ROC continues to push for the expansion of non-judicial foreclosure (“NJF”) laws around the country to benefit timeshare owners and homeowners’ associations (“HOAs”). Unlike primary residential dwellings, timeshares are vacation properties with short-term use, typically a week or two annually. The loss of a timeshare interest and the vacation experience it provides may impact one’s quality of life, but unlike a primary residence, it does not leave the owner without a place to live. As a result, less than 1% of timeshare owners contest foreclosure actions when pursued by lenders or homeowners’ associations.
Applying judicial foreclosure laws to timeshare interests is costly when contrasted with the value of a single timeshare unit. It is also very time-consuming and burdens the already stretched judicial system in many states. As a result, one of our core issues is to advocate for NJF options, which are less expensive, more efficient, and do not require as much judicial involvement.
What is Non-Judicial Foreclosure (NJF), and How Does it Work?
NJF is an alternative type of foreclosure to a judicial foreclosure. In a judicial foreclosure, the foreclosing party has to file a lawsuit asking a court for an order allowing a foreclosure sale. It can sometimes take a year or more to complete the entire judicial foreclosure process.
In states with NJF, a party, usually a lender or HOA, can foreclose without getting a court order. They will still have to follow all statutory procedures to use NJF, including restrictions on timelines and notices. Often, too, the party being foreclosed on will have the choice to opt for a judicial foreclosure.
In short, NJF is a faster, less costly, and less burdensome foreclosure method than a judicial foreclosure.
Why NJF is Good for Dues-Paying Owners
Most timeshare HOAs are legally responsible for maintaining, repairing, and replacing the resort’s common elements, like recreational facilities, roofs, roads, and parking lots. These maintenance and repairs are funded through the annual assessments paid by the timeshare owners collectively. If, for some reason, an owner stops paying his financial obligations, the association has to spread those costs among the rest of the owners in the association. This is an unfortunate burden on the rest of the owners.
In states that don’t have non-judicial foreclosure, the remaining dues-paying timeshare owners may be forced to cover 100% of a resort’s assessment obligations. As each owner’s individual share increases, an association may try to reduce expenses by deferring maintenance and repairs—thus decreasing the value and desirability of the entire resort. This also causes more owners to simply “walk away” as they are unwilling to subsidize a disproportionate share of assessment obligations. If this situation continues to snowball, it could result in the financial failure of the resort. In jurisdictions with NJF, though, an association can cost-effectively acquire the delinquent timeshares and resell them to new paying owners or rent them for the benefit of the association.
What ARDA-ROC is Doing
ARDA-ROC supports non-judicial foreclosure laws, which provide strong consumer protection provisions. As mentioned above, it is critical to recognize that practically all timeshare foreclosure actions go uncontested—most often because the owners have financial difficulties, are no longer interested in being involved with the resort, or no longer use their timeshares. To ensure that the rights of all timeshare owners are preserved, ARDA-ROC supports NJF legislation with two particular consumer protections for timeshares:
- Owners subject to foreclosure are free to “opt-out” of the non-judicial process and choose a traditional court procedure and protection through judicial foreclosure and
- The delinquent owner is not pursued in order to collect the assessments after the foreclosure is complete, and their credit rating will not be affected by the foreclosure action.
ARDA and ARDA-ROC have been working hard to advocate for owner-friendly NJF laws across the country. Most recently, in 2022 and 2023, we were able to get NJF legislation passed in Georgia through HB 1088/SB 493 and HB 182.
So far, 31 states and D.C. allow NJF for timeshares, and we look forward to expanding our efforts in 2024 and the future.