Whistler City Officials – Why Not Do The Right Thing?

BAW4.2We launched this website www.beware-at-whistler.com last week to warn others of the economic and political risk of investing in Whistler Phase 2 real estate.  Many of Whistler’s major properties have been built with this model and Phase 2 is a significant part of Whistler’s real estate market – there are 5000 Phase 2 units (list of properties here) in a town of about 10,000 permanent residents.

So if you’re looking to buy or sell Phase 2 real estate in Whistler, this issue matters.

We are investors and unit owners in a Whistler Phase 2 development called the Nita Lake Lodge. It’s a beautiful project, and the owners from around the world who paid to help build it were all looking to make a long term commitment to being part of Whistler.

What we learned is that being part of Whistler is not quite the experience many of us envisioned.  Although Phase 2 projects have a number of growing, simmering issues (we’re told the Four Seasons, the Hilton and the Westin have all had challenges around the model) Whistler doesn’t seem to want to deal with them, even though in our case, the City Council could easily resolve the situation.  It seems that in their wish to avoid any controversy or to acknowledge any issues with Phase 2, Whistler’s City Council will enable aggressive and predatory tactics that can render your investment in Whistler nearly worthless.http://www.dreamstime.com/royalty-free-stock-photography-what-you-waiting-question-urgent-act-now-d-words-orange-background-to-illustrate-asking-why-hesitating-not-image35557027

Our project has a majority unit owner who unilaterally appointed himself rental manager, announced that owners’ original Rental Pool Management Agreements (RPMAs) were terminated, ,then said if we don’t agree to his use of our property by his management business, we can’t use our own property.    He’s locked owners out of their property, withheld any payment to them for long periods of time, and as a result some owners have gone into foreclosure.  Meanwhile, the manager has bought foreclosed units for himself at 20 cents on the dollar.

This is only possible because of Whistler’s Phase 2 rules, and the City of Whistler’s unwillingness to prevent exploitation of  these rules. .

Let’s put this in context.  This manager has been very skillfully combining three things to intimidate and bully other owners; (1) a lending relationship with the previous manager, (2) a majority ownership of the units in the project (which he acquired from the previous manager), and (3) the Whistler covenant.

As we’ve seen, if you’re very clever and you’re willing to do things like not pay people for using their property and secretly switch out the locks off their doors so you physically control their property, you can go a long way with these three things.

Here’s how:

  • Using the lending the relationship with the previous manager, the investor put pressure on the previous manager to step down immediately, and worked out a private deal about project management.  Under the deal the new manager was to assume control of the front desk and the obligations of that manager.  Now the manager has control of the front desk and cash.
  • In a transition at a major project like this, the right thing to do is to have competitive bidding.  This manager didn’t want that.  Instead, using his majority power as owner, the manager prevented anyone else from bidding for the manager job.  He controlled rentals and use of everyone’s property, didn’t share any proceeds as required under the deal he assumed, and then later declared the deal he assumed to be retroactively terminated.
  • Other owners didn’t think such a retroactive termination was at all plausible.  But just for sake of argument, assume it is.  Once the manager terminates your rental agreement, he has no way to force people to work with him.  Either he owes what he owes for use of your property, or he has no right to use it. He has to pick.

But this is where the third thing, the covenant, comes in.  This covenant is the linchpin of the manager’s approach because as he uses it, it gives him enormous leverage to threaten and intimidate owners into accepting him as their manager on whatever terms he dictates.

Whistler has a rule that says projects should have a single manager, unless Whistler uses its discretion to release units from it – which it is entirely free to to do.

Relying on a distorted reading of this rule, this manager says that since he’s the self-appointed single manager, if he can’t manage owners’ property, then no one, including the owners, can use it.  This by the way, is not what the covenant says – it actually says it’s up to Whistler to decide what to do if you don’t follow it – , but hey, if you’re the RMOW, who cares, right?

Some more context may be helpful.  This manager is a professional investor and lawyer.  He does not come from a long career in the lodging profession, and we don’t believe this is the best management a major Whistler project can locate.  He has been previously sanctioned by the BC Law Society for misusing client trust funds and violating a court order. He’s been sued by his mother in a real estate dispute.  As part of its Phase 2 process, Whistler is supposed to approve a project manager.  As far as we know, they never did it here.

If you’re a new reader, you will of course ask, “Won’t the Courts help?.”  The short answer is in our experience, to date, no.  When the manager raises the covenant as a shield, the Courts look to Whistler to interpret its own rule.  At least so far, unless Whistler takes a position on its own rule, it’s been difficult to get anywhere.

Odd, how can the City of Whistler (the RMOW) be ok with this type of abuse of their rules? They seem to be looking for the easy way out. It’s their covenant and their rule to administer but when asked to administer it, they simply say they don’t want to get involved in an owners dispute.

So pay attention fellow Phase 2 owners or potential investors……if they sit on the sidelines when things get rough for us, they’ll likely do it to you. This can render your Phase 2 investment almost worthless like ours.

The takeaway…….until the City of Whistler is willing to intervene when their covenant is being abused, Whistler Phase 2 real estate is simply too risky.

 

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