Why Non-Judicial Foreclosure (NJF) for Timeshares?

Why Non-Judicial Foreclosure (NJF) for Timeshares?

1. Characteristics of Timeshares: Timeshare ownership enables owners to enjoy a vacation experience over the course of many years. Timeshares, however, are not primary residential dwellings; they are vacation properties with short-term use, usually of a week or two. In many states, the most common form of timeshare ownership is a deeded interest in real property.Other common forms of ownership involve trust interests that may or may not include a real estate interest, or memberships or licenses that are not considered to be real property.Timeshare interests are not investments – they are intended for personal and family recreational use.This makes the timeshare industry a unique component of states real estate and hospitality industry that requires special treatment.

2. Nationwide Trend Moving Toward NJFs, Judicial Foreclosures Too Costly: Applying judicial foreclosure laws to timeshare is costly, time consuming and a burden on the judicial system. Because of this, the trend across the country has been moving toward adopting non-judicial foreclosures (“NJFs”) because such foreclosures are less expensive, more efficient and do not require substantial judicial supervision. There are about 20+ jurisdictions nationally that allow NJFs for timeshare properties (as well as other real estate in some places). A few of those states include Arizona, California, Florida, Hawaii, Illinois, Maine, New Hampshire, South Carolina, Texas and Vermont, among others.

3. Timeshare Owners Associations Benefit from NJF: The non-judicial foreclosure of association assessment liens saves the owners’ association substantial foreclosure costs, helps reduce the association’s bad debt more quickly, and reduces the burden on all of the timeshare owners who timely pay their annual assessments.

4. States Acknowledging the Distinction Between Timeshares And Residential Properties: Because of the significant difference between timeshares and traditional residential properties, some states have acknowledged the importance of NJFs for timeshares while either prohibiting or limiting NJFs for traditional residential properties.

5. ARDA Proposed Legislation Provides Strong Consumer Protection Provisions:It is of critical importance to note that practically all timeshare foreclosure actions go uncontested because the owners are no longer interested in being involved with the resort and no longer use their timeshares. However, to ensure that the rights of all timeshare owners are preserved, ARDA-supportedNJF legislation allows timeshare owners subject to foreclosure to “opt-out” of non-judicial foreclosure and choose a court’s involvement and protection through the judicial foreclosure process.