ROFR obligation

[billymach4]

My question is, if you had an aquaintance interested in buying, then through a transfer company are you not allowed to sell to that aquaintance directly? Does every single sale have to go through ROFR?

There may be some exceptions I can't speak of at this moment. But yes all transfers and sales must pass thru the ROFR process.

 

[dioxide45]

My question is, if you had an aquaintance interested in buying, then through a transfer company are you not allowed to sell to that aquaintance directly? Does every single sale have to go through ROFR?

I understand that only transfers to a direct family member. Parent to child, grandparent to grandchild don't require ROFR. Even transfers between cousins, aunts, uncles, nieces, nephews require ROFR.

 

[vacationtime1]

I understand that only transfers to a direct family member. Parent to child, grandparent to grandchild don't require ROFR. Even transfers between cousins, aunts, uncles, nieces, nephews require ROFR.

This is correct and it is disturbing in its impact.

If your rich uncle wants to "sell" you his $10,000 timeshare for $2,500, it is not really a sale for $2,500; it is a sale for $10,000 + a simultaneous $7,500 gift. If this is unscrambled -- the sale is made for $10,000 (with the purchase and sale agreement so reflecting) and a $7,500 gift check is given to the niece/nephew purchasing for $10,000 -- the transaction will pass ROFR.

This is not fraud; the uncle wouldn't sell to a stranger for $2,500. The uncle is making a gift to the niece/nephew of $7,500 (perhaps made the day before the purchase and sale agreement is signed). The beneficiary of the gift is the relative, not Marriott; Marriott is not entitled to use ROFR to capture a gift.

 

[SueDonJ]

I wonder what would happen if one failed to follow through on signing over the deed only to later submit a higher contract. Could Marriott still only be obligated to the original one?

It would depend on whatever/if any restrictions are in the governing docs for that particular resort, and the time period between submissions.

My books aren't with me but I know this is something that's been discussed on TUG over the years. A search brings up this thread and particularly post #6, which I know I reviewed the SW docs to find those particulars before posting.

 

[SueDonJ]

This is correct and it is disturbing in its impact.

If your rich uncle wants to "sell" you his $10,000 timeshare for $2,500, it is not really a sale for $2,500; it is a sale for $10,000 + a simultaneous $7,500 gift. If this is unscrambled -- the sale is made for $10,000 (with the purchase and sale agreement so reflecting) and a $7,500 gift check is given to the niece/nephew purchasing for $10,000 -- the transaction will pass ROFR.

This is not fraud; the uncle wouldn't sell to a stranger for $2,500. The uncle is making a gift to the niece/nephew of $7,500 (perhaps made the day before the purchase and sale agreement is signed). The beneficiary of the gift is the relative, not Marriott; Marriott is not entitled to use ROFR to capture a gift.

Anytime the parties execute a side deal in order to intentionally bypass the stated terms of a real estate deal, isn't that fraud? Regardless, the question then becomes whether it's worthwhile for the party that set the terms to challenge the transaction - and it's anyone's guess whether Marriott would or wouldn't in the situation you describe. But the fact remains that they have a track record of authorizing ROFR exceptions among certain family lines and not among others, and it's a track record that doesn't appear to have been challenged with the argument you propose.

 

[Dean]

This is not fraud; the uncle wouldn't sell to a stranger for $2,500. The uncle is making a gift to the niece/nephew of $7,500 (perhaps made the day before the purchase and sale agreement is signed). The beneficiary of the gift is the relative, not Marriott; Marriott is not entitled to use ROFR to capture a gift.

I don't agree, if the intent is to bypass ROFR and one would not give the gift of $7500, it is Fraud and illegal in all states I know of under the Real Estate Rules. If one is willing to give the gift regardless then I would agree. Do things happen under the table, certainly they do.

 

[mbstn6254]

Why couldn't you sell to someone other than a direct relative for a price Marriott would never purchase it for, pay the three dollars and then gift that money back to them at another time?

 

[davidvel]

Why couldn't you sell to someone other than a direct relative for a price Marriott would never purchase it for, pay the three dollars and then gift that money back to them at another time?

You could if the stranger trusted you to gift the money back. But just because you can do something does not mean it is not fraud.

I doubt many judges would consider this a legitimate arms length transaction, and the "gift" to the stranger is actually a gift, as opposed to being part of a deal to defraud MVC out of their ROFR.

 

[pedro47]

Forget but I’m having trouble with my eyes. What is the date of the first post on this topics.

 

[SueDonJ]

Forget but I’m having trouble with my eyes. What is the date of the first post on this topics.

This thread was started last Friday, May 30. But it’s been a recurring TUG topic for all the years I’ve been here.

 

[daviator]

It seems to me that it shouldn't be that hard to think up some requirement of sale that you could put in a sales contract which a buyer would be willing to agree to, but MVC would not. Perhaps the inclusion of a bartered item which is unique, so the contract price could be something like "$10,000 plus the signed original artwork entitled 'Scribbles on a Notepad' by John Q. Buyer."

Since MVC would be unable to produce that "art" they would be unable to exercise ROFR. The buyer could then scribble on a notepad and remit the "art" along with the check.

It is a bit absurd, admittedly, but I don't know why it wouldn't work.

But it's also a fact that for most sellers, they don't fundamentally care whether MVC exercises ROFR, they get rid of their timeshare and get the negotiated price regardless whether it's from the third party buyer or from MVC. A jilted buyer won't be happy, of course, but many sellers won't really care.

 

[Dean]

It seems to me that it shouldn't be that hard to think up some requirement of sale that you could put in a sales contract which a buyer would be willing to agree to, but MVC would not. Perhaps the inclusion of a bartered item which is unique, so the contract price could be something like "$10,000 plus the signed original artwork entitled 'Scribbles on a Notepad' by John Q. Buyer."

Since MVC would be unable to produce that "art" they would be unable to exercise ROFR. The buyer could then scribble on a notepad and remit the "art" along with the check.

It is a bit absurd, admittedly, but I don't know why it wouldn't work.

But it's also a fact that for most sellers, they don't fundamentally care whether MVC exercises ROFR, they get rid of their timeshare and get the negotiated price regardless whether it's from the third party buyer or from MVC. A jilted buyer won't be happy, of course, but many sellers won't really care.

I've seen this discussed over the years both for MVC and DVC. I've seen it tried once or twice over the years with DVC. I've personally submitted something similar for DVC. This was a swap of timeshares and it was legitimate but the effect was the same. DVC did what MVC has done, require a dollar amount for the item in question else they wouldn't consider it a valid submission.

 

[mbstn6254]

You could if the stranger trusted you to gift the money back. But just because you can do something does not mean it is not fraud.

I doubt many judges would consider this a legitimate arms length transaction, and the "gift" to the stranger is actually a gift, as opposed to being part of a deal to defraud MVC out of their ROFR.

I was referring to the scenario where I had a friend or a non-immediate family member whom I wanted to give my membership to. Now, the rules don't allow it. Selling to a family member at a price Marriott would never exert its ROFR and then gifting the family member what they paid after a while could be a way to get around the transfer rule.

 

[Dean]

I was referring to the scenario where I had a friend or a non-immediate family member whom I wanted to give my membership to. Now, the rules don't allow it. Selling to a family member at a price Marriott would never exert its ROFR and then gifting the family member what they paid after a while could be a way to get around the transfer rule.

It should work but as I said earlier, it's illegal in all states I am aware of and I've never heard of a state that's an exception.

 

[iftravel]

It should work but as I said earlier, it's illegal in all states I am aware of and I've never heard of a state that's an exception.

I don’t know about that but this whole thing of developer having “right of first refusal” sounds illegal to me in the first place, should be banned in all states!

BTW, reminds me of “right of first night” of medieval time!!!

 

[Dean]

I don’t know about that but this whole thing of developer having “right of first refusal” sounds illegal to me in the first place, should be banned in all states!

BTW, reminds me of “right of first night” of medieval time!!!

It's a general Real Estate thing that Timeshare have also used, it's not specific to timeshares. I know for certain that submitting a contact that's different than the actual agreed upon deal (including rebates, other gifts) is illegal in FL and I understand it is across the board. I doubt any timeshare company would litigate for an individual but I could see them doing so if a company (broker) were involved. But they don't have to go that far, all they have to do is lock down the account.

 

[iftravel]

It's a general Real Estate thing that Timeshare have also used, it's not specific to timeshares. I know for certain that submitting a contact that's different than the actual agreed upon deal (including rebates, other gifts) is illegal in FL and I understand it is across the board. I doubt any timeshare company would litigate for an individual but I could see them doing so if a company (broker) were involved. But they don't have to go that far, all they have to do is lock down the account.

I am with you though people who defy "abusive" rules win my respect and if enough people do it, it can and will be changed. The "right of first night" was common in some place, not specific to timeshares if timeshares exist one thousand years ago. yeah, what if the "right of first night" is written into the contract for resales today?!

 

[daviator]

I don’t know about that but this whole thing of developer having “right of first refusal” sounds illegal to me in the first place, should be banned in all states!

BTW, reminds me of “right of first night” of medieval time!!!

It is certainly not illegal. Whoever bought the timeshare VOI from the developer initially contractually agreed to give the developer ROFR on resales. And because that contractual agreement is part of the property deed itself, it conveys with the VOI and continues to bind all future owners of that property. It's a deed restriction, essentially.

And although it's a standard part of the CC&Rs (Covenants, Conditions and Restrictions) for many MVC properties, I'm sure they'd argue that it's not unilaterally imposed on anyone – after all, a buyer who doesn't like that clause can simply not buy the VOI. If you buy it, you are agreeing to accept the ROFR requirement. If you bought a timeshare without reading the CC&Rs, that's on you.

I have encountered ROFR clauses in a variety of contracts over the years, not all of them involving real estate. It's a pretty common thing. And strictly speaking, it doesn't harm sellers, since they get their sales price regardless whether MVC exercises ROFR or not. But obviously it's a potential roadblock when your are trying to convey something to a specific buyer where you care about more than just getting your money.

 

[daviator]

I've seen this discussed over the years both for MVC and DVC. I've seen it tried once or twice over the years with DVC. I've personally submitted something similar for DVC. This was a swap of timeshares and it was legitimate but the effect was the same. DVC did what MVC has done, require a dollar amount for the item in question else they wouldn't consider it a valid submission.

Could you not put an unreasonable valuation on the item ("Scribbles on a Notepad" is worth $20,000"), such that MVC would pass on ROFR? The buyer wouldn't have to pay $20,000, they'd just have to produce that valuable artwork they just created.

I'm just suggesting this as an intellectual exercise, it seems like it should work. At some point MVC will get tired of the back and forth and will let the deal pass through... maybe?

 

[Dean]

I am with you though people who defy "abusive" rules win my respect and if enough people do it, it can and will be changed. The "right of first night" was common in some place, not specific to timeshares if timeshares exist one thousand years ago. yeah, what if the "right of first night" is written into the contract for resales today?!

I would add that we all went in knowing this was in place or should have known. IMO that takes away the martyr or principle angle. Submitting a false set of considerations to bypass ROFR is a violation of FL's real estate laws and I'm told other states as well. Whether it's reasonable for a timeshare developer to even have the clause is a different matter, personally I think it is.

 

[Dean]

Could you not put an unreasonable valuation on the item ("Scribbles on a Notepad" is worth $20,000"), such that MVC would pass on ROFR? The buyer wouldn't have to pay $20,000, they'd just have to produce that valuable artwork they just created.

I'm just suggesting this as an intellectual exercise, it seems like it should work. At some point MVC will get tired of the back and forth and will let the deal pass through... maybe?

You would have to put in writing a reasonable value but obvious there is some gray area there. I don't think one could just make up a number that was unrealistic. As I mentioned, I've submitted something (to DVC) where there was a consideration that could not be replaced. They simply refused to consider ROFR until we places a dollar value. Effectively we had to make them separate transactions. This was an even swap one deed for another, DVC for an Aruba timeshare. Fortunately the true value was basically identical so we could honestly give a dollar value that was realistic. It was high enough that DVC was likely to let it pass but not automatically so. I think we sometimes forget MVC, DVC, etc have the upper hand. They can simply lock the account, cancel reservations, administratively foreclose if necessary and refuse to transfer to a "new owner". You see people threaten to complain, sue, etc and in reality those things are not going to happen basically ever.

I sold 3 DVC contracts all at OKW. One was the one noted above that I acquired through the deed swap then later sold and two others. On one of those DVC exercised ROFR. However, the revised contract then sent me to sign contained additional restrictions not in the POS and not in the original contract. Basically it was a confidentiality clause that I would not discuss the sale price. I wrote them that I wouldn't sign it but if they wanted to waive ROFR I'd contact the original buyer and see if they wanted to proceed and I reminded them they did not have the right to add additional restrictions. I was prepared to keep it rather than signing for 2 reasons. Mainly on principle but also by that time I'd already discussed the sales price online. They proceeded with the purchase and never said another word about it.

 

[davidvel]

Could you not put an unreasonable valuation on the item ("Scribbles on a Notepad" is worth $20,000"), such that MVC would pass on ROFR? The buyer wouldn't have to pay $20,000, they'd just have to produce that valuable artwork they just created.

I'm just suggesting this as an intellectual exercise, it seems like it should work. At some point MVC will get tired of the back and forth and will let the deal pass through... maybe?

No you can't do this. Generally, courts have not upheld these artifice attempts in relation to ROFR. They consider this a bad faith breach of the covenant.

Courts will strike down those "side deals" that are not reasonably related to the sale of the property that are clearly intended to evade the effect of the ROFR, and the holder of the ROFR can proceed with the actual purchase deal if they choose.

 

[jellen613]

I understand that only transfers to a direct family member. Parent to child, grandparent to grandchild don't require ROFR. Even transfers between cousins, aunts, uncles, nieces, nephews require ROFR.

This lineal descendant thing really burns me up as someone without children... also as a niece who had to pay taxes on part of my uncle's estate (childless) when he died. He did have me as a co-owner on one of his accounts, however his larger account, I was added as co-owner 1 month too late (I had to be co-owner for at least a year and he was not ill when he added me, it was just a security measure).

 

[WorldT]

This is correct and it is disturbing in its impact.

If your rich uncle wants to "sell" you his $10,000 timeshare for $2,500, it is not really a sale for $2,500; it is a sale for $10,000 + a simultaneous $7,500 gift. If this is unscrambled -- the sale is made for $10,000 (with the purchase and sale agreement so reflecting) and a $7,500 gift check is given to the niece/nephew purchasing for $10,000 -- the transaction will pass ROFR.

This is not fraud; the uncle wouldn't sell to a stranger for $2,500. The uncle is making a gift to the niece/nephew of $7,500 (perhaps made the day before the purchase and sale agreement is signed). The beneficiary of the gift is the relative, not Marriott; Marriott is not entitled to use ROFR to capture a gift.

Gifting to anyone, especially to a family member is allowed at anytime of the year for any reason. People give family members cash to assist them in buying a house even when the person gifting the money is the one selling the house.
Gifting a family member any amount including the full sale price of a timeshare is perfectly legal.
However, if you draw up a contract for the gift , then it should be included in the purchase agreement for the timeshare. If there is no contract, you are free as a bird to do whatever you want with your money.

BTW, remember to include that gift in your tax return .