Homeowner Concerns - 8/24/06

You may have been receiving some emails and letters regarding the situation at LaMarina as we have, but we have also personally talked with 3 board members and Barbara Richard about the situation with the pool, board activities, finances and the legal status of the homeowners’ association and the Jeff George issue. Since you have expressed an interest in the operations of LaMarina in the past we thought it might be helpful to summarize what we have learned and why all owners should be paying very careful attention to what is going on with LaMarina right now. This may be lengthy, but hopefully, helpful.

Information and Communication

There is a board/administrator tradition at LaMarina to filter and even withhold controversial or upsetting information from the owners. We have personally experienced this many times, as have many other owners. In recent conversations with current and past board members they state they have been chastised for being candid and open with owners, the exception in recent years being Dave Siengo’s term as Administrator, which was quite open by comparison, and the attempts by Gordon English to improve communications with owners.

It should be no surprise therefore, that information on the events occurring at LaMarina reaching most of us reflects the views of the current administrator and board president who control the flow of information. Barbara Richard has been trying to alert owners to a broader picture of events and the ramifications of our legal and financial situation, which you should have received via email (if you did not, let us know and we’ll forward them). You may have recently received one from Gail Hudson, the only board member in Mazatlan and the only one with legal status to act on behalf of the association in Mexico (FM3 papers). These efforts have not been supported by the administration because they are critical of the handling of both the finances and the legal situation.

Legal

We discovered in our June statement that an assessment was being levied for legal fees. The first fruit of these fees you recently received in the form of a letter from our LM attorney declaring that our Association has no legal status in Mexico because it is not properly registered. This is the basis of the Jeff George dispute. We have read an early version (2003) of the legal opinion written by his attorney which states that our Association of “trust beneficiaries” has no status in Mexico and thus any decisions, assessments, policies etc. issued by our Association are irrelevant. This legal challenge was not shared with owners and instead, much castigation was heaped on the George’s and continues today. Mexican law has unique rules about annual meetings, governance and assessments and who is eligible to vote (only owners, not beneficiaries) and we apparently have violated most of them.

The knowledge of this opinion has influenced our own evaluation of association actions (or lack thereof) with respect to Jeff George’s claims. Many of us as owners have refused to accept that Mexican Law has preeminence over our familiar American procedures, etc., but when we signed our Trusts we agreed that the Trust is the owner of our property and we are the beneficiaries. Like an alcoholic who can’t beat the alcoholism until he admits that he has a problem, we can’t correct LM until we admit that we have a problem. Our administration is still framing the issue as a need to legally change our name in order to sue Jeff George. Complicating the situation is a history of bad relations between various owners and the George’s. In our opinion, personalities and past history are presenting obstacles to settling with the George’s and taking the steps needed to get LM in compliance with Mexican condominium law.

Given that now the LM attorney is basically corroborating the opinion of Jeff George’s attorney regarding the legal status of LM, to pursue an action against him seems not only costly but, doomed to failure. We are concerned that the longer it drags on, the more vulnerable we are to fines and penalties for not operating within the law. This situation is costing us thousands of dollars and devaluing our property, for who would buy into LM with this hanging over our heads? Indeed, would it even be legal to sell property at LM right now?

We realize there is much more to this situation than we can go into here. If you would like more documentation please let us know. Suffice it to say, we are being assessed unlimited amounts of money to take an action on which we were not consulted, given no choice and which we think is inappropriate, unwise and could and should have been handled another way.

Finances

Meanwhile, our finances are a mess! Last year we went way over budget. At the March Board and annual meeting board member Gus Noyd wanted to do a special assessment to correct this and improve our cash flow. The Board, perhaps in its fervor to get a new pool approved (our opinion), set aside his concerns. The priority for 2006 was obviously the new pool, not our fiscal problems. This delay only exacerbates our financial problems. This year the George’s provide about 9% of our revenues and they are not paying. They will not pay until the above dispute is resolved, so we are 9% short every month.

Our operating income/loss statement is incorrect because it mixes income from the pool, elevator, and insurance special assessments with our regular income. It lists these same amounts as expenses. The result is a confusing report that gives us no information as to how much has been spent on each of these projects and whether we are operating “in the black.” There should be separate accounting for each special fund. Also, where is the interest spent on the Pool loan listed? Since the Balance Sheet shows a loan balance of $35100 on 6/30, how much and to whom are we paying interest? Maybe this is an oversight or maybe someone doesn’t want to draw attention to it. We would like to know how much interest is being paid. The Balance Sheet itself paints a very misleading picture of our finances on 6/30. The Pool loan, Pool reserve, and elevator project reserve are correctly listed as liabilities but what about the Operating Reserve, Emergency Reserve and Insurance Reserve? These total about $110000 and should be listed as liabilities if they have zero balances, which we suspect. Making these adjustments our liabilities increase from $105311 to about $215311 and our owner equity drops from $122546 to less than $13000. Feel all warm and fuzzy now?

Pool

Where do we even begin? We have all seen the pictures posted on the web by Luis that were mostly taken from high above looking down. We have all seen the pictures taken by our onsite Board member, Gail Hudson, showing close-ups. What did you think of the quality of workmanship? The Assembly, whether legally or not (You decide) authorized $175000 for this project. We are being assessed for it (and the Georges’ are not paying their 9%) and paying interest, yet who is overseeing the project and looking out for our investment? The Pool Committee’s responsibility didn’t end with the Assembly vote. Indeed it was just beginning. One of them should have been down there all summer long to supervise this project. (they could have rotated the duty amongst them). If you hear from a Pool Committee member that he went to Maz to check on the project, ask him how long he was there and who paid for the trip.

We know from our own experience remodeling our unit that you have to pay attention to what is going on and to what you want done or it may turn out differently from what you planned. Those of you who have remodeled already know this. Apparently the Committee and the Administration trust the contractor to get it right and on budget. We are not as optimistic and Gail’s pictures seem to lend confirmation to our concerns. By the way, whatever happened to 100 workers for two months? It has been three months now and the project is nowhere near completion. Of course, that is not unusual for Mexico. The greater worry is whether we will have something usable (safely) and within the authorized amount by November.

Well that is our sad, sad tale. If you are concerned please send your thoughts to the Administrator and the Board, especially its President. Since they control all the information, they need to know what you think.

Eileen and Steve Richter, #503