Monday, October 26, 2009

The Operating Escrow Account (Eschewing Obfuscation)


Robyn Ryan is my new hero. When given the opportunity to perpetrate a schadenfreude, she did not waste it.



The event was a TREC meeting.



The setting for this bit of poetic justice was the morning of October 2, 2009, in a small ampitheatre-turned-hearing-room in Kingsport Tennessee.



The cast of characters involved were various and sundry TREC (Tennessee Real Estate Commission) commissioners, a judge, some clerks, some observers, the aforementioned Robyn Ryan, and ~ wait for it ~ Bob Leedy!



For those of you who've been personally degraded by Robert A. (Bob) Leedy in the past, and have been waiting with endless patience for Mr. Big Broker Bob to get his comeuppance, Ms. Robyn Lynne Ryan will be your hero, too.



Robyn is an attorney. Bob worked as a broker, and was seemingly buying trucks by writing checks from his escrow account. The two went head-to-head in a match of wits at the morning-long hearing. Bob was so out-gunned, it almost made you feel sorry for him. That is, until he would act like an ass.



Ms. Ryan hasn't been long at that post (assistant general counsel, Tennessee Real Estate Commission at the Department of Commerce and Insurance), but she knew exactly how to dash cold water on Mr. Leedy's hot, long-standing, nerve-grinding, attitude!






Listen closely at 1:48:54 when Robyn asks Bob "What is an Operating Escrow?"

Bob replied that he didn't know exactly what an Operating Escrow was, except that it was really his money and "my CPA said it was legal".

She gave Bob a chance by then asking "is your CPA a real estate agent?"


Now, Ms. Robyn gets a mushy fist-bump from me for this because, as everyone knows, most CPAs do NOT have a clue about how to manage an escrow account. They get stuck on looking for the 'profit', and have total meltdowns when told there is none. Neither do CPAs understand the co-mingling thingy. Of course, Bob answered her last question by saying "i don't know."



Bob tried very hard to explain that it made perfect sense to him that even though tenants' rents and deposits were held in that account, it was really his account because it was in his name with his social security number. He referred to it several times during the course of the hearing as his "Operating Escrow".



I was rewarded with a 'funny' when Ms. Robyn read aloud to the Commission from a letter Mr. Leedy had sent them in 2007. He had been charged (with improper dealings), found guilty and fined in 2006. I know you won't believe this, but apparently TREC had trouble collecting...



In an act of snark when forced to pay, he told the Commission (and i'm paraphrasing here) 'he'd heard the State was pulling back on TREC's budget, and they obviously needed his $1000 to pay the light bill'. Even though i could only see the back of his head in the video, it was evident he regretted committing his charming, rapier wit to paper, that long-ago day.



After everyone had their say, the Commission took about 3 seconds to decide to revoke Mr. Leedy's long-held Broker's license and impose a hefty fine.



Mr. Bob had hardly finished his closing argument (did i mention, in his hubris, Bob represented himself) before the motion was made, seconded, and a unanimous vote carried to protect the public from Bob Leedy.



Thank you, Ms. Ryan, for your decorum and aplomb during the hearing. And, for shutting down Bob Leedy every time he went on a wiggley-room tangent (ohhh yesss, Dear Reader, Bob annoyingly ignored Discovery rules and then acted all wounded when Robyn set him straight). And, Ms. Ryan, could you maybe take at another little oxymoron going on in our great state?




Operating Escrow is an Oxymoron.






PS: I'll update this post with a link to the TREC minutes when they are posted.

Backing in to how your money was lost


Let's hear this story backwards:

Defendant admitted that the advance deposits that Plaintiff kept on all sixteen units, and not just on the ten units Defendant said he had accepted, went toward the purchase price. Some people had paid advance deposits on the six units that Defendant claims he did not accept and Defendant admitted those people never received a refund.

Source of snip: IN THE COURT OF APPEALS OF TENNESSEE AT KNOXVILLE
Assigned on Briefs December 7, 2006

Defendent and Plaintiff: ROBERT W. BIBLE, D/B/A CHALET VILLAGE CHALETS v. TED MULLIKIN, ET AL. (Mountain Rentals in Gatlinburg)

The Problem: Ted didn't pay Bob all his money. Your slap in the face is on page 6.

Ted and Bob didn't even have the benefit of the new provision in the VLS rules ~ yet, they still treated the escrow account as petty cash. If the guests in those six units didn't get to come and stay, and perhaps no one told them, and they didn't get a refund, then - well, i guess they just got screwed all around.

This all began in 2000 ~ and i know that if you are one of those guests unwittingly embroiled in all this b.s. that you have NEVER forgotten about it.

Allow me to at least offer you an embarrassingly belated apology.


Friday, July 24, 2009

Just because it's crazy doesn't mean we have to keep doing it



There is a difference between a situation and a problem. Generally speaking, you can throw money at a situation and it will go away. Once, there was not enough hot water at my house. The solution: install a separate water heater that was plumbed piggy-back style to the existing water heater. That was a situation because it could be fixed with the $ tool.

On the other hand, if money cannot fix the situation ~ it is a problem.

You know the situation i'm talking about... something is horribly wrong with the Vacation Lodging Service escrow rules. If rubbing elbows with certain Legislators got the legislation passed that allows vacation lodging service (VLS) licensees to dip deep-down into their escrow accounts (with no ramifications), then how can tightening the rules and laws just because it's the right thing to do compete with said elbow friction?

(...sorry for the rambling sentence, but DANG ~ i get so mad when the root of the problem hits me square in the face!)

In other words: What's a voiceless, victimized sect of a population to do?

Tennessee's visitors do not have a Political Action Committee (PAC) that i can find. So far, the folks at Smoky Mountain Rental Owners Association are the only people in the entire great State of Tennessee ~ that i can find ~ helping out Tennessee property owners as a group. How are visitors' and owners' rights protected when the SoT allows ambiguous, self-serving rules and laws? Could we even have a tiny rule that licensees must publish their license number?

Just because grifting and Ponzi schemes have been the 'norm' since 2003 does not mean we can't rise up AS CONSUMERS and cry "Shenanigans!". Are the POWERS that BE afraid people won't get licensed if they give the money part of the rules more integrity? This situation is additionally unfair to the companies who sell their body parts, rather than spend the money held in trust.

The 107th General Assembly convenes in Nashville, Tennessee on January 12, 2010. Getting some ideas to a committee might be a good place to start! This means victims and concerned individuals starting the letter-writing, now. Some may view this and that and this as a Smoky Mountain situation, but it is a state-wide ~ nay, NATION-wide problem, since visitors and property owners come from all over the map. Remind the 'Legs' to budget for the public relations campaign to repair Tennessee's broken image.

CLICK HERE for a fascinating and easy-to-read wrap up of the 106th General Assembly. I hope you are as appalled as i am when you read the part about making home-schooled childrens' diplomas weigh as much as public school diplomas. Wha? They didn't already? Well ~ glad they took care of that bit of business!

It's like Tennessee needing a law that you can't marry your first cousin.


Thursday, July 9, 2009

Beg your pardon


The problem: UNlicensed rental companies stealing peoples' money because it's a cakewalk.

One solution: Make it a crime* in Tennessee to operate an overnight lodging service business without a license.

Then, we tighten up the license laws and see if Dolly will write and record a public relations commercial ('specially since she has a vested interest in this stuff, now, and for some reason Dollywood even got a VLS license even though Starr Crest already has one).

The jingle could go something like this:
Come on back!
We've cleaned up our act!
Don'tcha know we've made it so's
you won't get ripped or gyped or hosed.
Forgive us for our slip ~
We didn't mean to let 'em dip ~
It seemed OK back then, you see
but now we've stopped that big parteeeeee!
Dolly might do better with the music than the blue grass tune in my head. It will take a bit to get the word out about Tennessee's accepting responsibility to create laws and rules that PROTECT the public ~ not open up loopholes for thievery.

Tightening up the license law is a different matter. May i wholeheartedly start the list of things that would help everyone ~ the licensees included:

A) Let's find a middle ground for what companies should be doing with their escrow.

We could have a great compromise that allows the companies to draw down one-third of their escrow deposits. So, it's the best of both worlds. The companies don't have to feel like they're starving in a bakery, and the guests and owners don't have to worry about the company legally spending all the money and then folding.

The auditing process will be an entire blog post on it's own. I intend to take the Tennessee Real Estate Commission to task (Surprise!) over their current auditing process, with suggestions for how to make it better, easier, and how to deal with the 'Great Compromise'.

B) Bond the rental companies. And make 'em display the bond number.

This was the intent when TCA 62-13-104 was amended in 1998 to include vacation lodging service businesses. Of the three proposed amendments, the first one required licensed company to procure and proclaim a $50,000 bond. Amendment #1 failed to become part of Public Chapter 881, but the other two passed. Amendment #2 became the new paradigm for rental companies and Amendment #3 gave it six months to be promulgated.

Maybe Amendment #1 to SB3310 was ahead of it's time. Maybe now's the time.

There aren't too many solutions for unlicensed rental companies. However, the A+ American Vacation boys would have had to think twice about giving Tennessee a bloody nose to go along with that black eye if they had to get a bond.

Sure, crooks and liars could fake a bond number on their Homeaway.com advertising, but it's a different internet today than it was in 1998 - so maybe everybody's bond number has to link off to an official site (similiar to the licensee list on the right) where the bond AND license can be verified. Or a toll-free number underneath the bond number... i know you get my non-rocket-scientist mind's drift.

Would the likes of Steve Lear and Scott Adams (the A+ boys) had a more difficult time preparing for their scheme if they'd had to get a bond to be believed? If A+ did have a bond would there be fewer totally screwed sad folks today?

If you're a traveling or vacation property owning Tennessean, help me - i'm begging you! Help me peck away at Representatives Montgomery and McCord, and Senator Overbey (and your OWN legislators) unti their sense of what's right overcomes their sense of donation pockets.

And to all of our friends in the family of states, who love the short drive into what's basically an opulant Canadian biosphere ~ please come back. Ask questions when you book. I've taught you how it's supposed to be and you can email me (hammer.feather@gmail.com) if you're not sure. Check out your rental company (you'll find a list of licensees to the right) and please, thoroughly enjoy your stay.

*Okay. I know it's already a crime in Tennessee to operate an overnight rental company without a license. The problem is no one at the state level seems to know this.

Thursday, June 25, 2009

Oh NO! They DIDN'T!



They did, and it was awful. Just awful.

Two guys, Steve Lear and Scott Adams cooked up a company called A Plus American Vacations. They accepted lots of deposits and payments. You are correct if you are thinking "I bet they skipped".

It's heart-wrenching, too. Some of the stories are so sad, that one commentor is recommending the death penalty. (eek!)

You know how hard we all save to get out of the house and take that vacation, so you can imagine how it would feel to wake up one morning thinking everything is fine and so looking forward to your trip ~ and then you get a phone call, email, or a letter in your mailbox informing you that, uh, your reservation has been canceled and there is, gulp, no refund.

Here's my conjecture of how their operation worked:
  • They didn't have a brick and mortor store, nor a website.
  • They either really did have a unit(s) to rent, or they made up a unit(s) to rent.
  • They listed these units (real or phantom) on www.VacationRentals.com (and other websites belonging to HomeAway.com) as available for booking.
  • They only accepted checks as payment.
  • They left with the money, informing the ex-guests that they were in foreclosure, etc.
It was really very simple. It really was too easy. Steve and Scott told people they were a company. There are 15 people or more (who have come forward) out a couple of thousand apiece. Many more details will come to light, but the basic premise of what Steve and Scott were doing appears to be pure premeditated theft.

It's all over TripAdvisor and the news. I'm guessing this: (Click Here) was on the air on Thursday, June 25th, 2009.

There was one report that the Sevierville Police Department was telling folks "it could turn out to be a civil case". That's assumed to be policespeak for "you have to get your own lawyer". But: DANGIT. If lying and defrauding people isn't criminal, then something is very wrong and disturbed with the way my mind works.

If this turns out to be a well-planned scam, we can only pray that the POWERS THAT BE (that was screamed ~ but i'll whisper "Tennessee Real Estate Commission" and the "Attorney General's Office") will get off their well-fed asses and work to promote and pass laws that protect the public instead of allowing the Legislature to argue over a saggy pants ban.

(Isn't Scott Adams the Dilbert artist?)

UPDATE 11/29/2010:
They've been CAUGHT! Click HERE to read Jamie Satterfield's story in the Knoxville News Sentinel!

KnoxNews link:
http://www.knoxnews.com/news/2010/nov/28/fraud-schemer-strikes-plea-deal-provides-names/

Sunday, June 21, 2009

Welcome, Dear Tennessee Guest

Dear Tennessee Guest ~

Welcome to our beautiful state! I know, i know... it's hard to believe that God would put so much eye candy in one place. You will find that on the surface, it seems we knock ourselves out to make Tennessee a great way to enter and enjoy the Great Smoky Mountains National Park.

We've gone to a great deal of time, money and trouble to offer you a plethora of other activities, in case you become bored with the grandeur of the scenery.

Since you probably want to stay safe and financially solvent during your time in Tennessee, there are a few things of which you should be aware:

1) It's so embarrassing that we now allow 'Guns in Bars'. It's supposed to be illegal for someone to consume alcohol if they're packin' a concealed weapon, but it's hard for a restaurant server to tell if they are - indeed - carrying a gun. We so apologize for the vocal 3% of Tennessee's population (the concealed weapon permit holders) who thought that tequila and guns could be safely mixed in public. The other 97% felt there was no way it would pass.

Ask a cocktail waitress how many marriage proposals she's received from tables of men just sittin' around shooting tequila. Do you get it, Dear Tennessee Guest? Shooting off guns or marriage proposals whilst shooting tequila?

Our Governor, Phil Bredesen, vetoed this idea when it came across his desk, but the aforementioned 3% seemingly (appearance is everything) donated enough money to their Representatives and Legislators to have the veto overturned. Following his beat-down, Governor Bredesen was quoted as saying
"I still think I'm right," he said. "I still think that guns in bars is a very bad idea. It's an invitation to a disaster."

Your best bet would be to either bring your own gun (in case a fight ensues at the local Applebee's), or stick to restaurants that don't have a saloon on the side.

2) Unfortunately, July is the time for sneaky sales tax increases to become effective. Some counties raised their bed tax, some raised their local option sales tax.

I know this makes you mad, Dear Guest, but think of the ignorant Tennessee kids who will never really see any benefit from these tax increases, even though the kids were used as props to strong-arm the citizens into approving the tax increases. One example is so blatant that it would be funny if it wasn't really a tragedy. School Superintendents around the country can take notes if they're interested in raising the values on their own personal properties while only raising a few eyebrows.

3) Dear Guest, you're probably renting a cabin or condo during your stay in Tennessee. You're probably doing this to save money because you can eat in every meal, and not have to worry about the 'guns in bars/restaurants' thingy. However, since 2003, your deposit money has been subject to being used for making luxury car payments. A tiny paragraph in your guest agreement makes all the difference.

True or not, it's bad that in June 2009, rumors circulated that, in Tennessee, American Patriot Getaways was filing bankruptcy and Timbertops could not pay their owners for May 2009. These are two large, huge, enormous rental companies and their good or bad business practices affect a lot of people... in a wide-spreading, tentacle sort of way. It could spell exponential train wreck-like carnage of a 25-unit company behaving badly. We can only hope that these rumblings really are just rumors.

The problem is they (the rental management companies) have the ability to put your money into their operating account ~ immediately upon your payment. If you cancel, or otherwise become eligible for a refund, your money is refunded from their operating account. That is, IF there is enough money in their operating accout to make your refund. This is not how it's supposed to be handled. And the property owners are taking a drubbing, too, because it's their rent money being spent out from under them. A dipping management company depends on current deposits to fund last month's owners' checks. Icky, eh?

If you ever come across a rental company that brags on the fact they hold your money in an escrow or 'trust' account until your departure, try every way in the world to stay with that company. You'll find there aren't very many of them in Tennessee. It could be said that there is not enough of a profit margin in the overnight rental business to drive a luxury car. You have to draw your own conclusions about them 'that do'.

4) One last tip: As you pass through Tennessee, do not look at any fly ash. It has a little-known effect of disabling your outrage hormones.

Be well, drive safely, and enjoy your stay, Dear Tennessee Guest.

Sincerely,
Ninety-seven percent of the population of the Great State of Tennessee

Wednesday, May 20, 2009

Teetering on the bring of insanity


It's always fun to play developer/investor until someone gets screwed. WATE.com, based out of Knoxville, featured just such a story on the evening news, Wednesday.

Mr. Sterling Webb at Sterling Springs in Sevierville, TN, would pay unwary owners huge amounts of rent (regardless of how much - or not much - the unit actually rented) during their first months of ownership. The owners would be so impressed, they couldn't wait to buy another three-bedroom cabin... Good thing, too, because Mr. Webb needed that money to pay the other owners the huge rents. And he would need more lot/cabin sales to pay the new owners.

Apparently, Mountain National Bank happily went along with all of this, funding construction loans for units that might not be built for a while.

Fast forward a couple of years into the future ~ 2009 to be precise: Times are hard, sales are down, owners aren't getting very much money ~ and now the owners are finding out about things.

...wonder how much Sterling Webb has in his escrow account, today. Gee, i also wonder if Mr. Webb has a VLS license, as required by the State of Tennessee? Gosh, i wish the State would give a damn.


Wednesday, April 29, 2009

How Did We Get Like This?


Why is the Great State of Tennessee working against visitors and vacation property owners?

The POWERS THAT BE (i yelled that) only seem interested in pushing Bills for campaign donations and getting re-elected.  To hell with one particular Bill's ramification sufferers.  

As previously posted, something went awry in 2003 with the system in place to protect a management company's scheduled guests, property owners, and the State's own tax department.  Where there were once controls in place to keep the management companies from spending money they were holding in trust (on cars and furniture and such), there lurks now only ambiguity.  Avarice, greed, and people totally spazzing out due to being totally ripped off is the new paradigm.

Good grief!  How in the world... How in the heck...  did we get like this?
(Click on one link and it will ask you for a username and password.  Use your Back button to return to this blog ~ then click on the other link to actually see the report.  It's crazy that this works, but it does!)

Is it just me, or do YOU also think it looks like large campaign donations were made to key legislators to reap a huge benefit for overnight vacation rental management companies?  That benefit was the ability to grab that money* out of  what is still considered a TRUST account.  That's right.  Vacation Lodging Service (VLS) licensees in Tennessee are still required to keep an ESCROW account ~ they've just been allowed to spend the crap out of it since 2003.

(YooHooooo) HEY!  Powers That Be!  I'm fixin' to chronicle some very bad results of this little side-step of yours.  How can you just sit there, pocketing your campaign swag, and watch some of the management companies financially rape our guests and property owners?

*Clicking on 'grab that money' downloads the .pdf of the Public Act that passed on May 21, 2003, and went into effect June 4, 2003. Here's the URL: 

Sunday, April 19, 2009

Guest Posters Can Make The Best Points, Sometimes!


You can see the original post and it's replies, by clicking here.

The Author of the post has given his permission for it to be re-posted on this site, and you'll need a little context for the best reading enjoyment.  Part of what you need to know is that this poster, Tom Stone, is from the stunning hills of North Georgia.  (This awesome close up of a dollar bill is compliments of SqueakyMarmot at Flickr.)

Something else:  Georgia does not have any rules about keeping an escrow for the monies that belong to guests, owners, and the tax people.  Is it possible that common sense wafts on prevailing winds in the Blue Ridge Mountain area?  Mr. Stone, Mr. Stone (yelling loudly to get his attention) ~ blow some of that stuff over this-a-way!

Enjoy:

Are you keeping two sets of books?  Maybe you should...
by Tom Stone
Originally posted at VacationRentalsCommunity.com on 4/17/09

I read a comment from a cabin owner on a local website, where she said they are 4-5 months in the rear from their rental management company for the rents collected.  Why would anyone tolerate this!  Would you let a guest rent your vacation rental and pay you for their rental six months after their stay? 

My guess that this situation is the result of the management company dipping into money which wasn't theirs, meaning the owner's portion of the rental receipts.  They were probably in a tight place, and used the funds to cover operating expenses, figuring they could make it up when cash was flowing in the right direction again.  I recently heard about another management company which wanted to sell, but they had dipped so deeply into the advance deposits, that they could not sell for the price they wanted and needed.

Maybe you shouldn't keep two sets of books, but you should have two checking accounts. #1 is your Operating Account which is your money to play with.  #2 could be called an Escrow or Trust Account, where you hold deposits, taxes collected, housekeeping fees and cabin rental receipts.  The second account is where you hold money "In Trust" to distribute it as required.  All money you receive from guests goes into your Trust Account.

It is very important that you wrap your head around this: It is not your money! This money is actually someone else's not yours.  This money belongs to the guest, until they check in; the owner of the property you are managing; the housekeeper who cleans the property; and the taxing authorities, not you.  When a guest checks in, you can remove your portion of the rental as commission and deposit it into your Operating Account.  I do this once a week, usually on Thursday, when I cut checks for the week.  Some states require you have a separate Escrow or Trust Account, but many, including where I live, do not.

When it is time for you to cut Owner's checks, pay sales tax receipts, pay your housekeepers, or maintenance items, it all comes out of your Trust Account.  The money will always be there, in sufficient amounts to pay whatever funds are due.  When the money is due to be paid out, its there because you have not become confused about whose money is whose.

When a property owner places trust in you to manage, market and oversee their property, do you give them reason to trust you with their money too?  It's something you should think about.


Thursday, March 19, 2009

Ten to One ~ it's probably an understatement


If Vacation Lodging Service (VLS) licensees and real estate brokers are under the same supervisory commission, and if one reason for this is because both types of businesses (overnight rental company and a real estate office) are holding, in trust, as fiduciaries, other peoples' money ~ then why should ONE of these two not be afraid of the big bad wolf (Tennessee Real Estate Commission, or also fearfully known as TREC)?

Consider this:   Yes, there was a time in the real estate business when there weren't enough title companies to go around (pre-1990's) and most Tennessee real estate brokers did hold all the earnest money usually given to the listing broker to hold on behalf of usually the buyer.  

Brokers did draw the closing documents and do their own closings and dispersed large sums of money from their escrow accounts (even if the sale was funded by a bank!).  If you take that community standard and couple it with the fact that, during that time period, almost all earnest money deposits were at least 10% of the purchase price (pre-buyer agency) ~ that was a dang lot of money lying around in escrow accounts in the State of Tennessee.

However, Tennessee real estate brokers had the fear of TREC instilled in their hearts.  This was before the internet, so it must have just been a whisper campaign that TREC would come kill you if your escrow was out of balance EVEN ONE PENNY!  You can take this to mean that brokers felt that TREC would have them killed over a penny.  

At the time, the TREC folks must have been pig farmers and concrete plant owners, because brokers really were skeered.  These days, most real estate brokers want the title companies to hold the earnest money deposit on a real estate transaction. 

But, it begs a question:  Why haven't VLS licensees been afraid of being killed over a penny?  You say "well, they USED to be" and that is true ~ but why haven't they been respectful of other peoples' money and fearful of TREC since 2003?

To put it in perspective for you, 
  • if there are ONE million dollars sitting in real estate brokers' escrows, right now, on behalf of people from all over America anticipating the closing of their real estate purchase in Tennessee, 
  • there should be TEN million (or way more)  sitting in escrow with the Vacation Lodging Service licensees.
This is money that should be sitting in VLS escrow coffers, every penny earmarked in some shape, form or fashion as
  • guest advanced deposits,
  • money due to owners for checked-out rentals,
  • money due to the pest control guy and the rental company as commissions earned,
  • money collected from the guests and owed to the tax authorities.
So, for every One million of real earnest money being held in escrow accounts around Tennessee, there should be TEN million of VLS's guest, owner, tax, and vendor peoples' money.

 And how much is there really being held in Tennessee VLS escrow accounts that really belongs to someone else?  I would be suprised if it was more than 50 cents.


Wednesday, March 18, 2009

My black eye.

Sometimes you feel like you get a black eye and a bloody lip when you work at an overnight rental company.  Guests can be brutal; owners can be, well, owners (owners: people with enough time on their hands to watch every step you make).  

The pseudo black eye as described, above, can be dealt with and managed to a degree.  Good thing, too!  And, it's good that the bad days are balanced out by the days when the guests love you and the owners praise you.

However, the black eye that a shot and a beer won't cure is the  reputation that Tennessee is getting around the rest of the nation.  Absentee property owners have been ripped off by so many property managers in this mecca of opulant scenery and lying bastard property managers, that they are starting to talk about it amongst themselves.

They're not whispering, either.  They're yelling.  

Some property owners have lost their life savings.  Some have lost property ~ and not because of their overnight rental sitting empty, either.  Owners have not been paid for actual rentals in their property.  This means they had to pay the utilities for a reservation that they were never paid for.  KaPOW.

Monday, March 16, 2009

The Robber Baron State


Calling All Criminals: Come on up, down, or over to Tennessee! Are you currently running a Rob Peter To Pay Paul operation? Hey, that's no problem, here.

We've got the 'blurb'. The 'paragraph'. The 'notice to the public in a timely manner'. The "Dear Guest ~ In accordance with TCA-62-13-104(D)(i), your monies are going into my operating account, blahblahblah..."

When a property manager receives money from a guest in anticipation of an upcoming rental, that guest believes that they will get full credit for every penny paid on their behalf.

What does the Guest really have? Oh yeah, a belief.

When an owner places their property with a licensed (or license poseur) vacation rental manager, they trust the manager to diligently turn over all monies due to them from that vacation rental.

What does the Owner have? A belief ~ and a little more. The Owner and the Manager have a fiduciary relationship. It was created when they all signed an agreement for the Manager to rent the Owner's property.

But some Managers act like Robber Barons. They think it's OK to use the Guests' deposits and the Owners' net profits any way they see fit, as long as they have enough to cover the Guests' refunds and the Owners' checks :::::::drum roll:::::: when the time comes.

This concept of trust and accounting due an Owner from a Manager was re-affirmed in Tennessee by a judge in 1998 when Vacation Lodging Service locations were moved from Consumer Affairs to the Tennessee Real Estate Commission. The VLS licensees were required to keep the guests' and owners' money in an audited escrow account. Of course, that was watered down when it passed without the bonding requirement. But at least it passed.

Things seemed to rock along OK ~ until along came the (D)(i) insertion in 2003. Ah, the Barons.


Saturday, March 14, 2009

Company B was 'B' for BAD

There was once a super nice, ethical man named Don Shults. Don was a hard worker, and I say 'was' because, God rest his soul,  he worked himself right into the ground. Now, before Don went to meet his ancestors, he sold the rental company he had built from the ground UP. Great Smoky Mountain Vacation Rentals.

Don didn't realize it, but in July 1999 he sold his company to a financial rapist. The Financial Rapist ran wild with the company's escrow money until around March 2001.   Finally, enough of the owners were missing enough money and were collectively not feelin' the love e-nough that ~ they complained.

But it wasn't until January 2007 that justice was served and restitution ordered for that particular fiasco.Click HERE to read the sordid court document that details the trial, the witnesses, the injured, and the verdict.

However, as justice was taking it's sweet time - some how - some OTHER people were running the show at Great Smoky Mountain Vacation Rentals. We would have to check with the owners on that program at that time to know if the OTHER people were doing a good job with their fiduciary duties as a property manager. It's almost moot, however, because the OTHER people sold it to some MORE people. The name of the 'some MORE people' is Roy Duane Wilhite. 

So, a person named Duane Wihite is running the now-beleagured property management company known as Great Smoky Mountains CABIN Rentals.  It did deteriorate to the same tired  story:

Mr. Wilhite
  • fanfarelessly closed his doors on October 1, 2008;
  • owed his owners back rent money;
  • was seemingly unconcerned for the guests who had paid deposits, much less the guests who were were completely paid up in advance;
  • filed Chapter 7 Bankruptcy in November 2008.
What was Mr. Wilhite's problem?  We may never know the WHY, but we can easily deduce the HOW.   What if it was Drunken Uncle Ponzi?  

You know how Drunken Uncle Ponzi comes around and spends all the money that's EARMARKED,  so the poor company owner has to have more reservations in order to get more advance deposits so he can fund the owner, vendor and tax checks that USED to be funded ~ but D.U.P. struck, again.  It really hurts when half of your inventory is pulled in one fell swoop commensurately reducing your dipping ability.


Friday, March 13, 2009

Company A: swallowed up

Company A was 'A' for awesome!

But how could the Owner, a kind, gentle human ~ hardworking, ethical, and smart ~ have known what would happen to the new endeavor, along with everything else this Ethical Person had acquired in their lifetime of physical toil?

However, when the rubber met the road and the company closed it's doors, it was a simple matter to write checks out of escrow for

  • the balances due to owners, 
  • amounts due to taxes, 
  • and one check to the company taking the units with the respective advance bookings including the corresponding advance deposits.

Props to Company A. Props to the Owner and the meticulous bookkeeper behind the smooth closing-out of Company A's books.


Wednesday, March 11, 2009

A tale of two woes

The next two posts will detail two American Dream working-man stories. One has a saddish, but noble, ending and one ended in a tempest.

One company shall remain anonymous out of respect for their conduct and aplomb; the other shall be blasted all over these pages as more exposure to their dastardly deeds. Yes, they will be named ~ but as you're reading, please think about the many other companies that YOU know are behaving the same way.

They just haven't been exposed.


Sunday, March 8, 2009

The Pros of it and the Cons of it

Reasons to operate your overnight rental business in an ESCROW fashion (even though the law in Tennessee doesn't requre it):

1) You can sleep at night, knowing that if you wake up the next morning and decide not to be in the rental business, anymore, you know exactly who gets what so you can get OUT;

2) The guests, owners and the tax people can sleep better at night, knowing you are not using THEIR money to pay your employees or furnish your own personal cabins.

Reasons NOT to operate your overnight rental business in an ESCROW fashion (because the law in Tennessee allows it):

1) You can use the advance deposits to pay your payroll, or other office operating expenses;

2) You can use the money people think you are holding for fun things, like fancy cars, furniture, etc., etc.

What does it matter? If more people are going to make more reservations and give you more advance deposits ~ you can use that money to pay the people you owe, now.

Oh, wait... that sounds like a Ponzi scheme.


Saturday, February 28, 2009

What ogres will do for money

Long ago and far away, a princess was married to an ogre who liked to raise fighting cocks. The princess was really interested in the science of it, and the ogre in the sport and money parts.

Sometimes the ogre would get mad because his beloved sport was threatened by pending Acts. The ogre would go see other ogres and they would collect money to give to an ogre representing them in front of the king. This rep ogre would plead the case of the cock fighting ogres (sometimes under great duress ~ but the ogres back home had given him a great deal of money, so he was willing to take a black eye for it) and eventually the rep ogre would win out by bartering and trading his vote around to get done what his ogre-people back home needed to get done.

What if how it was done for ogre-cock-fighting back in the day is the same way you put the wheels in motion to get the laws changed to way financially benefit vacation lodging companies? And what if it was much to the detriment of the roosters Guest and Owners?

In other words, let's start looking here* to see how a law such as TCA 62-13-104D(i) could have been introduced, passed, and unleased on the unsuspecting guests and property owners in Tennessee.



*http://www.tennesseeanytime.org/tncamp-app/search/pub/report_full.htm?reportId=1651


Sunday, February 22, 2009

Wha?

This was added to TCA 62-13-104-3 in May 2003.  The sponsors were Clabough and Miller.  Phil Bredesen signed it in to law in June 2003 (click here to see the original Act as a .pdf):

(D)  (i)  No funds shall be distributed from the escrow/trustee account until the customer's stay is complete, unless such distribution is in accordance with terms disclosed to the renter in writing at the time of making the reservation, or within a reasonable time thereafter not to exceed three (3) days, mailed to the renter through the United States postal service or transmitted to the renter via electronic mail, facsimile, or other tangible form of communication. Commissions earned by the firm and the revenue due owners shall be disbursed at least monthly. Funds held in escrow shall be disbursed in a prompt manner without unreasonable delay.

Is it just me, or do two distinct sections jump out at you, too?  I can't figure out what the first sentence has to do with the second and third sentences.  The latter two are easily understood and not hard to implement.

The first sentence talks about informing the public that the rental company is spending their deposit money as soon as they get it ~ regardless of the guests' arrival date.  In other words, as long as a vacation rental management company, in the great State of Tennessee, has the following verbiage in it's guest agreement:

Pursuant to the provisions of the Tennessee Code Annotated, Title 47, Chapter 18 and Title 62, Chapter 13, Section 62-13-104(b)(3), Subdivision (D)(i), T***** T***, LLC discloses the following policy as of June 4, 2003: "All advance rent deposits, damage deposits and balance of rent due are deposited into a bank escrow clearing account. These deposits are considered income to T***** T***, LLC upon receipt and may be used immediately. Any refund considerations are expensed from the general books of T***** T***, LLC on a case by case basis."

then that company will be considered good to go as far as plundering the monies their supposed to be holding in a trust account as a fiduciary.

Friday, February 13, 2009

But the law's in the way...

If you've been reading from the bottom up, then you're up-to-date on the hypothetical question of "What to do?" about being a really big overnight rental company that has lots and lots of money in escrow.

And, yeah, (sucking teeth). You need that juicy money, but there's a pesky law standing in your way. Tennessee Code Annotated, Title 47, Chapter 18 and Title 62, Chapter 13, Section 62-13-104(b)(3), Subdivision (D) ~ Prior to May 2003. 

Prior to 2003, the VLS rules were that a vacation rental management company was not entitled to any monies until the guests' departure.


Thursday, February 12, 2009

Do you dip?

What if you started a property management company in Tennessee? Let's say you grew and grew and grew until you had almost 400 units on your program, and every time someone checked in or booked a future reservation your coffers grew and grew and grew ~ commensurately.

Are you with me? Big rental company with lots of money they are holding as deposits on future reservations?

Now, let's say the rules in Tennessee state that you, the professional vacation rental management company, are not supposed to touch this money until the guest departs.

But you need money! OMG, it's soooooo tempting! All that money sitting there in an account ~ just drawing interest.

You could pay your payroll with it ~ or back taxes ~ or, or, just about anything you might need money for to help you operate your business. Hell, if you could pay your office's electric bill with it, why not go a step further and use it to buy a new dining room set for your own personal rental cabin?

What to do? What to do? What to do? What to do? What to do?


The First Ping

If i have a personal blog for my family, a business blog for the software company ~ how am i supposed to gripe or pay homage?

Ergo: Hammer and a Feather.

My kids will tell you that i raised them with a "hammer and a feather". I came down hard, when called for ~ yet, i was the first to praise and condone when they earned it. In the business world, i heard it called "a velvet brick".

...how 'bout a velvet wrapped hammer. This blog is for what's making me insane.