Maintenance season is here again
As we approach that time of year when many resorts and developers send out their annual demands for maintenance fees. With the complete disruption of travel and holidays caused by the pandemic together with a feeling of general disappointment surrounding timeshare ownership, the invoice for maintenance fees is very unwelcome to many owners. We are in no doubt that in most cases these fees will have once again gone up, as they always seem to. Naturally, many owners are hunting for ways to avoid payment of these fees and the most common question posed to us we will explore below:
Should I stop paying maintenance fees?
The question posed to us on numerous occasions is; “What if I simply stop paying my maintenance fees?” Our standard answer is “Not a good idea”. Globally every timeshare ownership contract has a clause covering the owners contractual liability to pay maintenance fees and in some cases “extraordinary fees “as well. With that in mind non payment could bring all sorts of problems which we will comment on later.
If you are involved in legal action against a developer your lawyer may advise that you suspend maintenance payments but until that advice is given then it’s sensible to continue payment.
Why do resorts aggressively chase maintenance fees?
Simple answer, they are the new lifeblood of earnings, we say new because globally sales of new timeshare are dropping which removes a level of financial profit which needs replacing. The USA, which historically enjoyed a healthy timeshare market, has for the first time in years, seen a change in fortunes. This in part is due to the pandemic but also a seed change of opinion against the product amongst new potential timeshare owners. Below we share a chart published by the American Resorts Development Association (ARDA):
With the exception of maintenance fees, every other facet of the American industry is showing a downward trend. Although this chart terminates at the end of 2020, we have no reason to believe that the 2021 figures will be any different.
So what are the ramifications of failure to keep maintenance fees up to date?
Suspension of ownership rights
This is the first step to possible later escalation. Basically all this entails is the removal of the use of your timeshare until such time as maintenance fees are brought up to date but wont cancel ownership, that said, further action will often follow.
Recovery action
In many cases the suspension option is not used, the developer or resort engages debt collectors to recover sums outstanding. More often than not this sort of action is not taken immediately, it maybe you are lulled into a false sense of security, perhaps no maintenance bills arrive for a number of years or if they do and you ignore them. Often the annual amount owed may be too small to commence action because it’s not cost effective to do so but after a number of years the amount owing with late payment fees and interest becomes worthwhile to collect, so actions commence.
If debt collectors are engaged, failure to pay may well lead to a County Court Judgement with all the inherent credit and financial problems that this action would incur. As evidence, your purchase contract will be entered showing clearly that you signed and agreed to pay the annual fee, not much wriggle room there.
Termination
The best case scenario is that after a number of years of non payment the developer may simply terminate the ownership thus removing any ownership rights and further costs, although don’t rely on this happening. It should however be remembered that if you have a concurrent purchase finance agreement, this action will not remove your liability to maintain loan repayments until such time as the finance is extinguished. You will have lost your right to holiday but still end up paying for it.
Limitation Act 1980
One saving grace is the legislation above. In basic terms this law states that any debt created which happened longer than six years ago effectively falls off the clock so if you are in default for say 8 years then only 6 years can be claimed. Little solace if your fees are £ thousands every year. This of course only applies to UK based developers although other countries may have their own limitation rules.
Finally
When an ostrich buries its head in the sand it presents a much larger target for predators to aim at, the same may be said for playing ostrich with timeshare maintenance fees.
We started this article by stating that failing to pay maintenance fees is not a good idea. Whilst it may solve a short term problem, in the longer term it may be very detrimental. You may think you have won the battle but in reality you will certainly lose the war.
Whatever your reasons for withholding payment it won’t make the problem go away. The only legal way to stop demands for annual fees is to terminate your ownership, often that’s easier said than done. Timeshare free equals maintenance fee free.
This article mainly concerns developers with a UK presence and as such actions described only apply to UK owners but believe us when we say that timeshare developers globally have similar methods to penalise defaulters and penalise they will. In event of a default your credit score won’t follow you to the UK, however your debt can. Although foreign banks and lenders don’t have the same clout as UK banks or Government departments, they can still make sure you pay back the money you owe.
Whilst in many cases timeshare contracts are notoriously hard to terminate, there are ways to escape this annual burden. If you are at the point of thinking enough is enough and would like some guidance, please feel free to call us.
For more information regarding this article or assistance in any other timeshare related issues please contact the TCA on 01908 881058 or email: info@TimeshareConsumerAssociation.org.uk