What is a Timeshare Special Assessment Fee?

When we speak to clients that want to exit their timeshares, there are a few things that consistently come up: maintenance fees, mortgage costs, and special assessment fees. Even if maintenance fees creep up annually, and mortgage costs put pressure on the owners, these are things many people are aware of and can (potentially) prepare for. However, timeshare assessment fees often hit owners from seemingly out of nowhere, leaving them high and dry with the burden to fork over exorbitant fees out-of-pocket.

Why are they Assessed?

There are a variety of reasons why a timeshare might issue special assessment fees. Planning ahead on what you will owe for your annual maintenance fee is one thing. A fee based on a variety of random causes is much more difficult to see coming — let alone plan for. Some of the most common reasons timeshare owners get hit with special assessment fees include:

1) Upgrades: To remain competitive and be perceived as a desirable destination, a resort needs to maintain a certain level of modernity and “Ritz”. This means upgrades and updates. When the resort needs – or wants – to upgrade its services or amenities, the timeshare ownership (that’s you!) have to foot the bill. Often, the resort’s desire to upgrade doesn’t take your checkbook into account.

For example, in 2009 a Hawaiian resort decided to demand an immediate payment to upgrade their internet services. The special assessment they charged essentially doubled the member’s expected maintenance fees for the following year. Not everyone could afford it, and their credit suffered as a result. This resulted in a well-documented class action lawsuit.

2) Poor Management: If you’ve noticed the quality of your resort declining, it might be cause for concern. Not only will your vacation experience suffer due to this, but your bank account might also. Poor management increases the likelihood of breakdowns, repairs, needed upgrades, or the resort changing hands. All of these things can pass costs on to you.

3) Weather Damage: Enjoy spending your vacation in the tropics? Let’s face it, most of us do. However, none of us like tropical storms or hurricanes. Just like with upgrades, if any major damage happens to a resort, you can get stuck with the bill.

Take the 2011 case of DRI’s Hawaiian Collection, where individuals “were recently asked to help foot the bill for an estimated $65.8 million in repairs due to ‘water intrusion.’ Some 7,000 to 8,000 deeded week owners are being assessed $41.5 million over five years, while about 12,600 Hawaii Collection points owners are being dunned for $22.9 million during the same period…Yearly owners have been told they must pay a total of $5,893” (Source: SFGate). 

If you have the ability to predict flooding, hurricanes, avalanches, and tornados than you might be able to predict when you’ll have to pay your timeshare assessment fees. Unfortunately, most of us don’t have the ability to see into the future.

4) Change in ownership: There are some resort companies out there that have a history of acquiring failing resorts and making them profitable. Again, this can include upgrades and repairs of the existing resort, or simply “more effective” methods of squeezing profit out of individual members than the previous ownership.

When large companies that control many locations acquire a new property, they will often notify all owners in their network that the new property must be upgraded to meet the brand’s “high standards”. This means you could even be paying special assessment fees on a resort you’ve never even heard of just because you are a timeshare holder with the parent company.

5) Other owners not paying: When other owners refuse, or otherwise can’t pay their fees, the resort will make up the difference elsewhere. This is often referred to in the industry as a “revenue gap” created by “owner-delinquency or non-payment”. When this happens the resort board will levy special assessment fees on the other owners to “remedy” this monetary loss.

Clearly, timeshare assessment fees can and will be levied at nearly any opportunity. The resort’s wishes and mother nature’s plans won’t always align with your budget or plans. Timeshare assessment fees can come regardless of what special event you’ve been saving up for.

Who has to pay them?

If you are a timeshare owner, you are expected to pay for these fees. Additionally, as previously mentioned, depending on what parent company owns your resort you may end up paying special assessment fees to improve somebody else’s resort! When a resort gets taken over by a larger entity, they will often try to spread out the cost of improving the resort among all of their members.

What if I don’t pay my timeshare assessment fees?

If you don’t pay your special assessment fees, be prepared for the consequences. Not only will others be forced to pick up the tab that you couldn’t cover, but you could also face even worse consequences. Let’s face it, nobody likes dealing with collection agencies, wage garnishment, or liens. The possibility exists of having the resort foreclose on the agreement, potentially leading to fees for legal counsel and document filings.

What you can do:

Depending on your circumstance, you may have a few different options when it comes to your timeshare’s special assessment fees. Recalling the aforementioned scenario from example #1, the owner’s who were hit with special assessment fees decided to initiate a class action lawsuit. However, this doesn’t seem to be a common course of action and it likely may not be a realistic option for most people or most circumstances.

Even though many financial experts advise against timeshares, each situation is different and you may decide that keeping your timeshare makes sense for you. If so, the main thing to keep in mind is to always have a safety-net saved up so that these surprise fees are less surprising. It is also a good idea to be aware of the conditions and circumstances of your specific timeshare year-round.

If you decide that you’d rather be out of your contract than deal with these often sky-high fees in the future, there are a few things to remember. Never pay upfront fees for a company to buy, sell, or list your timeshare. There are many scams designed to list your timeshare and walk away with your upfront fee. This will still leave you liable and responsible for the ownership AND you’ll also lose a significant amount of cash. In the rare event that you can sell the timeshare on your own, make certain that you get written confirmation that all liability is out of your name.

Because the path to selling or donating your timeshare is lined with scams and fraud, many people choose to utilize the services of timeshare exit companies. Again, if you decide to go with an exit company make sure that you properly vet their services. You want to ensure that they have a proven track record and can back up their claims. 

If you’re concerned about special assessment fees, don’t panic just yet. Whether you currently have special assessment fees or are simply concerned about receiving them in the future, you likely have a variety of options you can choose from. 

 

 

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