Court ruling on March 26 – Royal Palm wholeowners contest outrageous maintenance fees

POSTED: 02/8/13 1:47 PM

St. Maarten – Diamond Resorts and wholeowners at the Royal Palm Beach Resort met in court again yesterday for the next stage of their ongoing dispute about increased maintenance fees. Judge Coen Luijks will pronounce his verdict on March 26.

Basically the dispute comes down to the interpretation of what the wholeowners actually bought: the right of apartment or 52 weeks of timeshare. Attorneys for the plaintiffs, mrs. Jelmer Snow and Vivian Choennie object to Diamond’s position that wholeowners (who bought an apartment at the Royal Palm) should be treated as timeshare owners.

Timeshare owners pay a maintenance fee for every week they bought at the resort. Whole-owners own 52 weeks according to Diamond Resorts and therefore they ought to pay 52 times the weekly maintenance fee.

Arthur Macdonald, one of the wholeowners, told the court yesterday that when he had bought his apartment in 2010, Diamond approved his contract and welcomed him into the Diamond family. The contract mentioned a monthly maintenance fee of $500. However, eight months later, Diamond decided to start treating wholeowners like timeshare owners. MacDonald’s maintenance fee skyrocketed to around $50,000 per year – and that for an apartment he bought for $330,000 and in which he invested $170,000 worth of renovations.

In December, Macdonald received a new invoice for maintenance fees to the tune of $53,097. Together with the charges for 2011 and 2012, Diamond now has $158,040 in outstanding maintenance fees on the books for Macdonald, who has faithfully pays his contractual maintenances fees of $6,000 each year. While the litigation is pending, he does not pay the higher amounts.

Lucas Berman, one of the attorneys for Diamond Resorts, said that the case was rather simple: “Diamond applies the principle of timeshare on the increase of the maintenance fees for wholeowners. For a very long time they structurally paid too little. Our client is not applying the increase retroactively but from 2011.”

If the wholeowners don’t pay, Berman told the court, the timeshare owners are saddled with the costs for the wholeowners. “Main Street would be paying for Wall Street,” he remarked.
“The wholeowners cannot stay in a hotel room for 52 weeks without paying the costs. They are a wealthy club and they own 52 weeks.”

If the court does not follow Diamond’s position that whole owners have to be treated as timeshare owners, it could be the end of the resort.” He added that some wholeowners rent out their units for as much as $3,000 per week.

Berman said that it is not possible for Diamond Resorts to deliver the right of apartment to the wholeowners and that the maintenance fees the company is charging are the real costs.

Attorney Jelmer Snow, who pleaded for Arthur Macdonald, said that his client’s contract mentions a maintenance fee of $500 per month plus the cost of metered services. “In 2010 Diamond agreed with this, but eight months later they increased the maintenance fee from $500 to $4,000 per month.

Snow referred to an old brochure of the “Royal Palm Resort that offered outright purchase of condos or quarter-share ownership. “There is not a word about timeshare in it,” he noted. “Diamond magically introduced timeshare in 2010.”

The attorney pointed out that wholeowners like Macdonald equip and maintain their own units. “This was clear until this club (Diamond Resorts – ed.) appeared on the scene. Diamond made an unconditional promise to honor the $500 monthly maintenance fee plus metered services. Now he is confronted with an increase of 860 percent.”

Snow contested Diamond’s claim that it would go belly up if the wholeowners do not pay the higher fees. “They made that claim already in 2011 and there is not a shred of evidence that this is true. This is a matter of smoke and mirrors. The TV’s in the timeshare units have been replaced and nobody has been fired.”

The fact that the management company AKGI discovered after fifteen years that the wholeowners pay too little in maintenance fees “says everything about the management of that company,” Snow said.

If the court allows the higher fees, “nobody will want to buy my client’s unit, not even if he gave it away for free,” Snow said.

With attorney Vivian Choennie, who pleaded for other wholeowners, Snow noted that the units at the Royal Palm are not like hotel rooms as Diamond Resorts wants the court to believe. “There is an essential difference with a hotel room. My client does not get services like a cleaning lady.”

One timeshare owner told the court that it were reasonable to increase the maintenance fees based on the local consumer price index. Applying that mechanism, he said, a $500 fee from the nineties would now be around $730.

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