Law glitch could put squeeze on timeshares

By TONY GEE

Some timeshare resorts face being rated out of existence under new laws coming into force on July 1.

Resorts with hundreds or thousands of unit owners face rate rises of at least 700 per cent if councils follow the letter of the law.

The anomaly in the Rating Valuation Act was exposed by the Far North District Council.

A case study the council carried out for a Bay of Islands timeshare shows the resort's rates would rise from about $40,000 a year now to more than $2.5 million from July.

There are 26 timeshare resorts in New Zealand, including three in the Far North, and John Sewell, of the NZ Holiday Ownership Council, which manages a number of resorts, is seeking a meeting with the Valuer General.

"We want to see if we can get some sort of amendment to the legislation. It's early days yet but we'd like to get it resolved before it becomes a major issue when councils strike their annual rates later this year."

Mr Sewell was sure no consideration had been given to the timeshare rating issue when the legislation was drafted.

"I'm equally sure there was no intention to place a huge burden on timeshare resorts."

Far North District Council revenue and policy manager Chris Ellington said he was sure legislators never intended to penalise the timeshare holiday industry.

"It has to be an anomaly. The way the legislation is written, even in a best case scenario, the minimum rate increases these holiday resorts face are in excess of 700 per cent."

The glitch arises in the Rating Valuation Act, which now says a separate certificate of title creates a separate rating unit.

Timeshare resorts typically have separate owners for every unit in each resort for every week of the year, and each owner has a separate certificate of title.

A 50-unit timeshare resort could have as many as 2500 owners, each with a certificate as owner of a unit for one week every year.

Mr Ellington said that under the legislation, each owner would now have to pay a council's uniform annual charge ($245 in the Far North) plus other specifically targeted rates like sewerage.

In the case study, this would include an extra $204 for a local amenities charge, plus charges for sewerage of about $400, making a total of around $860 a year.

The 50-unit resort, with more than 2500 unit owners, would then face an annual rates bill of over $2.5 million.

Under previous legislation, the corporate body for a timeshare resort was considered to be the ratepayer, and councils would levy only one uniform annual charge on the resort.

Mr Ellington said councils also faced big costs as a result of the new rules. Each certificate of title in a timeshare had to be added to a valuation information database at about $40 for each new entry. For a 50-unit timeshare, that would cost councils $100,000.

In addition, costs involved in setting up, maintaining and invoicing out 2500 separate new accounts would add $125,000 to council costs, making a total of at least $225,000 for a single resort.

The Far North council is working with the Valuer General's office, Local Government New Zealand and the Holiday Ownership Council to try to convince the Government to urgently amend the legislation before July 1.

Valuer General Warwick Quinn said the legislators never intended that a 50-unit timeshare resort should be rated 50 times over.

Given the Far North council's strict application of the law, the council was correct in what it was saying, but no one intended such an outcome.

The act now gave councils a lot more flexibility about how rates could be charged.

The issue was what constituted a separate rating unit and whether a district's valuation roll needed to show a 50-unit timeshare resort as 50 rating units or just one.

"We're also looking at whether all timeshare units are legally structured in the same way.

"Some may have different tenure arrangements and if anything was to change, it would have to cover all timeshares.

"We may have to get legal advice on timeshare tenure when we get a picture on what's going on."

He confirmed that his department was discussing the matter with the Far North District Council.