The Consequences of Unpaid Maintenance Fees
-by TS Newshound
Especially during tough economic times many resorts are faced with the ogre of unpaid maintenance fees, and especially for smaller and/or sold out resorts this can have drastic consequences for both owners and the resorts themselves. Unfortunately, David Walley’s Hot Springs Resort & Spa in northern Nevada is currently facing just such a situation.
According to Gary Grottke, treasurer of the Walley’s Property Owners Association and president of Quintus Resorts, as many as 40% of the resort’s 6,600 owners have not paid their maintenance fees for 2010. The resulting financial strain on the resort’s ability to pay its bills and keep the property in decent shape is likely to result in one of only three likely scenarios, none of them pleasant: A special assessment on owners who have paid up; cutting back drastically on services and maintenance at the resort; or closing the resort entirely.
Florida-based Celebrity Resorts, who bought out most of Walley’s real estate and management contract in 2008 (Quintus still owns some 500+ weeks), is opting for the special assessment option, to the tune of $494-$939 per interval. A meeting notice was sent out to owners in January that said “operating funds are depleted, and in order to continue operations, a special assessment is necessary.
“Ultimately, if the special assessment does not get approved, it is anticipated that the 2010 operating expenses will deplete your Association’s assets within the first quarter of 2010. In order to accurately identify the amount necessary to correct the deficit and replenish the reserve and operating funds, measures were first taken to reduce operating expenses and correct the operating budget. With a positive collection of the special assessment, the Association can eliminate the deficit and move forward with operations.”
A meeting was held on Feb. 21 but there were not enough votes to reach a quorum so another one will be held this Saturday (Feb. 27). Of course no one is happy about the situation, and many feel that Celebrity did a poor job of communicating with owners about the situation.
Ultimately it will come down to what the timeshare owners decide. They feel, with justification, that it isn’t fair that they should have to take on the extra burden of others’ unpaid obligations. In the end it will depend on how many of them want the resort to stay open, and whether or not they can afford the special assessment.
If they say “No”? The POA’s choices are difficult. They can increase the effort to collect the unpaid dues, cut expenses wherever they can and try to continue operations until their financial situation is resolved– or they can temporarily close the property.
Walley’s is not alone. This scenario is playing out, or will soon play out, at many timeshare resorts throughout the world where timeshare owners are essentially being asked not just to pay more for maintenance but to actually save the resort properties (and their own investment in their holidays).
The question then becomes, how much do timeshare owners love their resorts and vacations? And how much can they afford to love them?
Related posts:
- BREAKING: Celebrity Resorts, LLC Files for Chapter 11 Bankruptcy
- Timeshare Owners Cautioned Over Promises of Sales Requiring Upfront Fees
- Starwood Vacation Ownership Coming to Market With $166 Million in Notes
- Diamond Resorts International and The Point at Po’ipu Resort Squaring Off
- Celebrity Resorts and Hanalei Bay Resort Owners Reach Agreement
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Maintenance fees have always been a problem but even more so when they became a significant and separate profit center for the developers or the HOA!
And for all you out there that don’t understand what a ‘profit-center’ is then let me give you an example.
A roll of toilet paper cost the developer or HOA $0.15 (that cents) but they (developer/HOA) pad the cost so that the AMF each owner pays reflects a buck for the same roll(s) of toilet paper!
Not a bad mark-up!
And then add in everything else that is marked up that much (and more) from light bulbs to (you name it) and you’ll begin to appreciate why AMF’s have become such an issue!
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There’s a reason why developers and hotel brands fight so hard to keep the management contracts in there own hands: It’s really profitable! Part of that is the AMFs. HOA managed resorts are generally different and can face real challenges, especially if they are HOA managed. All resorts need to be well managed and there are some very good companies that specialize in that, but ts owners have to understand that profit for the management company is built into the fees they pay. All of that should be very transparent, and the budget details should always be available for any owner to view.
I once worked as a procurement director for a certain resort managed by the developer and I took my job seriously. It was time for refurbishment for the units and I worked my tail off getting the best deals possible. I also got new contracts for everything from toilet paper to light bulbs. Overall I saved the resort (and therefore the ts owners) THOUSANDS of dollars. How was I rewarded? The company gave me an ass chewing and fired me. Because they didn’t get all there usual kickbacks from the suppliers!!!!
It’s a dirty dirty world, children. Color me disenchanted.
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The MF’s that really crack me up are the ones charged in Mexico!
The developer pays the grounds keepers (with benefits; believe it or not) about $50/$60 a week (a six day work week mind you); less or about the same for the waiters, the maids and so on and then they turn around and charge the Gringo and Mexican TS Owners AMF’s comparable to the rates in the US, Canada etc. as if the Mexican developers have the same overhead (and fixed costs); Mordidas aside that is ;~)
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