With a View area) is being completely rebuilt and should open at Thanksgiving as a high-end restaurant according to the tenants. They, too, have been affected by the pandemic and have seen their incomes drop. The Frenchtown Brewery, who had planned to open a tasting room in the old Town Hall, has curtailed those plans due to financial constraints, and will relocate their brewery to the lower level which will include seating just outside the door. We will have great dining options again at the resort, and some revenue coming in as well!
Another item of interest to owners and renters alike was recently decided by the Third Circuit Court of Appeals. Most are aware that the Government of the VI passed a $25/night tax on each timeshare unit when in use. This tax was challenged by many timeshare folks on the island, including some national timeshare associations. The original decision to uphold the tax by a district judge was appealed to the Third Circuit, who just issued a ruling that the tax is constitutional, and that the government has every right to impose this on timeshare owners. This tax is only applied to owners, whether they use their unit or rent it out. If an owner rents his or her unit to another, that tax will be collected upon signing into the Castle. Remember, please, this is NOT a BBC fee, but is a governmental requirement that the Castle collects and remits to the government. If someone rents the unit through another source, they do not pay the $25/night, but there is a 12% tax built-in to the rental that is paid to the government. When you sign in, you will be required to pay that assessment by the Front Desk, but remember, it goes to the Government, not the Castle.
Speaking of finances, there was an across-the-board increase in maintenance fees by all the associations in 2021. For many of us, this was the first increase in several years. The Association Boards looked at many different approaches, but given the need to pay salaries, fund pension plans, pay for health insurance, maintain the grounds, perform maintenance where needed, provide security, cover the property insurance premium increases (which they are required to do under the controlling documents setting up the associations), pay utilities (such as water and electricity), etc., the shortfall between income and expenses required an increase. Several factors played into these decisions, which were not taken lightly. First, the number of owners who became delinquent in paying their maintenance fees increased by 10-12% in the past three years. Apparently, these owners felt they didn’t need to pay their “mortgages” because their “house” wasn’t available. This reasoning is faulty but, nonetheless it occurred, and revenues fell. Due to the hurricanes and the pandemic that followed, the Associations chose not to pursue the debtors until this year. Some have responded to the offers of amnesty put forth until September 30, 2021, but many believe they shouldn’t be required to pay anything. Since expenses don’t really change drastically due to owners not paying their fair share, the remaining owners have had to foot the bill. Not really fair, but it is a fact of financial life that income has to cover expenses. Each Board has cut every expense it could over the past years, and, in spite of comment on the internet about “no expenses during the closures” being bandied about, the truth is that there are and will continue to be fixed expenses with the Castle that must be met. Hence, the increase in maintenance fees was necessary.
Secondly, some of the cost increases were necessitated by the refusal of Villas 1 to pay their obligated share of common expenses, requiring the other three to pay them. We continue to insist they pay these fees in legal proceedings. Villas I has yet to legally dissolve due to many factors, but is in the process of doing so. We are making sure that our interests and rights are being maintained. We believe that Villas I should not be allowed to leave their buildings in a state of disrepair, improperly protected against rain and inadequately fenced. Once the matter wends its way through the court system, and the empty, derelict buildings sold or demolished, this should stabilize the finances a bit. However, this still may take many years, given the history of the court system in the VI.
Finally, costs have been increasing annually for many years, but your Boards have striven to keep maintenance costs level. Perhaps this was impractical and small increases should have occurred, such as those that have occurred with every other expense homeowners have: health insurance, car insurance, homeowner’s insurance, utility costs, taxes, air fares, etc. But the Boards tried to keep costs stable until it was no longer financially feasible to do so. Hopefully, if some of our delinquent owners return and the increase in rental business continues, the fees can remain stable for a while longer.
Now the islands await the return of the cruise ships and the tourist income they bring in. Until then, a lot of the stores are on limited hours, but the restaurants are open, the beaches are open, and life is good at the Castle. We encourage all owners get the Covid-19 vaccine when available to them, and then come on down to see for yourselves! Check the VI travel portal for up-to-date information on what you need to enter the USVI, so you don’t get surprised. Hope to see you soon on Island. It’s wonderful.
Harry Doerr, President, Pirates Pension
Scott Williams, President, Hilltops I and II, Villas III
Tom Houghton, President, Great Vistas, LLC
DEAR OWNERS,
To say the past year has been an eventful one is an understatement. Between the Covid-19 pandemic, the souring economy and unemployment due to quarantine issues, the closure of the USVI to tourists for a period of about 6-8 weeks, and travel declines of epic proportions, the financial positions of Bluebeard’s associations have deteriorated like every other business. Nonetheless, we are optimistic that tourism is back on the rise, that the Castle looks better than ever, and that the island of St. Thomas is open (partially) for business.
Let’s look at some specifics. The reconstruction of Bluebeards common area following the hurricanes has been completed. Hilltops I and II are completed with humidifiers in each unit to protect against mold by keeping a constant 55% humidity. This came about following a study by an independent agency last year that recommended this action, and the Hilltops Board agreed. Villas III’s east wing is nearing completion following the finding of mold and the necessity to gut the building and rebuild it, sealing areas that had been open causing the mold to circulate. This was NOT a result of the hurricanes, so it was not covered under the hurricane insurance settlement. Nonetheless, it had to be done in order to make the units habitable. Construction is on target for completion in early fall. Pirates Pension, damaged the least in the hurricanes, has new roofs, and has undergone replacement of aging and failing air conditioning units. Although the furnishings are not brand new, all the units have been completely inspected, any issues identified repaired, and the units repainted. The Turret has been repaired, brought up to code for tourism, and new lighting installed to make it visible at night without blinding the residents and guests. New exterior lighting, security cameras, re alarms, and other electronic improvements have been installed. In short, Bluebeards is open for business and better than ever. We have been very active in publicizing our great new resort with it’s updated and energized name, which is simply Bluebeards, and our new, refreshing brand identity. Rental bookings have been very good this season.
The Boards negotiated a new management agreement with Capital Vacations to manage the resort. And, in February, we welcomed back our new General Manager, Mikhail Shamkin. Some may remember Mikhail, who was GM about 8 years ago, and we are pleased he has returned. In addition, we entered into a rental agreement with Capital Vacations, our management company, that guarantees the Associations revenue from our vacant units. The Boards and CV worked out a contract that increases our revenues and increases CV’s ability to rent units to their customers, so it’s a win-win situation. Besides, it could expose more people to our beautiful resort and possibly engender some sales.
Restaurants at Bluebeards are beginning to open fully. Covid-19 threw a monkey wrench into the planned opening of the Gastropub on the site of the old Cabana Bar. Governmental restrictions would not allow the bar to open, so service could not be started. A small, test outing meal service was done on Valentine’s Day, and was a huge success. So once the Covid-19 restrictions are lifted, the Gastropub (to be renamed Deck With a View) will join the Pool Bar and Sunnyside Café as full- service restaurants on the grounds. The Spyglass (old Room With a View area) is being completely rebuilt and should open at Thanksgiving as a high-end restaurant according to the tenants. They, too, have been affected by the pandemic and have seen their incomes drop. The Frenchtown Brewery, who had planned to open a tasting room in the old Town Hall, has curtailed those plans due to financial constraints, and will relocate their brewery to the lower level which will include seating just outside the door. We will have great dining options again at the resort, and some revenue coming in as well!
Another item of interest to owners and renters alike was recently decided by the Third Circuit Court of Appeals. Most are aware that the Government of the VI passed a $25/night tax on each timeshare unit when in use. This tax was challenged by many timeshare folks on the island, including some national timeshare associations. The original decision to uphold the tax by a district judge was appealed to the Third Circuit, who just issued a ruling that the tax is constitutional, and that the government has every right to impose this on timeshare owners. This tax is only applied to owners, whether they use their unit or rent it out. If an owner rents his or her unit to another, that tax will be collected upon signing into the Castle. Remember, please, this is NOT a BBC fee, but is a governmental requirement that the Castle collects and remits to the government. If someone rents the unit through another source, they do not pay the $25/night, but there is a 12% tax built-in to the rental that is paid to the government. When you sign in, you will be required to pay that assessment by the Front Desk, but remember, it goes to the Government, not the Castle.
Speaking of finances, there was an across-the-board increase in maintenance fees by all the associations in 2021. For many of us, this was the first increase in several years. The Association Boards looked at many different approaches, but given the need to pay salaries, fund pension plans, pay for health insurance, maintain the grounds, perform maintenance where needed, provide security, cover the property insurance premium increases (which they are required to do under the controlling documents setting up the associations), pay utilities (such as water and electricity), etc., the shortfall between income and expenses required an increase. Several factors played into these decisions, which were not taken lightly. First, the number of owners who became delinquent in paying their maintenance fees increased by 10-12% in the past three years. Apparently, these owners felt they didn’t need to pay their “mortgages” because their “house” wasn’t available. This reasoning is faulty but, nonetheless it occurred, and revenues fell. Due to the hurricanes and the pandemic that followed, the Associations chose not to pursue the debtors until this year. Some have responded to the offers of amnesty put forth until September 30, 2021, but many believe they shouldn’t be required to pay anything. Since expenses don’t really change drastically due to owners not paying their fair share, the remaining owners have had to foot the bill. Not really fair, but it is a fact of financial life that income has to cover expenses. Each Board has cut every expense it could over the past years, and, in spite of comment on the internet about “no expenses during the closures” being bandied about, the truth is that there are and will continue to be fixed expenses with the Castle that must be met. Hence, the increase in maintenance fees was necessary.
Secondly, some of the cost increases were necessitated by the refusal of Villas 1 to pay their obligated share of common expenses, requiring the other three to pay them. We continue to insist they pay these fees in legal proceedings. Villas I has yet to legally dissolve due to many factors, but is in the process of doing so. We are making sure that our interests and rights are being maintained. We believe that Villas I should not be allowed to leave their buildings in a state of disrepair, improperly protected against rain and inadequately fenced. Once the matter wends its way through the court system, and the empty, derelict buildings sold or demolished, this should stabilize the finances a bit. However, this still may take many years, given the history of the court system in the VI.
Finally, costs have been increasing annually for many years, but your Boards have striven to keep maintenance costs level. Perhaps this was impractical and small increases should have occurred, such as those that have occurred with every other expense homeowners have: health insurance, car insurance, homeowner’s insurance, utility costs, taxes, air fares, etc. But the Boards tried to keep costs stable until it was no longer financially feasible to do so. Hopefully, if some of our delinquent owners return and the increase in rental business continues, the fees can remain stable for a while longer.
Now the islands await the return of the cruise ships and the tourist income they bring in. Until then, a lot of the stores are on limited hours, but the restaurants are open, the beaches are open, and life is good at the Castle. We encourage all owners get the Covid-19 vaccine when available to them, and then come on down to see for yourselves! Check the VI travel portal for up-to-date information on what you need to enter the USVI, so you don’t get surprised. Hope to see you soon on Island. It’s wonderful.
Harry Doerr, President, Pirates Pension
Scott Williams, President, Hilltops I and II, Villas III
Tom Houghton, President, Great Vistas, LLC
Hilltop 2019 photos
Hurricane Irma and Maria 2017 photos
2017
Owners upset about sin tax
From BBC:
Dear Bluebeard’s Castle Owners and Guests,
As many of you may know, the U.S. Virgin Islands government is having significant financial challenges. In December 2016, the Governor introduced a bill to generate revenue that included, among other items, a $30.00 per day timeshare occupancy fee in an effort to generate desperately needed revenue. The proposed legislation consisted of revenue-enhancing amendments to the U.S. Virgin Islands Code to implement initiatives of the Governor for financial stability and economic growth of the territory. The bill contained two main areas of focus: (i) excise taxes on products such as tobacco, alcohol and sugar carbonated beverages, and (ii) the establishment of an "Environmental/Infrastructure Impact Fee" on timeshare occupancy. Similar taxes have been in place in other popular tourist destinations, such as Hawaii and Aruba, for several years.
Several American Resort Development Association (ARDA) members, including Bluebeard’s Castle, Wyndham, Marriott Vacation Club, The Ritz-Carlton Destination Club, and many others, made a coordinated effort to oppose the legislation. In December 2016, ARDA retained highly respected lobbyists, including a former member of the U.S. Virgin Islands Senate, to oppose the December 2016 bill. In response to intense lobbying from ARDA, the U.S. Virgin Islands Chamber of Commerce and other groups, the Senate voted down the bill and instructed the Governor to seek input from affected groups and industries. With a newly elected Senate in January 2017, the Governor resubmitted the bill with some amendments.
On Tuesday, February 28, 2017, the U.S. Virgin Islands Legislature passed Bill 32-0005, The Virgin Islands Revenue Enhancement and Economic Recovery Act of 2017, which was signed by the Governor on Wednesday, March 22, 2017. The "Environmental/Infrastructure Impact Fee" will go into effect on May 1, 2017 and will require each occupied timeshare unit, whether occupied by an Owner or exchanger, to pay a $25.00 per day fee. The bill requires that this fee be collected upon check- in by SPM Resorts –Virgin Island, LLC., as the property manager for Bluebeard’s Castle St. Thomas, and also requires filing of reports and returns associated with the new fee. Renters will continue to pay occupancy tax at the 12.5% rate for a timeshare unit rented, and not the new $25 fee.
We will keep you updated as we get additional information that may be of interest to our Owners regarding this new law.
Steve Buckley
Regional Vice President of Operations/G.M.
Bluebeard's Castle
Read more in the news here
There has been legal action brought forth to stop the $25/day tax on timeshare owners. Stay tuned!!
October 2015
Boards elected for 2015/2016
The results we have are as follows:
Hilltop Board and Pirates Pension Boards remain unchanged. We still await Villas and Hilltop 3 results.
Summer 2015
Darwyn Harris- Board member passes away
We are sad to announce the passing of long time Board member Darwyn Harris. Our thoughts and prayers go out to her family.
Spring 2014
NEW RESALE DEPARTMENT OPEN FOR INTERESTED BUYERS
There is now the ability to buy units that are available for resale. If you are interested, please contact Bob Ficken by e-mail or phone at 631-255-6849 and in order to get the best deal, make sure you mention that you were referred by the bluebeards-castle.com website. Don't forget "bluebeards dash castle dot com". Bob looks forward to hearing from you!
See the list here: click to see for sale list for June 2014
Summer 2013
We have created an easier way to contact your Board of Directors. Each Board will now have their own contact page to allow you to send e-mails directly.
Please see the Contact the BOD tabs
Hilltop
Hilltop 3
Villas 1
Pirates Pension
We have also updated the travel links providing owners & visitors of Bluebeard's Castle with special discounted links to travel deals on airfare, car rentals, hotel stays, and more. Check them out at the TRAVEL LINK page and new CAR RENTAL LINK page.
Also, we have installed solar panels to provide power to the resort and lower the costs to owners.
