By Laura Brandow
A few weeks ago, the CBS Evening
News reported on an elderly couple who in looking to sell their timeshare,
ended up paying over
Now you may wonder why in the world
the couple continued to fork over money to the exit company with no result in sight...
While there are legitimate exit
companies who sincerely and ethically assist owners in selling their
timeshares, the industry has become infiltrated with companies who guarantee
they can get you out of your timeshare - but for a substantial fee. You’ve
probably seen the proliferation of ads on the internet and television attesting
to the success rate of these companies. These advertisements scare you into
believing that you will be unable to sell, be burdened with ever-increasing
maintenance fees and that your children will be liable for the maintenance fees
after your death. They claim to use secret proprietary methods they have
developed that “guarantee” to get you out of your timeshare. Some even have
celebrity endorsements and claim to have excellent BBB ratings and have
websites filled with many testimonials from satisfied customers but with very
little actual detailed content.
All these advertisements would lead
one to believe that timeshare owners are highly dissatisfied with their
timeshares when in actuality, timeshare ownership continues to be one of
largest growth areas in real estate. According to the American Resort
Development Association (“ARDA”, which was established as the trade association
representing the vacation ownership and resort development industries to combat
marketing abuses and promote the growth and development of the timeshare
industry and is actively involved in local, state and national governmental
affairs), 83% of all timeshare owners are satisfied with their timeshare. The
Better Business Bureau (the “BBB”) conducted the investigation which CBS
reported on after receiving thousands of complaints. The BBB found that out of
the 9 million or so timeshare owners, 1.5 million are seeking an exit from
their timeshare. With so many people looking to exit, more exit companies
continue to pop up because fraudsters recognize an easy way to make millions of
dollars by preying on the lack of knowledge of consumers. As the old saying
goes, even a broken clock is correct twice a day, and some exit companies do
manage to get results for some clients. However, it is their methods that have
raised the ire of the timeshare industry, even causing several of the larger
timeshare companies to file lawsuits against exit companies, including their
celebrity endorsers, such as national syndicated radio host Dave Ramsay who for
years endorsed an exit company on his radio show. Lack of knowledge on the part
of the owners assists the exit companies. Owners fail to read their condominium
documents, fail to contact the resort about exit options, and fail to take a
little time to do some research into exit options and the exit company itself.
Aside from the legitimate exit
companies, the fraudulent companies generally fall into two categories: Those
that basically do nothing more than collect their fee and send one or two
nonsensical letters to the resorts making vague allegations of fraud and
demanding contract termination and that the resort “take back” the timeshare;
and those which send out numerous letters to the resort claiming fraud,
misrepresentation, resort mismanagement and demand every piece of documentation
under the sun in the hopes that by overwhelming the resort with their demands,
the resort will give in and “take back” the timeshare in order to avoid
potential litigation. The exit companies claim the owners associations are the
successors in interest to the developers, and are thus directly liable for any
sins of the developer. The owners association was not a party to the sale of the
timeshare and may have no knowledge of what occurred at time of the sale or any
documentation from the sale. The exit company is betting that their threats
will scare the resort into agreeing to assume title to the timeshare in order
to avoid potential litigation. These companies also advise the owners to stop
making their maintenance fee payments and demand the owners and the resort have
no further contact with each other – thus preventing the resort from advising
the owner as to any sales or exit program it may have in place.
A common misperception amongst
timeshare owners is that the timeshare is a contract that can be terminated. In
Massachusetts, ownership is thru a recorded deed or license. The majority of
exit companies do not understand state conveyancing and timeshare law nor do
they care to. They are not based in the state where the resort is located and
do not conduct research as to how title to the timeshare week may be held.
Instead, they send a “one size fits all” form letter to the resort demanding
termination of the contract and make numerous allegations against the resort,
claiming the initial sale process was somehow illegal or unethical, that the
owners were promised the timeshare was a good investment and would be easy to
sell. If the exit company engages a law firm, then the resort is also subjected
to allegations of violations of the Federal Fair Debt Collection Practices Act,
Massachusetts consumer laws, and common law fraud. The exit law firms make
demands on the resort for any and all documentation as to budgets, financials,
minutes, contracts, loans for the last several years as part of their
“investigation” into how the resort is being run and managed. Should the resort
find such a document demand to be too cumbersome, then the exit company states
it will agree to drop any and all claims the owner may have against the resort
if they simply agree to take back the timeshare at no cost to the owner. The
resorts are forced to either capitulate to the exit companies’ demands or
engage legal counsel to respond to such accusations.
The demand to “take back the
inventory” rings hollow as the resort owners association has no obligation to
take title to deeded or licensed real estate of an owner. There have even been
numerous instances where the exit company sent a congratulatory letter to the
owner that they successfully persuaded the developer or resort to take back the
timeshare and have the owners execute a deed conveying title to the developer
or resort, which is then recorded, all without the knowledge or permission of
the developer or resort.
Some exit companies give
unsuspecting owners the false assumption by their name and website that they
are in fact a law firm, and not a group of people simply sending out form
letters and working the phones. Some exit companies engage complicit law firms
to send the appropriate correspondence to the resort without ever advising the
owner of the use of the outside law firm.
Timeshare ownership continues to be
one of largest growth areas in real estate. Consequently, as with any purchase
of real estate, buyers need to perform due diligence before purchasing and
understand their options on selling when they are no longer able to use the
timeshare. A common complaint of owners is that there is no easy mechanism to
sell a timeshare. If you own property in Boston, you can engage a broker who
will advertise on your behalf, hold showings and find a buyer who wants to own
or live in Boston. With a timeshare it is more difficult to sell as you need to
find a buyer who wants to buy into your particular resort or timeshare club.
The buyer pool becomes much, much smaller.
Any owner seeking to sell their
timeshare should always contact their resort first. As the vacation and travel
needs of aging original owners have changed, the vast majority of resorts have
realized that responsible exit programs needed to be developed. The larger
timeshare resorts have developed either resale programs for owners to enter
with an on-site broker or an exit policy that allows an owner to pay a one-time
fee in exchange for the resort to assume title to the timeshare. The resale
programs charge a brokerage fee and closing costs just as when selling
residential property. The resort exit policy typically costs far less than what
an exit company would charge and with use of an exit company, the resort will
still require payment of its exit policy fee, so an owner ends up paying twice
by engaging the exit company. If the owner is also a member of an exchange
company, they should contact the exchange company for alternative exit options.
ARDA and several large timeshare companies have developed a website –
ResponsibleExit.com – which provides information and resources for timeshare
exit options. ARDA’s main website, ARDA.org also has recommendations for sale
of timeshares and lists of legitimate exit companies. Owners can save money,
time and avoid stress by taking the time to do a little homework.
1. CBS Evening News, Timeshare exit
companies may be scamming customers, aired June 5, 2019.
Should you have any questions
regarding this article, please do not hesitate to contact Laura Brandow at
781-817-4900 or by email at lbrandow@lawmtm.com.
Laura Brandow
Laura has over
twenty-five years of experience as a practicing attorney in Massachusetts and
New Hampshire. Laura specializes in the area of time share condominiums and
vacation clubs and provides representation to national clients in connection
with resort and time share developments, as well as to traditional condominium
associations in Massachusetts and New Hampshire. Laura provides a wide range of
services for her clients including governance and enforcement of association
rules and regulations, and collection of condominium fees and time share
management fees and membership payments. Laura has a special concentration in
foreclosure, bankruptcy and lien enforcement issues for both residential and
time-share condominiums. Laura also represents several local New England banks
on all aspects of mortgage foreclosures.
Laura has lectured
on condominium lien issues for the Massachusetts Conveyancer’s Association,
Massachusetts Real Estate Bar Association, MCLE and on time-share issues for
the American Resort Development Association and is a member of the MA and NH
Bar Associations as well as a member of REBA and the American Resort
Development Association. Laura is also a contributing author for MCLE’s
Massachusetts Mortgages, Foreclosures and Workouts and Massachusetts
Condominium Law.
Originally posted June 25, 2019 on
tlawmtm.com.
