Turbulent times in time-sharing sales prompt control steps
Time-sharing of resort condominium units - the development and sale of a slice of ownership time in a unit - is one of the most controversial facets of the current real estate market.Skip to next paragraph
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The relatively new industry has experienced a roller-coaster ride of ups and downs during the past decade. Its peaks and valleys have been akin to boom and bust. Now it is a struggling industry hoping for a better market this year.
The key problem is sparked by overzealous sales managers who resort to questionable marketing techniques to promote sales of time-share units.
''The belief that time-share developers are fast-buck artists seems to prevail, as does the certainty that the buyer will be ripped off eventually,'' it is conceded in a time-sharing newsletter.
The documented reports of misrepresentations and rip-off promotions in the marketing of time-shares have produced negative and volatile public response in some areas. Resulting actions in local communities have ranged from banning the development and sale of time-shares to no action at all.
Perhaps a good ''middle of the road'' model has been hammered out in Bermuda, a self-governing British colony. Until about three years ago, time-sharing was virtually unknown there. It now offers many time-share developments and is proving to be good for its economic well-being.
Bermuda political leaders, however, recognized and acted on their belief that strong regulatory legislation was essential if the concept was to work well and serve the best interests of all Bermudans.
As a result, in August 1981 the Bermuda legislature passed the Timesharing Licensing and Control Act.
A few of the act's provisions include:
* All time-share developer-owners, managing agents, and marketing agents must be licensed.
* The Bermuda minister of tourism has authority to approve or disapprove proposed time-share developments and regulate the number of units coming onto the market at any one time.
* A 15-day rescission period and a compulsory escrow account in a financial institution into which all sales proceeds must be deposited during the rescission period are required.
Federal regulations to control certain practices in the time-share industry are probably inevitable, according to Gary Burnett, director of legal affairs of the American Land Development Association. ''However, it should be noted that even if a bill is introduced tomorrow, its ultimate passage could be years down the road,'' Mr. Burnett added.
''Also, increased legislative activity on the state level during the next couple of years may temper and influence the scope of any such congressional legislation. But my sources on Capitol Hill definitely suggest the introduction of a bill is imminent.''
Many time-share industry leaders, including Mr. Burnett, feel that federal control would not be all bad. It might just help to solve some serious problems that now exist.
''While the notion of federal legislation seems ominous, it might prove to be an excellent opportunity to put some nagging issues to bed once and for all,'' he noted.
''As an example, advantages might be gained from federal legislation by stepping up authority to investigate and enjoin operators who are creating much of the bad relations with the public.''
Some hesitant consumers are not as concerned about abuses in marketing time-share units as they are about its investment value. They feel when you add up all the costs of purchasing and owning a time-share unit, some of which are subject to continual increases, it makes more economic sense to rent.
Others like the idea of ownership, even for just a couple of weeks a year. They like it so much, in fact, that they feel it is worth the investment.
The industry, while struggling to establish itself on rather shaky legs, is developing and maturing in some ways. For example, now there is a title firm, Timeshare Title Trust Ltd., in Florida, that specializes exclusively in providing title-insurance coverage for time-share ownerships.
Perhaps the Bermuda-type plan is indeed workable - or at least worthy of serious study. It could potentially salvage the desirable aspects of time-sharing while regulating out the bad spots.