ELLSWORTH, Maine — The city of Ellsworth has been thrust into the vacation timeshare sales business after a resort developer and some timeshare owners have fallen far behind on taxes for dozens of units.
Beginning in April, Ellsworth officials began foreclosure sale proceedings on 66 timeshare units located in Acadia Village Resort, with each unit representing one week’s use of the specific property. In a timeshare system, owners typically purchase a share allowing them one week’s use of the property each year.
At some timeshare resorts, a legal trust that owns the resort or the homeowners association collects property taxes from each owner as part of a “maintenance fee” package and, therefore, mops up when owners fail to pay.
But in the case of Acadia Village, city officials are responsible for collecting one week’s worth of property taxes from the more than 2,000 partial owners because of the way the resort was incorporated. Timeshare owners represent about one-quarter of the city’s roughly 8,000 property tax payers.
And when owners fall three years behind on their taxes, their shares are put up for public sale on a first-come, first-served basis — under a process laid out in state law — even though the total due to the city is typically only a few hundred dollars.
“It is just as complicated as if we were to foreclose on somebody’s land or second home,” said Leann Beal, deputy treasurer and tax collector for Ellsworth. “We have to go through all of the steps as we would for foreclosure on a $100,000 house.”
Rather than seeking the assessed value of the timeshares — likely a hard sell during an economic downturn — the city is attempting to recoup the unpaid taxes plus legal and administrative costs, totaling between $296 and more than $636 per unit. Almost all of the units in foreclosure are off-season weeks in winter, making them more difficult to sell.
The new owners will be responsible for the annual maintenance fees at the resort — which range from over $300 to roughly $500, depending on the unit — plus the property taxes and any additional fees.
“It is a sign of the times,” Jim Killam, manager of Acadia Village Resort, said in reference to the depressed market for vacation timeshares. “I’m pretty sure everybody is suffering from the same thing.”
Beal said that in the past either the owner or the developer would often pay the back taxes before foreclosure. But this year, it’s the resort developer, Acadia Village Resort Inc., that owes back taxes on more than 40 of the shares.
Although nearly identical in name, the developer is a separate entity from the resort itself and from the Acadia Village Resort homeowner’s association represented by Killam. A representative for the development company, John Walker, could not be reached for comment.
“It is actually going to be positive for the resort to have these shares foreclosed on and have them go into the hands of owners who will pay maintenance fees into the future,” Killam said.
Ellsworth is not the only town in Maine to handle timeshare foreclosures, although the number handled by the city this year has grown. Last year, the city handled 40 timeshare foreclosures.
Joseph Clark, town manager of the Aroostook County town of Island Falls, said he handled four timeshare foreclosures from Vacationland Estates Resort this year, which he added was not a significant increase from past years.
Over at Harbor Ridge, a vacation resort in Southwest Harbor on Mount Desert Island that handles its own foreclosures, the homeowners association sold nine units last fall for failure to keep up with fees and expects to sell more this fall, manager Annette Bartlett said. The uptick in foreclosures at Harbor Ridge has not been significant, however.
Although not unusual for towns to be responsible for collecting property taxes on individual timeshares, the practice is becoming less common as the industry evolves, according to John Funk, a New Hampshire attorney in private practice who does some work in the industry.
Funk, who works with the American Resort Development Association, a trade group for timeshare resorts, said most newer resorts are set up differently so that a legal trust owns the property and is responsible for collecting fees and taxes. Funk also agreed that the industry is feeling the economic pinch like any other.
“It really is a sign of the times where we are seeing more of these foreclosures than we have seen in the past,” Funk said.
A recent report from the American Resort Development Association said that, despite the economic downturn, more than 90 percent of timeshare owners were making their maintenance fee and property tax payments industry-wide.
For information on the Ellsworth foreclosure sale, contact Leann Beal at 669-6634.