Today Newspaper St. Maarten

Retired American takes Diamond Resorts to court over outrageous maintenance fee

Arthur Macdonald: “I guess they want to get rid of me”

St. Maarten / By Hilbert Haar    – While the smoke is still clearing from the controversy at the former Pelican Resort timeshare project, another storm is brewing at the Royal Palm Beach Club in Simpson Bay. This afternoon, the Court in First Instance will hear the case of Rhode Island resident Arthur Macdonald, who was ambushed with a whopping $46,678 maintenance fee invoice and an additional $4,927 charge for the year 2011.

Macdonald, a 74-year-old retiree, who has been a regular visitor to St. Maarten for decades and who is a volunteer at the Heineken Regatta, bought a condo in whole-ownership in April of 2010.

The contract he signed with Las Vegas-based Diamond Resorts, the owner of the Royal Palm Beach Club, guarantees Macdonald that the annual maintenance fee will be $500. On top of that he has to pay for so-called metered services (water and electricity).

Earlier this year, Macdonald paid all the invoices Diamond submitted to him, plus the $6,000 for the 2011 maintenance fee.

But last week Friday, on the first of the month, the resort cut off Macdonald’s electricity, after he refused to pay the $46,678 invoice the company sent him, plus another $4,927 invoice for what is labeled as “a replacement reserve.”

According to Macdonald, Diamond Resorts based its calculation on a “supposed” budget of expenses. “My contract is straightforward and it says that the maintenance fee is $500 per month plus metered services. I told them, okay, let’s talk about this, but they don’t even want to do that. I guess they want to get rid of me.”

Macdonald is not the only one who is in trouble with the resort. On Wednesday a newly arrived owner had to call the police, because Royal Palm had her locked out of her condo. Next week Tuesday, another twenty owners go to court in a joint action against the resort over similar issues.

According to Macdonald and his daughter Lenna, the directive to cut off the electricity and to start shutting owners out came from Elisabeth Brennan, the Executive Vice President and general counsel of Diamond Resorts in Nevada.

Camiel Koster and Jelmer Snow, the attorneys for Macdonald, filed a petition for an injunction and sought extraordinary relief from the court last week. The court gave Diamond Resorts until last Monday afternoon at two o’clock to respond to the request for temporary relief. “Diamond responded just minutes before the deadline expired arguing that since our contract does not say that they can’t increase the maintenance fee, they can do whatever they want,” Macdonald says. “This is an interesting approach to contract interpretation; even though the contract has a specific provision with regard to the maintenance fee and the contract also provides that the terms can’t be changed without the written agreement of the parties, Diamond believes that it can charge any amount based on its own budget times a thousand.”

Macdonald notes that since Diamond Resorts took over the Royal Palm Beach Club it has argued that whole-owners need to pay their “fair share” of the costs for the property vis a vis the timeshare owners. Macdonald’s daughter says that this is considered an attempt “to pit the whole-owners against the timeshare owners.”

Macdonald has a whole-owner long lease agreement that entitles him to stay in the condo for the next 900 years. The previous owner of the project confirmed in writing to prospective buyers that whole-owners like Macdonald would be excluded from paying the timeshare maintenance fee, unless the condo-owner placed his unit in the rental pool.

Macdonald bought his condo for a price in excess of $300,000 and he is currently in the process of renovating the place at a cost estimated at around $125,000.

If the court grants Diamond Resorts the right to charge the excessive maintenance fee, Macdonald says, the value of his ownership will be completely destroyed. “We cannot afford to pay 44,300 per month for maintenance fees. We will also not be able to sell our unit with such an annual burden. Who is going to buy a condo for more than $300,000 knowing that he’ll have to pay $50,000 in maintenance fees every year? Our investment will be lost. Diamond will be able to remove the whole-owners from their property without paying anything, and the entire market will collapse.”