Over the past few weeks, we’ve been shedding some light on timeshare assessments and how they come into fruition. For the most part, these annual fees catch fractional owners off guard and the resort does little to prepare them for the bill. But assessments aren’t always induced because of expansion efforts, reparation or the greed of property management. While many buyers end up fearing what the resort will charge them for, local governments can be the culprit for unexpected fees.
Maui Government Sued After Assessing Resorts 10 Years Later.
Last year in Hawaii, the County of Maui [legally] went after a handful of timeshare projects in Kaanapali after the associations initially sued them for a timeshare property classification they rolled out back in 2004. The initial $10 million assessment was premised on market data for 2006-2008 for multiple Hawaiian resorts. In a nutshell, the County realized they didn’t assess each timeshare interval that was managed by certain properties in the region and decided to request payments in full.
Although the timeshare associations were able to cover the costs by charging owners, they weren’t very happy about it. Ironically, they now know how their own timeshare owners feel when the unexpected occurs. Nonetheless, Maui County apparently believed that since the property taxes were omitted, they should be able to request them whenever they felt the need to. But since county officials acknowledged that the taxes were paid in full on the assessed properties, there wasn’t much basis behind their prerogative.
Although Maui County left money on the table by assessing the resorts improperly, timeshare companies weren’t going to let it be their problem. Since the taxes were taken care of, they wanted to toss out the counterclaim altogether. “There’s a process for assessing tax and you didn’t follow it,” they said. Timeshare companies felt as though they had a right to sue the County. It seems like Maui officials simply wanted them to pay for their mistake. Looking at this from the outside in, it seems pretty chaotic doesn’t it?
The timeshare industry goes through scenarios like this all the time because of the amount of money involved with the purchase. Most buyers never expect to be on the hook for thousands of dollars in annual assessments – but they are. The perpetuity of the agreement basically guarantees the resort income whenever they want it. Luckily for them they’re able to leverage users for unexpected expenses of their own. Buyers aren’t so lucky.
What Really Resulted From the Tax Assessments in Hawaii?
After a multitude of court filing fees and hypothetical assumptions, the judge of the case finally ruled in favor of the timeshare companies. He agreed that the way Maui went about it was wrong and they shouldn’t be able to penalize someone else for their mistake – let alone a high number of innocent fractional owners. Since the tax obligations for the Maui properties came a decade later, he labeled them “unlawful” and, in the end, voided all of the supplemental assessments.
Moreover, the court mentioned that constitutional rights were violated because the Hawaiian County was attempting to sue timeshare companies simply as a method of retaliation. Because they were called out for their mistake, they wanted to financially punish specific resorts for their pursuit of restitution.
While retaliation may have seemed like a good idea at the time, civil laws forced the Maui Government to repay timeshare companies for attorney fees and compensate them for the damages they incurred along the way. They idea to collect assessment fees also forced them to refund $30 million in overpaid taxes.
Here’s what the judge had to say about the whole ordeal. “If the County can retroactively assess already-assessed real property to change the valuation and impose additional taxes, even many years later as it argues it can here, property owners can never have confidence that they have satisfied their tax obligation for any previous years. Potential buyers can never have confidence that a purchased property will not later be burdened by a hefty ‘amended assessment’ for some year long before their purchase.”
Up to this point, all has worked out in the fractional owner’s favor as they weren’t exactly liable for the unexpected fees. However, future assessments are pretty much guaranteed to be on the horizon. Random expenses like these are eventually passed down to the owners who are perpetually obligated to pay their share on the vacation property. The lack of clarity amongst these mandatory costs is disappointing to say the least. If you’re looking for a way to get out of a timeshare agreement, feel free to read another blog to learn more.