Podcast Episode 53:
“The Trouble with Timeshares.“
Timeshares are not a real estate investment. You are not an owner, which can make you subject to the whims of management. What’s worse, it can be hard to sell your shares if you want out.
The Trouble With Timeshares
My friend George bought a timeshare at what was Fairmont Resort Properties. Fairmont went into foreclosure and the new owners are demanding huge sums of money for renovations and increased fees. If you buy a timeshare, you have to understand some of the basic facts. They are NOT a real estate investment. Do a lot of research; the stories will give you pause.
Below, I have reproduced a letter from my friend George to the new owners. Read and beware!!
“May 24, 2013
Northmont Resort Properties Ltd. Philip K. Matlin Professional Corp.
5799 – 3rd St SE
Calgary, AB T2H 1K1
Response to Petition by Northmont Resort Properties
When I first became an owner at Fairmont 12 years ago, the quality and value of the resort made great sense to me as an investment, with the promise and expectation of ‘luxury accommodations at campground rates’ for the term of the contract. The huge increases in maintenance fees since 2009, coupled with the current Renovation Project fees, have completely blown the original terms and understanding of the contract out of context, to the point where it is no longer affordable or sensible!
At least a quarter of a billion dollars! Where has the money all gone? This is a conservative estimate of the initial investments made by Fairmont timeshare owners (14,500 owners times average investment of $18,000), excluding the rapidly increasing maintenance fees over the past 4 or 5 years.
In the letter to Timeshare owners from Northwynd Resort Properties, dated May 25, 2011, it was explained that the assets of Fairmont Resort Properties had been purchased by Northwynd Properties Real Estate Investment Trust (REIT) through a foreclosure sale. It was also explained that Northwynd had new leadership, fresh ideas, a new direction, and that many exciting changes for timeshare owners were to come. I think I can safely speak for all owners that the latest wave of Maintenance and Renovation Project fees hardly qualify as ‘exciting new direction and changes!’
In short, I am challenging /contesting Northmont’s ‘resort realignment plan’ and my reasons are as follows:
- I do not believe Northwynd/Northmont performed due diligence in assessing the state of the resort prior to purchasing its assets through foreclosure and now finds itself in the position of having to force the cost of unanticipated renovations on long term timeshare owners rather than absorbing these costs themselves.
- The Renovation Fees are a mishmash of many types of costs, the greatest involving completely redoing the B units at Riverside, with absolutely no input from timeshare owners. This is akin to a condo owner being told by the Condo Association that, ‘we don’t like how your condo is configured so we’re going to change it and you’re going to pay for it!’
- Also included in these renovation fees, it seems, are costs that have historically been covered by regular maintenance fees, such as deck and roof repairs.
- The original contracts were purchased with the understanding that all units in Riverside, Hillside and Riverview were deemed ‘common inventory’ for owners, offering much more choice in unit and availability than will be available in the new ‘shrunken resort.’
- There is absolutely no assurance that maintenance and renovation fees won’t escalate in the future, turning what is already a bad investment into a worse one.
- The Cancellation Offer of paying over $3,000 to avoid future costs of over $25,000 seems ludicrous by any description and is just part of the overall ‘realignment plan’ that seems designed to force timeshare owners out at great expense so that Northmont can assume control of the resort at little or no cost to themselves. What a deal for them: buy a resort through foreclosure at discount prices, force existing timeshare owners out, have them pay for all necessary renovation costs, and then commence renting or reselling the refurbished villas at incredible profit! Are you kidding me?
The above points outline my displeasure and concerns with the realignment plan and are intended to serve as input to the hearing on June 20, 2013, in lieu of a Form 67 (referred to in the Court Order of April 18, 2013). Note that phone calls and e-mail messages to Northwynd regarding Form 67 have never been replied to.
G and Maureen Wilkins”
“More than 15,000 timeshare holders are being asked to pay thousands of dollars to either renovate the complex or vacate their timeshares in Fairmont, British Columbia.
Tina and Matt Balsom say they were never thrilled with the ‘Sunchaser Vacation Villa’ they purchased in Fairmont four years ago for $11,000. Now, the Balsoms have grown to hate the property because of the bind it has left them in.
Northwynd, the resort owner, sent all timeshare owners a letter stating they either had to pay $4,000 to help renovate the resort or $3,000 to get out of their timeshare contract and the decision needed to be made in only a matter of weeks. Owners who failed to make their choice would be considered in default as of June 1, 2013.
The Balsoms and many Calgary-based owners have asked CTV Calgary Consumer Specialist Lea Williams-Doherty to help them understand their options. Lea investigated the property and learned the timeshare has had its share of problems.
Fairmont, the company that built the resort, went into bankruptcy in 2008. Fairmont’s creditors then took over the resort and became Northwynd, the current owner and management company. Northwynd says it inherited two major problems: leaky plastic pipes throughout the resort and neglected maintenance. The estimated repair cost is $40 million and Northwynd came up with the idea of a ‘pay to stay, pay to go’ program.
Several timeshare owners have hired lawyers to challenge whether Worthwynd has the legal authority to charge them a $3,000 cancellation fee. Other timeshare owners, wanting to keep their timeshares, are challenging Northwynd’s right to charge for the renovations.
There are concerns amongst the owners that Northwynd will make similar calls for cash down the road.
‘I can’t guarantee it’ll never come again,’ says Northwynd’s Doug Frey, ‘but I can tell you that never again will there be a deferred maintenance problem of the scope we’re dealing with right now.’
Timeshare owners have several options to dispute Northwynd’s demands:
- Choosing one of Northwynd’s provided options
- Hiring legal representation and waiting on the outcome of the case
- Submitting a letter to the B.C. court hearing the case stating that you don’t believe Northwynd has the right to require a choice, and will wait for the court to determine the parties rights”
- You are not an owner.
- You have no control, so management is ultra-important.
- Timeshares are illiquid, so selling your share is almost always difficult.
- Timeshares have a history of devaluation.
- A timeshare is not a real estate investment.
Contact Barry McGuire now. Alberta real estate needs an Alberta lawyer.