Ask RedWeek / May, 2015

Why are timeshare owner advocates pushing to veto a bill in Florida?

I own a timeshare in Florida – what is going on with the developer-backed bill that owner-advocacy groups are petitioning to veto?

Here is what RedWeek discovered after taking a thorough look over the past several weeks at the legislation, and talking to the people who support it (such as the American Resort Development Association), and those who oppose it (including the National Timeshare Owners Association).

In an 11th hour effort to derail a fast-moving bill backed by timeshare developers, three owner-advocacy groups, including RedWeek.com, have petitioned Florida Governor Rick Scott to veto legislation that, they claim, would erode owners' legal rights and allow developers to bypass the 125 percent cap on maintenance fee increases.

The Senate approved HR453, authored by Rep. Eric Eisnaugle (R-Orlando), with virtually no debate on April 28. Three days later, the Legislature adjourned with all enrolled bills sent along to the governor for review. If Governor Scott signs it, the bill will become law July 1.

The low-key final vote was a stark contrast to the high-volume tactics employed, late in the process, by owner-advocacy groups to stop the bill. The National Timeshare Owners Association and Florida Timeshare Owners Group launched a petition drive, with online signups, urging Gov. Scott to reject the legislation. Other groups, including RedWeek, signed on several days later, creating a loose alliance that also included HOAs and individual timeshare owners. Win or lose, the initiative was unusual, representing a first-ever ad hoc coalition between groups that presumably are natural allies on owner consumer protection issues.

The legislation would apply to Florida timeshare companies, Florida residents who own timeshares, and to non-residents who own timeshares in Florida. Opponents fear it would also become a blueprint for timeshare bills in other states, which is why they tried to rally opposition from owners across the country.

The Original Intent

Eisnaugle initially promoted his bill as a low-key vehicle to modernize outdated timeshare laws that were passed in the 1980s and amended in the 1990s. His counterpart in the Senate, Sen. Kelli Stargel (R-Lakeland) pushed an identical bill, SB932, in the Senate. Both bills are sponsored by the American Resort Development Association (ARDA) and its owner-related affiliate ARDA-ROC (Resort Owners Coalition). Neither group is accustomed to receiving much criticism over legislation from owner groups, especially when that criticism draws media attention from local newspapers. The critical press focused in part on the campaign contributions that Eisnaugle and other political groups have received from the developer community. Driven largely by NTOA's direct outreach to media companies, the negative press included two scathing columns in the Orlando Sentinel (at time of publication, they can be found here and here). The articles surfaced just as ARDA members gathered in Orlando for the annual ARDA World convention. As a result of this awkward timing, ARDA leaders spent more time than they anticipated answering questions about the legislation at their otherwise festive convention. Their message: the bill is good for owners and developers.

"No consumer protection is changing in any way," said Howard Nusbaum, ARDA's CEO and president. "The Florida legislation is multi-faceted. The one piece that has created the most aggravation for timeshare owners, or misconceptions, is this part about nonmaterial...differences [in a contract]."

The Controversial Language

The bill's most controversial clause would exempt developers from legal liability for "nonmaterial" mistakes in disclosures and contracts as long as the developers had otherwise substantially complied with the legal requirement to disclose all relevant information to buyers. In effect, the exemption would make it harder for longtime owners to get out of contracts and, as Nusbaum noted, deter what he described as "frivolous lawsuits" against developers and HOAs. Another contentious part of the bill would allow developers to exceed Florida's current 125 percent cap on annual increases in maintenance fees to pay for emergencies, such as a hurricane, or unexpected value-added taxes that jurisdictions frequently impose on timeshare properties.

NTOA and FTOG say they are receptive to other aspects of the bill, including a provision that allows legacy resorts, 25 years old or older, to extend or terminate their timeshare plans on a 60 percent vote. Some HOAs currently operate under much higher voting rules, or have no provisions whatsoever to end or extend plans.

But, the materiality and maintenance fee proposals backed by ARDA are fighting words for groups that pay attention to owner pocketbook issues. Greg Crist, CEO of the 20,000-member NTOA, and Frank Debar, founder and chairman of FTOG, said they were blindsided and outraged by supposedly minor changes in law that could have major implications for owners and future buyers.

"This is an unintended consequence of not communicating what ARDA and ARDA-ROC have been doing," Crist said. "Eisnaugle has been working on this for a year, yet nobody told us about it. Now everybody is hiding and ducking because they know they got caught with their hand in the cookie jar."

Debar, in a recent letter to Gov. Scott, said: "These bills have been rushed through the Legislature so quickly that most timeshare owner groups, such as ours, have just recently learned of its existence. It's clear the bill is unpopular with timeshare owners, and its passage, as presently drafted, will likely bring unfavorable publicity nationally, when consumer groups outside Florida become aware of its full implications."

The Legislation Sails Too Easily Thru Both Houses

At a recent Senate Fiscal Committee hearing, Sen. Stargel portrayed SB932 as a non-controversial "much needed update" of timeshare law to reflect market changes, especially the growth of trusts and multisite plans — programs that did not exist when the original legislation was adopted. She touted the 60 percent legacy resort voting rule as one of several benefits for owners. Stargel described the maintenance fee provision as something that "provides flexibility in fees" and termed the liability piece a "hold harmless provision for nonmaterial filing errors." (These phrases are mirror images of talking points on SB932 that ARDA distributed to members at the ARDA World convention).

Stargel also told the committee she was adopting an amendment — to allay unidentified "concerns" — that would put the burden of proof upon a developer to prove that a contractual filing error was minor, rather than material.

The amendment, designed to defuse opposition, did just the opposite.

"I appreciate they’re making that change, but think it will just further confuse things, because this was a muddy statute to begin with," said Michael D. Finn, a Largo lawyer whose firm testified against the bill, along with Crist of NTOA, in the House. Finn, in business 40 years with the Finn Law Group, specializes in representing timeshare owners who typically have contract problems with HOAs and developers. He said most of his cases settle, under a seal requested by developers, rather than go to trial. More often than not, they involve owners who are just trying to get out of their contracts, he said.

According to Finn, the hidden agenda of the legislation is much more insidious than just cleaning up outdated legal language. "They [the developers] are just trying to impede the right to sue. They argue that they need to protect individuals from frivolous lawsuits, but that's absurd. If a lawyer files a frivolous lawsuit in Florida, he will get nailed for court costs and attorney fees. Developers vigorously litigate these things. No lawyer would even think of filing one."

Ironically, the one clause in the legislation that would directly benefit owner pocketbooks — a section eliminating a duplicative $2 per owner fee in existing law — was removed from the bill for fiscal reasons. With the state facing a billion-dollar budget shortfall, lawmakers refused to give up nearly $400,000 in annual revenues timeshare owners are paying, unnecessarily, to the state to fund future regulations of the industry.

Stargel and Eisnaugle declined numerous interview requests for this story.

ARDA's Frustration

Nusbaum, ARDA's chief spokesman, expressed frustration with the way the bills have been treated in the media and "misrepresented" by critics.

"I think it is purposeful," he said in an interview. "Look at where the noise is, it's Finn Law. This is being driven by law firms who are trying to scare timeshare owners for their own personal gain. There is nothing in this bill that hurts the right of any owner who has a legitimate reason to have their contract interrupted. But these law firms have ginned up owners, and especially legacy owners, to be concerned that this [bill] means a cap off maintenance fees and there's no rescission to protect them — so I have a level of frustration and passion about this. I know the facts and I know the law, and I'm comfortable with this bill. I'm not mad at NTOA or anyone else. But people believe what they want to believe."

Regardless of its merits — or drawbacks — ARDA's bill is now on Gov. Scott's desk, awaiting a signature, right next to the veto petition backed by NTOA, FTOG, RedWeek, and an undetermined number of timeshare owners.

The Petition

Here is the petition: it speaks for itself.

On behalf of all Florida timeshare owners, and future buyers, we respectfully urge you to veto SB932, a developer-sponsored bill that was drafted without input from owners and consumer protection groups.

While perhaps well intentioned, the bill contains many flaws that erode owner legal rights and, worst of all, includes and expands vague language that will simply have to be litigated down the line. The bill, in short, needs to be amended to provide clarity and equity for both owners and developers on several key issues: public disclosure, contract litigation, timeshare trusts, legacy resorts and maintenance fees. As it stands, the bill before you is a one-sided effort by the development community to rewrite state law to match their current marketing efforts. Example: The bill allows developers to unilaterally decide what constitutes "compliance" and "materiality" with regard to mistakes and omissions in contracts. The bill also restricts owners' ability to challenge the legality of their contract after the 10-day rescission period required by current law. As you know, developers already hold all of the cards in timeshare transactions. Potential buyers are subjected to verbal high-pressure sales tactics that, under current law, are not actionable. Developers provide buyers with long and complicated contracts that are very difficult to read much less understand, and which are written to protect the developer. Beyond that, most timeshare developers don't even offer, to this day, programs that will allow longtime Florida owners with medical or financial hardship to get OUT of their timeshare contracts while their mandatory maintenance fees continue to increase.

SB 932, if enacted, would give developers even more leverage over the owner community — and the fact is, they don't need it. There is no emergency that requires passage of this bill. Action: Please send it back to the Legislature with a veto message that says, "Give me a fair and straightforward bill that balances the needs of owners and developers."

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About the author

This answer was provided by RedWeek's Chief Correspondent, Jeff Weir. Jeff is a California-based journalist who has covered California, Congress, and the White House. He also has roots in Silicon Valley, where he directed public relations and marketing programs for high-tech companies. He is also a timeshare owner and member of RedWeek.com.

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