Ask RedWeek / November, 2015

What can owners do when timeshare sales promises are not delivered?

I am a longtime owner who bought a mountain cabin timeshare where the sales people told me they would build a water-sewage system, but they built a "community bathroom" instead, which is right in the middle of woods frequented by bears. I recently learned that the resort is now re-selling units as members have dropped out while my maintenance fees increase to cover delinquencies. I feel like I was double-crossed. Are these changes legal? What can I do about it?

We get questions frequently about resorts not following through on promises that were central to the buyer's purchasing decision. To answer these questions, RedWeek consulted Michael Finn, a Largo, Florida timeshare attorney who represents owners who have problems with their resorts. He focuses on negotiating settlements that, typically, enable owners to get out of their contracts. When those negotiations fail and the circumstances are appropriate, he also files litigation against resorts and HOA's on behalf of his clients.

In many states, oral representations made by sales people are not legally binding and, therefore, are not actionable — that means you cannot sue a developer for statements and assertions made by sales people that turn out to be wrong. However, if those statements are deliberately misleading and deceptive, they can be challenged in court.

The controlling legal document — for owners, HOAs and developers — is the Public Offering Statement that developers file with their home state (for regulatory approval) and then share with owners upon the signing of a timeshare contract. If a POS states, for example, that 20 cabins and improvements, such as a pool, spa and workout complex, will be built over a specific period of time, the developer is obligated to provide those improvements. However, if the POS is silent on these issues, the timeshare buyer has little recourse to challenge oral promises that were not kept.

Every timeshare contract, according to Finn, includes wording that is designed to legally protect sales people (and their sponsor/developer) who overstate the attractions, amenities, and future development of a resort. While developers will dispute Finn's assertion, and there are certainly honest timeshare salespeople, the industry has the unfortunate reputation of making exaggerated promises to close the sale.

Under Florida's timeshare laws, buyers/owners cannot sue a developer for misleading or inaccurate statements made by sales people. The buyer-seller contract is the only binding document that spells out the rights of each party.

Finn worked with an attorney in Virginia recently where several owners complained about a developer's failure to build a water park that had been promised during the original sales presentation. The case evolved into a class-action lawsuit that, eventually, led to a settlement that enabled the owners to void their contracts.

That's not the standard outcome, however, for owner-developer disputes over promises for improvements and amenities.

The dynamics change when an HOA board — which represents owners and takes over after the original developer has departed — decides to change business decisions based upon cash-flow and other issues, such as increasing defaults on maintenance fees.

Timeshare owner associations pay all of their operating costs — repairs, improvements, amenities — from maintenance fees. When owners age-out, die, or simply refuse to pay their maintenance fees, the financial burden of running the resort falls, year to year, upon all other owners in good standing. As a result, their maintenance fees go up while the HOA board tries to resell inventory that has gone into foreclosure.

HOA Board members at legacy resorts are subject to the same POS documents as rank and file owners. At the same time, they have a fiduciary duty to manage the resort as responsibly as possible — which means, making the smartest decisions they can to extend the life and value of the resort. Sometimes that translates into drastic decisions, such as dismissing planned improvements that are no longer financially feasible, or raising unpopular annual fees.

These kinds of decisions often catch timeshare owners by surprise, particularly when they are not informed, in advance, of a resort's financial situation. But they are not necessarily signs of bad faith, breach of contract, or other legally actionable business practices.

Bottom line for owners in doubt about after-contract changes at their resort: contact your resort's board, the general manager, or the management company for a full explanation. Then review your contract documents to see if any of these issues are addressed in writing (and in a way you can understand them). If you have additional questions about your legal remedies, contact an attorney with experience in timeshare real estate law.

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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