Can a Timeshare Be Foreclosed for Nonpayment of Fees or Assessments?

If you buy a timeshare, you'll ordinarily be responsible for maintenance fees, special assessments, utilities, and taxes pertaining to the property. If you become delinquent in paying those fees and assessments, the timeshare association—the governing body that's responsible for the operation of the timeshare project—will be able to get a lien on your timeshare that could lead to a foreclosure.

Read on to learn more about timeshare liens and how they can be foreclosed.

Understanding Timeshares

A timeshare is a form of shared property ownership where several owners have the right to use the property (which may be a condominium, hotel room, cabin, RV, houseboat, etc.) for a specified period each year.

The main different types of timeshare interests are:

• a deeded interest (fee simple) where you have an actual share of ownership in the property, or
• a right-to-use interest, which is more like a lease interest (and typically considered personal property) where you get to use the property, but you have no ownership in the property.

Sometimes people pay the full purchase price of the timeshare when they buy it. In other cases, people take out a loan to purchase their timeshare.

When you take out a mortgage loan to purchase a timeshare, you have to make payments—just like with a home mortgage—until the debt is paid off. If you fall behind in payments, your deeded interest in the timeshare property can be foreclosed. If you have a right-to-use timeshare and fail to make the required payments for the purchase or for maintenance, pursuant to provisions contained in the timeshare membership documents, the right-to-use can be repossessed.

Timeshare Costs, Fees, and Assessments

Usually, in addition to the purchase price, timeshare owners are responsible for:

• Maintenance fees. Timeshare owners are required to pay an annual maintenance fee to cover maintaining the property. For example, the timeshare association—which is similar to a homeowners’ association—will use fees to pay for things like landscaping, security, pest control, repairs, and maintenance of amenities (such as pools, golf courses, workout rooms, and clubhouses). Timeshare maintenance fees vary from place to place, but they are often as much as several hundred dollars per year. You’ll have to pay maintenance fees even if you choose not to use your timeshare and the fees will most likely go up over time.

• Special assessments. At times, the timeshare association may levy special assessments for one-time expenses such as a major improvement or a repair not covered by insurance. For example, a resort may levy a special assessment to pay for a new roof for the community clubhouse or to pay for new tennis courts. You’ll have to pay the assessment whether you choose to use those facilities or not.

• Utilities. Timeshare properties also often charge owners for utilities. Some places will add up how much electricity you use and bill you for it at the end of the week. This can get expensive in tropical beach locations where you’ll run the air conditioning all week or in cold locations—like at a ski condo in winter—where you’ll have to run the heat.

• Taxes. Property taxes may also be assessed against the time you occupy the timeshare. Additionally, some places impose a timeshare tax on each night you stay in the timeshare.

These costs—collectively referred to as “assessments”—can add up very quickly.

Timeshare Assessments Liens

What people often don’t realize is that even if you're current in your deeded timeshare mortgage payments or the timeshare purchase price has been paid off, you could still face a foreclosure if you don’t keep up with the assessments. Or you could also be sued for the amount of the indebtedness.

The rules of the timeshare are set forth in what is called the Declaration of Covenants, Conditions, and Restrictions (Declaration). The Declaration usually provides that if there is any default in the payment of fees, costs, and assessments owed by an owner of a timeshare interest, the entire unpaid assessed sum with accrued interest and other charges shall become a lien against the timeshare interest of the non-paying owner.

In most cases, once an owner becomes delinquent on the assessments, the lien automatically attaches to the timeshare. In some cases, the timeshare association will record a lien with the county recorder to provide public notice that the lien exists, regardless of whether recordation is required by state law.

Depending on the terms contained in the Declaration, the timeshare owner might be liable for:

• the unpaid assessments
• late charges
• reasonable costs of collecting (for example, attorneys’ fees)
• fines (in some cases), and
• interest.

How Timeshare Foreclosures Work

Once a timeshare association or other managing entity has a lien on a timeshare, it may foreclose on that lien as permitted by the Declaration. The resort can foreclose either through judicial foreclosure or a nonjudicial process, depending on state law and the terms in the Declaration. (Learn about ways to avoid a timeshare foreclosure.)

To judicially foreclose an assessment lien, the association must file a lawsuit against the homeowner and obtain a judgment from the court granting permission to sell the timeshare to satisfy the lien. To nonjudicially foreclose, the association does not have to go through state court, but rather follows specific procedures as dictated by state law, as well as by the Declaration. (Find out how a timeshare foreclosure will affect your credit score.)

Limitations on Timeshare Assessments Lien Foreclosures

State laws often place particular due process requirements on how and when assessments liens can be foreclosed. Arizona, for example, permits a timeshare association to hold a nonjudicial trustee’s sale of the timeshare estate if the owner has been delinquent in the payment of assessments for one year. (Ariz. Rev. Stat. Ann. § 33-2211(A)).

Finding the Timeshare Foreclosure Law in Your State

To learn about the laws governing timeshare foreclosures in your state or in the state where your timeshare is located (if different from where you live), review the state’s statutes. To find out how to do your own legal research, see Nolo’s Laws and Legal Research section. Or talk to a local real estate attorney or foreclosure attorney.