-by TS Newshound
June 14, 2010– ARDA’s small army of lobbyists and attorneys won a pair of victories over the last year that might have gone unnoticed by the general public– and even timeshare sales reps– but both are very important and both have a direct impact not only on consumers and HOAs but also timeshare developers.
Interestingly enough, both victories came in Florida, the timeshare capital of the world. And both occurred following years of effort by ARDA.
Most recently, Governor Charlie Crist signed into law legislation that gives much needed relief to timeshare owners associations (HOAs) and developers from the lengthy judicial processes for timeshare interest foreclosures. The “Trustee Foreclosure” bill (FL HB 1411) will shorten the time to complete a foreclosure action from as long as 18 months to as little as 90 days. This is especially important for Florida HOAs as it will give them the opportunity to replace a non-paying owner more quickly and cost effectively while helping to eliminate the need for assessment increases or reducing or deferring much needed maintenance projects.
The need for this legislation arose in direct response to the growing challenge faced by HOAs and lenders from timeshare owners, strapped by the realities of the economic crisis, who either could not afford to maintain their payments or chose to “walk away” from their maintenance fee or mortgage payment obligations.
Though focused on providing relief to associations and owners left with the financial obligations, the bill also offers significant protections for the rights of delinquent owners. Most importantly, it will provide the unqualified right for an owner to opt out of the trustee process and force a judicial foreclosure, or to pay their debt at any time prior to a trustee sale without financial penalty. If the delinquent owner does consent to the trustee foreclosure, the owner will not be subject to any deficiency judgment for amounts not recaptured by the sale of the timeshare interest as can be the case through the judicial process.
An earlier win for ARDA, and timeshare owners, came in July 2009, when the passing of HB 61 codified protections for timeshare owners in several ways. Perhaps most important, Florida’s tax laws were amended to ensure that the use of a timeshare accommodation by an owner or owner’s guest, whether at the “home” resort or through an exchange, is not subject to Florida’s sales and tourist development taxes.
Essentially, the clarification recognizes that timeshare owners should not be taxed for a product they already purchased and on which they already pay high taxes in the form of ad valorem assessments.
The passage of the bill ensures that the temptation for some government bodies to try to tax timeshare exchanges to earn more revenue in this bleak economy will be nipped in the bud.
In addition to clarifying the laws regarding State and local taxes relating to timeshare activity, HB 61 also allows developers to add debt cancellation products in their offerings, a boon to both developers and consumers.
Of course the victory in this regard was not absolute. In return for obtaining clarity on those tax issues, ARDA-Florida found it necessary to agree to clarification of which timeshare transactions would be subject to transient rental taxes. The three such areas identified in the bill for inclusion of transient rental taxes are:
- Sales of timeshare licenses (the right to use a timeshare accommodation, not coupled with an interest in the underlying property)
- Transient rentals of a timeshare accommodation
- The sale of regulated short-term products
With respect to timeshare licenses, HB 61 states that consideration paid for the purchase of a license in a timeshare plan is to be treated as rent subject to the tourist development tax. With respect to rentals of these accommodations, HB 61 clarifies that timeshare resort rentals are subject to tourist development tax, tourist impact tax, convention development tax, and the transient rentals tax, by specifically listing rental of timeshare accommodations as a category of transient rental activity.
Regarding the regulated short-term products, which is a contractual right to use a timeshare plan’s accommodations in which the contract 1) is executed in Florida on the same day that a prospective purchaser receives an offer to acquire an interest in a timeshare plan but does not execute a purchase contract after attending a timeshare presentation; and 2) provides that all or a portion of the consideration paid will be applied to or credited against the price of a future purchase of a timeshare interest, or that the cost of a future purchase of a timeshare interest will be locked in at a specific price.
The clarification of that part of the law came as a result of an audit of Fairfield Resorts (now Wyndham Vacation Resorts) performed by Broward County. The County decided that the “one-time inspection privilege packages” (aka “fly-buys/mini vacs”) should have been assessed with the County’s tourist development tax. The decision was upheld by the courts, and uproar ensued. But in order to get tax relief in other areas, HB 61 provided that transient rental taxes for the consideration paid would be due and payable at the end of the last day of the stay– unless the consideration paid is applied to the purchase of a timeshare interest.
So that’s essentially it, and both ARDA and the Florida State Legislature are to be commended for the passage of those two bills.
TS Newshound, the standard byline for this column, is an inclusive nom de plume for anyone who wants to contribute to the Hot Cuppa Joe section. The “who” depends on who feels like writing or sharing information and therefore can change without notice. If you have something you’d like to contribute under that nom de plume, or a comment about this particular column, email email@example.com