Last week, Representative Carole Murray introduced HB 12-1116, which has the title “Concerning Deceptive Trade Practices Related to Timeshare Resale Transactions.”

With respect to regulation of the traditional resale business, the Colorado bill is similar to the Florida timeshare resale bill that we discussed in a prior post (but thankfully without Florida’s “ratio” disclosure requirement).  However, the Colorado bill is unique in that it is the first legislation to specifically regulate timeshare relief companies.  It does so through three basic steps:

  1. Creating specific disclosure requirements for “time share resale transfer agreements”
  2. Specifically applying Colorado’s 5-day cancellation right to these transactions 
  3. Delaying any consumer payment until after the relief company provides its transfer services  

These steps obviously benefit the consumer.  But from a resort management perspective, HB 12-1116 comes just in time as it is becoming increasingly obvious that other efforts regarding relief companies are likely ineffective:

  • Fraudulent Transfer Theories
    • In December, a Colorado Court of Appeals confirmed that, under UFTA, an asset does not include “property to the extent it is encumbered by a valid lien.”  Because most timeshare HOAs benefit from a statutory lien created at the time a project declaration is filed, it follows that an HOA would be foreclosed from using UFTA to challenge relief company transactions.
    • As discussed in this article, approaches using UFTA may create significant problems in collecting past due assessments.
    • An Eagle County timeshare association relying on UFTA as the basis for withholding transfer approval was sued by the company seeking the approvals (Fireside Registry).  The association decided the better course was to settle, and in the end approved the transfers and paid Fireside’s legal costs and expenses.   
  • Deed Acceptance & Delivery Theories:
    • In a petition for declaratory judgment, a Summit County timeshare association has argued that the transfer company did not accept the timeshare deed, or alternatively did not have the requisite capacity to accept the deed.  The petition cites support from decisions in Florida, Arkansas and Illinois, but not Colorado.  Even more curious, the petition does not address the relevant statute under which an acknowledged and recorded deed creates the presumption of effective delivery.
    • The association could simply be pinning its hopes on a default judgement as the transfer company may not want to incur the costs necessary to respond to the petition.  However, what would happen to the association’s arguments if the transfer company simply paid the assessment (which, for this resort, are at the lower end of the spectrum)?