By Clemons H.B. No. 362
A BILL TO BE ENTITLED
1-1 AN ACT
1-2 relating to reports of timeshare expenses charged and collected by
1-3 managing entities of timeshare properties; providing a civil
1-4 penalty.
1-5 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-6 SECTION 1. Section 221.002, Property Code, is amended by
1-7 amending Subdivision (23) and adding Subdivisions (32), (33), and
1-8 (34) to read as follows:
1-9 (23) "Timeshare expenses" means expenditures, <fees,>
1-10 charges, or liabilities for the operation of a timeshare property
1-11 or timeshare system, including any allocations to maintain reserves
1-12 but excluding any purchase money payable for timeshare interests:
1-13 (A) incurred in connection with a timeshare
1-14 interest by or on behalf of the owner of all timeshare interests in
1-15 a timeshare property; and
1-16 (B) imposed on timeshare interests by the
1-17 managing entity.
1-18 (32) "Timeshare fees" means an amount assessed against
1-19 or collected from an owner by a managing entity in a fiscal year,
1-20 without regard to the frequency with which the amount is assessed
1-21 or collected.
1-22 (33) "Owner" means a person who holds a legal or
1-23 equitable interest in a timeshare interest in timeshare property
1-24 subject to the requirements of this Act.
2-1 (34) "Timeshare system" means two or more timeshare
2-2 properties located in separate geographic areas that are:
2-3 (A) managed by the same managing entity; and
2-4 (B) subject to a written arrangement or
2-5 agreement whereby an owner of a timeshare interest in any one of
2-6 the timeshare properties may use a timeshare unit and the amenities
2-7 of any of the other timeshare properties as provided in the project
2-8 instruments.
2-9 SECTION 2. Section 221.011(b), Property Code, is amended to
2-10 read as follows:
2-11 (b) The declaration made under this section must include:
2-12 (1) a legal description of the timeshare property,
2-13 including a ground plan indicating the location of each existing or
2-14 proposed building to be constructed on the timeshare property;
2-15 (2) a description of each existing or proposed
2-16 timeshare unit, including the location and square footage of each
2-17 unit and an interior floor plan of each existing or proposed
2-18 building;
2-19 (3) a description of the amenities furnished or to be
2-20 furnished to the purchaser;
2-21 (4) a statement of the fractional or percentage part
2-22 that each timeshare interest bears to the entire timeshare regime;
2-23 <and>
2-24 (5) if applicable, a statement that the timeshare
2-25 property is part of a timeshare system; and
2-26 (6) any additional provisions that are consistent with
2-27 this section.
3-1 SECTION 3. Section 221.032(b), Property Code, is amended to
3-2 read as follows:
3-3 (b) The timeshare disclosure statement must include:
3-4 (1) the name and address of the developer and the name
3-5 and specific location of the timeshare property;
3-6 (2) a description of the accommodations, amenities,
3-7 timeshare property, and any project or development within which the
3-8 timeshare property is located or of which it is a part; the total
3-9 number of timeshare units in the timeshare property and whether and
3-10 under what circumstances that number may be increased or decreased;
3-11 and, if a timeshare interest includes amenities not yet in
3-12 existence, the commencement and completion schedule of the proposed
3-13 amenities;
3-14 (3) a description of the timeshare interests currently
3-15 available for disposition and, if applicable, the types and number
3-16 of units available;
3-17 (4) a statement that a council of purchasers exists or
3-18 is expected to be created or that such a council does not exist and
3-19 is not expected to be created and, if such a council exists or is
3-20 reasonably contemplated, a description of its powers and
3-21 responsibilities;
3-22 (5) the name and principal address of the managing
3-23 entity and a description of the procedures, if any, for altering
3-24 the powers and responsibilities of the managing entity and for
3-25 removing or replacing it;
3-26 (6) a complete budget for the operation of the
3-27 timeshare property for a period of one year after the first
4-1 disposition of a timeshare interest in the property, and
4-2 thereafter, the current operating budget, which operating budget
4-3 must include:
4-4 (A) the total amount included as a reserve for
4-5 the maintenance of the timeshare property and for the repair or
4-6 replacement of personal property or fixtures;
4-7 (B) the total amount of any other reserve and
4-8 the purpose of the reserve;
4-9 (C) the projected timeshare liability expressed
4-10 by categories of expenditure for all timeshare interests;
4-11 (D) the timeshare liability projected by
4-12 categories of expenditures for each timeshare interest;
4-13 (E) the name and address of the person who
4-14 prepared the operating budget; and
4-15 (F) the assumptions on which the operating
4-16 budget is based;
4-17 (7) a description of the nature and estimated amount
4-18 of any timeshare liability that may in the future be assessed and
4-19 the method and formula for assessing the timeshare liability;
4-20 (8) a description of any service that the developer or
4-21 person acting on his behalf provides or expense that is paid that
4-22 reasonably may be expected to become a timeshare liability, and the
4-23 projected timeshare liability attributable to that service or
4-24 expense;
4-25 (9) a description of the existing or proposed
4-26 amenities of the timeshare property and, if the amenities are
4-27 proposed or not yet complete or fully functional, a schedule for
5-1 the projected commencement, completion, and availability of those
5-2 amenities;
5-3 (10) a description and amount of any current or
5-4 expected dues, assessments, fees, or charges to be paid by
5-5 purchasers for the use of accommodations or amenities or for any
5-6 other purpose;
5-7 (11) a description of any unsatisfied final judgment
5-8 against the developer, seller, managing entity, or exchange company
5-9 with which the developer is under contract, but not including any
5-10 individual sales agent or representative who offers a timeshare
5-11 interest;
5-12 (12) a description and status of any pending lawsuit
5-13 or administrative action of which the developer has actual
5-14 knowledge that may materially affect a timeshare interest;
5-15 (13) a description and amount of insurance coverage
5-16 provided for the protection of the purchaser;
5-17 (14) the extent to which a timeshare interest may
5-18 become subject to a tax lien or other lien arising out of claims
5-19 against purchasers of different timeshare interests;
5-20 (15) a description of those matters required by
5-21 Section 201.041;
5-22 (16) a statement disclosing any right of first refusal
5-23 or other restraint on the transfer of all or any portion of a
5-24 timeshare interest;
5-25 (17) a statement disclosing that any deposit made in
5-26 connection with the purchase of a timeshare interest will be held
5-27 in an escrow account until expiration of any right to cancel the
6-1 contract or any later time specified in the contract and will be
6-2 returned to the purchaser if he elects to exercise his right of
6-3 cancellation; <and>
6-4 (18) if applicable, a statement that the timeshare
6-5 property is part of a timeshare system and that timeshare fees
6-6 collected from the owners may be placed in a common account with
6-7 the timeshare fees collected from the owners of other timeshare
6-8 properties participating in the timeshare system; and
6-9 (19) any other material circumstances concerning a
6-10 timeshare interest.
6-11 SECTION 4. Section 221.041, Property Code, is amended to
6-12 reads as follows:
6-13 Sec. 221.041. Purchaser's Right to Cancel. (a) A purchaser
6-14 may cancel a contract to purchase a timeshare interest before the
6-15 sixth day after the date the contract is signed.
6-16 (b) If a purchaser does not receive a copy of the contract
6-17 at the time the contract is signed, the purchaser may cancel the
6-18 contract to purchase the timeshare interest before the sixth day
6-19 after the date the contract is received by the purchaser.
6-20 (c) A purchaser may not waive his right of cancellation
6-21 under this section. A contract containing a waiver is voidable by
6-22 the purchaser.
6-23 SECTION 5. Section 221.043, Property Code, is amended to
6-24 read as follows:
6-25 Sec. 221.043. Contract Requirements. (a) Attached to each
6-26 contract shall be a separate page identified as Exhibit A. Exhibit
6-27 A <The following statement> shall be provided to each purchaser at
7-1 the time the contract is signed and<. The statement shall be on a
7-2 separate page and attached to the contract as Exhibit A. The
7-3 statement> shall contain the following information. Subdivisions
7-4 (1) and (3) shall be provided in the exact language set forth in
7-5 this section <language> with the seller's name and address, the
7-6 date of the last day of the fiscal year, and the address of the
7-7 managing entity inserted where indicated:
7-8 (1) "PURCHASER'S RIGHT TO CANCEL.
7-9 "(A) BY SIGNING THIS CONTRACT YOU ARE INCURRING
7-10 AN OBLIGATION TO PURCHASE A TIMESHARE INTEREST. YOU MAY, HOWEVER,
7-11 CANCEL THIS CONTRACT WITHOUT PENALTY OR OBLIGATION BEFORE THE SIXTH
7-12 DAY AFTER THE DATE YOU SIGN THE CONTRACT. IF YOU DO NOT RECEIVE A
7-13 COPY OF THE CONTRACT AT THE TIME THE CONTRACT IS SIGNED, YOU MAY
7-14 CANCEL THIS CONTRACT WITHOUT PENALTY OR OBLIGATION BEFORE THE SIXTH
7-15 DAY AFTER THE DATE YOU RECEIVE A COPY OF THE CONTRACT.
7-16 "(B) IF YOU DECIDE TO CANCEL THIS CONTRACT, YOU
7-17 MAY DO SO BY EITHER HAND-DELIVERING NOTICE OF CANCELLATION TO THE
7-18 SELLER OR BY MAILING NOTICE BY PREPAID UNITED STATES MAIL TO THE
7-19 SELLER OR THE SELLER'S AGENT FOR SERVICE OF PROCESS. YOUR NOTICE
7-20 OF CANCELLATION IS EFFECTIVE ON THE DATE SENT OR DELIVERED TO
7-21 (INSERT NAME OF SELLER) AT (INSERT ADDRESS OF SELLER). FOR YOUR
7-22 PROTECTION, SHOULD YOU DECIDE TO CANCEL YOU SHOULD EITHER SEND YOUR
7-23 NOTICE OF CANCELLATION BY CERTIFIED MAIL WITH A RETURN RECEIPT
7-24 REQUESTED OR OBTAIN A SIGNED AND DATED RECEIPT IF DELIVERING IT IN
7-25 PERSON.
7-26 "(C) A PURCHASER SHOULD NOT RELY ON STATEMENTS
7-27 OTHER THAN THOSE INCLUDED IN THIS CONTRACT AND THE DISCLOSURE
8-1 STATEMENT."
8-2 (2) A statement disclosing the amount of the timeshare
8-3 fees, on a monthly or annual basis, which are being assessed
8-4 currently against or collected from the owners of a timeshare
8-5 interest. Immediately following the timeshare fee disclosure
8-6 statement shall be a statement that the timeshare fees collected by
8-7 the managing entity may be used to pay for the administrative and
8-8 operating expenses of the property; and
8-9 (3) "As a timeshare owner you have a right to request
8-10 a written annual timeshare fee and expense statement. This
8-11 statement is prepared annually by the managing entity and will be
8-12 available no later than the 90th day following (insert the date of
8-13 the last day of the fiscal year). You may request the statement by
8-14 writing to (insert address of the managing entity)."
8-15 (b) Immediately following the required statements
8-16 <statement> on Exhibit A shall be a space reserved for the
8-17 signature of the purchaser. The seller shall obtain the
8-18 purchaser's signature on Exhibit A at the time the contract is
8-19 signed.
8-20 (c) The contract must also include the following:
8-21 (1) the name and address of the seller and the address
8-22 of the timeshare unit;
8-23 (2) whether the purchaser visited the location of the
8-24 timeshare unit before signing the contract;
8-25 (3) an agreement by the seller that if the purchaser
8-26 timely exercises the right of cancellation under the contract, all
8-27 payments made by the purchaser to the seller in connection with the
9-1 contract shall be returned to such purchaser before the 21st day
9-2 after the seller receives notice of cancellation;
9-3 (4) the name of the person or persons actively
9-4 involved in the sales presentation on behalf of the seller;
9-5 (5) a warranty that the timeshare common properties
9-6 are not mortgaged, unless the mortgage contains a nondisturbance
9-7 clause which protects the timeshare owner in the event of
9-8 foreclosure; and
9-9 (6) in the event such timeshare interests are sold
9-10 under a lease, right to use, or membership agreement where free and
9-11 clear title to the timeshare unit is not passed to the buyer, then
9-12 the contract must contain a warranty that the timeshare is free and
9-13 clear; or if subject to a mortgage, the mortgage must contain a
9-14 nondisturbance clause which protects the timeshare owner in the
9-15 event of foreclosure.
9-16 SECTION 6. Section 221.071(a), Property Code, is amended to
9-17 read as follows:
9-18 (a) A seller or other person commits a false, misleading, or
9-19 deceptive act or practice within the meaning of Subsections (a) and
9-20 (b) of Section 17.46 of the Texas Deceptive Trade
9-21 Practices-Consumer Protection Act (Article 17.46 et seq., Business
9-22 & Commerce Code), by engaging in any of the following acts:
9-23 (1) failing to disclose information concerning a
9-24 timeshare interest required by Subchapter D;
9-25 (2) making false or misleading statements of fact
9-26 concerning the characteristics of accommodations or amenities
9-27 available to a consumer;
10-1 (3) predicting specific or immediate increases in the
10-2 value of a timeshare interest without a reasonable basis for such
10-3 predictions;
10-4 (4) making false or misleading statements of fact
10-5 concerning the duration that accommodations or amenities will be
10-6 available to a consumer;
10-7 (5) making false or misleading statements of fact
10-8 concerning the conditions under which a purchaser of a timeshare
10-9 interest may exchange the right to occupy a unit for the right to
10-10 occupy a unit in the same or another timeshare property; <or>
10-11 (6) representing that a prize, gift, or other benefit
10-12 will be awarded in connection with a promotion with the intent not
10-13 to award that prize, gift, or benefit in the manner represented;
10-14 (7) failing to provide a copy of the contract to the
10-15 purchaser at the time the contract is signed by the purchaser,
10-16 unless the purchaser requests in writing that the contract be
10-17 mailed, and the contract is mailed to the purchaser before the end
10-18 of the next business day;
10-19 (8) failing to provide the annual timeshare fee and
10-20 expense statement as required by Section 221.074; or
10-21 (9) furnishing false information in the annual
10-22 timeshare fee and expense statement as required by
10-23 Section 221.074.
10-24 SECTION 7. Subchapter H, Chapter 221, Property Code, is
10-25 amended by adding Sections 221.074 and 221.075 to read as follows:
10-26 Sec. 221.074. ANNUAL TIMESHARE FEE AND EXPENSE STATEMENT.
10-27 (a) Notwithstanding a provision of the promotional disclosure
11-1 statement, project instrument, timeshare instrument, or bylaws
11-2 adopted pursuant to a timeshare instrument, not later than the 60th
11-3 day after the last day of each fiscal year the managing entity
11-4 shall make available to each owner a written annual accounting of
11-5 the operation of the timeshare property or timeshare system. The
11-6 statement shall include:
11-7 (1) a balance sheet;
11-8 (2) an income and expense statement which complies
11-9 with generally accepted accounting principles and reflects the
11-10 collection and expenditure of timeshare fees;
11-11 (3) the current operating budget for the timeshare
11-12 property or timeshare system required by Section 221.032(b)(6);
11-13 (4) an accounting identifying any unfunded reserves
11-14 for capital improvements and maintenance and upkeep of the
11-15 timeshare property; and
11-16 (5) the name and address of each member of the board
11-17 of directors of the council of purchasers or the owners'
11-18 association, if one exists, and the name, address, and telephone
11-19 number of a designated representative of the managing entity.
11-20 (b) The managing entity shall make the fee statement
11-21 available to owners of record of a timeshare interest as of the
11-22 last day of the fiscal year as reflected in the managing entity's
11-23 records.
11-24 (c) The statement shall be delivered in person or by mail to
11-25 each person on the board of directors of the council of purchasers
11-26 or the owners' association, if one exists.
11-27 (d) The managing entity shall post prominently in the
12-1 registration area of each timeshare property the following notice,
12-2 with the date of the last day of the current fiscal year and the
12-3 address of the managing entity inserted where indicated:
12-4 "As a timeshare owner you have a right to request a
12-5 written annual timeshare fee and expense statement. This statement
12-6 is prepared annually by the managing entity and will be available
12-7 no later than the 90th day following (insert the date of the last
12-8 day of the current fiscal year). You may request the statement, by
12-9 writing to (insert address of the managing entity)."
12-10 (e) If a request for the statement is received by the
12-11 managing entity prior to the date by which the statement is
12-12 available, the statement shall be provided no later than one week
12-13 after the date the statement becomes available. If a request for
12-14 the statement is received by the managing entity after the date the
12-15 statement becomes available, the statement shall be provided no
12-16 later than two weeks after the date the request is received by the
12-17 managing entity. For the purposes of this section, the statement
12-18 shall be deemed provided if it is deposited in the mail, properly
12-19 addressed, with postage prepaid.
12-20 (f) A managing entity shall provide a separate annual
12-21 timeshare fee and expense statement for each timeshare property
12-22 unless the property is part of a timeshare system. A managing
12-23 entity may provide a consolidated statement for all timeshare
12-24 properties comprising a timeshare system.
12-25 Sec. 221.075. CIVIL PENALTY FOR LATE STATEMENT; INJUNCTION.
12-26 (a) On a written request filed with the commission by a managing
12-27 entity before the date on which the statement required by
13-1 Section 221.074 must be made available, the commission for good
13-2 cause shown may grant the managing entity an extension of no more
13-3 than 30 days in which to provide the statement.
13-4 (b) If the statement required by Section 221.074 is late and
13-5 an extension has not been granted under Subsection (a), the
13-6 managing entity required to provide the statement is liable to the
13-7 state for a civil penalty not to exceed:
13-8 (1) $500 per day for each of the first 10 days that
13-9 the statement is late; and
13-10 (2) $1,000 per day for each day after the 10th day,
13-11 until the managing entity has complied with Section 221.074.
13-12 (c) In no event shall the civil penalties exceed $25,000 for
13-13 any one statement period.
13-14 (d) A managing entity may not assess against or collect from
13-15 the owners of a timeshare property the amount of a penalty incurred
13-16 under this section.
13-17 (e) If it appears that a managing entity has violated
13-18 Section 221.074, the attorney general may institute an action for
13-19 injunctive relief, a civil penalty, or both.
13-20 SECTION 8. Subchapter H, Chapter 221, Property Code, is
13-21 amended by adding Sections 221.076 and 221.077 to read as follows:
13-22 Sec. 221.076. MANAGING ENTITIES THAT MANAGE MORE THAN ONE
13-23 TIMESHARE SYSTEM OR PROPERTY. (a) A managing entity that manages
13-24 two or more timeshare properties which are not participants of the
13-25 same timeshare system may not commingle the timeshare fees
13-26 collected from owners of one timeshare property with the timeshare
13-27 fees collected from owners of any other timeshare property.
14-1 (b) A managing entity that manages two or more timeshare
14-2 systems may not commingle the timeshare fees collected from owners
14-3 participating in one timeshare system with the timeshare fees
14-4 collected from owners participating in any other timeshare system.
14-5 (c) A managing entity which manages a timeshare system may
14-6 deposit timeshare fees collected from owners of one timeshare
14-7 property into a common account with timeshare fees collected from
14-8 owners of other timeshare properties participating in the same
14-9 timeshare system only if the practice is disclosed in the timeshare
14-10 disclosure statement for each timeshare property in the timeshare
14-11 system and the appropriate statement is included in the declaration
14-12 for each timeshare regime as required by Subchapter B. Nothing in
14-13 this section shall be construed to allow a managing entity to
14-14 commingle the timeshare fees of:
14-15 (1) separate timeshare systems;
14-16 (2) separate timeshare properties which are not part
14-17 of a timeshare system; or
14-18 (3) a timeshare system with the timeshare fees of a
14-19 separate timeshare property which is not a participant in the
14-20 timeshare system.
14-21 Sec. 221.077. AVAILABILITY OF BOOKS AND RECORDS. A managing
14-22 entity, on written request of an owner, shall make available for
14-23 examination at its registered office or principal place of business
14-24 and at any reasonable time or times the relevant books and records
14-25 relating to the collection and expenditure of timeshare fees.
14-26 SECTION 9. This Act takes effect September 1, 1993, except
14-27 that Section 7 takes effect January 1, 1995.
15-1 SECTION 10. The importance of this legislation and the
15-2 crowded condition of the calendars in both houses create an
15-3 emergency and an imperative public necessity that the
15-4 constitutional rule requiring bills to be read on three several
15-5 days in each house be suspended, and this rule is hereby suspended.