Timeshare-owner charged with $100,000 in maintenance feesPOSTED: 01/16/12 1:01 PM
Diamond Resorts sticks to new treatment of whole-owners at Royal Palm Beach Club
St. Maarten / By Hilbert Haar – The battle between Arthur Macdonald and the Royal Palm Beach Club has reached a new low, after the Diamond Resorts Corporation, the timeshare resort’s Las Vegas-based owner sent the 74-year-old Rhode Island retiree an invoice for maintenance fees of almost $100,000. Macdonald will not pay the fee as he is still engaged in court cases against Diamond. The next step in these procedures is scheduled for next week Tuesday, but it could still take some time before there is a final ruling.
Last year in July, Royal Palm cut off Macdonald’s water and electricity, after he refused to pay $48,279.23 in maintenance fees. The Court in First Instance later ordered the company to restore the utilities. In December, Macdonald received the invoice for the 2012 maintenance fees: $46,678.32 plus another $4,927.532 for a so-called “replacement reserve.” With the outstanding from 2011, the fees now total $99,885.07 – close to a third of what the American paid for the unit in 2010.Arthur Macdonald in his Royal Palm unit (file photo).
MacDonald’s daughter Lenna, a corporate attorney, is following the developments closely with her father. “How can this not be shocking to anyone hearing the amount,” she wrote in a personal email to this newspaper. “It makes no sense given the local market, or the costs actually associated with the individual units.”
The attorney further pointed out that the “replacement reserve” is probably a charge for renovations, furnishings and appliances in the units. “The problem is that we (my parents and I) have personally renovated and furnished the unit to the cost of some $89,000 in direct expenses, before adding in labor, including replacing exterior windows and redoing the patios; that should have been addressed by Diamond. So Diamond is charging us to renovate and furnish our unit, after we just finished doing it ourselves.”
Macdonald is a so-called whole-owner. In April of 2010, he bought the right to his apartment at the Royal Palm for more than $300,000. The contract put the maintenance fees at $500 per month, and Macdonald has been faithfully paying his dues, which also include metered services (for water and electricity).
In 2011 Diamond Resorts decided to treat whole-owners (people like Macdonald who bought in fact 52 timeshare weeks) the same way it treats interval-owners (people who bought the right to stay at the Royal Palm for one or more weeks per year). The already hefty maintenance fee of around $1,300 per interval was in Macdonald’s case unilaterally multiplied by 52. Instead of a $6,000 charge for maintenance fees, he was suddenly saddled with an impossible charge of close to $50,000.
Attorneys for Diamond Resorts argued last year in court that Royal Palm was struggling with a $10 million deficit and that it threatens to go bankrupt if it is not allowed to charge these maintenance fees.
But a press release the company issued on November 15 of last year tells a slightly different story. “We are pleased with the year over year improvement in our operating performance and continue to remain focused on the growth of our core management and member services business and our sales and marketing platform,” president and chief financial officer David F. Palmer stated in a press release about the parent company’s third quarter results.
In last year’s third quarter, Diamond Resorts saw its EBITDA (earnings before interest, taxes, depreciation, and amortization) increase by 14.4 percent to $29.7 million. Vacation interest sales increased 6.6 percent to $60.2 million.
This increase, Palmer wrote, “was primarily due to a higher average sale price per transaction partly offset by a decline in the number of vacation interest transactions and closing percentage.”
So while less people are buying timeshare, Diamond Resorts is still generating more money in this market because it charges higher prices.
How did all this affect the Royal Palm Beach Club? Diamond Resorts projects an operational surplus of a bit more than $400,000 for the 23 whole-owner units in the resort. This is based on almost $1.2 million revenue from maintenance fees against almost $790,000 in payroll and operating expenses. But because the budget contains a provision of $1 million for “bad debts” plus almost half a million for insurances, management fees, depreciation and reserve capital expenses, the resort books on paper a negative result of $1,053,836.
The attorneys who won the case for Macdonald last year, mrs. Jelmer Snow and Camiel Koster, labeled at the time Diamond’s action as “a typical case of taking the law into one’s own hand. Who still wants to buy timeshare in St. Maarten after this? This is unlawful.”
Snow said last year that Diamond “pretends that Royal Palm is on the brink of bankruptcy. I have the feeling that they simply need money in Las Vegas. They throw up some figures without substantiating them. This is not good for St. Maarten, not good for the timeshare industry and not good for my client.”