Washington State

House of Representatives

Office of Program Research

BILL

 ANALYSIS

Commerce & Labor Committee

 

 

HB 2513

 

Brief Description:  Regulating timeshare interest reservations.

 

Sponsors:  Representatives Wood, Clements and Conway.

 

Brief Summary of Bill

$Authorizes the sale of a timeshare reservation by a promoter prior to registration of the timeshare offering.

 

 

Hearing Date:  1/28/02

 

Staff:  Sydney Forrester (786‑7120).

 

Background:

 

Timeshare Defined

A timeshare is a right to occupy a unit of real property during three or more separate periods over a term of at least three years.  A promoter is any person directly or indirectly instrumental in organizing a timeshare offering. The Department of Licensing, Business and Professions Division regulates the advertisement and sale of timeshares.  Regulation includes:  1) registration with the department of a timeshare offering prior to advertising or solicitation of a timeshare project; and 2) written disclosure of all information necessary to fully inform to a prospective purchaser prior to the sale of a timeshare.

 

Timeshare Offering Registration

Prior to the advertisement, solicitation of an offer, or any offer or sale of a timeshare, a timeshare offering must be registered with the department.  An application for registration of a timeshare offering requires the filing of a disclosure document (see below) and a statement from the promoter disclosing the following information:

 

1. The promoter's financial condition;

2. A projected budget for the timeshare project, including selling costs;

3.A10‑year background description of the promoter, including any criminal convictions, civil suits, and administrative actions;

4. Any fees in excess of the stated unit price to be charged to purchasers;

5. A statement of where and when the promoter has previously sold timeshares;

6. Any liens, defects, or encumbrances affecting title to the timeshare units;

7. Copies of all timeshare documents including the Timeshare Disclosure Document; and

8. Any additional information the director considers are relevant to describe the risks.

 

Registration of a timeshare offering is effective on the 13th day after receipt of a completed application and fee, remains in effect for one year, and maybe renewed.

 

Timeshare Disclosure Document

The disclosure document must be filed with the timeshare offering registration and, prior to the sale of any timeshare, a promoter or salesperson must provide a prospective purchaser the disclosure document that includes the following information:

 

$ The name and address of the promoter and affiliates;

$ The location and general description of the timeshare property and units;

$A list of all units offered including types, price, number, location, duration, and maximum number of units that may be offered;

$ A description of financing offered by the promoter;

$ A statement of ownership of all properties in the offering;

$ Copies of any agreement or lease to be signed at closing;

$ The identity of the managing company;

$ The selling cost per unit, and for the total project;

$ A statement of where and when promoter has sold timeshares previously;

$A description of the nature and purpose of all charges, dues, fees, and other expenses to be assessed;

$ A description of services the promoter provides, and anticipated expenses;

$ Notice of the purchasers right to cancel the purchase agreement within seven days;

$ Any restraints on transfer of the timeshare;

$ A description of insurance coverage provided;

$A statement of whether timeshare owners are permitted or required to participate in any ownership association and a description of the association;

$Any additional information the director considers necessary to fully inform prospective purchasers.

 

The director is authorized to deny suspend or revoke a timeshare registration as a result of a violation, or in the public interest, and also may issue a cease and desist order to prevent a future violation.

 

Summary of Bill:

 

A "timeshare interest reservation" is created, which allows a promoter to pre‑sell a revocable right to purchase a timeshare that has not been registered with the department.  A promoter may market and advertise a timeshare project and may accept a deposit from a prospective purchaser in an amount of up to 20% of the purchase price.  A promoter must file a promoter registration with the department prior to pre-selling a timeshare.

 

Promoter Registration

Prior to accepting a timeshare interest reservation a promoter must file an application with the department for a promoter registration that includes the following information:

1.The promoter's financial condition;

2.A projected budget for the timeshare project, including proposed selling costs;

3.A10‑year background description of the promoter, including any criminal convictions, civil suits, and administrative actions;

4.Any fees in excess of the stated unit price to be charged to purchasers;

5.A statement of where and when the promoter has previously sold timeshares;

6.Any liens, defects, or encumbrances affecting title to the timeshare units;

7.The form to be used to accept timeshare interest reservations;

8.A certified copy of a certificate of good standing from the Secretary of State;

9.The name, address, and telephone number of the promoter and any broker retained by the promoter;

10.The name and address of the escrow company that will receive reservation deposits and a copy of the escrow agreement;

11.The name and location of the timeshare property; and

12.Any additional information the director considers are relevant to describe the risks.

 

Within one day of accepting a timeshare reservation deposit, a promoter must deliver the deposit to an escrow or trust account.  Deposits must remain in the account until cancellation of the reservation or execution of a purchase agreement.

 

Within 30 days after receipt of an effective Timeshare Offering Registration (see above) the promoter must provide the prospective buyer a copy of the Disclosure Document and the proposed purchase and sale agreement.  A prospective buyer may cancel a timeshare interest reservation at any time before signing a purchase and sale agreement.  Within 10 days of a termination of a timeshare interest reservation, a promoter must refund the reservation deposit plus any interest earned less any applicable account fees.

 

If the director denies an application for a Timeshare Offering Registration for which a timeshare interest reservation deposit was accepted, the promoter must notify each prospective buyer in writing within 10 days and return any deposits.  Timeshare interest reservation forms shall contain a statement in conspicuous type:  "The Washington Department of Licensing has not inspected or approved the registration of this timeshare interest reservation offering."

 

Appropriation:  None.

 

Fiscal Note:  Not requested.

 

Effective Date:  Ninety days after adjournment of session in which bill is passed.