Time shares at Hensley's resorts to be auctioned

December 07, 1993|By Timothy J. Mullaney | Timothy J. Mullaney,Staff Writer

The three-year process of winding up the affairs of jailed Ocean City developer H. Lloyd Hensley will take a major step toward resolution Friday, when management associations running six of Mr. Hensley's resorts will put remaining unsold time shares up for auction.

Hensley has been out of the business since the state Real Estate Commission revoked his right to develop time shares in Maryland in January 1990, after the commission found widespread title fraud at some of his resorts.

Hensley's resorts were developed during the 1980s. Each condominium unit was divided into 52 week-long "intervals," or time shares. Buyers purchased the right to use the condominium during the same week each year, or to exchange the week for a stay at another resort through an international network of time-sharing resorts.

Hensley, pressed by financial problems, had taken to selling time shares without paying off the construction loans on the condominiums. The fraud kept customers from getting clear title to their units. Hensley was sentenced in 1991 to 20 years' imprisonment for theft and fraudulent misappropriation of funds by a fiduciary.

"Hopefully, this is the last chapter of this, or the last public chapter," said B. Randall Coates, an Ocean City attorney representing CDC Investment Corp., a company formed by time-share owners at the St. Tropez, Bay Club, Ocean Time, Ocean High and The Waves complexes in Ocean City, as well as Hensley's Lakewood resort at Deep Creek Lake in Garrett County.

Mr. Coates, who is also state's attorney for Worcester County, said CDC Investment bought the rights to a loan with a $5.2 million balance from the U.S. Resolution Trust Corp. in October, giving it the right to foreclose on several Hensley properties. The RTC had the loan because it had taken over a New Jersey savings and loan association that held the loan.

CDC Investment hopes to buy the projects at a sharp discount, inhopes of reselling the units at equally big discounts to individual unit buyers. CDC is expected to accept low resale prices because the unit owners' associations are more concerned about condominium fees, which support the resorts' operating budget.

The likely sale price of the units isn't known, but Mr. Coates and Assistant Attorney General Francis X. Pugh, who represents the Real Estate Commission, said the RTC had valued individual time shares at as little as $350 for accounting purposes.

Clinton Burr, president of the Resort Property Owners Association of America in suburban Chicago, said the strategy of owners' associations buying and reselling unsold units at a sharp discount has worked well at resorts in North Carolina.

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