Those of you who said that Marriott is wearing too many hats are spot on. It is in the interest of the timeshare association to see whether it can find a new owner willing to pay future maintenance. I don't know how aggressive the mortgage holders are, since the units are no doubt worth much less than the notes. So they may not be willing to foreclose, since the costs of carrying the timeshare unit may be more than they will realize on a sale of the unit.
I just read that Florida passed a law this spring that makes it easier for Timeshares to foreclose against owners who don't pay maintenance. It looks to me that the Association can complete the foreclosure relatively quickly and inexpensively, but may have to waive any claims for unpaid maintenance. I don't believe this type of foreclosure affects the underlying mortgage on the timeshare unit, but it is unclear what happens when the Association forecloses on the lien and there is a mortgage on title. Presumably the Association becomes the owner, subject to a mortgage which the Association has no obligation to pay. So the Association can't sell the unit, since there is a mortgage on it. I wonder if that the Association can rent the unit (and apply the rent to maintenance) while waiting for the mortgage holder to foreclose and subsequently sell the unit.
If Marriott on behalf of the mortgage holders is willing to take a deed in lieu of foreclosure and not pursue the unit owner, that is a win for all of us, because the law also allows a quick mortgage foreclosure if the mortgage holder waives a deficiency.
Here is a summary of that Florida law:
HB 1411
Trustee (non-judicial) foreclosure: The bill creates Section 721.855, Florida Statutes, providing for trustee foreclosure of timeshare assessment liens and Section 721.856, Florida Statutes, providing for trustee foreclosure of timeshare mortgage liens outside of the court system. For assessment liens, the process applies to any default giving rise to the imposition of an assessment lien which occurs after the effective date of the law. However, for mortgage liens, the process applies only to mortgages executed after the effective date of the law and that contain specific disclosure language, and to pre-existing mortgages only if the specific disclosure language is added to the mortgage with the consent of the borrower. In addition to providing for the specific procedures necessary to initiate and conduct a trustee foreclosure action, which procedures include requirements to deliver notice of the initiation of the process to an affected timeshare owner, the bill provides the timeshare owner with the right to opt-out of the trustee foreclosure process in favor of the judicial foreclosure process for any reason and at any time prior to the issuance of a certificate of sale by the trustee. In addition, lienholders may not proceed against the timeshare owner for any debt deficiency resulting from the trustee sale of the foreclosed timeshare interest. The bill also provides for the payment of a $50 fee for the recording of the trustee’s deed upon completion of the trustee sale. Attorneys who are in good standing with The Florida Bar and have been licensed to practice law in Florida for at least 5 years and title insurance companies authorized to conduct business in Florida for at least 5 years are authorized by the bill to provide trustee services.
Applying the business judgment rule: Similar to a provision for the benefit of condominium associations already contained in Chapter 718, Florida Statutes, the bill creates subsection 721.13(13), Florida Statutes, providing that officers, directors and agents of a timeshare owners’ association must discharge their duties in accordance with the "business judgment rule." Specifically, the business judgment rule provides that officers, directors and agents must discharge their duties in good faith with the care an ordinarily prudent person in a like position would exercise under similar circumstances, and in the best interests of the association. Provided that they do not act in bad faith or in their own personal interest, such officers, directors and agents will be exempt from liability for monetary damages by following the business judgment rule in the same manner as provided in Florida’s not-for-profit law contained in Chapter 617, Florida Statutes.
Referrals without Chapter 475 licensure: Currently, Section 721.20(2), Florida Statutes, exempts any timeshare purchaser who refers no more than 20 prospects each year to a developer from the licensure requirements of Chapter 475, Florida Statutes, Florida’s real estate broker law. The bill expands this exemption by providing that the prospects may be referred to a managing entity of a timeshare plan, as well as to a developer. This change will benefit timeshare owners’ associations that are seeking to sell off timeshare interests acquired by the associations through assessment lien foreclosure or otherwise.
