Atrium Questions - FAQ (Frequently Asked Questions)

1. My contract states that the MF may only increase in relation to the COL index?

We understand that your contract states this; however, based on the history of the last 13 years this is what is realistically needed to operate the resort. Festiva can not subsidize the resort as the previous owner did and in order to keep the resort in good operating condition (as contractually required of us) these are the funds needed. Without this increase the resort will not be able to pay all of its expenses and will not be able to operate on a year round basis. Additionally, the COL index was arbitrarily chosen at a time when it had historically been several points higher than it is today. For example, a 1% increase would be insufficient to raise the funds needed to address all the operating expenses.

2. What document gives Festiva or the Atrium the power to conduct a SA? 

In such events that the annual maintenance assessment does not cover all expected or unexpected expenses, the manager shall assess the lessee for the additional sums needed. This information can be found in the rules and regulations. Under your contract, the Rules and Regulations are required to be implemented from time to time. Just as there are operating guidelines in your unit each time you visit, the Rules and Regulations are needed to address the day-to-day realities of properly operating the resort for the benefit of all Members. 

3. Why have I never seen these before?

We cannot answer why you have never seen Rules and Regs before now as Festiva was not the owner or manager of the Atrium for the majority of its existence. Also, in its capacity as Sales and Marketing Agent, it had no involvement in such issues. Upon assuming ownership of the Atrium, Festiva discovered the apparent lack of contractually required Rules and Regulations and has, over the past several months, indeed written them as based on common Rules and Regs throughout the vacation ownership industry and within its family of resort properties.

4. Do we have to disclose the amount Festiva is paid for management?

Festiva receives a 10% management fee, which might be considered below average for St. Maarten and which is within industry standards. Among other things, this pays for toll free owner services and central reservations, centralized accounting, membership in Festiva Travel and Cruises and management oversight. It is important to remember that the previous owners of the Atrium were private individuals that CHOSE to voluntarily waive their deserved management fee each year. Had this management fee not been waived, the maintenance fees charged by our travel processor each year in the past most likely would have NOT covered the true operating expenses for the resort. 

5. What type of accounting will be done and will it be presented to the owners as to how the money for the special assessment will be spent and when it is disbursed?

A quarterly announcement will be made as to what projects are ongoing and once complete the final cost of those projects. Any and all funds left over as surplus will remain to fund the reserve account. Remember, similar to what the previous owners chose to do with regard to management fees, they chose to NOT fund a reserve account. Had a reserve account been funded from the beginning (as is the legally required norm in the vacation ownership industry), the special assessment now being faced would be much smaller or non-existent. 

6. Most people are upset that they are being asked to “front” all of the money with not enough specific information about projects, costs and timelines.

The amount that was determined as needed for the special assessment was based on solicited estimates and industry experience. While we have received many actual quotes and consulted with multiple structural engineers, generator companies, decorators and so on, the fact of the matter is the final cost has not been determined. These costs will be reported to you as work is completed and any additional funds will fund the reserve we are setting up, which has been unfunded for the entire 13 year history of the Atrium. Had a reserve fund previously been put in place, this assessment would not be as large or possibly not exist at all. All funds will be accounted for and a proper reserve will be established in an attempt to prevent this from reoccurring.

7. What powers does the owner advisory board have? 

The owner’s advisory board is to be established upon 80% sell out. At this time the resort is under 80% sell out. The percentage of sell out is a fluctuating number as members default on payments, choose to relinquish ownership etc. Thus, at any given time, it is difficult to establish precisely the sell out number. The board will be established when required and notice will be sent to the membership as needed to solicit participation. This board is advisory in its capacity and as such may advise the owner and manager, but is not empowered to make any binding decisions or agreements, nor is the owner or manager compelled to take action based on the board’s advice. That being said, Festiva values input from its owners/members and when the board is set up, it will strive to use input from the board to make decisions that will benefit the membership as a whole. 

8. It appears that Festiva may be taking these actions to encourage owners to turn over inventory so that it does not have to set up the Owner’s Association (board). Is this true? 

This is NOT true. We value all our current owners and would not encourage anyone to give up their ownership rights. Remember, the board is by definition in your lease “advisory” in its capacity. There is no reason that Festiva would not honor its responsibility to set the board up when appropriate (see #7 above). 

9. Many people want a list of all owners; do we have to provide this?

We are not compelled to publish a list of owner information nor will we do so in the interests of owner privacy. 

10. Many people want an explanation of why previous deficits were allowed to go on for so many years. What is the answer?

We cannot state why the previous deficits were allowed to continue on an annual basis as that was the responsibility of a different owner and manager, only that they did occur and Festiva is choosing to end that cycle. Festiva is choosing the financially prudent course of managing the resort without continued deficits and by establishing a reserve account to assist with future repairs and replacements. 

11. What is the company’s response as to why we chose to do this immediately after becoming owners of the Atrium? 

Festiva did not choose to increase the fees and special assessment immediately after purchasing the resort. In fact, Festiva became owner in October 2005 and during the past 12 months received input and advice from structural engineers, electrical engineers, decorators, insurance companies and so on. While we could have arbitrarily selected an amount at that time as to what we thought it would cost to begin the improvements and then assess again later if we were incorrect, we in fact chose a more prudent and educated route by obtaining factual information and figures before assessing the members. 

12. What document(s) show legal proof of Festiva’s ownership and control of the Atrium?

Festiva’s purchase of the Atrium involved many legal and confidential documents. As required by law, its ownership is listed at both the St. Maarten Chamber of Commerce and at the department of Economic Affairs. 

13. What happens if I disagree with the Special Assessment and refuse to pay it (even if I do pay the maintenance fee)? 

We hope this extreme situation does not happen as the Special Assessment is needed for the benefit of all owners. Additionally, within certain parameters, we will gladly offer a payment plan to owner so that payment of the SA can be spread over several months (without affecting use rights). However, should an owner outright refuse payment, under our fiduciary duty (as owner and manager) to all other owners, we would have no choice but to suspense your use rights until the SA is paid or until other arrangements are made. 

14. Why did Festiva decide to implement a 2x special assessment in one year instead of a 1x assessment in two consecutive years? 

To be answered later