RESORT LAW

New Law Targets Unscrupulous Timeshare Transfer Companies

Viking Ships Meet Their Maker: New Massachusetts law helps protect resorts and owners by imposing strict standards for timeshare transfer companies and timeshare resale advertisers.

Published in Resort Trades magazine

August 2014

Massachusetts has tackled a problem that has been plaguing the timeshare industry for the last several years. Timeshare transfer companies (TTCs) take advantage of owners who want to sell their deeded timeshares, but have had little success. The TTCs persuade the owners that the timeshare business is a scam, that they’re stuck with their timeshare forever and that they and their heirs will have to pay assessments in order to avoid a bad credit rating.

TTCs tell the owners, that to avoid this, that they will take the timeshares off their hands for a payment — sometimes in the thousands — and that the owners will never have to worry about it again.

What they don’t tell the owners is that the timeshares are almost always offloaded into limited liability companies who simply hold the title, but have no intention of using the timeshares or paying assessments. The TTCs let the LLCs languish and eventually fold; hence these companies are known by the rubric “Viking Ships” — referring to the Vikings who sent their dead out to sea in boats. The practice hurts the resorts by depriving them of assessment income and causing them to have to foreclose to get the property back. Sometimes the TTCs simply take the owners’ money, but don’t transfer title.

Massachusetts enacted Chapter 76 in the 2014 session which establishes strict standards for TTCs. There must be a transfer services agreement that clearly describes the parties, addresses, contact information, fees and services to be provided. The law requires that all funds be escrowed in Massachusetts until the services are performed, an owner’s cancellation right within 3 business days of signing, a refund of monies within 20 days after the receipt of the cancellation notice and the keeping of escrow agent records for 3 years. These requirements will get the owners the information that they need to make informed decisions and ensure that their funds will be protected by an escrow agent.

However, the most important feature of the law is that it prohibits TTCs from participating in a plan or scheme to transfer a timeshare to another person under circumstances in which the TTC knows or reasonably should have known that the person does not have the ability, means or intent to pay the assessments associated with the timeshare. A violation of this provision is a violation of the state Consumer Protection Act which provides injunctive relief and a civil penalty of $15,000 for each violation. Not only can the attorney general bring legal actions, but consumers can as well and recover attorneys’ fees if successful.

The law also reigns in fraudulent practices of timeshare resale advertisers (TRAs). It requires the TRA have an agreement with the owner which has the same information that is in a TTC agreement and provides the same rescission rights. It prohibits representations that the TRC will provide services other than advertising or that the timeshare has a specific resale value. The law provides the same remedies as those available against TTCs. Legitimate brokers are exempted.

Chapter 76 puts an important tool in the hands of owners and resorts to fight against fraud and false information.

* W. John Funk is admitted in New Hampshire, Vermont and Massachusetts.

W. John Funk
You may contact
John Funk at 603-545-3607.

Related practice areas:
Resort Law
Real Estate Development

See related article:
Strategies for Timeshare Resorts to Combat Unfair and Deceptive Resale Practices