A common and constant complaint from timeshare owners is the burden of annual maintenance fees. The American Resort Developers Association (ARDA) admits that these can run $1,000 per year, and the real number is often much higher than that.
Owners who have made their peace with this ongoing, increasing expense often justify it to themselves by simply believing what the developer says. In other words, the fees pay for the costs of maintaining nice timeshare resorts. Those legitimate costs are defrayed by evenly splitting them among all the owners.
It can be tempting to believe this story. It’s in their timeshare contracts, after all. But when owners have investigated what is really happening, they often find that the reality is quite different. In the best-case scenario, they might find that costs have been overestimated. In the worst case, they can find that the developer has been using maintenance-fee money to stuff its own pockets.
The latter situation is alleged in the case of Zwicky v. Diamond Resorts Incorporated et al, a class-action lawsuit currently pending in Arizona federal court. While the facts of that case are still being determined, the question it calls to mind is a good one: Do timeshare resorts really need the vast amount of money they extract in annual maintenance fees?
This article will take a look at the facts alleged in the Zwicky case. We’ll also discuss how you can start looking at your own timeshare fee arrangement and begin to figure out what the situation is with your developer and resort. Finally, if you are in one of these bad situations, we’ll talk about how Centerstone Group can help you make a legal and ethical exit from your unit.
As we’ve discussed elsewhere in this blog, Diamond Resorts International (DRI) is a huge timeshare developer based in Las Vegas, Nevada. Rather than deeded weeks, DRI resorts boast a specialized points system that Diamond owners use to reserve units in destinations like Hawaii or Mexico. The owners’ number of points are then used to calculate their annual maintenance fees.
Diamond timeshare owners have previously alleged fraud, high-pressure sales tactics, and other unethical activities by the company. DRI’s problems, though, go beyond sketchy sales presentations. The Zwicky case gives a newer, more detailed look at how the company operates. The class-action lawsuit was filed in Arizona state court in late 2020.
The complaint itself (attached as Exhibit A-3 to this court filing) alleges that DRI has been using maintenance fees from owners to enrich itself.
According to the complaint, the scheme involves giving DRI (or its subsidiary companies) control over timeshare owners’ associations. DRI supposedly did this by appointing its own companies to be in charge of the ownership associations until 95% of the units were purchased
DRI then allegedly used this power to create “false and misleading” budgets that were used to calculate owners’ maintenance fees. On top of that, DRI then hired another one of its own companies (Diamond Resorts Management Inc., or DRMI) to manage its properties without a competitive bidding process. And DRMI allegedly took its own hefty fees.
Upon receiving the timeshare owners’ complaint, DRI responded by removing the case to federal court.
Removal, or moving an action to federal court, is common for large companies that have been sued in consumer class actions. They often believe it will give them a legal advantage in the case. Consistent with that strategy, during the last year DRI and its affiliates have brought a number of motions to slow the case to a crawl.
Given that the case is still tied up in the early stages of litigation, it’s hard to say for sure what the facts are about Diamond Resorts maintenance fees. It’s harder still to say what the end result of the class-action suit will be. But the lawsuit raises an important question: How do you think your timeshare owners’ association is spending your ever-increasing annual maintenance fees?
First, let’s make it very clear what annual maintenance fees are supposed to do. It costs money to run timeshare resorts. The properties need a variety of things to keep them in good shape for their owners, like:
As you might imagine, those items can add up fast. When you consider that a vacation ownership company like Wyndham or Marriott Vacation Club has dozens or even hundreds of resorts under its name, those costs multiply. So it makes sense that the owners — the people who use those resorts — should bear those costs.
The owners’ organization (which is really just a kind of HOA) is in charge of paying resort maintenance costs on behalf of timeshare owners. But owners’ organizations don’t just guess at a number. They have to set a budget based on known and estimated costs. For example, they should know how much a resort pays in utilities or security costs every year. Repairs might require a bit more estimating.
With your own timeshare owners’ association, look carefully at the budget. You might see your fees increasing every year, but are the actual expenses rising at the same rate? If not, you may have a situation like the one alleged about Diamond Resorts maintenance fees in the Zwicky lawsuit.
Perhaps the biggest red flag, though, is the selection of your resort’s property manager. Having a property manager can make financial sense. But if the property management company is owned by the timeshare company, that’s a bad sign. And if there wasn’t a bidding process to hire the property manager, then you are probably paying more than you should.
Of course, every situation is different. But if any of these signs look familiar to you, it is possible that the amount of your fees is rising much higher than the actual costs of running your resort. In other words, you could be getting ripped off.
While you may not have known these details, they are probably not surprising. Timeshare maintenance fees are so high, and rise so often, that it makes sense that you might be paying more than necessary. The question is what you can do about it.
First, don’t let the timeshare sales staff talk you into buying more points. Salespeople may present that as an option that could lessen your fees, but in the end, it will just cause you to end up paying the company more. Remember that your maintenance fees are based on the amount of points you own, so buying more will just increase the fees.
Second, think about how to make an exit — just make sure that you do it carefully. Many owners try to leap into the timeshare resale market or, worse, list their units on eBay, without knowing that their efforts won’t work. Getting out of a timeshare takes patience, tenacity, and expertise.
Centerstone Group’s professionals have decades of collected experience in the timeshare industry. They know the ins and outs of the exit process and have developed several proprietary methods for securing legal and ethical exits for their clients.
Those exits can include contractual cancellation of units. Centerstone Group also uses pressure campaigns, including letters and administrative complaints, to get you an exit.
In other cases, owners need more substantial legal help, like the owners in the Zwicky case. Centerstone Group maintains close relationships with numerous lawyers for just this purpose. If getting legal counsel becomes necessary, Centerstone Group will help you and can negotiate lower rates with their legal partners than you would pay otherwise.
When you are stuck in a timeshare contract, it is difficult to think that there will ever be a way out. And as you pay more and more for maintenance fees, you may feel even more invested, like you now have to keep your timeshare for longer to justify your payments. But that is a losing game.
Whether or not your timeshare company is engaging in the kind of tactics that are alleged against DRI in the Zwicky lawsuit, Centerstone Group can help you. Contact us today for a free case consultation and case evaluation.