Dear Benny: I recently read your suggestions on how to get rid of a time share.
You suggested attempting to give your time share back to the company with a “deed in lieu“ but said that it probably won’t work. You are right. It did not work. However, I found a broker who was willing to take the time share off my hands for $3,000.
Is this the only other way to rid oneself of this burden, by paying money to give something away?
Also, is it true that this time share will follow my heirs and demand the maintenance fees on them after my death?
Have you any other suggestions of how to solve this problem? –Claire
Dear Claire: I receive a large number of email questions asking how to get rid of a time share. Unfortunately, there is no easy answer. Typically, the company that owns the time-share complex does not want to take back the time share, and there are a lot of scam artists who promise to sell but want a large amount of money — upfront — and then fail to perform.
Under no circumstances should you give any company (or person) any money upfront, regardless of the amount. You can sign an agreement that states, “If you are able to release me from all of my time-share obligations, I agree to pay you XX dollars.”
Yes, the time share will follow your heirs after your death. If you owe the company money and you die, your heirs will be legally obligated to continue making the payments.
I wish that the time-share industry would step up to the plate and arrange a legitimate procedure for those of you who no longer want (or use) that time share. Perhaps, however, this is only wishful thinking.
Dear Benny: Until recently, my wife and I had owned a time share in Kitty Hawk, N.C. We stopped paying the maintenance fee last year because we are scaling back our traveling.
I offered a deed-in-lieu but it was not accepted, so we gift-deeded the property to an individual hoping to avert any further billings of the maintenance fee.
Because we are senior citizens and own our home free and clear, we are not concerned about credit ratings.
Do you see a problem with this method of letting the time share go? –Marty
Dear Marty: The answer depends on what state law is applicable.
Because your time share is located in North Carolina, the documents you signed may state that North Carolina law is applicable, even though you do not personally live there.
I do not know the laws in North Carolina. I do know, however, that in 36 states, and in the District of Columbia, mortgage holders can pursue borrowers for what is known as a “deficiency judgment.”
Example: You owe $100,000 on the project. The lender forecloses, and someone buys the time share for $60,000 (or, alternatively, the lender takes it back for $60,000 because no one bid at the foreclosure sale). The lender is out $60,000 (plus legal and auction fees), and this is called a deficiency.
If the law in the state allows lenders to sue for this deficiency, the lender can get a judgment against you for this difference. Once there is a judgment, the lender can then go to the state where you live and try to collect on that judgment.
The law is very clear: Once there is a valid judgment in one state, the court in every state must give “full faith and credit” to that judgment.
So, depending on the laws of the applicable state, your personal assets may be in jeopardy. I suggest you talk with an attorney for more details.
Keep in mind that even if you live in a state that does not permit deficiency judgments, such as California, that may not protect you if some other state allows those judgments.
And to add insult to injury, you will most likely have to pay income tax on the amount of money that your lender did not get. I call this phantom income.
Benny Kass is a practicing attorney in Washington, D.C., and Maryland. No legal relationship is created by this column. Questions for this column can be submitted to email@example.com.