Deedbacks make sense

The latest issue of "Timesharing Today" has an editorial on page 3 titled "Deedbacks make sense". I suggest anyone interested in the topic or those who are unable to sale or give away their timeshare and feel burdened into infinity with maintenance fees to read the editorial. The point made is that a deedback is a win-win for both the resort and the timeshare owner because of the expense of the foreclosure process to the resort and the adverse impact of a foreclosure upon the credit of the timeshare owner.

The editorial points out that the resort may initially resist the deedback but that it is in their best interest to accept the deedback to save the owners money (foreclosure costs) and to quickly get the property into the hands of a new fee paying owner.

The editorial references a letter to the editor on page 5 from an owners association that complains of postcard companies who take title from timeshare owners for transfer fees of $2,500 or more and then default on the maintenance fee when unable to sell the timeshare. The writer said the owner's association is typically unable "to locate any representative from the business". Surprise! Surprise! The letter said the costs to the resort is typically $1,400 to go through a foreclosure. This is passed on to the owners in the form of higher maintenance fees. The only entity that profited from this series of transactions is the postcard company.

I agree with the points made in the editorial and will add a few thoughts of my own:

1. Maintenance fees are are not a personal liability because the timeshare buyer did not sign a promise to pay and the failure to pay these fees will not harm one's credit. The failure to pay will result in letters and phone calls but this action will not harm one's credit. Remember the failure to pay a maintenance fee is not related to a failure to pay the purchase money mortgage which is a personal debt. If you financed your purchase and fail to pay the mortgage your credit will be damaged because that is a personal liablity just like the mortgage on your home or car.

2. A failure to pay your maintenance fee will result in a foreclosure and that will definitely harm your credit and should be avoided by negotiating a deedback. A deedback will not harm your credit and is done to protect your credit.

3. The resort will initially resist a deedback because they "are not in the business of taking deedbacks" but ultimately most will for the reasons set out in the Timeshare Today editorial.

4. The comments above have no applicability to vacation clubs and those owners should check their contracts to determine whether they have a personal liability for annual fees. Most likely they do. One reason developers are trending to vacation clubs is to be able to sell more memberships per unit (timeshares can sell only a finite number - 50 to 52 per unit per year - but clubs can sell as many memberships per unit as they can get away with so long as they avoid out and out fraud) and to ensure personal liability.

5. Estates can be closed once assets are distributed and debts due at the date of death are paid. This would include maintenance fees due at death but not ongoing maintenance fees into the future. The executor has a legal obligation to publish a legal notice notifying creditors of the death of the timeshare owner but he/she is under no obligation to notify the resort of the death of an owner. It is the resort's obligation to timely file a claim with the executor/administrator within the time frame set by law. The failure to timely file causes a forfeiture of the claim. An heir can disclaim ownership of a worthless timeshare or any bequest for that matter within 9 months of the date of death.

A frequent poster on this site will vehemently disagree with what I have said here and will slice, dice, and distort what I have said. I will not engage her for reasons previously stated on this site. I suggest to her that she let the reader decide and that any reader who has doubts about what is written here should verify same with their personal attorney. I will not name this frequent poster but will say she by her own admission uses "dial up" to access the internet but she does know how to cut and paste and to use bold print.

Most resorts will not take back deeds under any circumstances .... I've read of only a few that will. If a resort took all deeds back when people got tired of paying maintenance fees, then the resort would implode from within due to lack of paid maintenance fees. You can ask any resort if they will take a deed back, but don't be disappointed when they say NO.

And in this economy, who is going to buy a timeshare that someone else didn't want? There are $1 timeshare weeks on Ebay that go without bids ..... many timeshare weeks are clearly not marketable at all.

carvana wrote:

1. Maintenance fees are are not a personal liability because the timeshare buyer did not sign a promise to pay and the failure to pay these fees will not harm one's credit. The failure to pay will result in letters and phone calls but this action will not harm one's credit. Remember the failure to pay a maintenance fee is not related to a failure to pay the purchase money mortgage which is a personal debt. If you financed your purchase and fail to pay the mortgage your credit will be damaged because that is a personal liablity just like the mortgage on your home or car.

2. A failure to pay your maintenance fee will result in a foreclosure and that will definitely harm your credit .....

1 and 2 are blatant contradictions to each other.

jayjay wrote:

carvana wrote:

1. Maintenance fees are are not a personal liability because the timeshare buyer did not sign a promise to pay and the failure to pay these fees will not harm one's credit. The failure to pay will result in letters and phone calls but this action will not harm one's credit. Remember the failure to pay a maintenance fee is not related to a failure to pay the purchase money mortgage which is a personal debt. If you financed your purchase and fail to pay the mortgage your credit will be damaged because that is a personal liablity just like the mortgage on your home or car.

2. A failure to pay your maintenance fee will result in a foreclosure and that will definitely harm your credit .....

1 and 2 are blatant contradictions to each other.

Actually, jayjay, they are not.

I realize that you are not an attorney and that the distinction referenced here might appear to be subtle. Carvana is merely making a legal distinction. Although this is certainly not an area in which I profess to have any expertise), please let me try (...once, and ONLY once) to intervene / simplify / summarize:

1. When a timeshare is purchased via loan, that loan is most certainly a personal liability. Defaulting on that loan will have immediate legal (and credit report) consequences.

2. When a timeshare is owned "free and clear" (i.e., no loan), the maintenance fee is certainly an associated financial obligation, but not a personal liability of reportable or credit consequence UNTIL AND UNLESS...

3. Foreclosure is ultimately initiated as a result of unresolved non-payment of fees. This foreclosure action is a legal proceeding of reportable (and credit impact) consequence.

I hope this helps. If not, I'm certainly not going to voluntarily enter into (or mediate) this fray further, other than to just point out as my FINAL word on the matter that Carvana clearly is NOT endorsing owners ignoring their maintenace fee obligations, but is instead merely making some subtle points of legal distinction which are, perhaps, not immediately obvious to the layman (or, for that matter, even to an experienced attorney unfamiliar with that particular area of law).

ken1193 wrote:

1. When a timeshare is purchased via loan, that loan is most certainly a personal liability. Defaulting on that loan will have immediate legal (and credit report) consequences.

2. When a timeshare is owned "free and clear" (i.e., no loan), the maintenance fee is certainly an associated financial obligation, but not a personal liability of reportable or credit consequence UNTIL AND UNLESS...

3. Foreclosure is ultimately initiated as a result of unresolved non-payment of fees. This foreclosure action is a legal proceeding of reportable (and credit impact) consequence.

If an owner is in arrears paying his maintenance fees for a few years, then the resort/HOA can foreclose and that foreclosure will affect the owner's credit rating even if there is no mortgage.

Ken, you've been reading Tug long enough to realize the above, as it has been report many, many times. And not only can a resort/HOA foreclose, the owner can be made to pay all legal fees involved plus all back maintenance fees.

A resort is not in the business of taking back deeds. That would be like cutting off their noses to spite their faces ..... they'd be left with weeks with no fees coming in and weeks that couldn't be re-sold due to non-interest.

I'm surprised Timesharing Today would even conjure up something like that article as they should realize that maintenance fees are the bread and butter and backbone of all resorts.

jayjay states in relevant part: >> If an owner is in arrears paying his maintenance fees for a few years, then the resort/HOA can foreclose and that foreclosure will affect the owner's credit rating even if there is no mortgage. <<

Yes. You've essentially echoed back what I have already clearly stated in point #3 of my post above. There is no disagreement on this; you may wish to reread point #3. And by the way, some resorts don't even wait "a few years". One Texas resort I know of acts in the very first year of delinquency of account. =================================================

Re: >> And not only can a resort/HOA foreclose, the owner can be made to pay all legal fees involved plus all back maintenance fees. <<

Alas, this is a pipe dream. The (now former) owner, in the aftermath of foreclosure proceedings, can be "made" to do nothing whatsoever. ===================================================

Re: >> A resort is not in the business of taking back deeds. That would be like cutting off their noses to spite their faces ..... they'd be left with weeks with no fees coming in and weeks that couldn't be re-sold due to non-interest.<<

True only in part. Some resorts with which I am personally and directly familiar which choose to accept (some) "deedbacks", promptly offer those weeks to existing owners in "sealed bid" internal auctions, with no minimum bid amount. An open minded HOA knows that the best possible market (with direct, free access) for resales is often among the current (paying) owners at the facility; people looking to extend their existing ownerships for an outlay of mere "peanuts". When that occurs, that particular week promptly leaves the ranks of the "delinquent accounts" and joins the ranks of the "paying owners" instead. Exactly such a program seemed to consistently work quite well for years at one (middle of the road, not a high demand) resort where I formerly owned (albeit in an economy in better shape than the one in which we are currently mired). ===================================================

Re: >> I'm surprised Timesharing Today would even conjure up something like that article as they should realize that maintenance fees are the bread and butter and backbone of all resorts.<<

With due respect, that's a somewhat narrow, limited viewpoint. Foreclosure is both a time consuming and expensive process. No fees are coming in, but expenses are going out --- and the calendar pages flip forward all the while. In the right circumstances, "deedbacks" can (and do) work. I have seen first hand proof of this for myself at my own (former) resort. It's certainly not a universal panacea of any sort for delinquent accounts, but there are certain situations and circumstances where deedbacks do indeed make sense --- good sense.

I have now provided ALL of the input I intend to offer on this topic in this thread. Having provided my input, I harbor no personal need to somehow "have the last word". That said, I have no doubt whatsoever that someone else here will, without any measure of objectivity, informed rational analysis, or first hand experience with the subject, feel predictably compelled to (once again) "have the last word" here.

ken1193 wrote:

It's certainly not a universal panacea of any sort for delinquent accounts, but there are certain situations and circumstances where deedbacks do indeed make sense --- good sense.

The only way a deedback makes sense is if the resort and time owned is HIGHLY sought after. Otherwise, the unit/week will stay empty with no dues coming in and the former owner is then off the hook. Now why would a HOA or a management team go this route? Answer, most won't, period.

You have to remember that even giving a week away is a liability to the recipient as they are then responsible for maintenance fees and special assessments forever. In the world of timesharing, there is no free lunch.