1-1 By: Clemons (Senate Sponsor - Haley) H.B. No. 362
1-2 (In the Senate - Received from the House May 17, 1993;
1-3 May 18, 1993, read first time and referred to Committee on Economic
1-4 Development; May 21, 1993, reported favorably by the following
1-5 vote: Yeas 9, Nays 0; May 21, 1993, sent to printer.)
1-6 COMMITTEE VOTE
1-7 Yea Nay PNV Absent
1-8 Parker x
1-9 Lucio x
1-10 Ellis x
1-11 Haley x
1-12 Harris of Dallas x
1-13 Harris of Tarrant x
1-14 Leedom x
1-15 Madla x
1-16 Rosson x
1-17 Shapiro x
1-18 Wentworth x
1-19 A BILL TO BE ENTITLED
1-20 AN ACT
1-21 relating to reports of timeshare expenses charged and collected by
1-22 managing entities of timeshare properties; providing a civil
1-23 penalty.
1-24 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-25 SECTION 1. Section 221.002, Property Code, is amended by
1-26 amending Subdivision (23) and adding Subdivisions (32), (33), and
1-27 (34) to read as follows:
1-28 (23) "Timeshare expenses" means expenditures, <fees,>
1-29 charges, or liabilities for the operation of a timeshare property
1-30 or timeshare system, including any allocations to maintain reserves
1-31 but excluding any purchase money payable for timeshare interests:
1-32 (A) incurred in connection with a timeshare
1-33 interest by or on behalf of the owner of all timeshare interests in
1-34 a timeshare property; and
1-35 (B) imposed on timeshare interests by the
1-36 managing entity.
1-37 (32) "Timeshare fees" means an amount assessed against
1-38 or collected from an owner by a managing entity in a fiscal year,
1-39 without regard to the frequency with which the amount is assessed
1-40 or collected.
1-41 (33) "Owner" means a person who holds a legal or
1-42 equitable interest in a timeshare interest in timeshare property
1-43 subject to the requirements of this Act.
1-44 (34) "Timeshare system" means two or more timeshare
1-45 properties located in separate geographic areas that are:
1-46 (A) managed by the same managing entity; and
1-47 (B) subject to a written arrangement or
1-48 agreement whereby an owner of a timeshare interest in any one of
1-49 the timeshare properties may use a timeshare unit and the amenities
1-50 of any of the other timeshare properties as provided in the project
1-51 instruments.
1-52 SECTION 2. Section 221.011(b), Property Code, is amended to
1-53 read as follows:
1-54 (b) The declaration made under this section must include:
1-55 (1) a legal description of the timeshare property,
1-56 including a ground plan indicating the location of each existing or
1-57 proposed building to be constructed on the timeshare property;
1-58 (2) a description of each existing or proposed
1-59 timeshare unit, including the location and square footage of each
1-60 unit and an interior floor plan of each existing or proposed
1-61 building;
1-62 (3) a description of the amenities furnished or to be
1-63 furnished to the purchaser;
1-64 (4) a statement of the fractional or percentage part
1-65 that each timeshare interest bears to the entire timeshare regime;
1-66 <and>
1-67 (5) if applicable, a statement that the timeshare
1-68 property is part of a timeshare system; and
2-1 (6) any additional provisions that are consistent with
2-2 this section.
2-3 SECTION 3. Section 221.032(b), Property Code, is amended to
2-4 read as follows:
2-5 (b) The timeshare disclosure statement must include:
2-6 (1) the name and address of the developer and the name
2-7 and specific location of the timeshare property;
2-8 (2) a description of the accommodations, amenities,
2-9 timeshare property, and any project or development within which the
2-10 timeshare property is located or of which it is a part; the total
2-11 number of timeshare units in the timeshare property and whether and
2-12 under what circumstances that number may be increased or decreased;
2-13 and, if a timeshare interest includes amenities not yet in
2-14 existence, the commencement and completion schedule of the proposed
2-15 amenities;
2-16 (3) a description of the timeshare interests currently
2-17 available for disposition and, if applicable, the types and number
2-18 of units available;
2-19 (4) a statement that a council of purchasers exists or
2-20 is expected to be created or that such a council does not exist and
2-21 is not expected to be created and, if such a council exists or is
2-22 reasonably contemplated, a description of its powers and
2-23 responsibilities;
2-24 (5) the name and principal address of the managing
2-25 entity and a description of the procedures, if any, for altering
2-26 the powers and responsibilities of the managing entity and for
2-27 removing or replacing it;
2-28 (6) a complete budget for the operation of the
2-29 timeshare property for a period of one year after the first
2-30 disposition of a timeshare interest in the property, and
2-31 thereafter, the current operating budget, which operating budget
2-32 must include:
2-33 (A) the total amount included as a reserve for
2-34 the maintenance of the timeshare property and for the repair or
2-35 replacement of personal property or fixtures;
2-36 (B) the total amount of any other reserve and
2-37 the purpose of the reserve;
2-38 (C) the projected timeshare liability expressed
2-39 by categories of expenditure for all timeshare interests;
2-40 (D) the timeshare liability projected by
2-41 categories of expenditures for each timeshare interest;
2-42 (E) the name and address of the person who
2-43 prepared the operating budget; and
2-44 (F) the assumptions on which the operating
2-45 budget is based;
2-46 (7) a description of the nature and estimated amount
2-47 of any timeshare liability that may in the future be assessed and
2-48 the method and formula for assessing the timeshare liability;
2-49 (8) a description of any service that the developer or
2-50 person acting on his behalf provides or expense that is paid that
2-51 reasonably may be expected to become a timeshare liability, and the
2-52 projected timeshare liability attributable to that service or
2-53 expense;
2-54 (9) a description of the existing or proposed
2-55 amenities of the timeshare property and, if the amenities are
2-56 proposed or not yet complete or fully functional, a schedule for
2-57 the projected commencement, completion, and availability of those
2-58 amenities;
2-59 (10) a description and amount of any current or
2-60 expected dues, assessments, fees, or charges to be paid by
2-61 purchasers for the use of accommodations or amenities or for any
2-62 other purpose;
2-63 (11) a description of any unsatisfied final judgment
2-64 against the developer, seller, managing entity, or exchange company
2-65 with which the developer is under contract, but not including any
2-66 individual sales agent or representative who offers a timeshare
2-67 interest;
2-68 (12) a description and status of any pending lawsuit
2-69 or administrative action of which the developer has actual
2-70 knowledge that may materially affect a timeshare interest;
3-1 (13) a description and amount of insurance coverage
3-2 provided for the protection of the purchaser;
3-3 (14) the extent to which a timeshare interest may
3-4 become subject to a tax lien or other lien arising out of claims
3-5 against purchasers of different timeshare interests;
3-6 (15) a description of those matters required by
3-7 Section 201.041;
3-8 (16) a statement disclosing any right of first refusal
3-9 or other restraint on the transfer of all or any portion of a
3-10 timeshare interest;
3-11 (17) a statement disclosing that any deposit made in
3-12 connection with the purchase of a timeshare interest will be held
3-13 in an escrow account until expiration of any right to cancel the
3-14 contract or any later time specified in the contract and will be
3-15 returned to the purchaser if he elects to exercise his right of
3-16 cancellation; <and>
3-17 (18) if applicable, a statement that the timeshare
3-18 property is part of a timeshare system and that timeshare fees
3-19 collected from the owners may be placed in a common account with
3-20 the timeshare fees collected from the owners of other timeshare
3-21 properties participating in the timeshare system; and
3-22 (19) any other material circumstances concerning a
3-23 timeshare interest.
3-24 SECTION 4. Section 221.041, Property Code, is amended to
3-25 reads as follows:
3-26 Sec. 221.041. Purchaser's Right to Cancel. (a) A purchaser
3-27 may cancel a contract to purchase a timeshare interest before the
3-28 sixth day after the date the contract is signed.
3-29 (b) If a purchaser does not receive a copy of the contract
3-30 at the time the contract is signed, the purchaser may cancel the
3-31 contract to purchase the timeshare interest before the sixth day
3-32 after the date the contract is received by the purchaser.
3-33 (c) A purchaser may not waive his right of cancellation
3-34 under this section. A contract containing a waiver is voidable by
3-35 the purchaser.
3-36 SECTION 5. Section 221.043, Property Code, is amended to
3-37 read as follows:
3-38 Sec. 221.043. Contract Requirements. (a) Attached to each
3-39 contract shall be a separate page identified as Exhibit A. Exhibit
3-40 A <The following statement> shall be provided to each purchaser at
3-41 the time the contract is signed and<. The statement shall be on a
3-42 separate page and attached to the contract as Exhibit A. The
3-43 statement> shall contain the following information. Subdivisions
3-44 (1) and (3) shall be provided in the exact language set forth in
3-45 this section <language> with the seller's name and address, the
3-46 date of the last day of the fiscal year, and the address of the
3-47 managing entity inserted where indicated:
3-48 (1) "PURCHASER'S RIGHT TO CANCEL.
3-49 "(A) BY SIGNING THIS CONTRACT YOU ARE INCURRING
3-50 AN OBLIGATION TO PURCHASE A TIMESHARE INTEREST. YOU MAY, HOWEVER,
3-51 CANCEL THIS CONTRACT WITHOUT PENALTY OR OBLIGATION BEFORE THE SIXTH
3-52 DAY AFTER THE DATE YOU SIGN THE CONTRACT. IF YOU DO NOT RECEIVE A
3-53 COPY OF THE CONTRACT AT THE TIME THE CONTRACT IS SIGNED, YOU MAY
3-54 CANCEL THIS CONTRACT WITHOUT PENALTY OR OBLIGATION BEFORE THE SIXTH
3-55 DAY AFTER THE DATE YOU RECEIVE A COPY OF THE CONTRACT.
3-56 "(B) IF YOU DECIDE TO CANCEL THIS CONTRACT, YOU
3-57 MAY DO SO BY EITHER HAND-DELIVERING NOTICE OF CANCELLATION TO THE
3-58 SELLER OR BY MAILING NOTICE BY PREPAID UNITED STATES MAIL TO THE
3-59 SELLER OR THE SELLER'S AGENT FOR SERVICE OF PROCESS. YOUR NOTICE
3-60 OF CANCELLATION IS EFFECTIVE ON THE DATE SENT OR DELIVERED TO
3-61 (INSERT NAME OF SELLER) AT (INSERT ADDRESS OF SELLER). FOR YOUR
3-62 PROTECTION, SHOULD YOU DECIDE TO CANCEL YOU SHOULD EITHER SEND YOUR
3-63 NOTICE OF CANCELLATION BY CERTIFIED MAIL WITH A RETURN RECEIPT
3-64 REQUESTED OR OBTAIN A SIGNED AND DATED RECEIPT IF DELIVERING IT IN
3-65 PERSON.
3-66 "(C) A PURCHASER SHOULD NOT RELY ON STATEMENTS
3-67 OTHER THAN THOSE INCLUDED IN THIS CONTRACT AND THE DISCLOSURE
3-68 STATEMENT."
3-69 (2) A statement disclosing the amount of the timeshare
3-70 fees, on a monthly or annual basis, which are being assessed
4-1 currently against or collected from the owners of a timeshare
4-2 interest. Immediately following the timeshare fee disclosure
4-3 statement shall be a statement that the timeshare fees collected by
4-4 the managing entity may be used to pay for the administrative and
4-5 operating expenses of the property; and
4-6 (3) "As a timeshare owner you have a right to request
4-7 a written annual timeshare fee and expense statement. This
4-8 statement is prepared annually by the managing entity and will be
4-9 available no later than the 90th day following (insert the date of
4-10 the last day of the fiscal year). You may request the statement by
4-11 writing to (insert address of the managing entity)."
4-12 (b) Immediately following the required statements
4-13 <statement> on Exhibit A shall be a space reserved for the
4-14 signature of the purchaser. The seller shall obtain the
4-15 purchaser's signature on Exhibit A at the time the contract is
4-16 signed.
4-17 (c) The contract must also include the following:
4-18 (1) the name and address of the seller and the address
4-19 of the timeshare unit;
4-20 (2) whether the purchaser visited the location of the
4-21 timeshare unit before signing the contract;
4-22 (3) an agreement by the seller that if the purchaser
4-23 timely exercises the right of cancellation under the contract, all
4-24 payments made by the purchaser to the seller in connection with the
4-25 contract shall be returned to such purchaser before the 21st day
4-26 after the seller receives notice of cancellation;
4-27 (4) the name of the person or persons actively
4-28 involved in the sales presentation on behalf of the seller;
4-29 (5) a warranty that the timeshare common properties
4-30 are not mortgaged, unless the mortgage contains a nondisturbance
4-31 clause which protects the timeshare owner in the event of
4-32 foreclosure; and
4-33 (6) in the event such timeshare interests are sold
4-34 under a lease, right to use, or membership agreement where free and
4-35 clear title to the timeshare unit is not passed to the buyer, then
4-36 the contract must contain a warranty that the timeshare is free and
4-37 clear; or if subject to a mortgage, the mortgage must contain a
4-38 nondisturbance clause which protects the timeshare owner in the
4-39 event of foreclosure.
4-40 SECTION 6. Section 221.071(a), Property Code, is amended to
4-41 read as follows:
4-42 (a) A seller or other person commits a false, misleading, or
4-43 deceptive act or practice within the meaning of Subsections (a) and
4-44 (b) of Section 17.46 of the Texas Deceptive Trade
4-45 Practices-Consumer Protection Act (Article 17.46 et seq., Business
4-46 & Commerce Code), by engaging in any of the following acts:
4-47 (1) failing to disclose information concerning a
4-48 timeshare interest required by Subchapter D;
4-49 (2) making false or misleading statements of fact
4-50 concerning the characteristics of accommodations or amenities
4-51 available to a consumer;
4-52 (3) predicting specific or immediate increases in the
4-53 value of a timeshare interest without a reasonable basis for such
4-54 predictions;
4-55 (4) making false or misleading statements of fact
4-56 concerning the duration that accommodations or amenities will be
4-57 available to a consumer;
4-58 (5) making false or misleading statements of fact
4-59 concerning the conditions under which a purchaser of a timeshare
4-60 interest may exchange the right to occupy a unit for the right to
4-61 occupy a unit in the same or another timeshare property; <or>
4-62 (6) representing that a prize, gift, or other benefit
4-63 will be awarded in connection with a promotion with the intent not
4-64 to award that prize, gift, or benefit in the manner represented;
4-65 (7) failing to provide a copy of the contract to the
4-66 purchaser at the time the contract is signed by the purchaser,
4-67 unless the purchaser requests in writing that the contract be
4-68 mailed, and the contract is mailed to the purchaser before the end
4-69 of the next business day;
4-70 (8) failing to provide the annual timeshare fee and
5-1 expense statement as required by Section 221.074; or
5-2 (9) furnishing false information in the annual
5-3 timeshare fee and expense statement as required by
5-4 Section 221.074.
5-5 SECTION 7. Subchapter H, Chapter 221, Property Code, is
5-6 amended by adding Sections 221.074 and 221.075 to read as follows:
5-7 Sec. 221.074. ANNUAL TIMESHARE FEE AND EXPENSE STATEMENT.
5-8 (a) Notwithstanding a provision of the promotional disclosure
5-9 statement, project instrument, timeshare instrument, or bylaws
5-10 adopted pursuant to a timeshare instrument, not later than the 60th
5-11 day after the last day of each fiscal year the managing entity
5-12 shall make available to each owner a written annual accounting of
5-13 the operation of the timeshare property or timeshare system. The
5-14 statement shall include:
5-15 (1) a balance sheet;
5-16 (2) an income and expense statement which complies
5-17 with generally accepted accounting principles and reflects the
5-18 collection and expenditure of timeshare fees;
5-19 (3) the current operating budget for the timeshare
5-20 property or timeshare system required by Section 221.032(b)(6);
5-21 (4) an accounting identifying any unfunded reserves
5-22 for capital improvements and maintenance and upkeep of the
5-23 timeshare property; and
5-24 (5) the name and address of each member of the board
5-25 of directors of the council of purchasers or the owners'
5-26 association, if one exists, and the name, address, and telephone
5-27 number of a designated representative of the managing entity.
5-28 (b) The managing entity shall make the fee statement
5-29 available to owners of record of a timeshare interest as of the
5-30 last day of the fiscal year as reflected in the managing entity's
5-31 records.
5-32 (c) The statement shall be delivered in person or by mail to
5-33 each person on the board of directors of the council of purchasers
5-34 or the owners' association, if one exists.
5-35 (d) The managing entity shall post prominently in the
5-36 registration area of each timeshare property the following notice,
5-37 with the date of the last day of the current fiscal year and the
5-38 address of the managing entity inserted where indicated:
5-39 "As a timeshare owner you have a right to request a
5-40 written annual timeshare fee and expense statement. This statement
5-41 is prepared annually by the managing entity and will be available
5-42 no later than the 90th day following (insert the date of the last
5-43 day of the current fiscal year). You may request the statement, by
5-44 writing to (insert address of the managing entity)."
5-45 (e) If a request for the statement is received by the
5-46 managing entity prior to the date by which the statement is
5-47 available, the statement shall be provided no later than one week
5-48 after the date the statement becomes available. If a request for
5-49 the statement is received by the managing entity after the date the
5-50 statement becomes available, the statement shall be provided no
5-51 later than two weeks after the date the request is received by the
5-52 managing entity. For the purposes of this section, the statement
5-53 shall be deemed provided if it is deposited in the mail, properly
5-54 addressed, with postage prepaid.
5-55 (f) A managing entity shall provide a separate annual
5-56 timeshare fee and expense statement for each timeshare property
5-57 unless the property is part of a timeshare system. A managing
5-58 entity may provide a consolidated statement for all timeshare
5-59 properties comprising a timeshare system.
5-60 Sec. 221.075. CIVIL PENALTY FOR LATE STATEMENT; INJUNCTION.
5-61 (a) On a written request filed with the commission by a managing
5-62 entity before the date on which the statement required by
5-63 Section 221.074 must be made available, the commission for good
5-64 cause shown may grant the managing entity an extension of no more
5-65 than 30 days in which to provide the statement.
5-66 (b) If the statement required by Section 221.074 is late and
5-67 an extension has not been granted under Subsection (a), the
5-68 managing entity required to provide the statement is liable to the
5-69 state for a civil penalty not to exceed:
5-70 (1) $500 per day for each of the first 10 days that
6-1 the statement is late; and
6-2 (2) $1,000 per day for each day after the 10th day,
6-3 until the managing entity has complied with Section 221.074.
6-4 (c) In no event shall the civil penalties exceed $25,000 for
6-5 any one statement period.
6-6 (d) A managing entity may not assess against or collect from
6-7 the owners of a timeshare property the amount of a penalty incurred
6-8 under this section.
6-9 (e) If it appears that a managing entity has violated
6-10 Section 221.074, the attorney general may institute an action for
6-11 injunctive relief, a civil penalty, or both.
6-12 SECTION 8. Subchapter H, Chapter 221, Property Code, is
6-13 amended by adding Sections 221.076 and 221.077 to read as follows:
6-14 Sec. 221.076. MANAGING ENTITIES THAT MANAGE MORE THAN ONE
6-15 TIMESHARE SYSTEM OR PROPERTY. (a) A managing entity that manages
6-16 two or more timeshare properties which are not participants of the
6-17 same timeshare system may not commingle the timeshare fees
6-18 collected from owners of one timeshare property with the timeshare
6-19 fees collected from owners of any other timeshare property.
6-20 (b) A managing entity that manages two or more timeshare
6-21 systems may not commingle the timeshare fees collected from owners
6-22 participating in one timeshare system with the timeshare fees
6-23 collected from owners participating in any other timeshare system.
6-24 (c) A managing entity which manages a timeshare system may
6-25 deposit timeshare fees collected from owners of one timeshare
6-26 property into a common account with timeshare fees collected from
6-27 owners of other timeshare properties participating in the same
6-28 timeshare system only if the practice is disclosed in the timeshare
6-29 disclosure statement for each timeshare property in the timeshare
6-30 system and the appropriate statement is included in the declaration
6-31 for each timeshare regime as required by Subchapter B. Nothing in
6-32 this section shall be construed to allow a managing entity to
6-33 commingle the timeshare fees of:
6-34 (1) separate timeshare systems;
6-35 (2) separate timeshare properties which are not part
6-36 of a timeshare system; or
6-37 (3) a timeshare system with the timeshare fees of a
6-38 separate timeshare property which is not a participant in the
6-39 timeshare system.
6-40 Sec. 221.077. AVAILABILITY OF BOOKS AND RECORDS. A managing
6-41 entity, on written request of an owner, shall make available for
6-42 examination at its registered office or principal place of business
6-43 and at any reasonable time or times the relevant books and records
6-44 relating to the collection and expenditure of timeshare fees.
6-45 SECTION 9. This Act takes effect September 1, 1993, except
6-46 that Section 7 takes effect January 1, 1995.
6-47 SECTION 10. The importance of this legislation and the
6-48 crowded condition of the calendars in both houses create an
6-49 emergency and an imperative public necessity that the
6-50 constitutional rule requiring bills to be read on three several
6-51 days in each house be suspended, and this rule is hereby suspended.
6-52 * * * * *
6-53 Austin,
6-54 Texas
6-55 May 21, 1993
6-56 Hon. Bob Bullock
6-57 President of the Senate
6-58 Sir:
6-59 We, your Committee on Economic Development to which was referred
6-60 H.B. No. 362, have had the same under consideration, and I am
6-61 instructed to report it back to the Senate with the recommendation
6-62 that it do pass and be printed.
6-63 Parker,
6-64 Chairman
6-65 * * * * *
6-66 WITNESSES
6-67 No witnesses appeared on H.B. No. 362.