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02/19/08: Vacation Ownership Interests: Deal or No Deal

HOUSING COUNSEL

By Benny L. Kass

Q: On a recent vacation to the Caribbean, we were approached by a young woman who wanted us to buy into a vacation ownership. According to this salesperson, for the money that we would give them, we would get a number of points, which could be used for vacations in a number of desirable hotels and cities throughout the United States. This was interesting to us, but we did not know enough about the transaction and opted not to buy. Can you provide some guidance on this concept? Is it a good deal?

A: One of the major travel books cautions vacationers that they will be deluged by attractive men and women who want to sell these vacations interests. According to the travel writer, while they are harmless, they should be ignored.

Many years ago, companies began selling time-shares. Depending on how much money you pay, you theoretically could stay at a large number of hotels all over the United States “free of charge” for a week or two. Many people bought into this concept.

If you owned a time share, you would have to pay a yearly maintenance fee, regardless of whether you used your vacation benefits. Over the years, many people became disillusioned with their purchase. Often, they were unable to stay at their desired vacation spot, and often they learned that they had to take their vacation at the same time each and every year.

When they tried to unload their time share interest, they learned that it sometimes was next to impossible to sell. They were stuck with the deal.

Because the concept of “time share” started to have negative consumer reactions, developers (and major hotel chains) started calling this a “vacation ownership interest “ (VOI). Instead of buying a fixed week or two, you bought points. The more you paid, the more points you got. But the concept remains the same. The sales pitch is that you can enjoy a week or two at a wonderful vacation site of your choosing.

On a recent vacation, I had a similar experience. I was approached by a very friendly salesman who asked me “how would you like to have a free week here at this wonderful resort?” Obviously, this peaked my interest.

He then proceeded to show me statistics, highlighting what the average consumer pays over a ten year period for vacations, as compared to what I would save if I joined his program.

He showed me a book which contained all of the hotels and resorts that I could take advantage if I signed up today. I advised him that I am an attorney, and would not sign anything until I carefully reviewed the sales contract. The salesman indicated that they do not have form contracts. “Why not just tell me how much you want to spend, and I will prepare the contract for your signature”, he said.

He also indicated that if I sign up today, he would throw in a free trip anywhere in the United States that was of interest to me.

I started to walk away. He asked me to talk with his manager. The manager confirmed that they do not have form contracts, so I suggested “why not just fill out a contract and call me John Doe, and then let me review that document tonight”. He reluctantly agreed.

Let me tell you some of the numerous concerns that I had when I finally read the contract:

– I was to get a percentage interest in a “to be built” condominium in another state.

– My benefits would only be every other year.

– I would acknowledge receipt of over 20 legal documents (such as the Condominium’s Public Offering Statement, a tax escrow agreement, and the method of calculating ownership interest) and would be bound by the rules and provisions of the Condominium documents, even though they were not available for my review. There was one interesting document that I would also have to acknowledge receiving: “A list of Documents not provided to Purchasers”.

– I learned that there would be a small handling fee at each hotel I would stay at.

– My ownership interest would begin four months before I signed up, which would mean that I would not get a full year’s benefits.

– My membership would automatically renew each year unless I affirmatively opted to cancel – in which case I would lose the money I had invested.

– and finally, contrary to the representations that I could use my points for one full week at most major hotels, I learned that there are different categories of hotels. For example, for the number of points listed in my contract, I could stay a full week at an economy property – such as a Days Inn. But for what they refer to as “high end” properties (such as the Ritz Carlton), my points would barely let me stay one full day,

To my knowledge, many of the major hotel chains are now in this business, so every where you vacation, you are sure to be approached by these salespersons. It obviously is enticing to get a free week at a nice resort in the Caribbean. But is it worth it in the long-run?

Only you can decide, but only after you carefully review all of the legal documents which you will be asked to sign. Don’t be afraid to ask questions, and don’t let the excitement of getting something free cloud your judgment.

Take the documents home (or to your hotel room) and tell the salesperson that you want to think about the proposal overnight. In my situation, when I advised the salesman that I would get back to him the next day, he suddenly had yet another “freebie” that he offered – but only if I signed right then and there.

It was not high-pressure salesmanship. We had a relaxing conversation, but he was still a salesman.

-Boilerplate-

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