The seller of a Timeshare is (in reality) is classed as a Merchant.
The matrix of the products can vary however, each Timeshare conveys to the buyer ‘property rights’ in some form or another. You can occupy a property within a ‘pooled inventory’ or an identified property, via what can be described as a collection of convoluted instruments.
Many timeshares are managed by a Club which is are Unincorporated Association thus as a matter of law, are not incorporated. Unincorporated Clubs cannot enter into contracts or own ‘property’ in their own right, whoever the Association of members can appoint someone to manage the resort to preserve the interest of the members it serves. Further, the Association of members can ask the management company to account for the costs. When accounted for, the costs are approved by a committee and when approved, the total costs are divided by the number of members in the club. This will deliver each member with their apportioned cost, commonly referred to as the management fee.
As the Club cannot enter into a contract with the Management Company, many Constitutions (the rules of the club) allow the Management Company to ask for and do deliver the Management fee and enforce its collection. The fees and the payment of them, allow the value of an asset that was acquired to be maintained.
In many cases, those fees have become more and more expensive over time and for reasons that are not fully understood, however, it the duty of the Committee to understand them, assess and account for the costs including the necessity and against the instructions given. If this is done, the claims delivered by the Management Company can be assessed as being reasonable and necessary and applied against legal principles to determine if the fee claimed is fair, reasonable and equitable, having regard for the circumstances.
What is a stark reality is, the fees that are presented by many Management Company are always accepted and little in the way of accountability occurs. In many cases, Management Companies retains a minimum of 2 seats on the Committee of the Club, therefore, enjoy a significant presence which gives corresponding power. In some clubs that power assists them in the appointment of the other 3 committee members. Should they appoint another who is an ally to them, 3 seats on the Committee would control the Club itself. The 3 could outvote the other 2 Committee members. This would result in the Committee always supporting the Management Company over and above the members they are supposed to represent. If this was evident, the corresponding effect would be that all the Management fees claims would be passed, and this appears to be the case in many instances.
Subjectively, the members believe they pay the best price to maintain the occupational right they acquired, have conjoined themselves with others to ensure that the costs were shared fairly so, the value and the rights acquired are maintained.
Objectively; the cost to maintain the timeshares value is largely dependent on the annual costs -v- the market rate of like – for – like holidays. If the annual costs are low, demand for timeshare would increase and timeshares value would escalate, and the in-going upfront fee consumers paid would rise, resulting in the existing members being able to resell the rights they had acquired. In contrast, if the annual fee was high when set against like – for – like holiday property, the timeshare would become valueless.
In today’s market, many timeshares are worthless and unsellable.
The need for a professional assessment of management fees is and has been known accordingly, the matter can and should be referred to the First-tier Tribunal (Property Chamber) as they do officiate over matters concerning rent increases for ‘fair’ or ‘market rates’ leasehold disputes and leasehold enfranchisement.
By way of Section 176A of the Commonhold and Leasehold Reform Act 2002 this gives the parties and all Courts including Arbiters the power to transfer matters to the appropriate ‘tribunal’ where matters fall within the Tribunal’s jurisdiction, which this clearly does.
If and when a demand for maintenance fees is issued its a ‘money claim’. At issue is, the Clubs are required to prepare a ‘set of accounts’ which establishes the collective cost of maintaining the entire resort and when done they are in many cases required to have those accounts ‘audited’ independently. When audited, this will determine if the costs claimed are reasonable, where necessary and have been spent. When this audit has been completed and passed the tests applied, the information can be delivered and apportionment as to the member’s liability can be calculated.
If the audit has not been performed, the committee is imposed on it innocent membership a financial peril as the committee has failed in its duty to protect its members. Again, the correct jurisdiction to address this issue is that of the First-tier Tribunal (Property Chamber), not the Courts.
The 2002 Act provides that the Tribunal has statutory jurisdiction under section 27A of the Landlord and Tenant Act 1985 to determine the reasonableness of service charges which are clearly in this case the management fees claimed.
Posted on: 14th December 2018