Northmont Sunchaser Scandal - The Untold Story

The Plot Summary:

Thousands of people are stressed, duressed and disheartened as they are being charged over $20,000 per annual lease (1 week per year of use) with some who have said their bills are almost $100,000. This payment is all about losing their family investment. They are being charged collectively and punitively by a timeshare company adding up to over $50,000,000 dollars, with a settlement, including a gag order and an agreement not to sue. If they don't comply within around a month's time they are threatened they will be pursued for another 162% of that amount.

Flash back in time 5 years when this company demanded people pay around $4,000 per annual lease to pay for a $40,000,000 million renovation for the entire timeshare, or alternatively to pay them a bit less to relinquish their unit. By unilaterally changing contracts, enabling this company to remove units and subsequently whole buildings from the resort, rezoning them and ultimately selling them for personal profit. These people looked for legal clarification on whether the company could charge this contending they own the right to use the property for a pre-paid slice of time, but not the property itself (as well as other arguments). All this by a company whose CEO hatched a plan in 2012 to get money to pay back investors that lost their initial investment money back when the resort(s) went into receivership. They have since been paying some investors millions of dollars – all while telling the courts without this fee the resort may not survive.

It sounds like the twisted plot from some book or made for TV movie. Or something that would happen in some third world country that doesn’t have consumer protection laws. But what if this was happening right here in Canada to thousands of Canadians right now?

Let's walk through this complicated, involved and twisted tale. One which has been a living nightmare for thousands of Canadians. And, unfortunately, not one with a happy ending.

If you are with a certain parties looking to keep this quiet, for the record this is all just an opinion. After all, it is a story, right?

The Storyline:

Let's set the scene. From 1990 to 2009 Fairmont Resort Properties Ltd. (“Fairmont”) constructed, marketed, and developed in phases, a time share resort property in Fairmont Hot Springs. The resort consists of three separate developments known as Riverside Villas, Hillside Villas, and Riverview Villas. The Riverside Villas are 80 villas in eight three-storey buildings that were constructed between 1990 and 1995. The Hillside Villas are 138 villas in eight three and four-storey buildings that were constructed between 1995 and 2002. The Riverview Villas are 32 villas in a four-storey building that was constructed in 2004. All of the buildings are generally of wood-frame construction, clad with face-sealed stucco, and built on slab-ongrade foundation. The three developments make up 17 multifamily buildings demised into 478 units operated as 228 two-bedroom units and 22 one-bedroom Terrace units. The resort also includes various maintenance structures, an indoor pool, an outdoor pool and water park amenity, sauna, steam room, tennis courts, games room, store, fitness centre, sand volleyball court, and a playground. The total area of the resort is approximately 34 acres. There are many seasonal outdoor activities in and around the valley.

Fairmont Resort Properties (FRP) was a very lovely timeshare nestled in between the pristine Canadian Rockies and the Purcell Mountain Range in Fairmont B.C. It was well run and a popular getaway for a great many people. Over the decades people paid between $15,000 to $40,000 per week on a 40 year lease for time at the timeshare plus an annual maintenance fee. It’s costly to be part of this timeshare but people make this an investment in their families and are often told that this is an asset that will only gain value over time. Plus because it’s a top resort it is easy to “trade” for vacations elsewhere. It’s a good thing for everyone involved.

The company was feeling like they could be so much more than they were and formed two real estate groups going and started getting investors. They had big dreams. Fairmont Resorts Properties Limited Finance (FRPLF) raises $41,500,000 million by selling various bonds and the funds were advanced to Fairmont and secured by Fairmont assets in Fairmont Hot Springs, Kelowna and by investing in houseboats. Resorts International Real Estate Investment Trust (RI REIT) raises another $24,000,000 and they invest in properties in Hawaii, Mexico, Belize, and Nevada. Overall investors put in around $65,000,000 in 2005 - 2007. And things are going well, and investors are getting returns.

But in 2008, the market crashed and things got tight for everyone. In December 2008 FRP failed to make the require payments to FRPLF.  But things can't be bad with Fairmont, they launch a "Legacy for Life" program that starts in the summer of 2009. Current owners are given the ability to pay additional fees and have their timeshares indefinitely. They are told they are going from a simple lessee to an owner in the property and how it’s a fabulous investment for your family. They can keep the dream alive and even pass it down to their children. They make millions around this program and there isn't a whisper of any financial issues to everyone who bought into this. Or that even though it only says FRP on the title, FRP no longer owns the resort and they are signing with another company.

By the March 30, 2009 order of the Alberta Court of Queen’s Bench, Fairmont obtained creditor protection under the Companies’ Creditors Arrangement Act, R.S.C. 1985, c. C-36 [CCAA] and Ernst & Young Inc. was appointed monitor. Pursuant to the CCAA proceedings, the approximately 800 to 850 bondholders converted their debt into units of Northwynd Properties Real Estate Investment Trust.

Pursuant to the terms of the Foreclosure Agreement dated June 15, 2010 between Fairmont and Northwynd Limited Partnership (“Northwynd”), and an Asset Transfer Agreement between Northwynd and Northmont, Fairmont’s rights in the resort were foreclosed and transferred to Northmont. On June 22, 2010 the Alberta Court of Queen’s Bench granted an order allowing the vesting of and transfer of title to the various foreclosed assets in accordance with the terms of the Foreclosure Agreement.

Northwynd had now assumed responsibility for Fairmont’s resort in Fairmont Hot Springs. Northwynd Resort Properties Ltd (Northwynd) agreed to acquire, through a court approved sale process, the group of resorts formerly owned by Fairmont Resort Properties Ltd. (FRP). These resorts included Fairmont Vacation Villas located in Fairmont B.C., Lake Okanagan Resort located in Kelowna B.C., Makaha Resort and Golf Club in Waianae Hawaii, Costa Maya Reef Resort in San Pedro Belize and Fairmont Rancho Banderas in Riviera Nayarit Mexico.

FRP became insolvent, but it appears that on the contracts that Northmont was the actual owner while these were being signed with FRP on the contracts being sold and no one purchasing was told any different.  In the spring the investors approve a proposal to restructure, one set of investors exchange their current bonds and get one REIT unit per dollar they had lost. Both Northwynd and Northmont are wholly owned, directly or indirectly, by Northwynd Properties Real Estate Investment Trust. The bondholders initially had no intention of owning the resort, but decided that the continued operation of the resort under proper management was the only viable way to recover their investment in the Fairmont bonds.

While the bondholders through Northmont are now manager of the resort, Northmont has subcontracted some of its operational and managerial responsibilities to Resort Villa Management. Northmont became the operator of the resort, now known as Sunchaser. Around 46,000,000 units are issued to investors of Northwynd REIT. Instead of bonds, RI RIET comes out owning a playground unit at the timeshare. There appears to be a lot of unusual things around the investments.

But… that is another story.

The timeshare leaseholders know nothing about what is happening, still blissfully enjoying their leased time and many investing in the Legacy for Life program. The owners of the leases that were signed to Fairmont Resort Properties (FRP) now was owned by Northmont/Sunchaser. Except that they had no idea their contracts had changed ownership. But the story has just begun to get interesting.

As of July 30, 2010, FRP did not have any operations, employees, premises and assets." On July 30, 2010, FRP filed for bankruptcy with liabilities of $19,600,000 and assets of $0.00. Since FRP owned many buildings around the timeshare, and leases for this (ergo assets), where did everything go?

It appears that in behind the scenes a lot of things happened without the leaseholders having any idea what was going on. New companies start playing parts in this - Northwynd, Northmont, Sunchaser, and Southwynd with Resorts West Management Group in Barbados somehow tied in as well. It is unclear what assets and revenues are moving where and why. But they collectively now own what was FRP and its assets and lease agreements. Interestingly, it appears the same people who were involved at the top management in FRP and the investors group now own the same properties under different companies.

The office in Calgary is the same, even the fax number.

Northmont commits among other things to the CCAA to reform the Owners Association, as this is part of the leaseholders contract they are taking over. In June 2010, the CEO of  Northwynd states Resort Villa Management Ltd. (RVM), a Northwynd subsidiary, will immediately introduce a Home Owner's Association to ensure timeshare owners are consulted in the operations of the timeshare units owned in trust by the Trustee. The advisory board of the HOA will be established to promote communication between the timeshare owners and the management company, RVM, and to ensure that input can be provided in the annual budgets.

The Owners Association watches over the resort Management and holds them accountable to both their actions and financial decisions. If Management is not acting appropriately they can call a vote to all leaseholders to replace them. It is an important accountability piece that ensures management acts responsibly to the leaseholders. With this happening in 2010 and being such a key piece, this should be in place within a short time. But it’s unfortunate that to this day one has not been formed and no one held to account.

In 2010 Kirk Wankel became the CFO, and in 2012 the CEO. On Nov 5, 2012 a business plan is revealed by the CEO to the board of trustees with a plan to get investors’ money back. It highlights using a cancellation program (similar to a cell phone model), special assessment management fees, and selling the timeshare buildings to raise money to pay back the investors.

In early 2013 the bomb drops. The “freedom to choose, reason to stay” letter is sent out to all leaseholders with an invoice. The letters state the resort needs renovations because it was initially built with “poly-b” tubing which is a problem. Northmont blames the previous management of the resort for this problem and puts out affidavits saying $40,000,000 is the estimate to fix and completely renovate all buildings and give the timeshare a face lift.

Around 14,500 leaseholders who have 18,600 agreements (For around 12,500 total weeks/year) are giving a bill in around $4,000 to stay and pay to renovate (called the RPF/Renovation Project Fee), or $3,000 to cancel and lose their investment completely (the costs varies per timeshare). They claim that because the leaseholders can be charged maintenance within their contracts that this renovation is a “special” maintenance fee.

Unfortunately, by paying Northmont either way they have to accept a clause saying they cannot contest the realignment (to remove buildings from the trust and shrink the resort) even if they want to stay. So it is not possible for anyone who does not feel this is fair to pay and then contest it after the fact.

Leaseholders who have issued stop payment in order to be able to seek legal advice. Many are deeply concerned about what is happening to the resort and want to stop this.

The group's Lawyer tells them that the way the cancellation is worded does not mean people who pay to cancel are actually released from their contract and Northmont has left the door open to come back after them. People who pay to leave also report that they are not getting any confirmation from Northmont that they are released from their leases, and are still getting maintenance bills from Northmont. So it appears that people who pay to leave may actually not be able to cancel.

Also the group is told that if they pay the RPF, there is a clause that states they cannot later contest it.  So those who believe the fee is wrong, they feel they cannot pay it.  With no Owners Association in place to turn to for dispute resolution, people in the group come to believe that legally fighting this is their only option to end this nightmare.

Around 1/3 pay to stay, 1/3 pay to leave and 1/3 for different reasons contest this. This 1/3 seeks legal advice. This legal group grows to a few thousand leaseholders under a law firm out of B.C. This group is quickly tagged by Northmont as “delinquent owners”.

Northmont chooses not to sell or bill itself maintenance fees on the units that it now owns through cancellations. Instead it moves forward to “realign the resort” and seeks to shrink it by the amount of cancelled contracts. This would also allow Northmont to sell any of these buildings or other entities in the resort it sees fit. Thereby shrinking the resort.

Collected fees for renovations and cancellations are not put in any trust as ordered, and nothing is put in place to ensure accountability for the tens of millions of dollars collected. Still with no Owners Association in place, the money goes directly under Northmont’s control and discretion.

Northmont now renovates a few of the buildings. Initially quoting a very high cost in their RPF to do a quality renovation, the job done seems to not be to the initial bar set. No independent audit is ever done on the quality of work or how much was actually paid into these renovations. Over the next few years, while still in court pleading for the resorts survival with needed renovation fees, Northmont appears to be putting two payments totaling 32 cents per unit to bondholders. This appears to add up to around $15,000,000.

During this time, 2008164 Alberta Ltd., a numbered company registered to Kirk Wankel is formed and it seems to have acquired a large portion of the resort (this is unclear because of the companies shuffling assets and lack of visibility). There is still no Owners Association in place, and Northmont is able to move assets and liabilities around to their own agenda. Kirk Wankel may now solely own the resort.

In court, Northmont impresses upon the B.C. judges the need to have contracts all become the same even though they were all different depending on the year of your purchase. They present that to try each Lesee individually would tie up the courts. They also implore the court that if these “delinquent owners” do not pay that the resort is unsustainable and could have a large economic impact to the entire area.

The B.C. judge notes to Northmont that they still haven’t formed an Owners Association and directs them to do so. Northmont still has never formed one, years after taking over the contracts.

The judges agree in B.C. with Northmont on two key points, and Alberta follows the B.C. decision. They rule the resort has the right to charge a fair renovation fee. All contracts are unilaterally changed and also converted to a single contract the initial “test” case was based on. The leaseholders’ Lawyer is ordered to talk to Northmont about settling the renovation fee and interest and ordered for both sides to be fair about it. There is much more to it than this, but this is the essence of the results. While the judgement is mostly focused only about their right to charge the RPF at all, Northmont is quick to imply that the courts ruled on every potential issue around this situation to dissuade any outside group from looking closer into this or taking action to protect the leaseholders through other avenues or put Northmont under closer inspection.

The Lawyer for the leaseholders has them sign a SIF (Sunchaser Instruction Form) allowing him to negotiate on their behalf for a settlement. For reasons of confidentiality we cannot say much of the details here, but in good faith almost all leaseholders sign. The loss in court is crippling on the group and most just want this to end and are tired and feeling beat down.  While this may make for an interesting book or movie plot, it has been a very stressful and difficult ordeal for the group. But the other shoe is just about to drop.

The leaseholder’s Lawyer has a closed room meeting with Northmont to negotiate a settlement. And Northmont takes full advantage. Charging everything they can, compounded with 26.82% interest for every year during the legal action and with a 20% additional fees. This 20% is presumably a cancellation charge but the costs are never explained, just unilaterally handed down. Leaseholders are hit with a fee of over $20,000 per lease year. Some people get a bill for almost $100,000. The Lawyer tells his clients that Northmont can charge “whatever they want” after losing in court and that since they signed the SIF they must settle. 

The settlement also comes with a gag order for the leaseholders, so once they sign they can never again speak of this and they must sign to agree to not sue Northmont for any reason. All of this to pay to lose their initial investments in the resort. There is no question that this will financially devastate all members of the group.

The group of leaseholders, most now in shock, are also told that they must pay this amount by Feb 15th, 2018  or Northmont will pursue them for 162% of this amount and continue the interest clock until they have their money.

They are also told to report to Northmont if they cannot pay (and they must send them pay stubs, bank account information, etc.) for evaluation and Northmont will deal with them on a “case by case” basis and effectively will now financially own them. Northmont is now in total control and are charging this group an estimated collective $40,000,000 - $50,000,000.

Northmont reported that as of December 2017 approximately 46% of owners have paid to cancel, 32% had paid the RPF and 22% were the “delinquent owners”.

Many owners are trying to reach out to each other, and have been having a lot of discussions about what to do. Northmont has said “that they are monitoring” these discussions. They have threatened “Since Northmont cannot determine individual complicity, all VIA Owners will be considered complicit in actively promoting further contract interference”. It’s not enough for Northmont to control their clients financially, but now they are forcing control over their very freedom of speech and ability to communicate through fear and intimidation. This is even before they have signed the forced gag orders with their settlements. It appears the company is allowed to have this amount of absolute power over their clients even crushing their basic freedom of speech.

So long as any party involved is only looking at one or two pieces, everything appears to be legal and reasonable and Northmont’s responses and steps have been carefully calculated. But if you take the time to put the pieces together and ask the right questions, things simply do not look right.

Please don’t take anything here as facts on their own and do your fact checking. There is evidence everywhere around this mess. There is a link below where we will be discussing and posting documents of all of the information we have been working hard to collect to put this story together.

1. Northmont has received a lot of money if you do the math. If approximately 46% of 12,500 annual leases paid either to stay or to leave – not including the “delinquent owners”, that’s around 5,750 leases paid. If you estimate an average payment of $3,500 each that’s around $20,000,000.

2. Add into this that they are seeking to reduce the resort by the 46% they have, then that cost to renovate now reduces by $18,400,000. Even with their renovation numbers, Northmont should already have enough money to renovate the resort. Why haven’t they?

3. Citing their high estimates for renovations, Northmont discussed the high quality of workmanship that was going into their buildings. How much was Northmont actually paying to renovate? With no Owners Association to review the renovation costs and quality no one
seems to know what the renovations on the buildings actually cost. If Northmont was collecting high fees but then putting in low cost renovations but not reporting this, would this be considered fraudulent?

4. If Northmont had a clear goal to renovate the buildings and carry on as a reputable timeshare as they have been insisting, then why are they saying in court and in statements to existing leaseholders that unless the “delinquent owners” pay the renovations they are not able to move forward? Would a company operating in good faith not renovate the entire resort and say they could have additional funds once the court cases are settled? Yet everything has ground to a halt while they continually demonized the “delinquent owners” as the reason and allowed the resort to run into disrepair. Why is that?

5. In court a large part of Northmont’s strategy was convincing the judges that the survival of the resort was a key issue. But within that same time they are paying out millions to investors.  Doesn’t this seem more in line with the business plan centered on paying investors over their words in court and to their leaseholders? If they wanted to save the resort could the REIT investor’s pockets not wait until the resort was healthy?

6. In forcing a settlement with these 22%, this was at a price higher than the entire renovations for the entire resort just for these few. Is this amount possibly justified or reasonable, when many were involved because Northmont’s wording had them accept the plan unilaterally or be forced to fight it all. Ironically many of the group were fighting because they wanted to save the resort.

7. Northmont has not been paying maintenance on the leases that it holds, and in court Northmont has said that they have chosen not to bill themselves, instead passing these increased costs to the leaseholders and blaming the "delinquent owners".

8. The judge in B.C. ordered that all leaseholders pay the RPF, including Northmont. Instead of complying with this judgment they have sought to "realign" the resort and shrink it by the amount of leases they hold. Are they not being held accountable to the court and trying to do an end run around this judgement? Is this not contempt of court?

9. Following the money. Where was the millions collected going? How are they tracking it? What has it been spent on? Before they deserve another penny, can they show accountability for the tens of millions they already have?

10. Lack of accountability. The money for cancellations or renovations were not held in trust and Northmont has done little to show accountability for the tens of millions they have already collected.

11. Northmont has not been charging themselves maintenance fees or renovations on the units it's gotten through cancellation, but has had no problems keeping charging maintenance to the "delinquent owners" at 26.82% interest compounding while the matters were tied up in courts, even though there was a stay in place during this case. The leaseholders are told by their lawyer they had no way to use the units, but are still being charged for them by Northmont.

12. Northmont has every access to use, lease, rent, or sell the units they have. However they refuse to use or pay maintenance fees on them. Many of these buildings get shuttered.

13. Northmont appears to have stopped being in the timeshare sales business and went into the contract cancellations business closing their sales office years ago. For a company insisting it want to run a quality resort, it seems contradictory to not have sales staff.

14. If they were bullish on recovering and properly running the resort, why were they not selling the leases they were getting back from the owners?

15. In the lease contracts it states there must be an Owners Association made up of leaseholders who ensure accountability for the management team and the resort. They had been directed to do so as far back as 2010 and still have not done this after 8 years, allowing them to act with impunity. Even after committing this to the CCAA and being ordered to do so by the court.

16. Northmont appears to have breached the contract several times in many other areas (included as a separate attachment) but this has also been conveniently ignored while holding to the letter of the contract so long as it benefits Northmont.

17. Northmont has been playing the investors and leaseholders against each other, telling them both very different stories. Both stories can’t be true.

Follow the money:

1. While Northmont has been successful in their pleading to the courts they needed this RPF for their very survival, the reality is more likely that Northmont is likely going to bring out of this enough to renovate the entire resort three or more times over, all made from siphoning money from the leaseholders they were able to hold prisoner.

2. With the cancellation rate jumping to 68% with the massive money they are demanding Northmont likely stands to make over $70,000,000 on cancellations alone. All free and clear for Northmont management.

3. If you start to also count the money to be made from selling most of the resort off, the millions they have made selling the other resorts they initially invested in, and what they made from Legacy for Life, the amount of money involved in all of this becomes staggering. This could add up to over $130,000,000. This could by far be the biggest legal fraud in Canada’s history.

4. All of this money flows freely into Northmont’s coffers with hardly any required accountability.

The management group made bad investment decisions to lose their investors’ money in 2008 (to which many of them were also investors) and to put the resort into receivership, but they will have made it all back with a very healthy profit. And all they had to do was hold hostage and financially destroy thousands of Canadian families.

As long as everyone involved is gagged and anyone in the media or government show sufficient apathy they will get away with what could be one of the biggest financial schemes in Canadian history.

Impact:

The impact is very real. People are being torn apart by this. There are a lot of numbers in this document, but the real story is behind the tremendous impact it is having on the people and their families. There are retirees who have worked hard their entire life and now they don’t know how to survive after they pay. There are people who are dealing with cancer in their family and now struggle to make ends meet. People are having to make choices around their ability to survive to pay Northmont what they are demanding. People who worked hard to do what they thought was right are having their lives destroyed for their efforts. You can see some of these people’s stories at Truths2Cents

Conclusion:

Sometimes the laws are not written in a way that are fair to consumers. And companies make the decision to stop being fair and focus on the letter of the law for their sole benefit. This is when Governments and officials need to step in to make things right and ensure the rights of the people are fairly protected. Canada prides itself as having safeguards in place to prevent and punish massive frauds and protect the people of this nation.

Thousands of people have been extorted, terrorized, and are very afraid. They are afraid of the financial impact to their families of such an unreasonable event. They are afraid that if they don't pay the fee, sign the gag order and quietly take this abuse that they will make good on their threat to come after us for 162% of that amount and that will be our next nightmare. As Northmont has aptly put it, “we have been defeated.”

And on Feb 15th, 2018, unless someone steps in, these people will have been forced to sign away any recourse, and be gagged from any further communication, and Northmont will have their money. At what point does this appear to be something closer to extortion and fraud than a company working hard to do a quality job and maintain the trust of their clients?

The one thing that we believe is most important is that Northmont should not be allowed to collect more money from the people who they have been holding hostage until they are properly investigated and held accountable for what they have done. At least make them stop until this can get sorted out.

Please, help make this right.

This has been a collaborative project by some of the Casualties.  Every effort for accuracy was made by the contributors.  We are all just ordinary people trying to make sense of a crazy making situation.

 The information contained in this blog is accurate to the best of my knowledge at the time of posting. I reserve the right to make changes as new information becomes available.

Any and all  information I share is for informational purposes only, not legal advice, as I am not a lawyer, just a lay person sharing information.