Ask RedWeek / October, 2017

When will owners see restitutions from the Manhattan Club?

Thanks for letting us know about the Manhattan Club settlement, but we need details! Who will get restitutions and when??

Some new details in the Manhattan Club settlement have finally been released. Let's start with the most important new revelations:

  • Owners will have to wait up to three years to get partial restitution for their complaints
  • The Eichners agree to sell the club to a timeshare company approved by the New York Attorney General

No Quick Relief For Owners

Two months after concluding its fraud investigation of sales-and-reservation practices at the Manhattan Club, the New York Attorney General's Office released details of its settlement with the embattled mid-town high-rise.

The Oct. 5 court filing, prompted by owners and attorneys who filed Freedom of Information Law claims to force disclosure of the settlement, gives owners some sense of the future at TMC, but no hard answers on how much restitution they'll receive, or other relief, as a result of the AG's successful investigation of the club. The future ownership and management of the club remain puzzles, as well.

The only certainty contained in the Assurance of Discontinuance (AOD) settlement, signed by the AG and the Manhattan Club's operators --- Ian Bruce Eichner, relatives and business associates ---is that TMC owners will have to wait, as much as three years, to weather the conclusion of the case. The AOD sets forth a three-year timetable for Eichner to sell the club, relinquish management of the club's day-to-day operations, and provide owners with $6.5 million in restitution payouts. Half of the money will be distributed to owners in year one for nights they could not use. The remainder will be distributed in years two and three to owners in good standing as partial reimbursement for the maintenance fees they paid between 2011 and 2014.

The AG's office announced that "hundreds" of TMC's 14,000-plus owners would share in the settlement as restitution for their inability to reserve rooms and resell their intervals. Doug Wasser, a Manhattan attorney who represents several dozen TMC owners, estimated that the payouts could go as high as $1,500 --- but that will depend on many factors, including whether owners paid all maintenance fees, previously and now, during the AG's four-year investigation of the club's sales practices. The payouts will be determined by a to-be-named claims administrator who will determine owner eligibility.

Wasser also said that the payouts, while small on a per-owner basis, pale in comparison to the AG's achievement in getting the Eichners to give up control of the club. This is the first time in the industry's history, he said, that a state regulator has forced a timeshare developer to get out of the business --- forever. Industry officials said they had no historical knowledge of a tougher outcome, either.

"I think this is a process, not a final settlement," Wasser said. "It's also significant that all sponsor-appointed officers and directors will resign and the new TMC purchaser will appoint new directors."

While making history in the timeshare universe, the outcome roiled owners who vented their feelings on RedWeek.com and other social media channels. Many owners, perhaps exercising wishful thinking, hoped they would get back their purchase money or be able to sell their timeshares to the club for fair market value.

"I'm concerned about what a pittance we're going to be handed," said Chris Volpe, a Long Island resident and ardent Manhattan Club owner who has long complained about the Eichners and, recently, advocated an owner protest against the settlement. "We have no idea what the (claims) administrator will decide."

Many owners who contacted RedWeek.com also anticipated a rollback in maintenance fees that, in recent years, soared to nearly $3,000 per week. The AOD acknowledges the rapid rise in maintenance fees, but is silent on what fees should be paid in the future. That, too, will depend on the new buyer.

An Unnamed Timeshare Company Will Buy and Manage the Manhattan Club

The AOD discloses, for the first time, that the club will be sold to a "third party operator of timeshare properties" that must be screened and approved by the AG's office. If the new buyer defaults on the purchase, the AG retains jurisdiction to appoint a monitor to run the club and take control of all books, records and personnel decisions. In addition to selling their stakes in the club --- which are unknown, since most of the deeds were sold to timeshare buyers --- the Eichners agreed to transfer the club's management agreement (run by an Eichner-managed company known as Urban) to the timeshare company that buys TMC. The Eichners also agreed to remove all business associates from the club's HOA board. Their replacements will be named by the buyer.

In summary, the AOD represents a clear-cut win for the Attorney General, a loss for the Eichners and, at least on paper, a positive result for the 14,000 or more owners who spent $400 million on TMC timeshares between 1996 and 2014.

Background: What Went Wrong at the Manhattan Club?

In its heyday, the Manhattan Club was one of the only luxury timeshare operations in Manhattan (the Hilton Club, a neighbor, is the other). Buyers were eager to purchase a slice of Manhattan for use every year, with maintenance fees initially subsidized by the Eichners. But instead of gaining easy access to the Big Apple, owners eventually hit roadblocks. Reservations got harder while the club continued to push new sales and ramped up nightly rentals to non-owners through online travel agencies. At the same time, owner maintenance fees escalated, year after year.

That AG's office started investigating the club's sales practice in 2014 after receiving hundreds of owner complaints. That led to an undercover sting operation where AG investigators posed as potential buyers and recorded the club's sales pitches. On the strength of those secret recordings, the AG got a court order in July 2014 that shut down the timeshare operation and froze the club's bank accounts pending additional investigation by the AG. Over many months, the AG filed court documents indicating that the original civil probe --- into violation of consumer protections in New York's Martin Act --- had expanded into a potential criminal investigation.

The criminal probe turned into a stalemate when Eichner's attorneys objected to the AG taking depositions that might force the Eichners to make statements, under oath, that could be used against them in a criminal proceeding. In addition to fighting the depositions, Eichner's attorneys filed petitions to unfreeze the club's bank accounts so the lawyers could get paid. It never happened.

Several months ago, both sides agreed to cancel pending court hearings in order to pursue settlement talks. Those discussions led to the AOD, which was announced in mid-August but not disclosed until this month.

Complicated Schedule for Eligible TMC owners to Receive Restitution

The restitution program has three parts. During the first year, $3.25 million will go to reimburse owners in good standing who could not secure reservations between 2011 and 2014 and did not use all their allotted nights. The maximum reimbursement for unused nights is $250 per night.

The second- and third year restitution distributions will provide $1.625 million each for owners as partial reimbursement for their maintenance fees. In each case, the claims administrator will determine the exact amounts of the pro rata distributions.

Findings in AG's Case Could Trigger Additional Litigation

While giving some money back to owners, the case could spawn additional lawsuits against the club, according to lawyers interviewed by RedWeek. The AOD, they said, includes specific admissions of wrongdoing that could become evidence in future lawsuits. Here is an example of the stipulated findings in the AOD: the court document says that "certain sales staff" sold timeshare intervals without providing a copy of the offering plan to prospective buyers. Other sales people, meanwhile, made misleading oral statements to buyers about the rescission period, the investment value of TMC timeshares and the club's "willingness to buy back the timeshare interest at the price paid by the purchaser."

The AOD settlement identified several violations of New York's anti-fraud Martin Act, including these findings:

  • The sponsor's sales staff failed to provide copies of the offering plan to purchasers.
  • The club's reservation agents did not abide by the terms of the offering plan, did not always provide reservations to owners on a first-come basis and gave preferential treatment to certain owners through a new-owner hotline.
  • In annual budgets, the sponsors under-reported reserves for bad debts (defaults on maintenance fees). In 2011, the reserve for bad debts was $600,000, while the actual bad debt exceeded $2.09 million. In 2012, the budgeted reserve was $900,000 while the bad debt expense rose to nearly $3.95 million. In 2013, the bad debt reserve was $1 million while the actual debt was $5.17 million. And in 2014, the reserve for bad debts was $1 million while the actual bad debt ballooned to $5.27 million.
  • The court settlement also says that the sponsor implemented aspects of the transient rental program "in an improper manner," but provides no specifics.

Between 2011 and 2014, the club's management arm, New York Urban Ownership Management, LLC, managed by Eichner, received an annual management fee that ranged between 13.8 percent and 18.1 percent of all maintenance fees -or approximately $6.5 million per year, the same amount as the restitution fund. Those payments, with a 15 percent cap on management fees, will continue.

Owners who sifted through the settlement document immediately raised questions that will take time to answer. Here is a sample:

What will happen to owners who declined to pay maintenance fees after the AG shut down the club? Are they entitled to any relief for the 2011-2014 restitution years? Will the club, or its new owners, create a surrender or deed-back program to facilitate owners who can no longer use (or sell) their intervals? How will the claims administrator determine eligibility for restitution? Will there be any changes to reservation processes to ensure that owners gain access to their timeshares?

While these questions hang in the balance, one fact has already emerged: the club is contacting owners to pay their maintenance fees, and threatening to file negative credit reports if they don't.

"This agreement is not going to satisfy a lot of people," Wasser acknowledged. "But I am hopeful that whomever purchases the Manhattan Club will take action to re-establish confidence and a smooth operation of the club, and that they'll work out steps to address owner concerns and re-establish market confidence."

Manhattan Club Back in Business?

The Manhattan Club, amid all the turmoil, continues to operate in full hotel mode, taking reservations online and over the phone from non-owners seeking nightly rentals. Some owners report that they have had more success making reservations since the AG shut down the timeshare operation. The club's operators, however, are not answering questions about any of the owner issues raised in this article. No owner, moreover, has reported receiving a single email about the club's four-year drama with the AG's office.

The settlement and dismissal of the AG's legal investigation also lifts the freeze on the club's bank accounts and thaws 15 sales contracts that were thrown into limbo by the AG's court action. Those buyers will have 30 days to proceed or rescind.

AG Eric Schneiderman declared that "the owners of the Manhattan Club lured thousands of timeshare buyers with false promises and shady sales tactics that violated New York law. While timeshares can be legitimate enterprises, scams like this one are common."

About the author

This answer was provided by RedWeek contributor, Jeff Weir. Jeff is a California-based journalist who has covered California, Congress, and the White House. He also has roots in Silicon Valley, where he directed public relations and marketing programs for high-tech companies. He is also a timeshare owner and member of RedWeek.com.

Comments (24)

    Avatar for Becky F
    Becky F
    Oct 11, 2017

    Thank you Redweek for keeping us informed. As an owner of a Penthouse-7 days per year, and in good standing between the dates specified in the settlement (2011-2014) I would like to keep my unit and receive none of the settlement except perhaps an adjustment on the fees I did pay. Going forward, I'm reluctant to pay maintenance fees that are currently outrageous and simply unaffordable. would you recommend that they be paid? Is this a question for the AG or is there any hint in the information you've received that would suggest that owners should hold back paying the fees until the new owners are established. It seems ridiculous to pay these fees, especially since you can't use your unit, without any promise of some restitution.

    Avatar for Nathan Z.
    Nathan Z.
    Oct 12, 2017

    Thanks Jeff! So, if I understand your summation, the operation of the MC is being shopped around to prospective buyers and a claims administrator will manage distribution of the settlement funds. Fair enough. This will most likely be a time-consuming process. Who is, or will be, monitoring the operation of the MC until it is transferred to the new operators? The AG will vet the new purchaser but who is making certain that the egregious management practices do not continue until then?

    Avatar for William M.
    William M.
    Oct 13, 2017

    Thanks Jeff!.

    Avatar for Michael C.
    Michael C.
    Oct 13, 2017

    One of my tow Manhattan Time Shares is due for renewal on 11/18/17. On 10/02/17 I received a letter from the Manhattan Club stating that a payment must be sent "to avoid any interest or late fees being applied to your account. The additional fees would consist of 16% interest being applied to the Timeshare charges in the amount of $347.86 along with a $50.00 late fee bringing the total amount due to $2,774.51" Since there is no indicated final payment date, can I assume these penalties will be assessed after the renewal date? If I elect not to renew, I realize I cannot use the contract to book any rooms, but why I should pay maintenance fees on a room that I am not using? I have had these 2 contracts for approximately 16 years+. It appears that no consideration is being given to .owners before 2014.

    Avatar for Luis D.
    Luis D.
    Oct 15, 2017

    RedWeek,

    Another timeshare company that needs to be investigate is the Holiday Inn Club Vacation in their operation of the Silverleaf Resorts and treatment of these owner vs Holiday Inn Club owners. It seems HICV is renting units to anyone and owners are second place. Thanks!

    Avatar for Fibo N.
    Fibo N.
    Dec 02, 2017

    Jeff and Redweek, thank you very much for research and updates. Personally I see a great chance of new litigations against TMC in the nearest future. Its still unclear what is the status quo of the club and the owners; it might take long years to figure it out. I stopped payments in 2014 and not going to continue.

    Avatar for Deborah N.
    Deborah N.
    Dec 11, 2017

    thank you for your information and research. I do not want to pay any maintenance fees until there is new management in place. Also, I do not want to pay anything until TMC removes the mortgage that never should have been recorded since we paid for this POS within 60 days of purchase. How do I force them to release the mortgage?

    Avatar for Oriett M.
    Oriett M.
    Mar 14, 2018

    I bought my timeshare in 2009 still paying my monthly fees. If I stop will I get in trouble.? Can’t afford it anymore.

    Avatar for Julie G.
    Julie G.
    Mar 30, 2018

    I bought my timeshare in 2014 still paying my monthly fees. If I stop will I get in trouble.? Can’t afford it anymore.

    Avatar for Carol N.
    Carol N.
    Apr 03, 2018

    Where can I find a copy of the final document for the settlement and restitution to existing owners? I am an existing owner of many years with an up-to-date maintenance record but I am wondering if I should continue to pay the outrageous maintenance fees.

    Carol Newfield cnak@atlanticbb.net

    Avatar for Barbara C.
    Barbara C.
    Apr 15, 2018 (edited)

    We have been owners since October, 2013 at this point we wish to explore options for resale, though not sure if that is feasible. Would it be possible to update us to the standing of a settlement or in fact a buyout of TMC? We too are reluctant to continue paying the maintenance fees as we agree that they are outrageous. What are the consequences for not submitting maintenance fee payment? Would you be so kind as to bring us up to date to the pending situation? Thanking you in advance barbarachoward@gmail.com

    Avatar for Nancy A.
    Nancy A.
    Apr 17, 2018

    We are owners AND so appreciate all your time and effort really on behalf of all of us!NBH

    Avatar for Joan R.
    Joan R.
    May 30, 2018

    We bought two units in 1996 and always had difficulty getting reservations. We have never received any e-mails from the Manhattan club explaining what was happening, we only got threatening letters if our maintenance was late. We did not keep records of how many nights we lost. As stated in one of the comments they are not considering those of us who lost a great deal of time before 2011. Is there any information on the third party who may be buying the club and possibly relinquishing the properties to the third party buyer?

    Avatar for Frank C.
    Frank C.
    Jul 01, 2018

    Hi I've had the Manhattan club for 20 yrs. plus Paid 18000.00 dollars and all my fees every year. Any thought on what i need to do if anything to get money back on the outrageous fees etc.,or just wait it out

    Avatar for Mary D.
    Mary D.
    Jul 14, 2018

    Do you happen to know if TMC is buying back timeshares at fair market value at this time (July 2018)? The last time I spoke with a TMC rep, they said no sales were happening because TMC was in litigation. If they are not buying back, do you happen to know if they are selling time shares again and at what price? I've been an owner since 2002 and have paid my maintenance fees every year on time. Thanks for any information you can provide. Sincerely, Mary DeChristopher mary.dechristopher@gmail.com

    Avatar for Vinny M.
    Vinny M.
    Aug 02, 2018

    1) How do I look into joining any law suits against The Manhattan Club? 2) Also, What is going to happen now that Bluegreen Vacations "BBX Capital" is taking over The Manhattan Club Can I get out as an owner and what about paying maintenance fees?

    Avatar for Doris R.
    Doris R.
    Sep 17, 2018

    I am thankful for all you have accomplished in your efforts to help us with the problems of outrageous annual fees and difficulty making reservations. I heard nothing about this litigation until I received a questionnaire to complete about fees and usage issues. I have seen some information about a company that may acquire TMC, but have not received specifics, so I am not sure where this is all going. Is there a way this information could be more available? I have paid all fees since 2005. How would this affect the contracts that were moved to RCI? Is there more information on any buyout opportunities from the new owners? Again, thank you.

    Avatar for Nicole V.
    Nicole V.
    Sep 24, 2018

    We received our first restitution check today. Thanks Redweek for staying on top of this. It was less than $200 but better than nothing.

    Avatar for Dick H.
    Dick H.
    Nov 27, 2018

    The wonderful folks at TMC (whoever they are!) never bothered to tell us as “owners” that this stuff was going on...unbelievable! I thought we were really buying into something great when we purchased in the early 2000’s as I am a NYC lover. Our original maintenance fee at around $1,500 was a little high but seemed fair...now we are paying around $3,000 with taxes and this has become unaffordable, particularly for us older folk who don’t get regular raises in our payouts. I think it goes even higher next year...guess we have to make sure Mr. Eichner continues to get his”fair share.” And, finally, I recently learned that TMC rents its rooms to “outsiders” at less than what it costs “owners” in our maintenance fees on a per diem basis! It’s hard to find the words to express how I feel about all this!

    Avatar for Bonnie S.
    Bonnie S.
    Jan 23, 2019

    If we cannot sell our TMC timeshare back to them, we will likely go deed-in-lieu at this point. There is no way we can rent it and compete with their lower prices on the website (it is less than our per diem cost of our dues) and we cannot afford the fees any longer (nor should we, considering what has been going on).

    This makes us sad and mad. We thought we had bought into a little piece of the Big Apple to savor over the years after we had moved to the West Coast.

    Gussie219

    Avatar for Melody S.
    Melody S.
    Mar 14, 2019

    I have been keeping an eye on this issue since I realized this was going on a few months ago. This explains a lot that the club has never disclosed. I received a check for about 54$ a year or so ago and was told for time I didn't use. I bought my time share in 2010 and have been in good standing ever since, but I am still paying 260 a month in mortgage with the maintenance fees over 3k. I inquired a several years ago when I kept having diffculty getting in to the club about selling the timeshare back to TMC as I remember them telling me at sale that they get first buy back option, but then they told me that they wouldn't even consider buying the timeshare back until it was paid in full. With the maintenance fees so high I cannot possibly pay it back in full anytime soon and I upgraded from a studio to a 1 bedroom. I had so much trouble getting into the club that I complained to whomever it was that was on the phone every time I tried to book a date. I love going to NYC and I hope this gets resolved. I would be happy with about half the price of maintenance fees. We are paying maintenance fees annually when they are raking in the dough renting the place out like a hotel. I am shocked that I just went to the website and can't even find an owners link but get a hotel reservation link. Owner2010Flex week with 2 Saturdays. I have two weekends and 3 points days. What happens to this type of week?

    Avatar for Robert B.
    Robert B.
    Mar 15, 2019

    Melodys73,

    I would suggest that you visit the other category for the Manhattan Club on this site, “Manhattan Club Lawsuit”. Thousands of defrauded owners have been posting there for years about their complaints just like yours. If you go back a year or so and read forward, you’ll see where we are now, preparing to take legal action against TMC! Join the fight!

    Bob Biello

    Avatar for Rob G.
    Rob G.
    Aug 13, 2024

    Join my owners against the unfair Manhatten Club

    Avatar for Rob G.
    Rob G.
    Aug 13, 2024

    Are you like me and feel that you were held back from being told all the facts when signing up for your timeshare. I was told if I didn't like it, the Manhatten Club would buy it back. Again I just tried to sell for one dollar and the lady whose name starts with an F said NO. Do you want your kids and then your grand kids to inherit these very, very high maintenance costs? It's like an open check book. What will the cost be in five , ten, or twenty years. It can be as high as the Manhatten Club wants to charge. Will we have to get a home equity loan to pay this rising cost? Do you know that non owners, are staying over night cheaper then us. If you average out my fees (which only gives me a week). per night it is not even a deal anymore. I was told all the great deals I would get and I feel like I was scammed. Do you feel that way also? Join my new team. Together we can make a difference. RBGPRO@aol,com. P.S. Don"t think you tried in the past and it didn't work.