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Re: Sell or not pay (by Carvan A.):

edwardm109 wrote:

Ok, I'm fairly new to this but I need some assistance from someone that knows about time shares. About 4 years ago I bought a Timeshare @ Westgate Villas & know I just want to get rid of it. Is it dificult to sell this, if not how can I do this ? A person has told me that if I can't sell it just stop making payment as it will not affect my credit since it was finance in house & not through a bank, does anyone know if this is true ? Please help out someone as I' have a baby on the way & I just can't afford this extra payment but @ the same time I don't want to ruin my credit.

Two issues are involved in answering your question. One, is the debt for the purchase of the timeshare and the second is the debt for the annual maintenance fees.

1. Whether or not you financed the purchase of the timeshare through a third party (bank, etc) or the seller financed it for you is immaterial to your liability for the debt. You signed a promise to pay the debt and you are contractually obligated to pay the debt and a default can certainly affect your credit. If you still owe money on the original purchase you might consider offering a settlement offer to the one holding the debt. They might be willing to accept less than the amount owed to at least salvage something. If you walk away they get nothing.

2. The second issue involves the maintenance fees. You did not sign an agreement to pay these but you are obligated to pay these because of the declaration filed in the county deed records by the original developer. The declaration is like a deed restriction many neighborhoods have to protect the value of their property. It binds all future purchasers. That is, future puchasers of the property are bound by the terms of the declaration. JayJay will say and has said that this debt is just like any other debt you owe but in reality it is somewhat different in that you did not personally sign a promise to repay the debt. You are obligated because of the declaration on file. Most of us never read these declarations when we purchase the timeshare although our title insurance will certainly include a brief statement referring to the declaration to protect the title company.

You are personally liable for the purchase money mortgage (described in 1 above) and failure to pay will in all probability adversely impact your credit and could lead to a judgement against you that will impact your credit even more.

The declaration says you are personally liable for the maintenance fees and the resort will certainly take the position that you are. A declaration is clearly a unilateral instrument intended to protect the developer. Whether or not you are personally liable when you did not sign a promise to pay the maintenance fees will turn on state law. If you are not personally liable the debt cannot be reduced to a judgment and the resorts only recourse is a foreclosure.

Hopefully your property is free and clear of the original purchase money debt and you have only the maintenance fees to worry about. JayJay has said many times that the maintenance fees are the bread and butter of the resort and that if you don't pay the other owners will have to take up the slack. That is stating the obvious and is of little help to a person who owns a timeshare that cannot easily be rented because of market saturation and cannot be sold even if one reduces the asking price to zero and agree to pay closing costs.

Most declarations include a provision requiring the timeshare to maintain sufficient reserves to maintain the property. Any special assessment would almost be a defacto admission of the board's failure to do so. You could have a cause of action against individual members of the board for the failure to carry out their fiduciary responsibility to you. This would apply only in situations where there are excessive special assessments.

I suggest you contact the resort management and attempt to negotiate a deed in lieu of a foreclosure. A foreclosure will be reported on your credit report and will adversely impact your credit. You should try to avoid it if at all possible. The resort management will initially reject your offer for a deed in lieu of foreclosure and will in due course refer the matter to a collection agency. This will probably be your first experience with a collection agency and the collectors who work on a commission will scare you to death. There are many safe guards for consumers built into the FDCPA (Federal Debt Collection Practices Act), a federal statute that protects your from collector abuse. If the matter is referred to a collection agency familiarize yourself with the federal statute. Violations by the collector can result in severe penalties to the collection agency. In time the collection agency will give up - that is, if you don't pay and the matter will go back to the resort. This is the time to again offer them a deed in lieu of a foreclosure because foreclosures costs them money and they would prefer not to throw good money after bad.

CGlenn