On a vacation in Mexico six years ago, Jessica Martinez and her husband took about two hours away from relaxing on the beach sipping margaritas to attend a seminar hosted by a team of salespeople, brokers, and executives. After listening to the sales reps pitch them the deal of a lifetime, they signed and became the proud owners of a time-share in a resort city.
The euphoria was short-lived when they realized later that the deal they clinched in their vacation paradise, the one they thought was too good to be true, turned out to be exactly that.
“They gave us this amazing deal which wound up not being an amazing deal because on the back end it wound up being a terrible mistake. People don’t know better. They go on this lovely vacation and these reps are like ‘come in, take this tour, we’ll give you this free and that free,’ but it’s all just lip service.”
Jessica and her husband are like thousands of couples across the United States roped into a time-share nightmare.
A time share is a rental program in which people share use of a property by dividing among themselves the rights to use the property, usually a resort or vacation property, for specific time periods. A developer splits the occupancy of each of the units into time-based intervals, usually a week. Each owner of an interval receives the right to use a specific unit for a designated time period.
Over the course of the contract Martinez has paid between $30,000 and $40,000 in mortgage costs and fees on a property she has never visited or even used. Now that’s she’s fully paid up on her mortgage she’s stuck paying the maintenance, and no matter how hard she’s tried it’s been futile to get the property off her hands.
“It’s a loss, but I don’t want to keep paying annual membership fees when we don’t even visit the property. When I approached them about selling it off, that it was a hardship, they were like ‘sorry, you can’t get out of it, it’s yours forever.’ Now I’m stuck with these annual fees and maintenance which they can increase whenever they want.”
So how do people get drawn in?
The hook is the promise that you can use the time share at other locations around the world. A portal you can step into and enjoy a weeklong vacation at vacation paradise resorts across the globe. Martinez argues that that isn’t the case.
“It really isn’t because I was going to use it on a vacation to Aruba but then we were hit with daily fees. I wound up going on Orbitz.com and found out I could do the same trip for half the price. The trip would have cost me $3,300 with the time share but on Orbitz it cost me $2,000.
So where did such an attractive vacation ownership concept begin to go wrong?
Blackenterprise.com spoke with real estate contract attorney Patrick Kennedy with Finn Law Group in Largo, Florida, in the Tampa Bay area.
Kennedy says when time shares first appeared they were a much better deal because they had a value to them that was intrinsic, especially for people who went to Disney World where most time shares started.
“These were your blue-collar workers who got the same fixed week off every year. And it was a great deal because one didn’t have to bother about whether hotels were booked out or times of season, whatever. In my opinion the advent of the Internet kind of killed that. Once people got a look at the discounts being offered online it was essentially over. You no longer have to buy the cow to get the milk.”
Kennedy says these days salesmen and brokers have to get creative and crafty in order to lure potential buyers into acquiring a product that is no longer what it once was and so there is a lack of disclosure. He says as far as the market goes there are some players who are worse than others.
He also maintains that there are time shares out there that are doing things the right way. He cites Disney as an example.
“We really don’t have any clients from Disney because they work with them to
let them out of their contracts. Whereas most other time share resorts don’t. It’s a binding, valid contract that is most times pretty airtight because they pay brilliant attorneys very good money to write them up.” He also tells BE, “The thing is once you pay off the contract, unlike other standard contracts that end, this contract is in perpetuity where you are still on the hook for maintenance fees.”In many cases even filing for bankruptcy is futile. A trustee would have to accept the asset back and most of these time shares don’t have any value to them. Most bankruptcy trustees don’t accept the property back, in which case you’ll still be on the hook for maintenance fees. They may wipe out the debt for that year and any residual mortgage debt but any future maintenance fees you’ll still be on the hook for. It’s a contract in perpetuity because annually these things renew.