Resort Trades Magazine: Timeshare Article by John Rogers Burk
April 2014
Convert Your Project to Non-Deeded before It's Too Late
When you are in a hole, stop digging. With the maturing of the timeshare industry it's time to do things differently. The flaws of deeded vacation ownership are becoming increasingly obvious. They can be catastrophic if allowed to continue for too long.
Why Convert to Non-Deeded?
The selling points to the individual member/owners
are:
• It cannot be overemphasized that in the conversion
there is absolutely no change in the use rights,
benefits, ownership and opportunities for the
individual owner/member.
• A deed is only evidence of ownership – it adds
nothing to the ownership rights.
• There is personal exposure for what happens in
the unit or at the resort, such as for personal injury,
property damage, or environmental cleanup, if a
person’s interest in the property is evidenced by a
recorded deed.
• Deeded interests must be probated in the state
where the property is located, which is a great
disadvantage if an owner dies a resident of
another state.
• The cost of individual
transfers upon death, or
by gift, or into a living
trust are substantially
greater with a deed.
• The cost and
delay of giving
the timeshare
interest
back to the
developer or
association is
substantially
greater with
a deeded
interest. In a
recent case
handled
by the
author, the
association
agreed to
take back the
timeshare of an
elderly, widowed
owner who was
unable to travel. A
title search disclosed an
unsatisfied deed of trust. It
took substantial time and cost
to track down the former lender, who
fortunately agreed to reconvey the deed of trust,
which had long since been repaid.
The non-deeded legal model provides several
advantages to the association:
• It is much easier and less costly to foreclose
by the association, or the developer or lender,
and thereby decrease the association’s budget
by 3% - 13%. The cost of a deed foreclosure
in a streamlined state like California is at least
$300-$500 per week. In some states it’s as high
as $2000 per week for attorney fees and court
costs. The hard cost of a non-deeded foreclosure
is now 49 cents. The high cost of foreclosure in
some states has actually caused some mature
associations to go out of business and have to
liquidate.
• If the association wants to exchange an
obsolescent unit for a comparable or better
unit, the cost and delay of clearing title to the
obsolescent unit may prevent the exchange.
• Every enterprise should consider an exit strategy.
In the event a project must be liquidated, the net
proceeds are to pass to the member/owners in
proportion to their individual ownerships. But the
cost and delay of clearing title to deeded interests
will greatly delay and diminish the return to the
individual owners.
• Deeded ownerships by individuals allow liens
to be recorded against the project for debts or
judgments against individual owners.
How is the conversion made?
The Board of Directors of the Association makes
certain findings, mirroring the features, advantages
and disadvantages set forth in the previous section
of this article. The Board then recommends the
conversion to the members, who must vote to
change the documents, primarily the Bylaws
and recorded Declaration. The documents must
provide that timeshare interests will be evidenced
by a Certificate of Vacation Ownership and grant
certain powers to the Association to carry out the
conversion. The conversion can be entire and
mandatory, or optional and available when needed.
Background:
For background on why a timeshare project should
be non-deeded, and how it operates, see the
author’s previous articles at www.timeshare-attorney.
com.
Conclusion:
For the cost savings and protections of both the
Association and the individual owners, there is every
reason to convert to the non-deeded legal structure.
When you are in a hole,
stop digging. With the
maturing of the timeshare
industry it’s time to do
things differently.
Legal
John “Roger” Burk
designed the legal structure for
Wyndham’s WorldMark, The Club
25 years ago. WorldMark has blazed
the successful non-deeded trail
for everyone to follow. Burk is a
California attorney with over three
decades of designing the legal
structure and registering non-deeded
timeshare resorts in California,
Nevada, Florida and Hawaii, four of
the most highly regulated timeshare
states. Roger may be reached at
(916) 784-7030 or
jrb@jrblawcorp.com .
Convert Your Project to
Non-Deeded before It’s Too Late
by John “Roger” Burk
