Today we start with the first of a three part article on what Irene calls the 3 R’s of Timeshare, although this first part begins with “F”.
In the US this is Foreclosure, which to those of us in Europe would just be Relinquishment or Surrender. What we have to remember in Europe is that for our American cousins, timeshare tends to be governed by Real Estate Law and financial agreements are usually associated with a mortgage rather than a personal loan or finance agreement. So foreclosure will be similar to repossession of your house for not keeping up with mortgage payments. Failure to keep up payment on a loan does not result in the timeshare being “repossessed”, as the finance is separate from the timeshare.
As for relinquishing or surrendering your timeshare in Europe, this very much depends on who you purchased with, some companies are better than others.
As a very good example of the bad, we only have to look at MacDonald Resorts, this particular company has been the subject of many press articles, including some published here on Inside Timeshare. This company is renowned for not allowing people out of their contracts even after death, so this means the children inherit the timeshare and the subsequent maintenance bills.
A very good case which Inside Timeshare has been working on is that of Mrs B, an 87 year old lady in ill health, who used a company to relinquish her contract. This was done by selling to a third party, MacDonalds refuse to accept this, stating they do not recognise the transfer, even though we have notary documents proving the transfer. Consequently they are pursuing Mrs B for arrears in maintenance, passing the debt onto a debt collecting agency who are threatening court action if it is not paid. Inside Timeshare is now lodging a formal complaint to the Financial Conduct Authority as the debt is “under dispute” and should not be chased by the agency.
This company also “offers” a limited number of members to hand in their timeshares every couple of years, but only on the payment of 4 years maintenance fees.
Another company that is renowned for being very difficult to get out of is Petchey Leisure, now owned by MGM Muthu. As far as they are concerned your contract is in perpetuity and that means never ending, so even your grandchildren will end up with the maintenance bills.
Diamond Resorts in Europe on the other hand seem to be getting their act together, for several years now they have allowed any member over 75 to hand back their membership. They also allow others to hand back in what they term as “exceptional circumstances”. These are the death of a partner, illness and financial difficulties. For those who do not fall into these categories they will allow surrender on payment of upto 3 years maintenance fees.
So now on with Irene’s Article.
The 3 Rs or F of Timeshare:
Part I Resolution, Relinquishment, Refund or Foreclosure
What will happen when you decide your timeshare decision was a mistake?
Part II: The 3Rs of Timeshare
Part III: 2 More Rs – Timeshare Rentals and Resales
By Irene Parker March 28
Except for failure to pay child support, there is no debtor’s prison. Anyone feeling desperate, angry, worried, ashamed or scared about their timeshare situation can rest assured they can put their timeshare troubles behind them through the 3 Rs or F of Timeshare.
The words I used above are how I describe timeshare members who have reached out to Inside Timeshare or to me through our Advocacy Facebook Page, burdened by high interest loan payments and rising maintenance fees. Our goal is to convert this owner into an informed and empowered owner.
Often, life without timeshare can be achieved without legal assistance, but we have a crew of able bodied lawyers there if you need them as a last resort. Advocacy works but has its limitations. All of our Advocates are unpaid, helping individual timeshare owners and members while working towards timeshare reform.
Last week we quoted Mr. Nusbaum’s feelings about the secondary market. Mr. Nusbaum is President and CEO of ARDA, the timeshare developer lobby.
“This is a legacy problem. People buying a timeshare today are buying it from multisite clubs that have management forever and sales teams forever, so the ability to recycle inventory will not be a problem in the future.” June 2014 RedWeek
On the other hand, here is another Nusbaum quote from the same article sounding somewhat contradictory:
“The developer community is not without some dirt under their nails in this. We’ve created a business model that needs recycling. We want to help the secondary market. For self-perpetuity, it’s insane not to have a healthy secondary market.”
But most of all, according to Nusbaum, the long-term outlook is improving because the largest timeshare companies are developing programs that offer exit strategies for their owners. The complete RedWeek article:
“Exit strategies” are voluntary surrender programs. Requests are evaluated case by case. It is difficult to determine how many requests are granted compared to the number of requests overall. Are these programs just media window dressing to make it look like the industry is responding?
Michael Kosor has worked with Nevada Senator Becky Harris in an effort to propose legislation that would allow better disclosure as to the limited, or sometimes non-existent, secondary market.
“Actions by the timeshare industry, regulators, and legislators, are analogies to firefighters rescuing the elderly trapped in a burning building. Until the cause of the fire is identified, consumers will continue to be lured into these burning (defective) timeshare products that are not supported by a secondary market. While I applaud the rescue, we should not allow the industry and those responsible for consumer protection to hide behind said rescue efforts while they inexplicably fan the flames. Ambulance chasing fraudulent transfer agents is a back-ended solution – a Band-Aid reaction.”
Treating symptoms without studying the cause can be problematic for medicine or timeshare. The cause in the case of timeshare is the active destruction of the resale market for the benefit of immediate developer profits.
“Where are the association Boards we elected to represent our timeshare interests”?
“Owners clearly would like to see more done to advance and advocate for an improved resale market,” continues Michael. “Why is it our advocacy group is the only voice in this discussion? With the exception of a few legacy associations, virtually none of the industry affiliated associations have an active resale program available to owners to assist in exit and preclude foreclosure, if a voluntary surrender is denied”.
I approached my association a few years ago, the Wyndham Grand Desert, and was told “this was not their responsibility.” Instead, my (and most all) associations’ leaders throw owners wishing to exit (which we all do eventually) to the wolves of the current resale environment or transfer agents. They then enter into very lucrative repurchase contracts with and for the developers. These repurchase contracts provide the association pennies on the dollar of outstanding assessments, then give the developer very low cost inventory to sell as new to the next owner.
The real issue is not merely failing to fix the resale market. Worse, the industry is actively working to build the recycle model which requires the intentional undermining of the resale market. Advocate owners and members understand the cause and the fact the industry has no desire to fix the problem. It’s sad that we as advocates have to educate and walk the elderly, the ill and those burdened financially, through the foreclosure process when all else fails.
The developers consider themselves benevolent when they allow the surrender of a $25,000 to over $100,000 vacation plan in exchange for a surrender of zero value. As long as the vacation points or weeks stay in the hands of the developer, there is no free market system. Lenin would be proud.
Back to the 3Rs or F of Timeshare
We want to avoid the F for foreclosure, but for some owners there is no choice.
Let’s get this last and most unpleasant option out of the way so we can focus on more positive outcomes.
Where do we start? Pull out all those documents and start digging!
I hear a lot of “I think” or “I’m not sure” when I ask the following questions:
- When did you first buy your timeshare?
- Where did you buy your timeshare?
- How many points do you own?
- What was the sales agent’s name?
- What interest rate are you paying if you have a loan?
- What do you want to happen?
We begin at the end – Foreclosure
If a member has an otherwise unblemished credit score, he or she can work to have the reason for foreclosure added to a credit report. I asked timeshare attorney Mike Finn of the Finn Law Group some questions about the foreclosure process. We use one unnamed resort as an example, but the procedure is similar to all timeshare companies. A common question is:
Will the timeshare company try to ruin my credit for non- payment of maintenance fees loans or both?
Mike Finn: Generally no credit reporting on maintenance fees, yes they do on “mortgage” payments. Most timeshare property owner associations, which are separate non-profit entities, do not report non-payment of maintenance fees largely because they don’t maintain subscriber contracts with the credit reporting agencies. However, once referred to collection, those agencies do maintain subscriber relationships and that’s where the issue becomes relevant.
Can or will members be taken to court for non-payment of maintenance fees loans or both?
Mike: Can yes, will, maybe not so much
Do they place liens for non-payment of loans?
Mike: Yes in the sense that they do pursue foreclosures, yes for maintenance fees as well.
Do they place the lien just on the timeshare? In other words, does the lien apply just to the timeshare, or does the lien apply to a member’s primary residence as well?
Mike: The word ‘lien’ can be utilized in more than one way. In the timeshare world it typically means the security interest filed against the timeshare itself by virtue of nonpayment of maintenance fees. Only the timeshare interest itself is impacted by that kind of lien, not the owner’s property beyond the timeshare. A mortgage lien on the timeshare caused by non-payment of the initial purchase price can, under certain circumstances, become a judgment which could be satisfied by going after the defaulting party’s personal assets. This very rarely happens, but it has happened, so we can never, say never.
Is it advisable to just stop paying fees without the aid of an attorney?
Mike: It really does depend on your ability to endure collection calls, letters threats, and a foreclosure on your credit report is quite damning, it will make refinancing or new residential purchases an issue for about 5 years. Rarely will they sue for deficiency balance.
According to Charles Thomas, here is how it works in Europe
This resort employs a debt collection agency, one they use is called Daniels Silverman, the debt is passed on to them (usually sold), they now own the debt and will threaten court action – whether they will is another matter. If this does occur, then yes credit rating will be affected as it will then be a County Court Judgement and failure to pay will result with the court bailiffs being sent in to recover either cash or goods to the value. Only they have the right of entry into the home.
As for a loan, if it is with a third party i.e. Barclays Partner Finance, any failure to keep up payments will result in County Court action as above and credit blacklisting.
It is advisable to seek advice from an attorney before just stopping any payments, as by doing this the debt cannot be passed on to an agency as under the Financial Conduct Authority regulations. The debt can be classified as “under dispute”.
According to the Canarian Legal Alliance CLA, when the firm takes on a relinquishment with a loan attached, they also try to have the loan agreement cancelled.
It is advisable to completely check any company that offers relinquishment services, as this is an area which is fraught with con artists.
Below is our Inside Timeshare article on debt collection with links to various authorities, it also includes a list of those resorts who employ debt collectors and a list of those who have taken people to court.
As Charles Thomas reported, Europe maintains a thriving timeshare foreclosure and collection industry as well.
Our Advocates, relying on their experience and expertise, are here to evaluate and work together, each bringing a piece of the puzzle to help you find your answer.
Next week we continue with Part II – The 3Rs of Timeshare:
Resolution, Relinquishment, Refund
Part III – The 2Rs of Timeshare – Rentals and Resales
Contact us today if you would like to share your story or work with us by becoming a Timeshare Advocate.
Thanks to Irene, Mike Finn and Michael Kosor for their contribution.
As you already know as owners of timeshare, whether in Europe or across the “Great Lake” in the US, once you purchase timeshare, getting out of it is fraught with obstacles. It does depend on who you own with, some are better than others. In Europe, Spain is leading the way with timeshare law, it is giving “consumers” more protection, making it easier to get out.
Inside Timeshare hopes these articles are of benefit to you the owners, that only through coming together and sharing information can we hope for any change in the industry.
If you have any questions or want to share your experience contact Inside Timeshare or join the Advocacy FB page.