Published on: March 29, 2009

Hotel & Timeshare Lawyer: Does the timeshare exit strategy or repositioning your property create ADA problems?

By Jim Butler and the Global Hospitality Group®

29 March 2009

Click here for the latest articles on ADA Compliance and Defense.

Hotel Lawyer and Timeshare Lawyer in Orlando at the ARDA Conference.

Hotel Lawyer: Exit strategies of repositioning can create ADA issues you need to watch. Timeshare lawyer David Sudeck is in Orlando at the ARDA Conference right now, comparing notes with others in the timeshare business. Many see conversion of hotel or condo projects to timeshare as an alternate exit strategy for their investment, but are missing some important issues, as he writes for www.HotelLawBlog.com.

Distressed hotels looking to convert to timeshare. Others repositioning.

As a sign of the times, we are working with the owners of several distressed branded and independent hotels (particularly extended stay hotels) and condominium hotels to explore whether a conversion to timeshare or fractional may be a preferable use. Although the timeshare receivables financing market has been crushed by the general credit crisis, there are still limited sources of qualified consumer financing available for timeshare acquisition purposes, and even with downward pricing pressure on timeshare sales, the economics of timeshare properties in certain locations may be more attractive than continued operations of distressed hotel properties.

Whether we are advising our clients regarding the conversion of an existing hotel project to vacation ownership use or the conversion of a hotel property from one brand to another, the rebirth typically involves some renovation or modification. Whether a renovation is necessary due to conversion, a product improvement plan or otherwise, the owner and operator of the property need to be cognizant of the issues outlined in the article below. The article below was written by our own hotel and time share lawyer, David Sudeck, in consultation with JMBM’s ADA expert Marty Orlick.

Hotel and Timeshare Lawyer: When you renovate or
reposition your hotel (or timeshare property),
understand ADA implications!

By David Sudeck and Marty Orlick
Global Hospitality Group® Hotel Lawyers

The Global Financial Crisis is motivating lenders, developers and operators to get creative. We at JMBM are busy looking at opportunities with our clients to purchase and/or reposition distressed hotel properties, unsold condo hotels or condo hotel inventory (see articles on how to “uncondo” a condo hotel elsewhere on www.hotellawblog.com), and unsold timeshares and timeshare inventory. Some of these properties will need to be renovated and repurposed to compete in this difficult market. It is important to understand what physical modifications to a timeshare, hotel or other facility may involve upgrades under the Americans with Disabilities Act and applicable state disabled access laws.

How can you determine if your property is compliant with applicable access laws?

Title III of the Americans with Disabilities Act prohibits discrimination against individuals “on the basis of disability in the full and equal enjoyment of the goods, services, facilities, privileges,

Is a modification an “alteration”?

To determine whether a modification to a structure is an “alteration” under the Americans with Disabilities Act, the following are considerations:

The aggregate cost of the modification relative to the physical and financial characteristics of the structure
The physical scope of the modification (e.g., What specific portions of the structure were modified? Did the modification affect only the structure’s surfaces or did it affect the structural components? Did the modifications affect only personal property or did it affect fixtures that are considered realty? Did the modifications affect the “usability” of the building or facility?)
The reason for undertaking the modification (e.g., maintenance? improvement? to change the purpose, function, or use of the structure?)

Basically, as the cost, degree, and scope of the modifications increase, the ADA Standards may change. However, even an inexpensive or minor modification to an important accessible element of a property may be regarded as an “alteration” if it fundamentally changes the use or “usability” of the facility.

advantages, or accommodations of any place of public accommodation”. See 42 U.S.C. § 12182(a). If the property in question is older and currently “grandfathered in” under the ADA, the property may currently comply with the Act even though the physical characteristics of the property would not comply if built today. However, if the property is renovated, certain areas may need to comply with the alterations standards of the ADA and state laws.

In determining whether a property complies with the requirements of the ADA, compliance authorities (e.g., building and safety officials in connection with the issuance of a building permit) will likely focus in part on whether the inaccessibility of a property to a disabled person constitutes discrimination. Keep in mind that neither the issuance of a building permit by a department of building and safety or its equivalent nor the preparation of design plans by a licensed architect is a guarantee that a property complies with state and federal requirements relating to disabled access. In particular, out-of-state and international architecture firms may not be sufficiently familiar with accessibility requirements to serve as a meaningful resource in this regard. You should have an expert attorney (like those at JMBM), along with an experienced local site-adapt architect or access consultant, conduct an overview of the plans
What is the “Path of Travel” and must it be accessible?

Title III of the ADA, under certain circumstances, requires that altered portions of public accommodations be made accessible to the disabled, but this does not apply if the property has not been altered after January 26, 1992.

Relevant provisions of the ADA provide that “discrimination” includes, “a failure to make alterations in such a manner that, to the maximum extent feasible, the altered portions of the facility are readily accessible to and usable by individuals with disabilities, including individuals who use wheelchairs. Where the entity is undertaking an alteration that affects or could affect usability of or access to an area of the facility containing a primary function, the entity shall also make the alterations in such a manner that, to the maximum extent feasible, the path of travel to the altered area and the bathrooms, telephones, and drinking fountains serving the altered area, are readily accessible … where such alterations … are not disproportionate to the overall alterations.” That being said, the Department of Justice in its implementing regulation does recognize that normal maintenance and certain upgrades that do not affect the “usability” of the building or facility are not alterations.

Where certain alterations are made, it is possible that the “path of travel” to the altered area must also be made accessible for the disabled, and the defined “path of travel” may be much broader than you would expect. However, the cost of modifying a “path of travel” may be considered, when it was the alteration of a portion of a property that triggered the additional requirement to make the path of travel to the altered area accessible. Specifically, a proportionality requirement (looking at the cost of modifying the path of travel in proportion to the cost of the unit alterations) can limit the extent to which a supporting area must be made accessible. A different standard may apply when architectural barriers exist that limit accessibility. This analysis is complex, and you should be sure to have competent counsel and consultants review the standards and the facility with you.

Should you be concerned?

The Department of Justice and local Attorneys General offices are stepping up the enforcement of federal and state accessibility requirements. The factors relating to compliance requirements are not straightforward, but JMBM’s attorneys have deep experience in this area of the law, and you should consult with ADA counsel in connection with any renovation that you are contemplating or undertaking. Our ADA attorneys also work with other experts to conduct independent surveys of our client’s hotel and resort properties to assess the level of accessibility and recommend cost-effective ADA compliance strategies.

Other articles on ADA and Timeshare
ON ADA

If you found this article of interest, you may want to check out some of the other articles on this topic on www.HotelLawBlog.com which can all be found under the “HOTEL LAW TOPIC” of “ADA” at the top of the home page (or by clicking here(https://hotellaw.jmbm.com/ada/)). The following are titles and links to some of those articles:

ON TIMESHARE

You can access David Sudeck’s articles on timeshare and vacation ownership under the “Timeshare” HOTEL LAW TOPIC — one of the tabs at the top — at www.HotelLawBlog.com or by clicking here. (https://hotellaw.jmbm.com/timeshare/).

JMBM is a proud member of ARDA. See www.arda.org.

If you are, or are considering, developing a timeshare, fractional interest or condominium hotel project or if you are considering modifying the project documentation of an existing project, please contact David Sudeck, a senior member of JMBM’s Global Hospitality Group®. David can be reached at dsudeck@jmbm.com or 310.201.3518. Look for David’s timeshare articles under the “Timeshare” HOTEL LAW TOPIC tab at the top of the home page on HotelLawBlog.com.

This is Jim Butler, author of www.HotelLawBlog.com and hotel lawyer, signing off. We’ve done more than $87 billion of hotel transactions and more than 100 hotel mixed-used deals in the last 5 years alone. Who’s your hotel lawyer?

________________________
Our Perspective. We represent developers, owners and lenders. We have helped our clients as business and legal advisors on more than $125 billion of hotel transactions, involving more than 4,700 properties all over the world. For more information, please contact Jim Butler at jbutler@jmbm.com or 310.201.3526.

Jim Butler is one of the top hospitality attorneys in the world. GOOGLE “hotel lawyer” or “hotel mixed-use” or “condo hotel lawyer” and you will see why.

Jim devotes 100% of his practice to hospitality, representing hotel owners, developers and lenders. Jim leads JMBM’s Global Hospitality Group® — a team of 50 seasoned professionals with more than $87 billion of hotel transactional experience, involving more than 3,900 properties located around the globe. In the last 5 years alone, Jim and his team have assisted clients with more than 100 hotel mixed-use projects — frequently integrated with energizing lifestyle elements.

Jim and his team are more than “just” great hotel lawyers. They are also hospitality consultants and business advisors. They are deal makers. They can help find the right operator or capital provider. They know who to call and how to reach them.

Contact him at jbutler@jmbm.com or 310.201.3526. For his views on current industry issues, visit www.HotelLawBlog.com.

Jim Butler

Jim Butler is recognized as one of the top hotel lawyers in the world. He devotes 100% of his practice to hospitality, representing hotel owners, developers and lenders. Jim leads JMBM’s Global Hospitality Group® — a team of seasoned professionals who have helped clients around the world with more than 4,700 hospitality properties worth more than $125 billion.
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Robert Braun

Robert Braun is a partner in JMBM's Corporate Department and a senior member of JMBM's Global Hospitality Group® -- a team of seasoned professionals who have helped clients around the world with more than 4,700 hospitality properties worth more than $125 billion. Bob represents owners in both transactional and operational issues. He advises clients with respect to business formation, financing, mergers and acquisitions, venture capital financing, joint ventures and strategic partnerships. He has represented hotel owners in the negotiation of several hundred management agreements, as well as spa management and franchise agreements. Bob also advises hotel owners regarding telecommunications, software, internet, e-commerce, data processing and outsourcing agreements. To read Bob's articles, go to www.HotelLawBlog.com and select "Management Agreements." For more information, please contact Bob Braun at 310.785.5331 or rbraun@jmbm.com.

Marta Fernandez

Marta Fernandez is a partner in JMBM's Employment and Labor Department and a senior member of JMBM’s Global Hospitality Group® -- a team of seasoned professionals who have helped clients around the world with more than 4,700 hospitality properties worth more than $125 billion. As a management labor lawyer with more than 20 years of experience, Marta specializes in representing hospitality industry clients in all aspects of labor and employment including labor-management relations such as union prevention, collective bargaining for single as well as multi-employer bargaining units, neutrality agreements and defense of unfair labor practice charges before the NLRB. She defends employers in administrative and litigation claims, such as employee claims of sexual harassment and discrimination and counsels clients in preventative strategies such as executive training, arbitration enforcement, and policies and procedures. To read Marta's articles, go to www.HotelLawBlog.com and select "Labor & Employment." For more information, please contact Marta Fernandez at 310.201.3534 or at mfernandez@jmbm.com.

Guy Maisnik

Guy Maisnik is a partner in JMBM's Real Estate Department and a senior member of JMBM's Global Hospitality Group® -- a team of seasoned professionals who have helped clients around the world with more than 4,700 hospitality properties worth more than $125 billion. Guy's deep and broad transactional practice includes complex real estate finance and venture capital transactions, including project finance, commercial finance, leveraged leasing and real estate acquisitions. He assists clients with development, leasing and disposition, loan portfolio acquisitions, loan and debt restructure, workouts and real estate exchanges. Go to www.HotelLawBlog.com for current information in these areas. For more information, please contact Guy Maisnik at 310.201.3588 or mgm@jmbm.com.

David Sudeck

David Sudeck is a Partner in JMBM's Real Estate Department and a senior member of JMBM’s Global Hospitality Group® -- a team of seasoned professionals who have helped clients around the world with more than 4,700 hospitality properties worth more than $125 billion. David has significant experience in the vacation ownership arena, focusing on the formation and registration of condominiums, timeshares and fractional interest regimes. He negotiates hotel, spa and restaurant management agreements, and assists client in the development, acquisition, sale and leasing of hotels, golf courses and restaurants. For David's take on current issues in the timeshare arena, go to www.HotelLawBlog.com and click on the topic, "Timeshare." For more information, please contact David Sudeck at 310.201.3518 or dsudeck @jmbm.com.

Robert Kaplan

Robert Kaplan is a partner in JMBM's Bankruptcy, Insolvency and Restructurings Group and a senior member of the Global Hospitality Group® -- a team of seasoned professionals who have helped clients around the world with more than 4,700 hospitality properties worth more than $125 billion. Bob represents lenders, special servicers, hard money lenders, community banks, national banking associations, distressed debt investors, and equity investors, positioning them for the best possible outcome by acting expeditiously to preserve value and increase cash flow. His industry experience and his knowledge of the current capital markets -- where distressed assets often include complex deal structures and securitized loans -- allows him to bring creative and effective strategies to the table. When aggressive litigation is the best strategy, he is a vigorous and effective advocate for his clients. Bob represented the securitized lender in the Chapter 11 bankruptcy case filed by the Clift Hotel in San Francisco, and in the subsequent negotiations and successful sale of the loan to a third party. The lender -- acting by and through GMAC Commercial Mortgage Corporation as special servicer -- was the holder of a $60 million loan secured by a Deed of Trust on the Clift Hotel. He has also served as counsel to CapMark, J.E. Robert Company, Inc., AMRESCO Management Inc. and Midland Loan Servicer in their capacity as special servicers on troubled hotel loans in CMBS pools. For more information, contact Robert Kaplan at 415.984.9673 or rkaplan@jmbm.com.

Martin Orlick

Martin Orlick is a partner in JMBM's Real Estate Department and a senior member of JMBM's Global Hospitality Group® -- a team of seasoned professionals who have helped clients around the world with more than 4,700 hospitality properties worth more than $125 billion. Marty specializes in representing hospitality industry clients in Americans With Disabilities Act (ADA) compliance and defense. He has represented more than 500 businesses in ADA issues, many of them hotels and restaurants, as well as hotel mixed-use properties. Marty is a member of the American College of Real Estate Lawyers (ACREL) and a frequent speaker on the ADA and other topics. To read Marty's articles, go to www.HotelLawBlog.comand select "ADA." For more information, please contact Marty Orlick at 415.984.9667 or morlick@jmbm.com.

Scott Brink

Scott Brink is a senior member of JMBM's Global Hospitality Group® and a partner in JMBM's Labor & Employment Law Department. Scott is a management labor lawyer with more than two decades of experience representing employers in all aspects of labor relations and employment law including union prevention, collective bargaining negotiations, defense of unfair labor practice charges before the NLRB, wrongful discharge litigation, individual and class action employment discrimination and wage-and-hour claims, sexual-harassment litigation, arbitrations, personnel policies, California wage and hour law, and employee discipline and discharge. An experienced trial attorney, Scott has litigated a number of high-profile and complex cases involving a wide range of labor and employment law matters. For more information, contact Scott Brink at RSB@jmbm.com or 310.785.5365.

Travis Gemoets

Travis Gemoets is an experienced trial attorney and represents management in all facets of labor and employment law, including wage/hour class actions, claims of discrimination, harassment, wrongful termination, trade secrets and unfair competition, union/management relations and workplace violence. He is a member of JMBM's Global Hospitality Group(r), in which capacity he negotiates union contracts and resolves labor disputes throughout the country, defends class action claims, develops strategies for the mass onboarding and separation of employees, and recommends proactive changes to employers' policies and practices in order to minimize potential liability risks. Reach him at 310.785.5387 or tgemoets@jmbm.com.

Mark S. Adams

Mark S. Adams is an experienced trial lawyer and a member of JMBM's Global Hospitality Group® and Chinese Investment Group™. He focuses his practice on business litigation including contracts, corporate and partnership disputes, and hospitality disputes and litigation. On behalf of hotel and resort owners, Mark has successfully litigated the termination of long-term, no-cut, hotel management agreements, franchise agreements, fiduciary duty issues, investor-owner disputes, TOT assessments, and more. He has wide-ranging trial experience in a variety of commercial disputes, including complex multi-party litigation and class actions. He has tried numerous cases in state courts, federal courts, and in domestic and international arbitrations, and is a frequent author and speaker on trial practice. Mark's trial wins have been covered by Forbes, Reuters, and other publications. He has obtained two of California's annual 50 largest jury verdicts in the same year. Mark has taken or defended nearly 1,000 depositions throughout North America, Europe and the Middle East. He has been quoted as an expert on noncompete agreements in the Wall Street Journal. For more information, contact Mark at 949. 623.7230 or markadams@jmbm.com.

Bennett Young

Bennett Young is a partner in JMBM's Bankruptcy, Insolvency and Restructurings Group and a senior member of the Global Hospitality Group® -- a team of seasoned professionals who have helped clients around the world with more than 4,700 hospitality properties worth more than $125 billion. His clients include lenders, financial institutions, secured and unsecured creditors, distressed investment funds, businesses, receivers, special servicers and creditors' committees. Ben represented the owner of a partially completed multi-billion dollar resort property in the restructuring of its finances and has represented lenders to hotels and casinos. For more information, contact Ben Young at 415.984.9626 or byoung@jmbm.com

Sheri Bonstelle

Sheri Bonstelle is a partner in JMBM's Government, Land Use, Environment and Energy Department, and a member of JMBM's Global Hospitality Group®. She represents owners and developers in land use, zoning, environmental, litigation and construction matters. She manages all aspects of the entitlement process, including representing clients before local and state agencies, commissions and councils. Sheri also represents clients in a variety of land use and real estate litigation matters in state and federal courts, including cases arising under CEQA and other environmental laws. Her hotel experience includes handling the adaptive reuse of an historic office building as a luxury boutique hotel. For more information, please contact Sheri Bonstelle at 310.712.6847 or SBonstelle@jmbm.com.

Kevin McDonnell

Kevin McDonnell is a partner in JMBM's Government, Land Use, Environment and Energy Department, and a member of JMBM's Global Hospitality Group®. Kevin represents developers and owners of hotels in a broad range of land use and zoning issues including entitlements, code enforcement, easements and parking requirements, as well as related Parcel Map and Tract Map subdivision issues. His hospitality experience includes hotels, condo-hotels and mixed-use projects. A registered Civil Engineer and Structural Engineer in California, and a former building official for the City of Los Angeles, Kevin brings unique experience and insight in Zoning and Building Code applications and Code Enforcement issues. For more information, please contact Kevin McDonnell at 310.201.3590 or kkm@jmbm.com.

Jamie Ogden

Jamie Ogden is a tax lawyer at Jeffer Mangels Butler & Mitchell LLP. He advises individuals and businesses on a range of tax planning, tax controversy and estate planning matters. Jamie’s experience includes all tax aspects with respect to the hospitality industry, including acquisitions and dispositions (including Section 1031 exchanges), financing and management agreements. He also serves as lead tax counsel on M&A transactions, financing, internal corporate restructurings and deferred compensation matters. Jamie also works frequently with litigators on the tax aspects of litigation, judgments and settlements. Jamie has extensive experience with foreign compliance matters, including each variation of the IRS amnesty programs. In addition to his experience in private practice, Jamie also brings several years of service from both state and federal government. For more information, contact Jamie at JOgden@jmbm.com or 310.201.3510.

Wei Deng

Wei Deng is General Counsel of Bosen American Capital, Inc. where in addition to his legal duties, he is responsible for sourcing, evaluating and proposing United States investment opportunities to the company. Wei was previously with JMBM, where he focused on transactional and litigation matters.

Jay Thompson

Jay Thompson has extensive experience representing private companies, business owners, family offices and investors in mergers and acquisitions, private equity and venture capital transactions and private securities offerings. Jay serves as general counsel to many of his clients, their management, and board of directors, helping to shape and execute their business strategies, facilitate growth and liquidity, as well as to advise them on day-to-day legal and other strategic issues. He is known for his practical approach to business issues. Contact Jay at JThompson@jmbm.com or 949.623.7258

Marianne Martin

Marianne Martin has nearly fifteen years of experience advising clients on a variety of commercial, financing, bankruptcy, restructuring and M&A matters, with a particular niche dealing with distressed and/or turnaround situations. Her clients frequently include private equity and hedge funds, independent sponsors, family offices, public and private corporations, financial institutions and banks, healthcare-related companies, municipalities and venture capital funds. She has represented clients in various capacities, including as borrowers/debtors, lenders, acquirers, and agents/trustees in negotiating and documenting complex commercial transactions, out-of-court restructuring transactions and advising on purchasing considerations in secondary market debt transactions. Contact Marianne at MMartin@jmbm.com or 310.201.3531

Trevor Countryman

Trevor Countryman is an associate in the firm's Real Estate Department. He advises clients in all aspects of real estate transactions including property acquisitions and dispositions, financing, leasing, development and construction. Trevor's clients range from large funds to individual developers and opportunistic investors, engaged in deals involving office, retail, multi-family, single-family, mixed-use and hotel properties. Contact Trevor Countryman at 310.201.3546 or TCountryman@jmbm.com.

Vanessa Han

Vanessa Han is an associate in JMBM's Corporate group. Vanessa can be reached at VHan@jmbm.com or 310.785.5383

Vince Farhat

Vince Farhat is Chair of JMBM's White Collar Defense and Investigations practice. Vince has extensive jury trial experience and focuses his practice on representing companies and individuals in criminal and civil investigations and prosecutions by government enforcement agencies, as well as complex federal litigation. He also advises companies in connection with complex and sensitive internal investigations. Prior to joining JMBM, Vince served as an assistant United States attorney in the Major Frauds Section of the U.S. Attorney's Office for the Central District of California. Contact Vince Farhat at 310.785.5382 or VFarhat@jmbm.com.

Ask the Hotel Lawyer™ is a quarterly column that I write for JMBM's Global Hospitality Advisor®. If you have a question you would like to submit to Ask the Hotel Lawyer™ please use the comments box below. While your question may not be of sufficient general interest for the column, I will try to respond to you individually if you leave your contact information below.
Jim Butler.