If there is a bond supporting the refund promise, determine whether the bond is worth the paper it's printed on. It's possible that a bond may not be backed by anything other than marketing hype.

Understand the assumptions underlying the tax liability of the operator. A client who buys into a private nonequity club program could risk federal and state tax liabilities.

Lydia Cruz, subdivision licensing director for the Colorado Division of Real Estate, says her division has been checking out private nonequity country clubs, including Exclusive Resorts, as it sees ads. However, it has no legal basis to make them register. Cruz says that besides Exclusive Resorts, her department questioned "Club Mirabella" and "Portofino Club."

"Most of the offerings that I have seen tend to cost in the area of $400,000 and there is no real estate transferred," Cruz says. "It's nothing more than really a club. There's no guarantee that they (members) are going to have the right to stay at any of these places."

So far, she says she knows of no problems. "They're pretty high-end projects so usually, when you're dealing with that kind of money, individuals would consult with an attorney before they go forward with something like this anyhow."

Don't expect much state regulation until consumer complaints pour in, Webb warns. "Unfortunately, that leaves us in the position of leaving one of these deals with an undercapitalized developer to blow up," he says. "Then we're in damage control."

At Exclusive Resorts, a member's refundable deposit is used to purchase real estate or is placed in a cash account, according to its website. The 20% "transfer fee"-the nonrefundable portion of the deposit-funds the company's general operating expenses. Annual dues maintain and service residences. The company's debt to equity ratio averages 30% and never exceeds 50%.

Handler cites key advantages to his club over traditional timeshares. For one thing, most timeshares sell out 50 weeks, he says. If you want to exchange weeks, "you have to hope somebody else wants to exchange. With our model, we only promise half the time. ... So there's always 50% availability." It keeps a ratio of just six members to every property. Unlike many timeshares, it doesn't rent out vacant units to nonmembers, ensuring availability. Plus, it highly protects its upscale members' confidentiality.

Potential members enter into a nondisclosure agreement to both protect the confidentiality of members and the confidentiality of the company's financial information. They are provided access to audited limited financial statements if they ask for it. "Very few ask for it," Handler says.

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