A South Carolina law that took effect earlier this year seeks to prevent an outbreak of holiday home hassles and allow for the orderly dissolution of resort timeshare plans, many of which are slated to expire in the coming years.
The Vacation Time-Sharing Plan Extensions and Termination Act provides that, unless the timeshare declaration provides a lower percentage, a vacation time sharing plan may be terminated or extended at any time with the consent of 60 percent of all eligible voting interests. Before the law’s passage, state law included little or no guidance for dissolution or extension of timeshare plans.
Many of the vacation time sharing plans that will be affected by the new law were created prior to the 1990’s and are a major portion of current timeshare properties. Compared to the massive resort projects built in the last few decades, these older resorts may require structural, maintenance or major upgrades, or may be in locations that are no longer popular among vacationers.
Justin Vermuth, vice president of state government affairs and deputy general counsel for the American Resort Development Association, said the legislation would provide options for resorts that currently are not marketable, usually because of their age, and allow group owners to band together to either revitalize the properties or to sell them. Coordinating the interests of so many owners can be difficult.
When they were drafted years ago, resort timeshare plans included expiration dates that are now about to expire. With each timeshare unit having at least 50 co-owners, and properties having dozens, if not hundreds, of units, expiration of contracts at the same time could create chaos.
Vermuth said the law would allow timeshare owners of legacy resorts to have the option to either extend or terminate their contracts when their plan expires. If a sale is necessary after a termination, the law allows the homeowners association to act as representative of the unit owners.
“This allows an attorney, HOA, or resort to be able to get them the necessary votes to be able to terminate a resort,” he said. “This just gives practitioners tools to be able to deal with either an aging resort or a resort that’s thriving, and timeshare owners want to continue on and want to continue to vacation there, then this allows them to have the tools to be able to extend the time share plan.”
Vermuth said changing the voting structure was important because previously the assent of 80 to 100 percent of owners had been necessary to change anything related to the shared property regime. The portion of the law lowering that figure to 60 percent of a property’s owners will be applied retroactively.
“We did this retroactively, which is not something the legislature takes lightly. If you’re retroactively impairing contracts to allow for a lower voting requirement, there has to be a public purpose. And the legislature deemed this a sufficient public purpose in order to do so,” he said.
South Carolina has 14,170 units at 109 resorts. More than 20,000 of those South Carolina timeshare units are owned by state residents, according to the ARDA.
In South Carolina, timeshare property is considered real property, not investment, said Zach Naert of Naert & DuBois on Hilton Head Island, who said his firm gets calls daily from timeshare owners.
“People sit down and they go to buy these timeshares and they see this person on the other side of the table who represents themselves as some kind of authority figure, some sort of verification officer, but they’re not an attorney. They’re not your attorney. And they’re not there to look out for you,” he said.
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