Experienced timeshare attorney explains UCC Article 9 and timeshare repossession
Timeshares are often characterized as an investment in real estate by those selling them. The idea is that real estate holds unique intrinsic value by virtue of its finite availability, particularly in desirable locations where people want to travel. For this reason, a major talking point among timeshare salespeople is to tout the putative resale value of a given timeshare interval to unwitting consumers, especially those unaware of the encumbrances appurtenant thereto, particularly annual dues for maintenance and arbitrary restrictions on accessibility, which collectively render the ‘investment’ an actual net liability. One need only to perform an online search to find that many or most timeshare interests are listed for little or no consideration.
So even if a timeshare interest is properly deemed to be in the nature of real property, typically it will carry little or no intrinsic value for investment purposes. This characterization also presupposes that the interest is deeded – many timeshares are actually sold as points-based interests – the idea being that one purchases points of access according proportionately more access to those with more points. In this instance, the nature of the legal interest sold is more properly defined in legal terms as personalty – specifically, intangible personal property.
With passing time, endeavoring to define a timeshare interest as personal property has significant advantages for a timeshare developer. First and foremost, if the developer lacks scruples and is inclined to oversell its inventory relative to those seeking access to it, there are no legal constraints associated with the recording of deeds which, by design, would prevent such a practice.
Also, even use of the word ‘timeshare’ has taken on a decidedly pejorative connotation in recent years, undoubtedly due to widespread abuses rife throughout the industry. So rather than calling it a timeshare, from a marketing perspective, instead referring to it as ‘vacation ownership’ based on points of access granting membership to a ‘vacation club’, ‘vacation network membership’, or the like, has proven to be something of a marketing coup.
Moreover, upon default on an obligation appurtenant to the points-based timeshare, repossession thereof may be performed faster, simpler, and more economically than through a judicial foreclosure process historically required of a deeded interest. And although many or most jurisdictions now provide for power of sale foreclosure statutorily, any title-related issues may still require judicial foreclosure. But if the interest is not deeded at all, the timeshare developer may use the UCC Article 9 repossession provisions upon default. This typically involves a notice of intent to repossess and disposition of proceeds of the resale to offset the obligation. It must be handled in a ‘commercially reasonable’ fashion. Where appropriate, any overage in the repossession and resale of such an interest should be documented and paid to the erstwhile owner of the property.
Increasingly bad actors within the timeshare industry have abandoned any semblance of adherence to legality in the repossession process – failing even to notify the ‘owners’ that a given timeshare interest has been repossessed and resold. Rather, the unscrupulous timeshare developer will simply deign to make a perfunctory digital bookkeeping entry, call it a repossession or foreclosure when reporting to the credit bureaus, thereby dispensing with the inconvenience of even the minimal legal requirements of UCC Article 9. The disaffected observer may complain: “It’s not enough that they openly flout the law, they must also lie about it publicly so as to disparage the creditworthiness of the hapless consumer”.
To legally address these and other irregularities that seem to happen with increasing frequency will require substantial financial and human resources in an adversarial judicial context. These are measures that, to date, have not been undertaken on a scale sufficient to curb the kind of abuses documented herein, though some have taken up these issues on a smaller scale. Needless to say, a nuanced treatment of the issues is necessary, requiring formal legal training by a licensed attorney.
 See, e.g., Fla. Stat. §721.05(28), http://www.leg.state.fl.us/statutes/index.cfm?App_mode=Display_Statute&URL=0700-0799/0721/0721.html