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Timeshare: Maintenance fees out of control
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Helene G, a reader, owns a resort in the Caribbean, and she is concerned because the annual expenses when she purchased in 2001 were $540, and in the last few years she’s seen them skyrocket to well over a thousand dollars per year. This, understandably, has her concerned, and she wonders if this is a common occurrence.
It’s a good question, and, in my experience, it’s not a typical situation.
I am still looking into the specifics of her situation, but there are some general circumstances that may contribute to an uptick in annual expenses, sometimes in the short run, and sometimes a more permanent increase.
Some of the factors that are relevant here; the property is located outside the United States, so to some degree, at least, the annual expense calculations are subject to some degree of currency exchange rates. Although generally, resorts in Mexico and the Caribbean benefit from lower labor costs.
The particular property the reader asks about is part of the RCI points program. Many people like the flexibility of points (I’ll revisit the issue soon, meanwhile here is an article I wrote about points several years ago), but it is a more expensive program to administer. If the conversion took place after the reader purchased, the annual costs will be higher.
Sometimes natural disaster plays a role. My sister and her family own a different resort in the same region. When she purchased, it was a “Right to Use” property, with her ownership expiring in 50 years. After the resort suffered major damage in a hurricane, the new management company operating the property imposed an assessment of several thousand dollars, but part of the change over also resulted in the ownership being converted to a permanent deeded property. It is now something that can be in her family for generations.
In some cases, there are limits built into the original policies and procedures when a resort opens, restricting the amount the annual cost could increase from one year to the next, with allowances for special assessments in case of emergency. But real estate laws in other countries aren’t always as all encompassing as in the United States.
And in the case of the emailer, the maintenance fee is not supposed to increase by more than 4% each year, but there is the assessment, then there is a club fee, a points fee and an operational fee. They were even assessed a fee when the call center moved from India to the United States. It begins to look a little like the junk fees when you refinance a mortgage or buy a car.
Not to be ignored is the fact that the management company for the resort in question has been recently acquired by a larger developer, one that has had financial challenges in the recent past. Again, just speculating, but it wouldn’t be the first time a company created ways to increase the revenue to shift acquisition costs to the end user.
Costs are generally more controlled for US based properties, but sometimes they are subject to a number of costs over and above the annual maintenance fees. They could include property taxes and insurance, though in some cases these costs are built into the one maintenance fee. As a matter of fact, the developer in question has US based properties as well.
And most owners have other costs beyond their maintenance fee anyway. These usually include membership in an exchange company, the cost of exchanges when they take place, and any other programs, like ICE Gallery, they may join.
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