New Law Shifts Burden Of Timeshare Taxation

A recently enacted statute, LD 1857, is good news for Wells and any other town in Maine that contains time-share vacation units. The law, signed by Gov. Baldacci in late April, changes the way property taxes are collected by towns from the owners of the timeshare.

As a result of the change, the entity that manages the timeshare units is now responsible for collecting taxes from the individual owner. In the past, towns had to collect them directly from the owners. With a timeshare, there could be as many as 100 owners for each unit.

“There are roughly 2,500 timeshares in Wells,” said Town Treasurer Leo Ouellette. “We had to send individual bills to each of them. I had [budgeted] more than half of one staff person’s time doing [the bills for timeshares].”

Ouellette said his department’s work involved sending out tax bills and dealing with the matter of foreclosures. “We send the bill to the timeshare owner,” he said. “Often the letter will come back marked ‘addressee unknown.’ The managing entity often doesn’t know the address. If they haven’t paid by the 12th month after billing, we put a lien on the property and then the owner has another 18 months to pay. We send another notice at the end of the 18 months, and if that’s not paid after 60 days, we foreclose.”

If the town forecloses, it becomes the owner of the particular week that had been the subject of the lien. That’s not necessarily a good thing. As a result, the town becomes responsible for the common expenses of the timeshare association, since the town is the owner.

Town Assessor Tanya Freeman explained that some of the tax assessments are so low that they are less than the fees the town incurs through ownership. “At the Nautical Mile, for example, it’s $31.56 per unit per year in property tax, on average,” Freeman said. “The lien fee is more than that. But, you can’t not tax something. That’s why we had to have this legislation.”

Recently, the town negotiated an agreement with the Nautical Mile to sell back 37 foreclosed units at a price of $100 each. “The town has been hands-on in running the business,” said Selectman Jim Spiller. “We had to go after each one. Often the value of the timeshare is less than it costs us to collect the taxes.”

Freeman noted that the 2,500 timeshares in town represented over 17 percent of the town’s 14,000 property tax accounts. “Until we change ownership issues, we have to have an account for each one,” Freeman said of the assessment process. “But, once they’re set up, they’re not a bother. There’s work only when the ownership changes or there’s a reassessment.”

Under the new law, the town would still individually assess each timeshare unit, but the managing entity would be responsible for collecting the tax and maintaining escrow accounts of the money until the town billed for it.

“We’ve worked on [this issue] ever since I’ve been in Augusta,” said Wells State Representative Ron Collins. “Every term there’s been a bill set forth to address the issue. There are a lot of timeshares in Wells, but there are also all over the state. This is not unique to Wells.”

Spiller agreed the effort to change the law had extended over time. “We’ve been monitoring this for a long time, and trying to get it through,” he said. “This should save the town a tremendous headache.

“This empowers the [condo] association to collect taxes on behalf of the town and get into the lien process itself. There’s another piece of legislation that would make it a lot easier for the association to take a timeshare back for lack of payment.”