Get the Facts About Timeshare Fraud

Timeshares are arrangements in which several investors jointly own a property and have the right to use the land as a vacation spot based on a time-sharing agreement. There are dozens of companies in Florida that market timeshares as cost-effective ways for buyers to get the vacation homes of their dreams. Unfortunately, a lot of timeshare promoters and sellers pitch these investments in deceptive and sometimes fraudulent manners.

3 Signs a Timeshare Investment is Not Secure

Not all timeshare investments are scams, but fraudulent promoters, sellers, and buyers frequently pervade the market. Timeshare investors have lost thousands of dollars to aggressive and deceptive timeshare “professionals.” Suspicious timeshare operations send up red flags investors can learn to recognize. Look for these three signs of a bad deal while talking with a timeshare promoter or salesperson:

  1.  A sense of urgency. Many timeshare promoters and sellers create an unnecessary sense of urgency behind their offers. The promoters often behave like salespeople in unregulated industries, and try to make the investor think he or she has to act quickly, or else another investor will snatch away the purported timeshare opportunity. An honest seller will let you take your time considering the offer.
  2. Aggressive sales tactics. It’s natural for timeshare investors to have second thoughts about the investment when a seedy sales pitch sealed the deal. Aggressive promoters will try to up-sell investors as part of a “trade” when they complain or have misgivings. For example, the promoter will say, “If you buy now, we’ll upgrade your membership.” Don’t fall for these deceptive tactics.
  3. Verbal agreements. Never rely on a verbal agreement between yourself and the timeshare promoter. Do not give any money or information to the seller until he or she has drawn the proper paperwork. Timeshare sales typically involve Purchase and Security Agreements, Promissory Notes, and other such documents. Verbal agreements are more difficult to uphold in court and are indicative of attempted fraud.

Investors must not only watch for fraud and deceit during the purchase of a timeshare, but also while selling their shares. Be wary of any company that charges upfront fees or securities, or that tries to convince you to put down a refundable deposit. Licensed timeshare promoters will not charge upfront fees to create your listing. This is a way for the individual or company to make money without attempting to sell the timeshare.

Some timeshare companies have faced public scrutiny for their business practices. For example, in 2012, a timeshare company executive agreed to make an appearance on a national TV show. On the program, he promised to return money to unhappy timeshare owners.

The executive’s appearance on the show led to more 100 alleged owners contacting the company and requesting refunds for above-normal maintenance fees. Since then, several timeshare owners have brought lawsuits against the company for alleged consumer fraud, including a billion-dollar action that accused the company of targeting the vulnerable elderly. The company also recently sued a law firm for allegedly aggressively soliciting clients and saying negative things about the timeshare company.

Explore Your Opportunities for Getting Out of a Bad Timeshare Deal

If you believe you are the victim of timeshare fraud or deceptive practices, there may be a way out of your financial obligations. An attorney can explore legal avenues, such as your statutory right of rescission. This is the right to withdraw from purchase securities if the promoter did not comply with state laws that protect residents from deceptive sales pitches. A law firm can notify the timeshare promoter of your statutory right after an investigation reveals unfair or deceptive sales or trade practices. A lawyer may also be able to sue the promoter for violation of securities laws, since timeshares are technically sold as investments.

A typical investigation of timeshare promoters will require a review of numerous documents. Your lawyer may need to review (or request if you do not have the files) the Purchase and Security Agreement, Timeshare Public Disclosure Statements, the timeshare’s most recent audited financial statement, documents evidencing the timeshare’s compliance with applicable state and federal laws, and documents purporting to require the investor to arbitrate rather than litigate any dispute.

Be cautious and prudent when considering a timeshare purchase. You’re making a major decision, and should understand as much as possible about the rights and responsibilities involved in timeshare ownership before you buy. The same is true for timeshare sales. Don’t give into sellers that pressure you, or make you offers that seem too good to be true, because you’re probably encountering a timeshare scam, fraudulent deal, or deceptive tactics. When in doubt about a timeshare investment, confide in a trusted financial litigator.

Sources:
https://www.consumer.ftc.gov/blog/be-lookout-timeshare-resale-phonies
https://www.consumer.ftc.gov/blog/timeshare-resale-fail
https://www.consumerreports.org/cro/news/2015/06/timeshare-resale-scams/index.htm
http://www.aarp.org/money/scams-fraud/info-2017/timeshare-scams-how-they-work.html

Mr. Haut focuses on litigation relating to commercial litigation, cybersecurity, and privacy law matters. In his final year of law school, Mr. Haut served on the Sherman Minton Moot Court Executive Board, where he helped draft the Moot Court competition problem — exploring issues relating to government searches of electronic devices, cybercrime, and sentencing reform.