April 25, 2002 – In an attempt to force an update of the law concerning what licenses vacation villa managers need, the owner of a St. Croix villa management company has filed suit in Territorial Court.
Carl Gotts, who owns Vacation St. Croix, is asking the court in the suit filed on Monday to declare that vacation villa managers do not need real estate sales licenses.
As the law stands, anyone dealing with properties who "leases, sells, conveys in any way" needs a real estate sales license and must be supervised by a licensed real estate broker.
Gotts has a real estate broker's license, but his wife, Marti, who is a co-owner of Vacation St. Croix, does not. This prompted the V.I. Real Estate Commission on April 11, 2000, to issue a cease-and-desist order against Vacation St. Croix, which Gotts said caused the company to lose money. The Real Estate Commission removed the order on Nov. 19, 2001, with no explanation.
Gotts wants to make sure he's not hit with any further attempts to curtail his business. "What's needed is a new license" for vacation villa managers, he said.
The issue is immensely complicated and could impact on a significant sector of the territory's tourism industry.
For starters, enforcement of the real estate sales license law appears to be uneven. While many vacation villa managers hold real estate licenses, others have a partner who does so. Still others operate solely under the homeowners' representative/coordinator license. Many, like Gotts, hold both licenses plus a slew of others. At vacation villa management companies with staff, most of the employees do not have either a real estate sales license or a homeowners' representative/coordinator license.
The law seems to imply that vacation villa managers need a real estate license because they handle money. But how they do that varies by company. Many villa managers hold joint accounts with the villa owners; guests write their deposit checks to the homeowner, and the villa manager just does the bookkeeping. However, some put reservation deposit checks into escrow accounts. This gives the manager what is termed fiduciary responsibility, similar to that of real estate agents.
Gotts said that whether the villa manager has a joint account with the villa owner or uses an escrow account is a matter of which way the manager wants to do the bookkeeping. He noted that many types of businesses use escrow accounts.
Meanwhile, the V.I. government collects the 8 percent hotel occupancy tax on vacation villa rentals. This prompted Licensing and Consumer Affairs Commissioner Andrew Rutnik to comment, "If they are a hotel, why do they need a real estate license?"
Gotts said a further question is whether travel agents also must have real estate sales licenses — because they, too, book vacation villas.
Rutnik is working to resolve the issue. He said that Gotts's suit will force the courts to make a decision but that the Legislature must pass a law mandating the indicated change. He said his staff will work on drafting the legislation.
He expects the whole matter to be resolved in about six months. It may take a meeting of the minds among several government agencies to avoid the enactment of a law that could discourage the building of vacation villas in the territory.
Rutnik said the government is pushing to declare vacation villas commercial property, which would raise the property tax rate for owners. If they are considered commercial property, he added, owners would have to seek commercial building permits from the Planning and Natural Resources Department before starting construction, and that would increase the costs for what Rutnik said is a $10 million-a-year industry on St. John alone.
That figure represents only what is generated by villa rentals and does not include money paid by the villa owner for services such as house cleaning and maintenance. "It's a big business," Rutnik said. He did not have figures for St. Thomas and St. Croix.
Rutnik also said that the issue of time-share sales will be addressed after the matter of vacation villa manager licenses is resolved.
Gotts contends that the Real Estate Commission acted improperly in his case. It held no hearing before issuing its cease-and-desist order against Vacation St. Croix. An agenda from a Jan. 31, 2000, Real Estate Commission meeting indicates that it considered an "anonymous letter" in reviewing Vacation St. Croix's activities, which Gotts argues was reprehensible. He said it's also been difficult to get the Real Estate Commission to provide the evidence upon which it based the cease-and-desist order. Gotts said he doubts any evidence exists.
"For some reason, it appears he was singled out. I'm not aware of any complaints from owners," Gotts's attorney, Vincent Coliani II, said.
Gotts said he knows of six other people or companies that received legal notice from the Real Estate Commission regarding licenses for vacation villa managers.
Real Estate Commission minutes and agendas from several meetings, one as recent as Oct. 22, 2001, refer to the need for the commission to address the real estate license issue for vacation villa managers. But apparently it has not done so. In the Aug. 28, 2001, minutes, reference is made to the fact that Rutnik told them they must take up the matter.
Jan Hanley, who chairs the Real Estate Commission, could not be reached for comment. When Fred Vialet Jr., the previous chair and still a commission member, was contacted on Thursday, he said his office was closed for business and that he doesn't speak to anyone over the telephone who isn't his client. Vialet signed as chair for the minutes of the Jan. 31, 2000, meeting in which the anonymous letter was discussed.
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