Two timeshare scams have lately proliferated, preying on vacation owners desperate to be delivered from the burden of their timeshare interest:

• “Sale” of your timeshare interest to a relief company by paying them often $2,000 to $3,000 per week to take over ownership, and
• Payment of an advance fee of $500 or higher to a resale company which promises to sell or rent your timeshare interest.

Do you know how to protect yourself from scams?

First, there are legitimate timeshare relief companies, but you must know how to protect yourself from the scams which merely take your money and leave town, like the “Music Man.”

• Require that your money be held by a neutral escrow, such as an attorney trust account or title company, until the transfer process is complete.
• A transfer of a timeshare interest is not complete until the timeshare association to which you belong approves the transfer.
• If the timeshare interest is evidenced by a recorded deed, the deed transferring the interest must be recorded in the local county records.
• Determine if the relief company is a member of the American Resort Development Association (ARDA), the primary national timeshare industry association, by going to www.arda.org.

Is there really timeshare relief?

Second, there are legitimate timeshare resale and rental organizations that provide a great service.  But:

• You should not pay more than a nominal upfront fee.  (In California it is illegal to be charged any upfront fee.)
• Determine if the resale or rental company is a member of the American Resort Development Association (ARDA), the primary national timeshare industry association, by going to www.arda.org.
• Check on local broker or timeshare sales licensing requirements.

If  you  have questions, please feel free to call me for a complimentary consultation at 916-784-7030.

Is it easy to find misrepresentations?

There are so many laws and regulations that govern the development and sale of timeshare interests that it is difficult to comply with all of them.  In addition, there is often exaggeration in describing benefits and omission of material considerations when making the sale.

 Why do most timeshare sales fail to comply with some consumer protection statutes?

A significant omission in most timeshare sales is compliance with consumer protection laws that apply to the sale of goods and services.  Because most developers sell timeshares using recorded deeds, they think they are exempt from such laws.  However, significant features of a timeshare interest are the goods –the furnishings of the units and other personal property that provides comfort and utility to the land and buildings – and the services – reservations, housekeeping, repairs and general management – that make a timeshare much more care-free than sole ownership.  These statutes often contain a right of rescission that is ongoing if they weren’t complied with at point of sale.

Why are there always omissions of material disclosures in the sale of deeded timeshares? 

Sellers of deeded timeshares universally fail to disclose:

• ancillary probate if the buyer dies a resident of another state,
• a higher cost to the association to foreclose against defaulted members,
• exposure of the individual members to liability for what happens at the project they are deeded into, and
• higher cost and difficulty for the association if it must clear title to a unit.

Do you want to be a member of a Timeshare Association that is thriving?

There are important things you can do to help your Association.  This blog will discuss only the possible legal solutions, and not the practical solutions of having good management of your Timeshare Association.

First, I will share with you the most immediate remedies which are to (a) implement a sound rental program and (b) follow up promptly and effectively collecting assessments, all in compliance with the project governing documents and applicable laws.

The most effective long term solution, if the timeshare interests are deeded, is to convert the project from deeded to non-deeded interests.  The virtues of non-deeded over the burdens of deeded interests have been publicized since 1995 in industry articles and workshops.  (See www.timeshare-attorney.com .)  It is therefore appropriate to request developer contribution to the added costs of operation and remedies due to setting up a much costlier legal structure than necessary.

So, what are the advantages of non-deeded interests to the Association and its members?

• Lower foreclosure costs against defaulted members (A recent informal study revealed the annual Association Budget is 3% – 13% higher to foreclose against deeded timeshares.)
• No ancillary probate necessary at the death of out-of-state owners (The added cost of $1,000 – $4,000 is further discouragement to heirs who may not really want the timeshare anyway, which leaves the Association no alternative but to foreclose.)
• No quiet title issues if a unit is to be sold to help pay Association expenses, assuming there are sufficient units remaining to service owners in good standing

Although there are many forms a non-deeded structure can take, I am most familiar with the Association holding an appropriate amount of undivided interest in the real property to support the timeshare interests held by the owners/voting members.  The conversion process must be in compliance with the project governing documents.  In the first “conversion” I did the project declaration did not specify the form of conveyance for the timeshare interests, so the Association held the undivided interests it foreclosed upon and issued voting memberships.  If the declaration specifies deeds for conveyance, it must be amended.  If title to units must be cleared, that can sometimes be done by the Association if the declaration includes a power of attorney from each member to the Association to clear title if necessary.

In either case the conversion can be accelerated by inviting the members to sign a deed to the Association in exchange for a Certificate of Ownership, based on the three advantages listed above plus:

• No personal liability of the individual owners for what happens on the property, if they are not directly on title.

I have found these recommendations to be very helpful to Timeshare Associations I have worked with.  I hope they will cause you to look at your Association in a new way.  Best wishes for a thriving Timeshare Association!

Frequently overlooked when meeting with an estate planning attorney is ownership of a timeshare interest.  Then when a person dies it may be unnecessarily expensive and cumbersome to pass title to the timeshare interest to the heirs or beneficiaries of the estate.A one-week timeshare is usually of sufficiently low value to pass by summary probate or small estate affidavit if it is the only asset left out of a trust.  If it is a deeded timeshare interest in another state, then the probate proceeding must take place in the state where the deed is recorded, unless the timeshare is in a trust.

So, what is the best thing to do with your timeshare?

Good estate planning for an estate of any consequence would include putting all the substantial assets in a trust, including all timeshares.  If a timeshare has special significance for a family, there may be special planning for maintaining the timeshare for the family, including providing for its financial support.  If no one other than the original owners wants the timeshare, then it could be willed to the timeshare association.  If that isn’t covered, then the executor or trustee should consider abandoning the timeshare.

Taking time to consider all of your timeshare estate planning options can simplify things for your heirs immensely.  It is time and money well spent!

In fact, an heir can disclaim an asset if he or she has not accepted a benefit in connection with the asset. In some states a disclaimer must be made within a certain time.  For example, California requires a disclaimer to be made within nine months of the date of death, but Nevada apparently has no time limit.

It’s important to know that an executor of an estate or a trustee of a trust is not compelled to accept property into the estate or trust, and  may have an obligation to abandon property if it is in the best interest of the estate or trust.  For example, contaminated real property, or a timeshare interest that no one in the family or beneficiary pool wants to use, should be rejected or abandoned by the executor or trustee as not only unproductive property but property that could materially deplete the estate or trust.

It is my hope that knowing this information can save you a lot of unnecessary grief when you find yourself inheriting an unwanted timeshare.

John Rogers Burk

www.timeshare-attorney.com