Everyone who has ever been through a timeshare sales presentation has become acquainted with the term “maintenance fee” or “assessment”. Also, anyone who has ever owned a condo unit knows the term. Otherwise, it may be a strange term, and even those who know it may not know how it operates as to timeshare properties. Yet it’s very important, and anybody involved in timeshare should have a good working knowledge of this subject.
First, it is virtually universal in timesharing. Only once have I ever encountered timeshare properties without a maintenance fee, and that was a very limited situation. A developer in Mexico began to sell timeshare weeks at his resort without any provision for charging buyers this fee. Probably not a great number of weeks were sold this way and why it ever started this way we’ll never know. Then presumably the developer learned two things: 1) all the costs of operating these timeshare weeks were coming out of his pocket and 2) other developers were readily able to impose a maintenance fee on buyers. At any rate, the developer began to impose a maintenance fee on all weeks sold and has done so ever since.
Next let’s ask some questions. What is it, and is it necessary? Is it fair? Have we any say-so, or any alternative? Will it ever increase, and what if it’s increased too much?
People who stay in timeshare units expect to arrive at the resort and be met with something pretty much like hotel accommodations. There must be someone there to check them in, and the unit is expected to be turn-key ready for occupancy-utilities on, clean and fully furnished, down to linens, china, silverware, and appliances. Help in finding the unit, learning the rules (pool hours, desk hours, parking and myriads of others), and having ongoing comfort, safety, and there is no rent to these owners or exchangors of timeshare units. Rather, the owners pay for all the expense of furnishing these services (and many other services) by means of what the industry call the “maintenance fee”. In short, this fee pays for all of the ownership, management, and operating costs of the resort and prorates these costs among all the owners by charging each week its fair share of all the costs of the property.
So the answer to the question of its necessity is that it is not only necessary but also highly and importantly desirable.
A week of timeshare ownership represents a considerable investment; one the owner wants to protect. Yet there is very little that is more damaging to the value of a week or a resort than a failure to keep the property well maintained and appealing. Poor maintenance can ultimately lead to abandonment of their weeks by some owners and, perhaps worse, lowered ratings of the property by the timeshare exchange systems. So it is in the best interests of all the owners that the costs of maintenance and operations (and sometimes even improvements) be adequately funded.
Is the maintenance fee fair? This may vary between resorts, and the perception may vary greatly between owners. Certainly abuses are possible-own any WorldCom stock? But let’s look at general factors, and principles of fairness.
First, there should be an operating budget, and it should include all applicable expenses (including personnel costs, management fees, and reserves to replace everything about the property, from linens to structural components, all at realistic intervals. Generally this budget would be developed by the management company (most resorts are managed by a professional management company-the developer’s or someone else) and approved by the Board of Directors of the property owners’ association. In most cases the budget is then divided on some equitable basis (square footage, number of bedrooms,) for example among all the units and weeks and the pros rata share then billed to all the owners. Thus for example if your week consisted of 1/10 of 1% of the total budget. It is very important to all owners that the association be able to collect these fees or assessments, so usually the property’s governing documents provide that the maintenance fee is a lien upon the week against which it is assessed, and if it is not paid by some deadline the week would be at risk of being forfeited to the owners’ association. Every year many weeks of timeshare ownerships are lost to the owner for this reason. Hopefully these weeks are then sold and the net proceeds given to the owners’ association.
To see the importance of collecting this fee, consider this: a certain property only collects 85% of the maintenance fees billed. What is the consequence? It must function by spending less than the budget, or collecting more fees from those who’ve already paid, or some combination. None of these consequences bode well for the long-term success of the property.
Some properties furnish owners with very detailed budgets and records of expenditures, while some are less informative. This of course can vary a lot between managers and resorts. Perhaps the extreme of un-informativesness (new word?) is found in Mexico. Here the timeshare buyer is actually buying only a “right to use” (we’ll be back to this term in another column) a specified week for a fixed number of years, after which the buyer has nothing. There is often no separate management company (it’s the developer), no owners’ association, and no right to vote on anything. My maintenance information from two resorts where I own in Mexico is just a mailed statement that my maintenance fee for the coming year is so much (in dollars), please remit No other explanation whatsoever.
As so the amount of maintenance fees, they, too, vary all over the place! I’ve heard of one resort in Africa that has an annual fee of $120 per week of ownership, and I’ve seen fees that exceed $1,000. It’s important to you as an owner! Assuming adequate maintenance either way, a low fee will add value to your unit, while unduly high fees will reduce value. As to use, an owner might divide their maintenance fee for their week by seven. This gives you the cost per day to occupy cost gets uncompetitive with other lodging alternatives, your timeshare would seem to have very little value for you.
One final question to answer: What about increases in fees? You can pretty well rely on maintenance fees increasing sometimes almost every year! And if they increase beyond what seems reasonable to you, you can always complain! Good luck!
Copyright ©2003 George Wagner
