Over the past few years Silverpoint Vacations SL (“Silverpoint”) sold apartments in this popular hotel complex, but many new owners are surprised that their investment is not turning out as they had hoped. Initially the apartments were presented to clients with a draft rental contract that was very appealing – offering up to six months private use, and an income to the owner equal to 50% of income for their apartment net of marketing costs. However, when they came to sign to take possession of their apartments, owners where presented with a much worse rental contract.
Not wanting to be left paying community fees and utility bills without a corresponding income many investors simply took the easy option and signed the new rental agreement and only now realise the implications.
Excel Hotels & Resorts SL “Excel” claim to be completely separate from Silverpoint Vacations SL (“Silverpoint”), who sold the properties in the first place, but the company administrator is none other than Diana Aitchison, the previous Chief Operating Officer of Silverpoint.
In addition, a clause in the rental contract gives the voting rights for that apartment to Excel. This means that Excel has a vast majority of votes in community meetings. Using these votes, Excel has voted one of it´s officers president of the community. During the community meeting in early 2019 Excel used these proxy votes to push through items where the private owners in attendance wanted the contrary decision.
The apartments that are currently under rental contract are close to impossible to sell for the following reasons:
- The current rental contracts used in the resort only allow owners to use their apartments for 8 weeks a year, subject to availability (typically May and June) and paying €42 per night for the privilege.
- The income is calculated as a share of gross profits of the hotel, a figure that potential purchasers are worried will be manipulated.
- Income is due to be paid to the owners within 4 months of the end of each calendar year. I.e. contractually owners won´t receive income from say January until well over a year later.
- It seems that for the year ended 31 December 2018 many owners have still not received a payment at the time this article is published in June 2019.
- Many rental contracts are 5 years in duration – a typical date for an apartment to come out of contract is in 2022-2023
Unsaleable company participations
In addition to the above difficulties, many investors do not directly hold title deeds to an apartment. They have bought shares in a company, or a “participation”, that in turn should own an apartment (in other resorts the legal form is still 52 timeshare weeks!). The initial “administrator” of each company was of course Silverpoint, but Excel may try to take over this role.
As you can imagine the secondary market for such shares is almost non-existent, meaning that it is nearly impossible for investors to get their money out of the investment. Exercising voting rights at community meetings is also more difficult with this structure.
What you can do
Investors can contact Nordic Consulting with their documentation for advice on the best way to exit this investment.
If you have bought a company participation, there is good news – favourable judgements from the courts of Arona have already been awarded. With the bankruptcy of Silverpoint rumoured to be happening shortly, it is a good idea to contact us straight away. Our lawyers have the experience to analyse your case and submit the necessary paperwork to the court as soon as possible.
The Nordic Consulting CI also specialises in the administration and sale of apartments in this complex. Contact us now to what the market is like currently and how we can help in your specific case.