A vacation time-share property can be a great investment for anyone wishing to experience the flexibility and familiarity of a vacation home without the sole responsibility of meeting the often-exorbitant costs of maintenance, taxes and homeowner’s association fees. But, as with most real estate investments, there are risks to be aware of.
Timeshare agreements 101
Timeshare plans are generally joint-ownership agreements allowing several individuals to maintain a vacation home or condo. These arrangements are secured by a time-share agreement, which governs the amount of time each owner is allotted to enjoy the property throughout the year.
Timeshares may provide for equal annual time per owner or may allow for representative time based on ownership percentages. Larger timeshares with more members may only allow for one or two weeks of possession per year, while smaller timeshares may allow much more leisure time.
From a legal perspective, timeshares can be structured as either a joint-ownership, where all parties have an actual, transferrable ownership right in the property, or a lease arrangement with a “right-to-use” clause that provides no actual property ownership for the lessee.
Trouble in paradise
Scams can crop up virtually anywhere, and the vacation industry is certainly no exception. One of the most common timeshare-related scams involves fake offers to resell time-share properties, as millions of time-share owners have been trying to escape their arrangements in light of the economic downturn.
According to data and complaints collected by the Federal Trade Commission, scammers are known to contact time-share owners, request a ridiculous upfront fee and offer empty promises of securing a definite, sure-thing buyer for the timeshare interest. As of 2013, the FTC had identified nearly 200 time-share scam operations, some of which were exposed by authorities in other countries.
Time-share scams are unfortunately often targeted at the elderly, with scammers finding unsavvy owners in dire financial straits. The FTC estimated that swindlers siphoned over $14 million from vulnerable victims looking to gain financial breathing room by selling their time-share property interest.
In Florida, a hotbed for vacation-related rip-offs, Attorney General Pam Bondi worked to construct the Timeshare Accountability Resale Act, which implements strict resale guidelines and harsh penalties for scammers.
In an off-shoot from the time-share resale scam industry, the FTC is now warning people that fraudsters are engaging in a new wave of dishonesty by contacting owners with news of available settlement funds from the FTC, the Department of Justice and various federal courts. The offer: for a small upfront fee, time-share owners or former owners can receive their “fair share” of the settlement reached on behalf of resale scam victims.
The scam cycle continues.
What to do if facing a time-share scam
The best advice to remember is that anyone calling to offer a service for a large, suspicious or vague upfront fee is more than likely trying to scam you. What’s more, the federal or state governments can neverrequest fees, costs or expenses relating to a settlement in which you are entitled to a portion. As always, if an offer seems too good to be true, well, you know the rest.
If you believe you have been scammed, there are criminal and civil penalties awaiting your fraudster. One place to start is by lodging a complaint with the FTC and with your state’s consumer protection agency.
From there, you can talk with a lawyer who may be able to help you recover the amount of money you lost from the swindle. However, con artists are notoriously skilled at disappearing, so recovering what you lost may be difficult, but not impossible.
1 comment
Peggy Bryant
Timeshares need to be looked up as a purchase and not an investment. Regardless of how timeshares are presented, they don´t perform as well as a house or stock investment. If you look around the resale market for timeshares on websites like EBay, Redweek, or TUGBBS will find that you can buy a timeshare for far less money than what the first owner purchased it for.