A few weeks ago, the CBS Evening News reported on an elderly couple who in looking to sell their timeshare, ended up paying over $18,000.00 to an exit company who promised to assist the couple in “terminating” their timeshare contract. They paid, and today they still own the timeshare.1 Now you may wonder why in the world the couple continued to fork over money to the exit company with no result in sight, and the couple admits to being embarrassed over their own naiveté, but this is exactly what exit companies count on.
Now you may wonder why in the world the couple continued to fork over money to the exit company with no result in sight...
While there are legitimate exit companies who sincerely and ethically assist owners in selling their timeshares, the industry has become infiltrated with companies who guarantee they can get you out of your timeshare - but for a substantial fee. You’ve probably seen the proliferation of ads on the internet and television attesting to the success rate of these companies. These advertisements scare you into believing that you will be unable to sell, be burdened with ever-increasing maintenance fees and that your children will be liable for the maintenance fees after your death. They claim to use secret proprietary methods they have developed that “guarantee” to get you out of your timeshare. Some even have celebrity endorsements and claim to have excellent BBB ratings and have websites filled with many testimonials from satisfied customers but with very little actual detailed content.
All these advertisements would lead one to believe that timeshare owners are highly dissatisfied with their timeshares when in actuality, timeshare ownership continues to be one of largest growth areas in real estate. According to the American Resort Development Association (“ARDA”, which was established as the trade association representing the vacation ownership and resort development industries to combat marketing abuses and promote the growth and development of the timeshare industry and is actively involved in local, state and national governmental affairs), 83% of all timeshare owners are satisfied with their timeshare. The Better Business Bureau (the “BBB”) conducted the investigation which CBS reported on after receiving thousands of complaints. The BBB found that out of the 9 million or so timeshare owners, 1.5 million are seeking an exit from their timeshare. With so many people looking to exit, more exit companies continue to pop up because fraudsters recognize an easy way to make millions of dollars by preying on the lack of knowledge of consumers. As the old saying goes, even a broken clock is correct twice a day, and some exit companies do manage to get results for some clients. However, it is their methods that have raised the ire of the timeshare industry, even causing several of the larger timeshare companies to file lawsuits against exit companies, including their celebrity endorsers, such as national syndicated radio host Dave Ramsay who for years endorsed an exit company on his radio show. Lack of knowledge on the part of the owners assists the exit companies. Owners fail to read their condominium documents, fail to contact the resort about exit options, and fail to take a little time to do some research into exit options and the exit company itself.
Aside from the legitimate exit companies, the fraudulent companies generally fall into two categories: Those that basically do nothing more than collect their fee and send one or two nonsensical letters to the resorts making vague allegations of fraud and demanding contract termination and that the resort “take back” the timeshare; and those which send out numerous letters to the resort claiming fraud, misrepresentation, resort mismanagement and demand every piece of documentation under the sun in the hopes that by overwhelming the resort with their demands, the resort will give in and “take back” the timeshare in order to avoid potential litigation. The exit companies claim the owners associations are the successors in interest to the developers, and are thus directly liable for any sins of the developer. The owners association was not a party to the sale of the timeshare and may have no knowledge of what occurred at time of the sale or any documentation from the sale. The exit company is betting that their threats will scare the resort into agreeing to assume title to the timeshare in order to avoid potential litigation. These companies also advise the owners to stop making their maintenance fee payments and demand the owners and the resort have no further contact with each other – thus preventing the resort from advising the owner as to any sales or exit program it may have in place.
A common misperception amongst timeshare owners is that the timeshare is a contract that can be terminated. In Massachusetts, ownership is thru a recorded deed or license. The majority of exit companies do not understand state conveyancing and timeshare law nor do they care to. They are not based in the state where the resort is located and do not conduct research as to how title to the timeshare week may be held. Instead, they send a “one size fits all” form letter to the resort demanding termination of the contract and make numerous allegations against the resort, claiming the initial sale process was somehow illegal or unethical, that the owners were promised the timeshare was a good investment and would be easy to sell. If the exit company engages a law firm, then the resort is also subjected to allegations of violations of the Federal Fair Debt Collection Practices Act, Massachusetts consumer laws, and common law fraud. The exit law firms make demands on the resort for any and all documentation as to budgets, financials, minutes, contracts, loans for the last several years as part of their “investigation” into how the resort is being run and managed. Should the resort find such a document demand to be too cumbersome, then the exit company states it will agree to drop any and all claims the owner may have against the resort if they simply agree to take back the timeshare at no cost to the owner. The resorts are forced to either capitulate to the exit companies’ demands or engage legal counsel to respond to such accusations.
The demand to “take back the inventory” rings hollow as the resort owners association has no obligation to take title to deeded or licensed real estate of an owner. There have even been numerous instances where the exit company sent a congratulatory letter to the owner that they successfully persuaded the developer or resort to take back the timeshare and have the owners execute a deed conveying title to the developer or resort, which is then recorded, all without the knowledge or permission of the developer or resort.
Some exit companies give unsuspecting owners the false assumption by their name and website that they are in fact a law firm, and not a group of people simply sending out form letters and working the phones. Some exit companies engage complicit law firms to send the appropriate correspondence to the resort without ever advising the owner of the use of the outside law firm.
Timeshare ownership continues to be one of largest growth areas in real estate. Consequently, as with any purchase of real estate, buyers need to perform due diligence before purchasing and understand their options on selling when they are no longer able to use the timeshare. A common complaint of owners is that there is no easy mechanism to sell a timeshare. If you own property in Boston, you can engage a broker who will advertise on your behalf, hold showings and find a buyer who wants to own or live in Boston. With a timeshare it is more difficult to sell as you need to find a buyer who wants to buy into your particular resort or timeshare club. The buyer pool becomes much, much smaller.
Any owner seeking to sell their timeshare should always contact their resort first. As the vacation and travel needs of aging original owners have changed, the vast majority of resorts have realized that responsible exit programs needed to be developed. The larger timeshare resorts have developed either resale programs for owners to enter with an on-site broker or an exit policy that allows an owner to pay a one-time fee in exchange for the resort to assume title to the timeshare. The resale programs charge a brokerage fee and closing costs just as when selling residential property. The resort exit policy typically costs far less than what an exit company would charge and with use of an exit company, the resort will still require payment of its exit policy fee, so an owner ends up paying twice by engaging the exit company. If the owner is also a member of an exchange company, they should contact the exchange company for alternative exit options. ARDA and several large timeshare companies have developed a website – ResponsibleExit.com – which provides information and resources for timeshare exit options. ARDA’s main website, ARDA.org also has recommendations for sale of timeshares and lists of legitimate exit companies. Owners can save money, time and avoid stress by taking the time to do a little homework.
1. CBS Evening News, Timeshare exit companies may be scamming customers, aired June 5, 2019.