S-3422.1  _______________________________________________


                         SENATE BILL 6424



State of Washington   57th Legislature        2002 Regular Session


By Senators Prentice, Honeyford and Winsley


Read first time 01/17/2002.  Referred to Committee on Labor, Commerce & Financial Institutions.

Regulating timeshare interest reservations.

    AN ACT Relating to timeshare interest reservations; adding a new section to chapter 64.36 RCW; and prescribing penalties.




    NEW SECTION.  Sec. 1.  A new section is added to chapter 64.36 RCW to read as follows:

    (1) For the purpose of this section, "timeshare interest reservation" means a revocable right to purchase an interest in a timeshare for which an effective registration has not been obtained under this chapter.

    (2)(a) An effective registration required by RCW 64.36.020, 64.36.030, 64.36.060, and 64.36.140 is not required for any party to enter into a timeshare interest reservation.  However, a promoter offering a timeshare interest reservation under this section must complete an effective registration and provide the registered disclosure document to each prospective purchaser prior to the closing of any timeshare sale.

    (b) Any party offering a timeshare interest reservation under this section must be a promoter, or register as a promoter, and comply with subsection (3) of this section.

    (3) Before the registration of a timeshare offering, a promoter may market and advertise its project and may accept a deposit from a prospective buyer for a timeshare interest reservation, subject to all of the requirements under this subsection.

    (a) Before accepting any timeshare interest reservation, the promoter shall file an application for promoter registration signed by the promoter and containing the following information on a form prescribed by the director:

    (i) The name, address, and telephone number of the promoter;

    (ii) The name, address, and telephone number of any real estate broker retained by the promoter to promote the timeshare interest reservation program;

    (iii) The name and address of the escrow company that will hold the deposits paid by the prospective purchaser of a timeshare interest reservation and a copy of the escrow agreement between the promoter and the escrow company;

    (iv) The name and location of the timeshare property for which timeshare interest reservations are to be offered;

    (v) The form to be used for accepting timeshare interest reservations, subject to approval by the department;

    (vi) The promoter's balance sheet as of a date within four months before the filing of this application;

    (vii) The promoter's statements of income, shareholders' equity, and material changes in financial position as of the end of the last fiscal year and the date of the last balance sheet;

    (viii) A projected budget for the timeshare project for two years after the offering is being made, including but not limited to sources of revenue and expenses of construction, development, management, maintenance, advertising, operating reserves, interest, and any other necessary reserves;

    (ix) A statement of the proposed selling costs per unit and the total proposed selling cost for the project, including sales commissions;

    (x) A description of the background of the promoters for the previous ten years, including information about the business experience of the promoters and any relevant criminal convictions, civil law suits, and administrative actions relating to any promotions during that period;

    (xi) A statement disclosing any fees in excess of the stated price per unit to be charged to the purchasers, a description of their purpose, and the method of calculation;

    (xii) A statement disclosing when and where the promoter or an affiliate has previously sold timeshares;

    (xiii) A statement of any liens, defects, or encumbrances on, or affecting, the title to the timeshares and if they will be removed prior to closing the sales of the timeshare interests;

    (xiv) Any additional information to describe risks that the director considers appropriate; and

    (xv) A certified copy of a certificate of good standing from the secretary of state showing the promoter's current authorization to do business in the state of Washington.

    (b) The reservation deposit for a single timeshare interest shall not exceed twenty percent of the purchase price.

    (c) Within one business day after a reservation is accepted by the promoter, the reservation deposit shall be delivered to an escrow or trust account in a federally insured depository.  The account may be interest bearing at the direction of either the promoter or prospective buyer.  Payment of any account fees and payment of interest moneys shall be as agreed to between the prospective buyer and promoter.  All reservation deposits shall remain in the account until cancellation or termination of the timeshare interest reservation or execution of a purchase agreement.

    (d) Within thirty calendar days of receipt by the promoter of acceptance of an effective timeshare registration by the director, or as the registration is otherwise effective under RCW 64.36.040, the promoter shall provide the prospective buyer with a copy of the disclosure documents and a copy of the proposed purchase agreement for the sale of the timeshare interest.

    (e) A prospective buyer may cancel a timeshare interest reservation at any time before the execution of a purchase agreement by delivering written notice of termination to the promoter as provided in (i) of this subsection.

    (f) Within ten business days after a timeshare interest reservation has been terminated for any reason, the promoter shall refund to the prospective buyer all reservation deposits made by the prospective buyer including any interest moneys earned less any account fees agreed upon, if applicable.  The escrow account or trust account agent shall refund to the prospective buyer all reservation deposits made by the prospective buyer including any interest moneys earned less any account fees agreed upon, if applicable, and the promoter is not available.  After this refund, neither the prospective buyer nor the promoter has any obligation to the other arising out of the timeshare interest reservation.

    (g) A prospective buyer may not transfer rights under a reservation without the prior written consent of the promoter.  Any purported transfer without the consent of the promoter is voidable at the sole discretion of the promoter.

    (h) If the director denies an application for registration of the timeshare offering on which timeshare interest reservations were taken, within ten business days of notification by the director, the promoter shall notify in writing each prospective buyer who entered into a timeshare interest reservation agreement.  The promoter shall return any reservation deposits previously taken.

    (i) Any notice required to be given must be in writing and is delivered as of:  (i) The date the notice is personally delivered or sent via telecopier; (ii) one day after being sent by overnight courier service; or (iii) three days after being sent by registered or certified mail, postage prepaid.

    (j) All notices required by this section to be given to the department, the prospective buyer, or the promoter shall be in writing and either hand delivered or sent by certified mail, return receipt requested, with postage fully prepaid.  Notices sent by mail are considered delivered on the earlier of actual receipt, as evidenced by the delivery receipt, or seven calendar days after being deposited in the United States mail.

    (k) Each timeshare interest reservation form shall contain the following statement in conspicuous type:

    "The Washington Department of Licensing has not inspected or approved the registration of this timeshare interest reservation offering."

    (4) The department may deny authorization to accept timeshare interest reservations under this section to any person who has violated, or is in violation of, any provision of this chapter.


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