ARIZONA STATE SENATE
Phoenix, Arizona
tax valuations; timeshare
property
Creates statutory
requirements for the valuation of timeshare properties.
Background
In 2001, the Legislature
passed legislation that changed several provisions of Arizona’s real estate
timeshare statutes (Laws 2001, Chapter 170). These changes incorporated modern
variations of the timeshare product, streamlined existing timeshare
requirements, increased and modernize consumer protections and authorized
payment of finder fees.
At the same time, court
cases involving the classification and valuation of timeshares were being heard
in Maricopa and Mohave counties.
In London Bridges Resort Inc. v. Mohave Count, the timeshare property
owner challenged the Mohave County Assessor’s valuation of the timeshare
property using the gross market value for each accommodation. The County Assessor then reduced the gross
market value to account for the nonrealty components of the sales price and for
personal property in the accommodation.
The court ruled that this method of valuation was permissible.
In Scottsdale Links Condominium Association v. Maricopa Count, the
timeshare property owner challenged the Maricopa County Assessor’s
classification of the timeshare property as commercial property (class 1). The assessor and the timeshare property
owner settled this matter prior to a court ruling. In an effort to prevent
future problems, S.B. 1224 requires managing entities to submit a “use form” to
the county assessor including information about the number of accommodations
and nights that were used by a transient occupant for commercial use. These provisions attempt to address the problem
of entities developing timeshare properties (class 4) and using them for
commercial use.
Currently, there is no statutory method for valuation of timeshare properties in the State of Arizona. This has created some inconsistencies when the county assessor values timeshares. S.B. 1224 is a cooperative piece of legislation proposed by the American Resort Development Association (ARDA) and county assessor representatives, requiring county assessors to value timeshare property by utilizing the gross sales price of the timeshare interval less a presumed reduction of 65 percent to account for nonrealty components. This bill also requires a county assessor to classify a timeshare as a class 4 rental property.
A fiscal note
has been requested from Joint Legislative Budget Committee staff, but has not
been received.
Provisions
1. Classifies, in class 4 property taxation, timeshare properties that are not used for commercial or industrial purposes.
2. Requires county assessors to value timeshare property based on the original gross sales price of the timeshare interest to the buyer and further specifies that if there is insufficient original sales, county assessors may use comparable timeshare interest sales minus 65 percent for nonrealty components.
3. Specifies that nonrealty components include unusual financing, excess sales commission costs, atypical developer risks, extraordinary initial marketing costs, club memberships, business going concern value, transactions that are not at arms length, extended marketing time and the value of any personal property.
4. Requires county assessors to value timeshare interest based on resale prices and further specifies that if there is insufficient resale prices, county assessors may use comparable resale prices minus any nonrealty components, including atypical resale cost and personal property.
5. Requires county assessors to notify the managing entity of a timeshare property if the county assessor does not agree with a 65 percent reduction of the gross sale price for nonrealty components and develop an alternative method of determining the value of the timeshare property.
6. Requires county assessors to mail a timeshare use form to a managing entity before August 1 of each year and specifies that the use form contains the following information:
(a)
name
and mailing address
(b)
total
number of accommodations and available nights
(c)
total
number of nights and months each accommodation was occupied in a year
(d)
the
gross sales price of a timeshare interest
7. Allows a managing entity to repeal the classification of a timeshare property if a use form was not filed with the county assessor.
8. Requires that a county assessor treat a timeshare property as if no transient occupancy occurred if the transient use of timeshare property was less than ten percent of all available nights.
9. Specifies that the managing entity as indicated on the use form is the agent of the timeshare property owner.
10. Defines “accommodation” as a unit that is available for residential occupancy use in a timeshare plan.
11. Defines “association” as any organized body of timeshare purchasers.
12. Defines “developer” as any entity that is directly or indirectly in the business of selling, leasing, planning, mortgaging or transferring timeshare properties.
13. Defines “managing entity” as any entity that is responsible for managing a timeshare property.
14. Defines “promotion” as any type of plan or device used as incentive to sale timeshare interest.
15. Defines “timeshare interest” as an estate or timeshare use.
16. Defines “ timeshare property” as one or more timeshare accommodations.
17. Defines “transient occupant” as any person using a timeshare accommodation, but does not include a person using the accommodation as part of a promotion, timeshare interest or exchange program.
18. Provides for a general effective date.
Prepared by Senate Staff
February 7, 2002