What is the perpetuity clause? First we need to define perpetuity:
According to explanation 2, indefinitely, eternity, wow that’s a long time!
To our knowledge, timeshare globally is still being sold with a perpetuity clause in the contract, that is with the exception of Spain who outlawed perpetuity in January 1999. In Spain the maximum term for a long term holiday product or timeshare is 50 years, still a lifetime but not half as bad as a “forever” contract.
Perpetuity – Perception V Reality
In the USA it’s pretty well taken for granted that all new and existing timeshare contracts are in perpetuity, in fact this is sold as an advantage, pay once, holiday forever. On the surface this seems like a good deal but what it doesn’t factor in is the changes in life and attitudes or countless other factors that may come into play in the future, not to forget the commitment to rising annual maintenance fees technically forever.
The perception of an advantage soon pales into the distance when the enormity of a forever contract is viewed in the cold light of day.
Terminating a forever contract
That is easier said than done. In common with global timeshare very few developers have a structured exit strategy; the developer sentiment seems to be “why on earth would you wish to get rid of the best holiday product since sliced bread”. At the risk of being boring, we have stated on more occasions than we care to mention the fact that just because something is right today, it may not be tomorrow. What is it that developers don’t understand, or more to the point, don’t want to understand that life changes. Unfortunately, timeshare contracts are about as flexible as a tungsten steel bar.
If you actually went out to buy a timeshare the deal could be concluded in the time it takes to print off the ownership contract for signature, but as we all know, no one actually goes out with the intention of buying a timeshare; this is the reason for the six to seven hour grind down sales presentations. If only getting out were that easy we think that owners would be prepared to sit through a six or seven hour “stay in” pitch if it meant at the end they could sign an exit form and walk away, unfortunately this is just a pipe dream.
Death and the perpetual contract
No one likes to think of that day when we shuffle off our mortal coil but if owning a perpetual contract in the USA it’s a bridge that should be crossed before the fateful day arrives.
In most cases, a timeshare will become part of your estate when you die. If you included it in your will it would go through probate and pass to the beneficiary(ies) of your choosing. Whilst alive you could also transfer it directly to a beneficiary through a trust or joint tenancy titling that is of course if you know someone who actually wants a timeshare! In the USA different States have different laws, if you die without a will or the timeshare for some reason isn’t included, the particular state’s intestacy laws would determine who inherits it.
When you die, the beneficiary could file what’s called a disclaimer of interest with the probate court and if more than one beneficiary each should send a copy of the disclaimer to the estate’s executor. It follows that copies must also be sent to the timeshare company. Basically, this would be rejecting the inheritance. It doesn’t follow that the entire inheritance is rejected if you have other assets that you plan to leave. The disclaimer would apply specifically to the timeshare. Because of the legalities involved it’s important to consult with an American lawyer whenever drafting a legal document. A quick word of warning, UK law in relation to wills is not the same.
Generally, the beneficiary has nine months from the time of death to take action, though, as we stated above, the laws vary somewhat from State to State. Once the beneficiary rejects the timeshare, it would likely go to the next person in line according to the particular States laws. That means that each person who stands to inherit the timeshare would need to file their own disclaimers of interest. If all the potential heirs reject the timeshare, the timeshare company will probably take foreclosure action. Your estate may be responsible for fees, which could eat into any other inheritance that beneficiaries would receive. But those who would normally be in line to inherit the timeshare would personally be removed from any timeshare-related costs.
Those who could potentially inherit the timeshare should not use the timeshare. Whenever the beneficiary rejects an inheritance no benefit from the property being disclaimed must take place. By staying for even one night at the timeshare would risk violating this rule.
State law
To complicate matters, as mentioned above, most US States have their own laws so owning in California may be totally different than owning in New York. A point we discovered recently was also complications with probate. In the case we were involved a husband had died and his estate was so simple that probate in the UK was not required, however even if it was, in Florida this would not be acceptable. In this case a Florida probate needed to be obtained and filed in the county where the timeshare was owned, in this case, being Osceola. More cost and more problems.
Suggested solution
Don’t wait till the inevitable happens. If after discussion none of your potential beneficiaries want to inherit your timeshare then act sooner rather than later. A family death is traumatic enough without having the complications of sorting out a timeshare on the other side of the planet and that’s said without reference to stress, time and costs involved.
We would be the first to acknowledge that exiting a USA timeshare is at best difficult and at worst nearly impossible, however there are specialist companies who can assist but it’s important to choose the right one. The USA is no different to Europe in as much as there are a fair number of rogue exit companies so it isn’t just a case of doing a Google search.
TCA Conclusion
The perpetuity clause can be one of the biggest problems facing owners of timeshare in the USA, in fact being realistic, anywhere else for that matter. The fact of the matter is in the real world it’s far from a benefit, if anything it can be a rock around the neck and a potential problem waiting to jump up and bite when least prepared. If you own a timeshare in perpetuity then it’s certainly worth thinking about what the future holds and maybe taking the appropriate action now to avoid the guaranteed problems in the future.
For more information regarding this article or assistance in any other timeshare related issues please contact the TCA on 01908 881058 or email: info@TimeshareConsumerAssociation.org.uk