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What Is Right of First Refusal in Timeshares?

If you’re buying or selling a timeshare, the Right of First Refusal (ROFR) is a clause you need to understand. It allows the resort or developer to step in and purchase your timeshare under the same terms you’ve agreed upon with a buyer. This process can delay transactions and impact buyers and sellers in different ways.

Key Points:

  • For Sellers: ROFR can delay sales by 30–45 days while the resort decides whether to exercise its right. If the resort buys the property, it replaces the buyer but must honor the agreed terms.
  • For Buyers: The resort can cancel your purchase agreement if they exercise ROFR, refunding your deposit but leaving you without the property.
  • Legal Binding: ROFR clauses are enforceable, and bypassing them can lead to legal issues.
  • Why Resorts Use ROFR: It helps maintain property values and control over ownership.

Understanding ROFR before entering a timeshare transaction can save time, frustration, and legal headaches. Buyers and sellers should review contracts carefully and consider working with brokers or legal professionals to navigate the process effectively.

How ROFR Works in Timeshare Sales

Understanding how the Right of First Refusal (ROFR) works is crucial for both buyers and sellers, as it can introduce delays and require careful decision-making. The process is structured, but each party faces its own set of challenges when ROFR is involved.

The ROFR Process: Step-by-Step

ROFR kicks in as soon as you decide to sell your timeshare. Here’s how the process typically unfolds:

  • List Your Timeshare: Start by listing your timeshare to attract potential buyers.
  • Receive and Accept an Offer: Once a buyer makes an offer, you agree on the terms, including price, financing, and conditions.
  • Sign the Purchase Agreement: Both parties sign a formal purchase agreement, which is essential to initiate the ROFR process.
  • Submit to the Resort: The signed agreement and related documents are sent to the resort for review.
  • Resort Evaluation: The resort evaluates the deal, considering factors like the unit size, purchase price, and any outstanding balances.
  • Developer’s Decision: Within 30–45 days, the resort decides whether to exercise its ROFR or waive it. If no response is given in that timeframe, the ROFR is automatically waived.
  • Final Outcome: If the resort exercises its ROFR, it steps in as the buyer under the same terms. If waived, the sale proceeds with the original buyer.

These steps directly impact both the timeline for sellers and the risks for buyers.

How ROFR Affects Sellers

For sellers, the ROFR process introduces a waiting period of 30–45 days after signing the purchase agreement. This delay can be frustrating, as the resort’s decision is often driven by profit motives, leaving you in limbo.

If the resort decides to exercise its ROFR, it essentially replaces the buyer in the transaction but must honor the same terms outlined in your agreement. While you’ll receive the agreed-upon price, the substitution of the resort for the original buyer can feel disruptive.

Interestingly, when a resort exercises its ROFR, it often signals that the offered price was considered too low. This could suggest that you might have been able to negotiate a higher price for your timeshare.

How ROFR Affects Buyers

Buyers face their own set of challenges during the ROFR process. The most significant risk is that the developer can cancel your agreement, even after you’ve signed the contract and arranged financing. If the resort exercises its ROFR, your purchase is voided, but any deposit you’ve made will be fully refunded.

While this refund protects your finances, it doesn’t compensate for the time and effort you’ve invested in the deal. Losing out on a property you had your heart set on can be disappointing, especially after extensive research and negotiation.

The uncertainty doesn’t end there. Even after signing the purchase agreement, you’ll need to wait 30–45 days to find out if the resort will allow the sale to proceed. This can disrupt your vacation plans or financial arrangements, adding another layer of stress to the buying process.

To navigate these challenges, working with an experienced timeshare resale broker can make a big difference. A knowledgeable broker can help identify properties less likely to trigger ROFR and set realistic expectations about the process, making it easier for buyers to manage the uncertainties involved.

The rules surrounding the Right of First Refusal (ROFR) in timeshare contracts can differ depending on the state. Understanding these legal requirements is essential for both buyers and sellers to avoid potential legal headaches.

Are ROFR Clauses Legally Binding?

Yes, ROFR clauses are binding agreements that all parties involved must honor. When you sign a timeshare contract with a ROFR provision, you’re entering into a legally enforceable agreement that gives the resort specific rights when you decide to sell in the future.

For a ROFR clause to hold up legally, certain key elements must be clearly outlined in the contract. These include the terms for making and accepting an offer, the conditions for acceptance, and the timeframe for exercising the right. Additionally, there must be valid consideration – essentially, something of value exchanged between the parties – to make the agreement enforceable.

Precision in the contract language is critical. Vague or unclear terms can lead to disputes and make it harder to enforce the ROFR in court. The agreement should clearly define how notifications will be handled and the exact conditions under which the ROFR can be exercised.

"The requirements of the ROFR are determined by the terms of the agreement itself", explains attorney Adam Leitman Bailey, emphasizing the importance of the specific language in each contract.

Courts take a close look at ROFR agreements when disputes arise. Since 2001, New York courts have published 31 decisions involving ROFR disputes, with 25 of those cases stemming from disagreements over implementation or unclear contract terms.

This legal enforceability gives resorts significant discretion in deciding whether to exercise or waive their rights.

When Resorts Waive ROFR

While ROFR clauses are legally enforceable, resorts don’t automatically exercise their rights in every sale. They typically waive their right when the resale price is close to the current market value, as stepping in under such conditions may not align with their goal of maintaining property values.

The process can vary by resort. For instance, Marriott usually responds to ROFR requests within about 10 days, though they may take up to 30 days. If they don’t respond within the allowed timeframe, they automatically waive their right, and the sale moves forward with the original buyer.

Even when a resort waives its ROFR, there may be additional administrative fees. For example, Marriott charges a $95 fee after waiving its ROFR to cover the cost of reviewing the transaction.

This waiver process helps provide clarity for everyone involved. Sellers can proceed with the agreed-upon price, and buyers either complete their purchase or receive a full refund of their deposit if the resort decides to exercise its ROFR.

Because ROFR clauses are binding, trying to bypass them can lead to serious legal trouble. Ignoring these terms or attempting to sidestep them is a breach of contract, which can result in lawsuits, financial penalties, or even the cancellation of the sale.

Some sellers mistakenly think they can avoid ROFR by structuring the sale differently or failing to notify the resort about a pending transaction. However, this approach can backfire, potentially voiding the sale. Courts consistently uphold properly written ROFR clauses, and attempts to bypass them often lead to additional complications and expenses.

"[A] right of first refusal does not give a party a right to purchase the property on any terms so long as the price offered by the third party is met", explains attorney Adam Leitman Bailey, stressing the importance of adhering to the specific terms of the contract.

Buyers who participate in transactions that attempt to sidestep ROFR also face risks. If a court finds that the ROFR process was improperly avoided, the buyer could lose their investment and face legal action from the resort. Additionally, title issues might arise, affecting the buyer’s ability to use or resell the timeshare later.

Given the complexities of timeshare law, it’s best to work with professionals who are familiar with ROFR requirements. For personalized guidance, you can consult Aaronson Law Firm, which offers free consultations to help protect your interests.

Pros and Cons of ROFR in Timeshare Contracts

ROFR (Right of First Refusal) clauses in timeshare contracts come with their own set of advantages and disadvantages, depending on whether you’re a buyer, seller, or the resort. Knowing these trade-offs can help you navigate timeshare transactions more effectively.

Benefits of ROFR

ROFR clauses tend to favor resorts or developers, but they also offer some benefits to buyers. Here’s a closer look:

Party Benefit Description
Resorts/Developers Inventory acquisition Resorts can reclaim units at lower prices by matching the original contract terms, then resell them at a higher price.
Buyers Deposit protection If the resort exercises its ROFR, buyers are refunded their deposit in full.

Drawbacks of ROFR

While ROFR clauses offer some advantages, they also introduce challenges, especially for sellers and buyers:

Party Drawback Description
Sellers Extended holding costs Sellers remain responsible for maintenance fees and other expenses during the 30–45 day ROFR review period.
Sellers Reduced buyer interest Potential buyers may hesitate to make offers, knowing the resort can match and cancel their deal.
Sellers Restarting the ROFR process Any changes to the deal after submission trigger a restart of the ROFR process, causing further delays.
Buyers Purchase uncertainty A signed agreement doesn’t guarantee closure if the resort exercises its ROFR.
Buyers Delays in finalizing sales The ROFR review adds extra steps, complicating the transaction timeline.
Buyers Potential disappointment If the resort exercises its ROFR, buyers lose the unit they wanted and have to start their search over.

Additional Considerations

ROFR clauses often extend the sales process by 30–45 days, during which sellers must cover ongoing costs like maintenance fees. For buyers, this delay can mean missed opportunities or losing out on their preferred unit. If any deal terms are modified after the initial offer, the entire ROFR process must restart, leading to even more delays.

These clauses have also been the subject of frequent legal disputes. Issues like unclear contract language, improper notification procedures, or resorts failing to act within the specified timeframe have all led to litigation.

At their core, ROFR clauses are designed to protect the financial interests of the resort or developer. This often creates an imbalance, leaving sellers with limited options and buyers facing uncertainty throughout the transaction.

Understanding these pros and cons is crucial when deciding how to approach ROFR clauses in a timeshare sale.

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How to Handle ROFR in Timeshare Sales

Building on the mechanics and legal considerations of Right of First Refusal (ROFR), here’s how to navigate this process effectively when selling or buying a timeshare. Whether you’re a seller or a buyer, understanding your role in the ROFR process can help you avoid delays and protect your financial interests.

What Sellers Should Do

If you’re selling a timeshare, taking the right steps early can make a big difference in how smoothly the process goes.

  • Review your contract for ROFR terms before listing your property. Each ROFR clause comes with its own rules and deadlines, so knowing these upfront will help you avoid costly mistakes.
  • Submit all required documentation promptly once you’ve signed the purchase agreement. A complete and accurate agreement is essential for starting the ROFR process. Missing details or errors could cause unnecessary delays.

"Sellers must have a signed purchase agreement to begin the Right of First Refusal process. Upon having a signed contract for sale, the agreement is sent to the developer. Then, the developer will determine whether they wish to exercise their Right of First Refusal and assume the role of the buyer." – Premier Timeshare Resale Editorial Team

  • Plan for ongoing fees while the ROFR review is underway. During the 30–45 day evaluation period, you’ll still be responsible for maintenance fees and other costs.
  • Work with a knowledgeable timeshare resale broker to guide you through the process. An experienced broker can help you price your timeshare appropriately and handle the submission requirements. Keep in mind that if the resort doesn’t respond within the set timeframe, the ROFR is automatically waived.

What Buyers Should Do

For buyers, understanding how ROFR works is just as important. Here’s how to approach the process wisely:

  • Research the resort’s ROFR policies before making an offer. Some resorts are more likely to exercise their ROFR than others, so knowing their history can help you decide which properties to pursue.
  • Look for properties without ROFR clauses if you’d rather avoid the uncertainty. For example, some Marriott Vacation Club locations, such as Marriott’s Desert Springs Villas I in Palm Desert, CA, and Marriott’s Frenchman’s Cove in St. Thomas, VI, don’t have ROFR requirements.
  • Account for possible delays of 15–30 days while the developer reviews the agreement. Build this extra time into your purchase plans and avoid making commitments based on a quick closing.
  • Protect your deposit by working with a trusted closing company. Ensure your deposit is held in escrow and is refundable if the resort decides to exercise its ROFR.
  • Have backup options ready in case the developer matches your offer. Since there’s always a chance the resort will step in, identify alternative properties that meet your needs.
  • Partner with an experienced broker who understands the timeshare market. They can provide valuable insights on current trends and help you navigate the ROFR process.

Sometimes, the ROFR process can get complicated, and that’s when professional legal advice becomes essential.

  • Consult a legal expert before listing your timeshare or making an offer. They can help you avoid mistakes that could lead to legal or financial trouble.
  • Seek immediate legal assistance if you’re dealing with aggressive collection efforts or suspect unfair sales practices. An attorney can help you understand your rights and explore your options for exiting the timeshare.
  • Hire a contract law attorney if you’re managing multiple contracts or facing complex ROFR issues. While legal fees can range from $4,000 to $15,000 or more, the investment may be necessary to safeguard your financial interests.
  • Reach out to Aaronson Law Firm for time-sensitive issues. If you’re dealing with broader timeshare contract problems or a resort that fails to respond within the ROFR timeframe, their team specializes in timeshare contract cancellation. They offer free consultations to evaluate your case and can assist with rescission letters or litigation if needed.

Conclusion

Understanding the Right of First Refusal (ROFR) is crucial when buying or selling a timeshare. This clause allows the timeshare developer to step in and purchase the property under the same terms offered by a third-party buyer, which can sometimes lead to delays in the transaction process.

The ROFR review period usually takes around 30–45 days, leaving buyers in a state of uncertainty until the process is complete. This legally binding step can slow down sales, making it important for all parties to be well-prepared.

For sellers, preparation is everything. Carefully review your contract, ensure all required documents are submitted on time, and consider working with professionals familiar with the process to avoid unnecessary setbacks. Accuracy and timeliness are key to staying compliant.

Buyers, on the other hand, should dig into a resort’s ROFR history and have backup plans in place. Given the potential legal complexities, seeking professional guidance is a smart move. If challenges or disputes arise, reaching out to Aaronson Law Firm can provide the expertise needed to navigate the situation.

FAQs

How can I find out if a timeshare’s Right of First Refusal (ROFR) clause might apply before making an offer?

To figure out whether a timeshare’s Right of First Refusal (ROFR) clause could be activated, the first step is to carefully review the original contract. Pay close attention to any terms outlining when the developer or resort might choose to use this right. For example, it could apply if the sale price falls below a specific threshold or if a third-party buyer is involved. Some contracts also include exceptions – like transfers to family members – that wouldn’t trigger the ROFR.

If anything feels unclear or you’re unsure about the details, reaching out to a legal professional experienced in timeshare agreements can provide the guidance you need before moving forward with your offer.

What should I do if the resort uses its Right of First Refusal after I’ve signed a timeshare purchase agreement?

If the resort decides to use its Right of First Refusal (ROFR) after you’ve signed a purchase agreement, it means they’re stepping in to buy the timeshare themselves under the same price and terms you agreed upon with your buyer. Here’s how it generally unfolds:

  • The resort will inform you of their decision to exercise the ROFR.
  • The original sale to your buyer will be canceled, and the resort will take over the purchase instead.

Make sure to carefully review the resort’s notification to confirm the process is being handled according to the terms of your contract. If anything seems off or unfair, it’s a good idea to seek advice from a legal professional. Firms like Aaronson Law Firm specialize in timeshare contracts and can help you understand your options, whether it’s selling, disputing the resort’s actions, or exploring ways to cancel your timeshare.

How can I reduce the chances of a resort exercising its Right of First Refusal (ROFR) on a timeshare purchase?

To reduce the chances of a resort using its Right of First Refusal (ROFR), you can follow these practical steps:

  • Choose resorts less active in the resale market. Resorts that don’t focus heavily on resales are less likely to enforce ROFR.
  • Price your deal at fair market value. Resorts are more inclined to step in on contracts priced well below market rates, so keeping the price reasonable can help.
  • Avoid informal transfers or gifting. While these methods might seem like a way around ROFR, they often come with legal risks that aren’t worth the trouble.

If you’re dealing with a timeshare contract or unsure about how ROFR might affect you, reaching out to a legal professional can offer guidance and safeguard your rights.

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Jerrod Williams