Housing Laws: Timeshare's Legal Loophole Explored

Timeshare laws vary from state to state in the US, with some states like Florida, Nevada, South Carolina, and California having more extensive legislation due to a high volume of timeshare usage. These laws often focus on regulating the sale and resale of timeshares, protecting consumers from fraudulent activity, and establishing cooling-off periods during which buyers can cancel their contracts. While timeshare contracts are unique in that they create a non-cancellable lifetime obligation, housing advertising laws under the Fair Housing Act (FHAct) prohibit discrimination in housing-related transactions, including advertising, based on protected characteristics such as race, religion, and disability. It is important to understand how these advertising laws apply to timeshare marketing and ensure compliance with federal, state, and local regulations.

Cooling-off periods

Every timeshare purchase comes with a cooling-off period that starts the moment you sign the contract. This period gives you the option to cancel or change your timeshare contract, which can be a relief if you feel you were pressured into buying. The length of the cooling-off period varies by location, but it's usually between 7 and 14 days. For example, in the US, each state has its own laws, with California and Louisiana offering 7 days, Maryland offering 10 days, and Connecticut and Massachusetts 3 days. In Florida, there is a statutory 10-day cooling-off period, and if you purchase from a resale, you may have even longer. In the UK, British consumers need to be aware that the laws of the country or state they are in will apply, not UK or EU regulations.

The time is usually measured in calendar days, not business days, and you will need to cancel in writing, sometimes using a proforma provided by the timeshare company. After the cooling-off period, it is very difficult to cancel a contract unless there was a breach or the company was fraudulent.

Verbal promises

However, if these statements are deliberately misleading and deceptive, they can be challenged in court. To avoid this, timeshare contracts often include wording that is designed to legally protect sales teams and their developers/sponsors who overstate the attractions, amenities, and future development of a resort. This means that even if a timeshare salesperson makes a verbal promise, it may not be legally binding, and it is important to get any promises made in writing.

In the US, the controlling legal document is the Public Offering Statement (POS) that developers file with their home state and then share with owners upon the signing of a timeshare contract. If a POS states, for example, that a certain number of cabins and improvements will be built over a specific period, 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.

In Florida, under timeshare laws, buyers/owners cannot sue a developer for misleading or inaccurate statements made by sales teams. The buyer-seller contract is the only binding document that spells out the rights of each party. Therefore, it is important to be aware of the laws in the state or country in which you are purchasing a timeshare, as they may differ.

Cancellation waivers

To cancel a timeshare contract, buyers must typically submit a written cancellation letter within the specified cancellation period. This letter should include the buyer's name and contact information, the name of the timeshare company, a description of the timeshare, the date of purchase, and a clear statement of cancellation. It's important to follow the instructions in the contract regarding the delivery method of the cancellation letter, as failing to do so may result in an invalid cancellation.

In some states, such as Arkansas, buyers may have the option to cancel their timeshare contract after the rescission period has expired. This usually entails bringing a lawsuit against the timeshare company with the help of an attorney. Additionally, it's important to be cautious of timeshare exit companies that claim to help buyers get out of their contracts, as many of them are scammers.

Right of first refusal

The Right of First Refusal (ROFR) is a specific sales clause that might exist within a timeshare contract. This clause grants the timeshare brand or resort the right to purchase back your timeshare if you are looking to sell it. If you have an ROFR clause within your vacation ownership contract, you’ll need to contact your resort before selling your timeshare independently on the secondary market.

• Timeshare Owner Lists on the Resale Market: The sale process begins when an existing owner (i.e. not through the resort) puts their unit up for sale.
• Potential Buyer Makes an Offer: When an interested third party expresses interest, they make an offer and then negotiate the terms of the sale.
• Offer Gets Accepted and Closed: After the offer is accepted, terms are agreed upon, and the paperwork is signed. The agent facilitating the sale will then send the closing documents to the resort to begin the ROFR process.
• The Resort Evaluates the Sale Agreement: The property developers will assess the timeshare's resale terms, considering the points or weeks listed, the unit size, and any outstanding balances.
• The ROFR Is Exercised or Waived: The resort decides whether to allow the resale transaction or interrupt the sale to buy back the timeshare.

If the resort exercises its ROFR, it will step in as the buyer and take over the sale. The seller does not have to make any adjustments, while the original interested buyer is no longer eligible to purchase the specific unit. The escrow deposit is refunded or it can be used towards the cost of another sale.

If the resort waives the ROFR, the sale can continue between the original buyer and seller.

Disclosure requirements

In addition to the federal regulations, almost all states have their own laws governing the disclosure requirements and cancellation policies for timeshare contracts. These laws can differ significantly from state to state, and it's important for buyers to understand the specific laws in their state before purchasing a timeshare. For example, in Florida, buyers have ten days to cancel a timeshare purchase, while in Arizona, the initial cancellation period is seven days. It's worth noting that some states, like Florida, also have specific laws and regulations regarding the advertising of timeshares, which are designed to protect consumers from misleading or deceptive practices.

The disclosure requirements for timeshare purchases can include a range of information that must be provided to the buyer before or during the sales process. This can include details such as:

• A description of the timeshare plan, including the length and nature of the plan
• A description of the accommodation included in the timeshare, including the size, location, and any amenities or services provided
• Information about how expenses and ownership elements are calculated and divided among the owners
• Details about any maintenance fees, property taxes, or other ongoing costs associated with the timeshare
• A clear explanation of the buyer's cancellation rights and the process for cancelling the contract

It's important to note that timeshare developers and salespeople may not always voluntarily provide all the necessary disclosures. In some cases, they may use aggressive or misleading sales tactics to pressure buyers into making a purchase without fully understanding their rights and obligations. As such, it is crucial for buyers to be vigilant and conduct their own research into the specific laws and disclosure requirements in their state before signing any contracts.

Frequently asked questions