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H.B. No. 1045
AN ACT
relating to amendments to the Texas Timeshare Act.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Section 221.002, Property Code, is amended to
read as follows:
Sec. 221.002. DEFINITIONS. As used in this chapter:
(1) "Accommodation" means any apartment, condominium
or cooperative unit, [or] hotel or motel room, cabin, lodge, or
other private or commercial structure that:
(A) is affixed to real property;
(B) is designed for occupancy or use by one or
more individuals; and
(C) is part of [in a building or commercial
structure that is situated on] a timeshare plan [property and
subject to a timeshare regime].
(2) "Advertisement [Advertising]" means any written,
oral, or electronic communication that is directed to or targeted
at individuals in this state and contains a promotion, [direct or
indirect solicitation or] inducement, or offer to sell a timeshare
interest, including a promotion, inducement, or offer to sell:
(A) contained in a brochure, pamphlet, or radio
or television transcript;
(B) communicated by [to purchase and includes a
solicitation or inducement made by print or] electronic media or
telephone; or
(C) solicited[,] through direct [the] mail[, or
by personal contact].
(3) "Amenities" means all common areas and includes
recreational and maintenance facilities of the timeshare plan
[property].
(4) "Assessment" means an amount assessed against or
collected from a purchaser by an association or its managing entity
in a fiscal year, regardless of the frequency with which the amount
is assessed or collected, to cover expenditures, charges, reserves,
or liabilities related to the operation of a timeshare plan or
timeshare properties managed by the same managing entity.
(5) "Association" means a council or association
composed of all persons who have purchased a timeshare interest.
(6) "Commission" means the Texas Real Estate
Commission.
(7) "Component site" means a specific geographic
location where accommodations that are part of a multisite
timeshare plan are located. Separate phases of a single timeshare
property in a specific geographic location and under common
management are a single component site.
(8) [(5) "Council of purchasers" means a council or
association composed of all persons who have purchased a timeshare
estate.
[(6)] "Developer" means:
(A) any person, excluding a sales agent, who
creates a timeshare plan or is in the business of selling timeshare
interests or employs a sales agent to sell timeshare interests; or
(B) any person who succeeds in the developer's
interest by sale, lease, assignment, mortgage, or other transfer if
the person:
(i) offers at least 12 timeshare interests
in a particular timeshare plan; and
(ii) is in the business of selling
timeshare interests or employs a sales agent to sell timeshare
interests [regime].
(9) [(7)] "Dispose" or "disposition" means a
voluntary transfer of any legal or equitable timeshare interest but
does not include the transfer or release of a real estate lien or of
a security interest.
(10) [(8)] "Escrow agent" means a [an independent]
bonded escrow company, a financial [or an] institution whose
accounts are insured by a governmental agency or instrumentality,
or an attorney or title insurance agent licensed in this state [and]
who is responsible for the receipt and disbursement of funds in
accordance with this chapter.
(11) [(9)] "Exchange company" means any person[,
including a developer,] who owns or operates an exchange program.
(12) [(10)] "Exchange disclosure statement" means a
written statement that includes the information required by Section
221.033 [201.033].
(13) [(11)] "Exchange program" means any method,
arrangement, or procedure for the voluntary exchange of [program
under which the owner of a] timeshare interests among purchasers or
owners [interest may exchange a timeshare period for another
timeshare period in the same or a different timeshare property, but
does not include a one-time exchange of timeshare periods in the
same timeshare property if offered to a purchaser by a developer
after that purchaser's disposition].
(14) "Incidental use right" means the right to use
accommodations and amenities at one or more timeshare properties
that is not guaranteed and is administered by the managing entity of
the timeshare properties that makes vacant accommodations at the
timeshare properties available to owners of timeshare interests in
the timeshare properties.
(15) [(12)] "Managing entity" means the person
responsible for operating and maintaining a timeshare property.
(16) "Multisite timeshare plan" means a plan in which
a timeshare purchaser has:
(A) a specific timeshare interest, which is the
right to use and occupy accommodations at a specific timeshare
property and the right to use and occupy accommodations at one or
more other component sites created by or acquired solely through
the reservation system of the timeshare plan; or
(B) a nonspecific timeshare interest, which is
the right to use and occupy accommodations at more than one
component site created by or acquired solely through the
reservation system of the timeshare plan but which does not include
a right to use and occupy a particular accommodation.
(17) [(13) "Master deed" or "master lease" or
"declaration" means the deed, lease, or declaration establishing
real property as a timeshare regime.
[(14)] "Offering" or "offer" means any advertisement,
inducement, or solicitation and includes any attempt to encourage a
person to purchase a timeshare interest other than as a security for
an obligation.
(18) [(15)] "Project instrument" means a timeshare
instrument or one or more recordable documents, by whatever name
denominated, applying to the whole of a timeshare project and
containing restrictions or covenants regulating the use,
occupancy, or disposition of units in a project, including a
[master deed, master lease,] declaration for a condominium,
association articles of incorporation, association [or] bylaws,
and rules for a condominium in which a timeshare plan is created.
(19) [(16)] "Promotion" means any program, [or]
activity, contest, or gift, prize, or other item of value used to
induce any person to attend a timeshare sales presentation.
(20) [(17) "Promotional disclosure statement" means a
written statement that includes the information required by Section
201.031.
[(18)] "Purchaser" means any person, other than a
developer [seller], who by means of a voluntary transfer acquires a
legal or equitable interest in a timeshare interest other than as a
security for an obligation.
(21) "Reservation system" means the method,
arrangement, or procedure by which a purchaser, in order to reserve
the use and occupancy of an accommodation of a multisite timeshare
plan for one or more timeshare periods, is required to compete with
other purchasers in the same multisite timeshare plan, regardless
of whether the reservation system is operated and maintained by the
multisite timeshare plan, a managing entity, an exchange company,
or any other person. If a purchaser is required to use an exchange
program as the purchaser's principal means of obtaining the right
to use and occupy the accommodations and facilities of the plan, the
arrangement is considered a reservation system. If the exchange
company uses a mechanism to exchange timeshare periods among
members of the exchange program, the use of the mechanism is not
considered a reservation system of the multisite timeshare plan.
[(19) "Seller" means any person, including a
developer, who in the ordinary course of business offers a
timeshare interest for sale to the public, but does not include a
person who acquires a timeshare interest for his use and
subsequently offers it for resale.
[(20) "Substantially complete" means that the
timeshare unit, including furnishings and appliances, is complete
as represented in the timeshare disclosure statement, the
accommodations are ready for occupancy, and the amenities dedicated
to the timeshare regime are as represented in the timeshare
disclosure statement.
[(21) "Timeshare estate" means any arrangement under
which the purchaser receives a freehold estate or an estate for
years in a timeshare property and the right to use an accommodation
or amenities, or both, in that property for a timeshare period on a
recurring basis.]
(22) "Single-site timeshare plan" means a timeshare
plan in which a timeshare purchaser's right to use and occupy
accommodations is limited to a single timeshare property. A
single-site timeshare plan that includes an incidental use right or
a program under which the owner of a timeshare interest at a
specific timeshare property may exchange a timeshare period for
another timeshare period at the same or another timeshare property
under common management does not transform the single-site
timeshare plan into a multisite timeshare plan.
(23) "Timeshare disclosure statement" means a written
statement that includes the information required by Section 221.032
[201.032].
(24) [(23)] "Timeshare estate [expenses]" means an
arrangement under which the purchaser receives a right to occupy
[expenditures, charges, or liabilities for the operation of] a
timeshare property and an estate interest in the real property [or
timeshare system, including any allocations to maintain reserves
but excluding any purchase money payable for timeshare interests:
[(A) incurred in connection with a timeshare
interest by or on behalf of the owner of all timeshare interests in
a timeshare property; and
[(B) imposed on timeshare interests by the
managing entity].
(25) [(24)] "Timeshare interest" means a timeshare
estate or timeshare use.
(26) [(25)] "Timeshare instrument" means a master
deed, master lease, declaration, or any other instrument used in
the creation of a timeshare plan [regime].
[(26) "Timeshare liability" means the liability for
timeshare expenses allocated to each timeshare interest.]
(27) "Timeshare period" means the period within which
the purchaser of a timeshare interest is entitled to the exclusive
possession, occupancy, and use of an accommodation [a timeshare
unit and to the general use of all amenities].
(28) "Timeshare plan" means any arrangement, plan,
scheme, or similar method, excluding an exchange program but
including a membership agreement, sale, lease, deed, license, or
right-to-use agreement, by which a purchaser, in exchange for
consideration, receives an ownership right in or the right to use
accommodations for a period of time less than a year during a given
year, but not necessarily consecutive years.
(29) [(28)] "Timeshare property" means:
(A) one or more [all real property that is
subject to a timeshare declaration, including all] accommodations
and any related amenities subject to the same timeshare instrument;
and
(B) any other property or property rights
appurtenant to the accommodations and amenities.
[(29) "Timeshare regime" means the real property use
that is created by the filing and recordation of a master deed,
master lease, or declaration.]
(30) ["Timeshare unit" means any accommodation that is
divided into timeshare periods.
[(31)] "Timeshare use" means any arrangement [other
than a hotel or motel operation, whether by lease, rental
agreement, license, use agreement or other means,] under which the
purchaser receives a right to occupy [use an accommodation or
amenities or both for] a timeshare property [period on a recurring
basis], but under which the purchaser does not receive an [a
freehold] estate interest [or an estate for years] in the [a]
timeshare property.
[(32) "Timeshare fees" means an amount assessed
against or collected from an owner by a managing entity in a fiscal
year, without regard to the frequency with which the amount is
assessed or collected.
[(33) "Owner" means a person who holds a legal or
equitable interest in a timeshare interest in timeshare property
subject to the requirements of this Act.
[(34) "Timeshare system" means two or more timeshare
properties located in separate geographic areas that are:
[(A) managed by the same managing entity; and
[(B) subject to a written arrangement or
agreement whereby an owner of a timeshare interest in any one of the
timeshare properties may use a timeshare unit and the amenities of
any of the other timeshare properties as provided in the project
instruments.]
SECTION 2. Section 221.003, Property Code, is amended by
adding Subsections (d) and (e) to read as follows:
(d) A timeshare property subject to this chapter is not
subject to Chapter 209 unless an individual timeshare owner
continuously occupies a single timeshare property as the owner's
primary residence 12 months of the year.
(e) If a person with a specific program that might otherwise
be subject to this chapter received from the commission, before
January 31, 2005, a written determination that the program is
exempt from this chapter as the chapter existed when the
determination was made, the program remains exempt from this
chapter if:
(1) the program does not vary materially from the
terms on which the exemption was granted; or
(2) the program varies materially from the terms on
which the exemption was granted, but the person receives from the
commission a new written determination that the program is exempt
from this chapter.
SECTION 3. Sections 221.011, 221.012, 221.013, and 221.014,
Property Code, are amended to read as follows:
Sec. 221.011. DECLARATION. (a) The developer of a
timeshare plan any part of which is located in this state must
record the timeshare instrument in this state. When a person [who
is a developer, the sole owner, or the co-owner of a building or
proposed building or buildings] expressly declares an intent to
subject the property to a timeshare plan through the recordation of
a timeshare instrument [master deed, master lease, or declaration]
that sets forth the information provided in Subsections (b) and
(c), [and that sets forth the intent to submit that property to a
timeshare regime,] that property shall be established thenceforth
as a timeshare plan [regime].
(b) The declaration made in a timeshare instrument recorded
under this section must include:
(1) a legal description of the timeshare property,
including a ground plan indicating the location of each existing or
proposed building included in [to be constructed on] the timeshare
plan [property];
(2) a description of each existing or proposed
accommodation [timeshare unit], including the location and square
footage of each unit and an interior floor plan of each existing or
proposed building;
(3) a description of any [the] amenities furnished or
to be furnished to the purchaser;
(4) a statement of the fractional or percentage part
that each timeshare interest bears to the entire timeshare plan
[regime];
(5) if applicable, a statement that the timeshare
property is part of a multisite timeshare plan [system]; and
(6) any additional provisions that are consistent with
this section.
(c) Any timeshare interest created under this section is
subject to [an interest in real property within the meaning of]
Section 1101.002(5), Occupations Code, but Sections 1101.351(a)(1)
and (c), Occupations Code, do not apply to the acts of an exchange
company in exchanging timeshare periods [under a timeshare
program].
[(d) Any timeshare interest located wholly without this
state may be sold or otherwise disposed of within this state if the
timeshare property is in full compliance with the legal
requirements of and may be validly sold or otherwise disposed of as
a timeshare property in the jurisdiction in which the timeshare
property is located and if all information required in this section
is included in the disclosure statement.]
Sec. 221.012. CONVEYANCE AND ENCUMBRANCE. Once the
property is established as a timeshare plan [regime], each
timeshare interest may be individually conveyed or encumbered and
shall be entirely independent of all other timeshare interests in
the same timeshare property. Any title or interest in a timeshare
interest may be recorded.
Sec. 221.013. COMMON OWNERSHIP. (a) Any timeshare
interest may be jointly or commonly owned by more than one person.
(b) A timeshare estate may be jointly or commonly owned in
the same manner as any other real property interest in this state.
Sec. 221.014. PARTITION. An action for partition of a
timeshare interest may not be maintained during the term of a
timeshare plan [unless expressly permitted by the declaration].
SECTION 4. Subchapter C, Chapter 221, Property Code, is
amended by amending Sections 221.021, 221.022, 221.023, 221.024,
and 221.025 and adding Section 221.026 to read as follows:
Sec. 221.021. REGISTRATION REQUIRED. (a) Except as
provided by Subsection (b) or (d) of this section or another
provision of this chapter, a [A] person may not offer or dispose of
a timeshare interest unless the timeshare plan [property] is
registered with the commission.
(b) Before a registration application for a timeshare plan
is submitted or completed, a [A] developer or any person acting on
the developer's [his] behalf may accept a reservation and a deposit
from a [the] prospective purchaser if the deposit is placed in a
segregated [an] escrow account with an independent escrow agent and
if the deposit is fully refundable at any time at the request of the
purchaser. The deposit may not be forfeited unless the purchaser
affirmatively creates a binding obligation by a subsequent written
instrument.
(c) A developer or any person [anyone] acting on the
developer's [his] behalf may not offer or dispose of [or encumber] a
timeshare interest during any period within which there is in
effect an order by the commission or by any court of competent
jurisdiction revoking or suspending the registration of the
timeshare plan [property] of which such timeshare interest is a
part.
(d) At the developer's request, the commission may
authorize the developer to conduct presales before a timeshare plan
is registered if the registration application is administratively
complete, as determined by the commission or as established by
commission rule. The authorization for presales permits the
developer to offer and dispose of timeshare interests during the
period the application is in process. To obtain a presales
authorization, the developer must:
(1) submit a written request to the commission for an
authorization to conduct presales;
(2) submit an administratively complete application
for registration, including appropriate fees and exhibits required
by the commission; and
(3) provide evidence acceptable to the commission that
all funds received by the developer will be placed with an escrow
agent with instructions requiring the funds to be retained until a
registration application is complete as determined by the
commission.
(e) During the presales authorization period, the developer
must:
(1) provide to each purchaser and prospective
purchaser a copy of the proposed timeshare disclosure statement
that the developer submitted to the commission with the initial
registration application; and
(2) offer each purchaser the opportunity to cancel the
purchase contract as provided by Section 221.041.
(f) After the final timeshare disclosure statement is
approved by the commission, the developer must:
(1) give each purchaser and prospective purchaser a
copy of the final timeshare disclosure statement; and
(2) if the commission determines that a materially
adverse change exists between the disclosures contained in the
proposed timeshare disclosure statement and the final timeshare
disclosure statement, provide the purchaser a second opportunity to
cancel the purchase contract as provided by Section 221.041.
(g) The requirements of this subchapter remain in effect
during the period the developer offers or disposes of timeshare
interests of the timeshare plan registered with the commission.
The developer must notify the commission in writing when all of the
timeshare interests of a timeshare plan have been disposed of.
Sec. 221.022. APPLICATION FOR REGISTRATION. (a) An
application for registration filed under this section must include
a timeshare disclosure statement and any required exchange
disclosure statement required by Section 221.033, recorded
[201.033, certified] copies of all timeshare instruments, and other
information as may be required by the commission. If the timeshare
property is a newly developed property, recorded copies of the
timeshare instruments must be provided promptly after recorded
copies are available from the entity with which the instruments are
recorded. If existing or proposed accommodations are in a
condominium, an applicant who complies with this section is not
required to prepare or deliver a condominium information statement
or a resale certificate as described by Chapter 82.
(b) If existing or proposed accommodations [timeshare
units] are in a condominium or similar development, the application
for registration must contain the project instruments of that
development and affirmatively indicate that the creation and
disposition of timeshare interests are not prohibited by those
instruments. If the project instruments do not expressly authorize
the creation and disposition of timeshare interests, the
application must contain evidence that existing owners of the
condominium development were provided written notice, at least 60
days before the application for registration, that timeshare
interests would be created and sold. If the project instruments
prohibit the creation or disposition of timeshare interests, the
application must contain a certification by the authorized
representative of all existing owners that the project instruments
have been properly amended to permit that creation and disposition.
(c) The commission may accept an abbreviated registration
application from a developer of a timeshare plan if all
accommodations in the plan are located outside this state. The
developer must file written notice of the intent to register under
this section not later than the 15th day before the date the
abbreviated application is submitted.
(d) A developer of a timeshare plan with any accommodation
located in this state may not file an abbreviated application
unless:
(1) the developer is a:
(A) successor in interest after a merger or
acquisition; or
(B) joint venture in which the previous developer
or its affiliate is a partner or a member; and
(2) the previous developer registered the timeshare
plan in this state preceding the merger, acquisition, or joint
venture.
(e) A developer filing an abbreviated application must
provide:
(1) the legal name and any assumed names and the
principal office location, mailing address, telephone number, and
primary contact person of the developer;
(2) the name, location, mailing address, telephone
number, and primary contact person of the timeshare plan;
(3) the name and address of the developer's authorized
or registered agent for service of process in this state;
(4) the name, primary office location, mailing
address, and telephone number of the managing entity of the
timeshare plan;
(5) the certificate or other evidence of registration
from any jurisdiction in which the timeshare plan is approved or
accepted;
(6) the certificate or other evidence of registration
from the appropriate regulatory agency of any other jurisdiction in
the United States in which some or all of the accommodations are
located;
(7) a declaration stating whether the timeshare plan
is a single-site timeshare plan or a multisite timeshare plan;
(8) if the plan is a multisite timeshare plan, a
declaration stating whether the plan consists of specific timeshare
interests or nonspecific timeshare interests;
(9) a disclosure of each jurisdiction in which the
developer has applied for registration of the timeshare plan and
whether the timeshare plan, the developer, or the managing entity
used were denied registration or, during the five-year period
before the registration application date, were the subject of a
final adverse disposition in a disciplinary proceeding;
(10) if requested by the commission, copies of any
disclosure documents required to be provided to purchasers or filed
with any jurisdiction that approved or accepted the timeshare plan;
(11) the appropriate filing fee; and
(12) any other information reasonably requested by the
commission or required by commission rule.
(f) A foreign jurisdiction providing evidence of
registration as provided by Subsection (e)(6) must have
registration and disclosure requirements that are substantially
similar to or stricter than the requirements of this chapter.
(g) The commission shall investigate all matters relating
to the application and may in its discretion require a personal
inspection of the proposed timeshare property by any persons
designated by it. All direct expenses incurred by the commission in
inspecting the property shall be borne by the applicant. The
commission may require the applicant to pay an advance deposit
sufficient to cover those expenses.
Sec. 221.023. AMENDMENT OF REGISTRATION. The developer
shall [or managing entity shall promptly] file amendments to the
registration reporting to the commission any materially [material
and] adverse change in any document contained in the registration
not later than the 30th day after the date the developer knows or
reasonably should know of the change. The developer may continue to
offer and dispose of timeshare interests under the existing
registration pending review of the amendments by the commission if
the materially adverse change is disclosed to prospective
purchasers.
Sec. 221.024. POWERS OF COMMISSION. (a) The commission may
prescribe and publish forms and adopt rules necessary to carry out
the provisions of this chapter and may suspend or revoke the
registration of any developer, place on probation the registration
of a developer that has been suspended or revoked, reprimand a
developer, impose an administrative penalty of not more than
$10,000, or take any other disciplinary action authorized by this
chapter [seller] if, after notice and hearing, the commission
determines that a developer [seller] has materially violated this
chapter, the Deceptive Trade Practices-Consumer Protection Act
(Subchapter E, Chapter 17, Business & Commerce Code), or the
Contest and Gift Giveaway Act (Chapter 40, Business & Commerce
Code). [The commission may bring suit in a district court of Travis
County, Texas, to enjoin a violation of this Act or for any other
relief as the court may deem appropriate.]
(b) The commission may:
(1) authorize specific employees to conduct hearings
and issue final decisions in contested cases; and
(2) [shall] establish reasonable fees for forms and
documents it provides to the public and for the filing or
registration of documents required by this chapter.
(c) If the commission initiates a disciplinary proceeding
under this chapter, the person is entitled to a hearing before the
commission or a hearing officer appointed by the commission. The
commission by rule shall adopt procedures to permit an appeal to the
commission from a determination made by a hearing officer in a
disciplinary action.
(d) The commission shall set the time and place of the
hearing.
(e) A disciplinary procedure under this chapter is governed
by the contested case procedures of Chapter 2001, Government Code.
(f) The commission may file a suit in a district court of
Travis County to prevent a violation of this chapter or for any
other appropriate relief.
(g) Judicial review of a commission order imposing an
administrative penalty is:
(1) instituted by filing a petition as provided by
Subchapter G, Chapter 2001, Government Code; and
(2) by trial de novo.
Sec. 221.025. EFFECT OF REGISTRATION ON OTHER LAWS:
EXEMPTION [SALE EXEMPT] FROM CERTAIN LAWS [SECURITIES ACT]. (a) A
developer's compliance with [The filing of a registration under]
this chapter exempts the developer's offer and disposition of [sale
of] timeshare interests subject to this chapter from securities and
dealer registration under The Securities Act (Article 581-1 et
seq., Vernon's Texas Civil Statutes).
(b) A timeshare plan created as a condominium regime before
January 1, 1994, that complies with this chapter is exempt from the
requirements of Section 81.112 relating to club membership.
(c) A timeshare plan subject to Chapter 82 that complies
with this chapter is exempt from the requirements of Section
82.0675 relating to club membership.
(d) A developer's compliance with this chapter as to any
timeshare plan exempts any company, as defined by Chapter 181,
Finance Code (Texas Trust Company Act), that holds title to the
timeshare interests in the timeshare plan from compliance with the
Texas Trust Company Act as to the company's activities relating to
the holding of that title.
Sec. 221.026. ISSUANCE AND RENEWAL OF REGISTRATION. (a)
The commission by rule shall adopt requirements for the issuance
and renewal of a developer's registration under this chapter,
including:
(1) the form required for application for registration
or a renewal of registration; and
(2) any supporting documentation required for
registration or renewal of registration.
(b) The commission shall issue or renew a registration under
this chapter for a period not to exceed 24 months.
(c) The commission may assess and collect a fee for the
issuance or renewal of a registration under this chapter.
(d) The commission may assess and collect a late fee if the
commission has not received the fee or any supporting documentation
required before the 61st day after the date a registration is issued
or renewed under this section.
(e) Failure to pay a renewal fee or late fee is a violation
of this chapter.
SECTION 5. Sections 221.031 and 221.032, Property Code, are
amended to read as follows:
Sec. 221.031. ADVERTISEMENTS AND PROMOTIONS [PROMOTIONAL
DISCLOSURE STATEMENT]. (a) At any time, the commission may request
a developer to file for review by the commission any advertisement
used in this state by the developer in connection with offering a
timeshare interest. The developer shall provide the advertisement
not later than the 15th day after the date the commission makes the
request. If the commission determines that the advertisement
violates this chapter or Chapter 40, Business & Commerce Code, the
commission shall notify the developer in writing, stating the
specific grounds for the commission's determination not later than
the 15th day after the date the commission makes its determination.
The commission may grant the developer provisional approval for the
advertisement if the developer agrees to correct the deficiencies
identified by the commission. A developer, on its own initiative,
may submit any proposed advertisement to the commission for review
and approval by the commission.
(b) Any advertisement that contains a promotion in
connection with the offering of a timeshare interest must comply
with Chapter 40, Business & Commerce Code.
(c) As provided by Subsections (d) and (e), an advertisement
that contains a [Before the use of any] promotion in connection with
the offering of a timeshare interest must include, in addition to
any disclosures required under Chapter 40, Business & Commerce
Code, [the person who intends to use the promotion shall include]
the following [information in its advertisements to the prospective
purchaser]:
(1) a statement to the effect that the promotion is
intended to solicit purchasers of timeshare interests;
(2) if applicable, a statement to the effect that any
person whose name is obtained during the promotion may be solicited
to purchase a timeshare interest;
(3) the full name of the developer [and seller] of the
timeshare property; and
(4) if applicable, the full name and address of any
marketing company involved in the promotion of the timeshare
property, excluding the developer or an affiliate or subsidiary of
the developer.
(d) An advertisement containing the disclosures required by
Chapter 40, Business & Commerce Code, and Subsection (c) must be
provided in writing or electronically:
(1) at least once before a scheduled sales
presentation; and
(2) in a reasonable period before the scheduled sales
presentation to ensure that the recipient receives the disclosures
before leaving to attend the sales presentation.
(e) The developer is not required to provide the disclosures
required by this section in every advertisement or other written,
oral, or electronic communication provided or made to a recipient
before a scheduled sales presentation[;
[(5) the complete rules of the promotion; and
[(6) the method of awarding, the odds of winning, a
statement of the retail value of prizes, gifts, or other benefits
under the promotion as set forth in Subsection (b) of this section,
the geographic region in which the promotion is being conducted,
the beginning and ending dates of the promotion, and the date by
which each prize, gift, or benefit will be awarded or conferred].
[(b) For the purposes of this section, the retail value of
the item is the price at which a substantial number of sales of the
exact item, having the same manufacturer, brand, model number, and
type, have been made to members of the general public by at least
two principal retail outlets in the State of Texas during the six
months immediately preceding the offering of the prize or gift
described in the promotion. However, if a substantial number of
sales of a particular prize have not been made in the State of Texas
in the six months immediately preceding the offering of the prize or
gift in a promotion or if the developer elects, then the retail
value of the prize or gift is the actual unit cost of the prize or
the gift, net of any discounts or rebates to the developer, plus 200
percent.
[Provided, however, in the event a prize or gift involves
lodging, airfare, trips, or recreational activity, the retail value
shall be the retail sales price of the lodging, airfare, trips, or
recreational activity to a member of the general public not
involved in a promotional or other discount transaction.]
Sec. 221.032. TIMESHARE DISCLOSURE STATEMENT. (a) Before
the signing of any agreement [or contract] to acquire a timeshare
interest, the developer shall provide a timeshare disclosure
statement to the prospective purchaser and shall obtain from the
purchaser a written acknowledgement of receipt of the timeshare
disclosure statement.
(b) The timeshare disclosure statement for a single-site
timeshare plan or a multisite timeshare plan that includes a
specific timeshare interest must include:
(1) the type of timeshare plan offered and the name and
address of:
(A) the developer; and
(B) the single site or specific site offered for
the multisite timeshare plan [and the name and specific location of
the timeshare property];
(2) a description of the duration and operation of the
timeshare plan;
(3) a description of the existing or proposed
accommodations, including the type and number of timeshare
interests in the accommodations expressed in periods of seven-day
use availability or other time increment applicable to the
timeshare plan. The description of each type of accommodation
included in the timeshare plan shall be categorized by the number of
bedrooms, the number of bathrooms, and sleeping capacity, and shall
include a statement indicating whether the accommodation contains a
full kitchen, which means a kitchen that has a minimum of a
dishwasher, range, sink, oven, and refrigerator. If the
accommodations are proposed or incomplete, a schedule for
commencement, completion, and availability of the accommodations
shall be provided [amenities, timeshare property, and any project
or development within which the timeshare property is located or of
which it is a part; the total number of timeshare units in the
timeshare property and whether and under what circumstances that
number may be increased or decreased; and, if a timeshare interest
includes amenities not yet in existence, the commencement and
completion schedule of the proposed amenities];
(4) [(3)] a description of any existing or proposed
amenities of the timeshare plan and, if the amenities are proposed
or incomplete, a schedule for commencement, completion, and
availability of the amenities [the timeshare interests currently
available for disposition and, if applicable, the types and number
of units available];
(5) the extent to which financial arrangements have
been provided for the completion of all promised accommodations and
amenities that are committed to be built;
(6) a description of the method and timing for
performing maintenance of the accommodations;
(7) a statement indicating that, on an annual basis,
the sum of the nights that purchasers are entitled to use the
accommodations does not exceed the number of nights the
accommodations are available for use by the purchasers;
(8) a description of the method by which purchasers'
use of the accommodations is scheduled;
(9) [(4)] a statement that an association [a council
of purchasers] exists or is expected to be created or that such an
association [a council] does not exist and is not expected to be
created and, if such an association [a council] exists or is
reasonably contemplated, a description of its powers and
responsibilities;
(10) relating to the single-site timeshare plan or the
specific timeshare interest of a multisite timeshare plan, copies
of the following documents, if applicable, including any amendments
to the documents, unless separately provided to the purchaser
simultaneously with the timeshare disclosure statement:
(A) the declaration;
(B) the association articles of incorporation;
(C) the association bylaws;
(D) the association rules; and
(E) any lease or contract, excluding the purchase
contract and other loan documents required to be signed by the
purchaser at closing;
(11) [(5)] the name and principal address of the
managing entity and a description of the procedures, if any, for
altering the powers and responsibilities of the managing entity and
for removing or replacing it;
(12) the current annual [(6) a complete] budget, if
available, or the projected annual budget for the timeshare plan or
timeshare properties managed by the same managing entity if
assessments are deposited in a common account. The budget [for the
operation of the timeshare property for a period of one year after
the first disposition of a timeshare interest in the property, and
thereafter, the current operating budget, which operating budget]
must include:
(A) a statement of the amount reserved or
budgeted for repairs, replacements, and refurbishment [the total
amount included as a reserve for the maintenance of the timeshare
property and for the repair or replacement of personal property or
fixtures];
(B) the projected common expense liability, if
any, by category of expenditure for the timeshare plan or timeshare
properties managed by the same managing entity [total amount of any
other reserve and the purpose of the reserve];
(C) [the projected timeshare liability expressed
by categories of expenditure for all timeshare interests;
[(D) the timeshare liability projected by
categories of expenditures for each timeshare interest;
[(E)] the name and address of the person who
prepared the operating budget; and
(D) [(F)] the assumptions on which the operating
budget is based;
(13) the projected assessments and [(7)] a description
of the [nature and estimated amount of any timeshare liability that
may in the future be assessed and the] method for calculating and
apportioning those assessments among purchasers [and formula for
assessing the timeshare liability];
(14) any initial fee or special fee due from the
purchaser at closing, together with a description of the purpose
and method of calculating the fee;
(15) [(8)] a description of any lien, defect, or
encumbrance on or affecting title to the timeshare interest and, if
applicable, a copy of each written warranty provided by the
developer [service that the developer or person acting on his
behalf provides or expense that is paid that reasonably may be
expected to become a timeshare liability, and the projected
timeshare liability attributable to that service or expense];
(16) [(9)] a description of any bankruptcy that is
pending or that has occurred within the past five years, pending
civil or criminal suit, adjudication, or disciplinary actions
material to the timeshare plan of which the developer has knowledge
[the existing or proposed amenities of the timeshare property and,
if the amenities are proposed or not yet complete or fully
functional, a schedule for the projected commencement, completion,
and availability of those amenities];
(17) a description of any financing offered by or
available through the developer;
(18) any current or anticipated [(10) a description
and amount of any current or expected dues, assessments,] fees[,]
or charges to be paid by timeshare purchasers for the use of any
accommodations or amenities related to the timeshare plan, and a
statement that the fees or charges are subject to change [or for any
other purpose];
(19) [(11) a description of any unsatisfied final
judgment against the developer, seller, managing entity, or
exchange company with which the developer is under contract, but
not including any individual sales agent or representative who
offers a timeshare interest;
[(12) a description and status of any pending lawsuit
or administrative action of which the developer has actual
knowledge that may materially affect a timeshare interest;
[(13)] a description and amount of insurance coverage
provided for the protection of the purchaser;
(20) [(14)] the extent to which a timeshare interest
may become subject to a tax lien or other lien arising out of claims
against purchasers of different timeshare interests;
(21) [(15)] a description of those matters required by
Section 221.041 [201.041];
(22) [(16)] a statement disclosing any right of first
refusal or other restraint on the transfer of all or any portion of
a timeshare interest;
(23) [(17)] a statement disclosing that any deposit
made in connection with the purchase of a timeshare interest must
[will] be held by [in] an escrow agent [account] until expiration of
any right to cancel the contract and that any deposit must be [or
any later time specified in the contract and will be] returned to
the purchaser if the purchaser [he] elects to exercise the [his]
right of cancellation; or, if the commission accepts from the
developer a surety bond, irrevocable letter of credit, or other
form of financial assurance instead of an escrow deposit, a
statement disclosing that the developer has provided a surety bond,
irrevocable letter of credit, or other form of financial assurance
in an amount equal to or in excess of the funds that would otherwise
be held by an escrow agent and that the deposit must be returned if
the purchaser elects to exercise the right of cancellation;
(24) [(18)] if applicable, a statement that the
assessments [timeshare property is part of a timeshare system and
that timeshare fees] collected from the purchasers [owners] may be
placed in a common account with the assessments [timeshare fees]
collected from the purchasers [owners] of other timeshare
properties managed by the same managing entity [participating in
the timeshare system];
(25) if the timeshare plan provides purchasers with
the opportunity to participate in an exchange program, a
description of the name and address of the exchange company and the
method by which a purchaser accesses the exchange program; and
(26) [(19)] any other information the commission
determines is necessary to protect prospective purchasers or to
implement the purpose of this chapter [material circumstances
concerning a timeshare interest].
(c) A developer who offers a specific timeshare interest in
a multisite timeshare plan also must fully disclose the following
information in written, graphic, or tabular form:
(1) a description of each component site, including
the name and address of each component site;
(2) a description of each type of accommodation in
each component site, categorized by the number of bedrooms, the
number of bathrooms, and sleeping capacity, and a statement
indicating whether the accommodation contains a full kitchen, which
means a kitchen that has a minimum of a dishwasher, range, sink,
oven, and refrigerator;
(3) a description of the amenities at each component
site available for use by the purchasers;
(4) a description of the reservation system, which
must include:
(A) the entity responsible for operating the
reservation system, its relationship to the developer, and the
duration of any agreement for operation of the reservation system;
(B) a summary or the rules governing access to
and use of the reservation system; and
(C) the existence of and explanation regarding
any priority reservation features that affect a purchaser's ability
to make reservations for the use of a given accommodation on a
first-come, first-served basis;
(5) the name and principal address of the managing
entity for the multisite timeshare plan and a description of the
procedures, if any, for altering the powers and responsibilities of
the managing entity and for removing or replacing it;
(6) a description of any right to make additions to,
substitutions in, or deletions from accommodations, amenities, or
component sites, and a description of the basis on which
accommodations, amenities, or component sites may be added to,
substituted in, or deleted from the multisite timeshare plan;
(7) a description of the purchaser's liability for any
fees associated with the multisite timeshare plan;
(8) the location of each component site of the
multisite timeshare plan, the historical occupancy of each
component site for the prior 12-month period, if the component site
was part of the multisite timeshare plan during such 12-month time
period, as well as any periodic adjustment or amendment to the
reservation system that may be needed in order to respond to actual
purchaser use patterns and changes in purchaser use demand for the
accommodations existing at the time within the multisite timeshare
plan; and
(9) any other information the commission determines is
necessary to protect prospective purchasers or to implement the
purpose of this chapter.
(d) A developer who offers a nonspecific timeshare interest
in a multisite timeshare plan must disclose the following
information in written, graphic, or tabular form:
(1) the name and address of the developer;
(2) a description of the type of interest and the usage
rights the purchaser will receive;
(3) a description of the duration and operation of the
timeshare plan;
(4) a description of the type of insurance coverage
provided for each component site;
(5) an explanation of who holds title to the
accommodations of each component site;
(6) a description of each component site, including
the name and address of each component site;
(7) a description of the existing or proposed
accommodations, expressed in periods of seven-day use availability
or any other time increment applicable to the timeshare plan. The
description of each type of accommodation included in the timeshare
plan shall be categorized by the number of bedrooms, the number of
bathrooms, and sleeping capacity, and shall include a statement
indicating whether the accommodation contains a full kitchen, which
means a kitchen that has a minimum of a dishwasher, range, sink,
oven, and refrigerator. If the accommodations are proposed or
incomplete, a schedule for commencement, completion, and
availability of the accommodations shall be provided;
(8) a statement that an association exists or is
expected to be created or that such an association does not exist
and is not expected to be created and, if such an association exists
or is reasonably contemplated, a description of its powers and
responsibilities;
(9) if applicable, copies of the following documents
applicable to the multisite timeshare plan, including any
amendments to the documents, unless separately provided to the
purchaser simultaneously with the timeshare disclosure statement:
(A) the declaration;
(B) the association articles of incorporation;
(C) the association bylaws;
(D) the association rules; and
(E) any lease or contract, excluding the purchase
contract and other loan documents required to be signed by the
purchaser at closing;
(10) a description of the method and timing for
performing maintenance of the accommodations;
(11) a statement indicating that, on an annual basis,
the sum of the nights that purchasers are entitled to use the
accommodations does not exceed the number of nights the
accommodations are available for use by the purchasers;
(12) a description of each type of accommodation
included in the timeshare plan, categorized by the number of
bedrooms, the number of bathrooms, and sleeping capacity, and a
statement indicating whether the accommodation contains a full
kitchen, which means a kitchen that has a minimum of a dishwasher,
range, sink, oven, and refrigerator;
(13) a description of amenities available for use by
the purchaser at each component site;
(14) the location of each component site of the
multisite timeshare plan, the historical occupancy of each
component site for the prior 12-month period, if the component site
was part of the multisite timeshare plan during such 12-month time
period, as well as any periodic adjustment or amendment to the
reservation system that may be needed in order to respond to actual
purchaser use patterns and changes in purchaser use demand for the
accommodations existing at the time within the multisite timeshare
plan;
(15) a description of the right to make any additions,
substitutions, or deletions of accommodations, amenities, or
component sites, and a description of the basis upon which
accommodations, amenities, or component sites may be added to,
substituted in, or deleted from the multisite timeshare plan;
(16) a description of the reservation system that
shall include all of the following:
(A) the entity responsible for operating the
reservation system, its relationship to the developer, and the
duration of any agreement for operation of the reservation system;
(B) a summary of the rules governing access to
and use of the reservation system; and
(C) the existence of and an explanation regarding
any priority reservation features that affect a purchaser's ability
to make reservations for the use of a given accommodation on a
first-come, first-served basis;
(17) the name and principal address of the managing
entity for the multisite timeshare plan and a description of the
procedures, if any, for altering the powers and responsibilities of
the managing entity and for removing or replacing it, and a
description of the relationship between the multisite timeshare
plan managing entity and the managing entity of the component sites
of the multisite timeshare plan, if different from the multisite
timeshare plan managing entity;
(18) the current annual budget of the multisite
timeshare plan, if available, or the projected annual budget for
the multisite timeshare plan, which must include:
(A) a statement of the amount reserved or
budgeted for repairs, replacements, and refurbishment;
(B) the projected common expense liability, if
any, by category of expenditure for the multisite timeshare plan;
(C) the name and address of the person who
prepared the operating budget; and
(D) the assumptions on which the operating budget
is based;
(19) the projected assessments and a description of
the method for calculating and apportioning those assessments among
purchasers of the multisite timeshare plan;
(20) if applicable, a statement that the assessments
collected from the purchasers may be placed in a common account with
the assessments collected from the purchasers of other timeshare
properties managed by the same managing entity;
(21) any current fees or charges to be paid by
timeshare purchasers for the use of any amenities related to the
timeshare plan and a statement that the fees or charges are subject
to change;
(22) any initial or special fee due from the purchaser
at closing, together with a description of the purpose of and method
of calculating the fee;
(23) a description of the purchaser's liability for
any fees associated with the multisite timeshare plan;
(24) a description of any lien, defect, or encumbrance
on or affecting title to the timeshare interest and, if applicable,
a copy of each written warranty provided by the developer;
(25) the extent to which a timeshare interest may
become subject to a tax lien or other lien arising out of claims
against purchasers of different timeshare interests;
(26) a description of those matters required by
Section 221.041;
(27) a description of any financing offered by or
available through the developer;
(28) a description of any bankruptcy that is pending
or that has occurred within the past five years, pending civil or
criminal suits, adjudications, or disciplinary actions material to
the timeshare plan of which the developer has knowledge;
(29) a statement disclosing any right of first refusal
or other restraint on the transfer of all or a portion of a
timeshare interest;
(30) a statement disclosing that any deposit made in
connection with the purchase of a timeshare interest must be held by
an escrow agent until expiration of any right to cancel the contract
and that any deposit must be returned to the purchaser if the
purchaser elects to exercise the right of cancellation; or, if the
commission accepts from the developer a surety bond, irrevocable
letter of credit, or other form of financial assurance instead of an
escrow deposit, a statement disclosing that the developer has
provided a surety bond, irrevocable letter of credit, or other form
of financial assurance in an amount equal to or in excess of the
funds that would otherwise be held by an escrow agent and that the
deposit must be returned if the purchaser elects to exercise the
right of cancellation;
(31) if the timeshare plan provides purchasers with
the opportunity to participate in an exchange program, a
description of the name and address of the exchange company and the
method by which a purchaser accesses the exchange program; and
(32) any other information the commission determines
is necessary to protect prospective purchasers or to implement the
purpose of this chapter.
(e) A developer may include any other information in a
timeshare disclosure statement required by this section on approval
by the commission.
(f) If a timeshare plan is located wholly outside this
state, the commission may permit the developer to submit a
timeshare disclosure statement the developer is currently
providing purchasers or an equivalent timeshare disclosure
statement filed for the timeshare plan in another state if the
current statement or the equivalent statement substantially
complies with the requirements of this subchapter. This subsection
does not exempt the developer from other requirements of this
chapter.
SECTION 6. Section 221.033(a), Property Code, is amended to
read as follows:
(a) Before the signing of any agreement to purchase [or
contract to acquire] a timeshare interest in which a prospective
purchaser is also offered participation in any exchange program,
the developer shall also deliver to the prospective purchaser the
exchange disclosure statement of any exchange company whose service
is advertised or offered by the developer or other person in
connection with the disposition.
SECTION 7. Section 221.034, Property Code, is amended to
read as follows:
Sec. 221.034. EXEMPT OFFERINGS AND DISPOSITIONS;
COMMUNICATIONS [WHEN DISCLOSURE NOT REQUIRED]. (a) An offering or
disposition is exempt from this chapter if it is [A disclosure
statement need not be delivered in the case of]:
(1) a gratuitous offering or disposition of a
timeshare interest;
(2) a disposition pursuant to a court order;
(3) a disposition by a governmental agency;
(4) a disposition by foreclosure or deed in lieu of
foreclosure;
(5) an offering or [a] disposition by an association
of its own timeshare interest acquired through foreclosure, deed in
lieu of foreclosure, or gratuitous transfer [that may be canceled
by the purchaser without penalty at any time and for any reason];
(6) an offering or [a] disposition of all timeshare
interests in a timeshare plan [regime] to not more than five
persons;
(7) an offering or [a] disposition of a timeshare
interest in a timeshare property situated wholly outside this state
under a contract executed wholly outside this state, if there has
been no offering to the purchaser within this state;
(8) an offering or [a] disposition of a timeshare
interest to a purchaser who is not a resident of this state under a
contract executed wholly outside this state, if there has been no
offering to the purchaser within this state; [or]
(9) the offering or redisposition of a timeshare
interest by a purchaser who acquired the interest for the
purchaser's [his] personal use; or
(10) the offering or disposition of a rental of an
accommodation for a period of three years or less.
(b) If a developer has a timeshare plan registered under
this chapter and is subject to Section 221.024, the developer may
offer or dispose of an interest in a timeshare plan that is not
registered under this chapter to a person who is the owner of a
timeshare interest in a timeshare plan created by the developer. A
developer under this subsection is exempt from Sections 221.021,
221.022, 221.023, 221.032, 221.041, 221.042, 221.043, 221.061,
221.071(a)(1) and (8), 221.074, and 221.075 if the developer:
(1) permits the purchaser to cancel the purchase
contract before the sixth day after the date the contract is signed;
and
(2) provides the purchaser all timeshare disclosure
documents required by law to be provided in the jurisdiction in
which the timeshare property is located.
(c) The following communications are not advertisements
under this chapter:
(1) any stockholder communication, including an
annual report or interim financial report, proxy material,
registration statement, securities prospectus, timeshare
disclosure statement, or other material required to be delivered to
a prospective purchaser by a state or federal governmental entity;
(2) any oral or written statement disseminated by a
developer to broadcast or print media, excluding:
(A) paid advertising or promotional material
relating to plans for acquiring or developing timeshare property;
and
(B) the rebroadcast or other dissemination of any
oral statements by a developer to a prospective purchaser or the
distribution or other dissemination of written statements,
including newspaper or magazine articles or press releases, by a
developer to prospective purchasers;
(3) the offering of a timeshare interest in a national
publication or by electronic media that is not directed to or
targeted at any individual located in this state;
(4) any audio, written, or visual publication or
material relating to the availability of any accommodations for
transient rental if:
(A) a sales presentation is not a term or
condition of the availability of the accommodations; and
(B) the failure of the transient renter to take a
tour of the timeshare property or attend a sales presentation does
not result in a reduction in the level of services or an increase in
the rental price that would otherwise be available to the renter; or
(5) any follow-up communication with a person relating
to a promotion if the person previously received an advertisement
relating to the promotion that complied with Section 221.031.
(d) The following communications are exempt from this
chapter if they are delivered to a person who has previously
executed a contract for the purchase of or is an owner of a
timeshare interest in a timeshare plan:
(1) any communication addressed to and relating to the
account of the person; or
(2) any audio, written, or visual publication or
material relating to an exchange company or program if the person is
a member of that exchange company or program.
SECTION 8. Sections 221.041, 221.042, and 221.043, Property
Code, are amended to read as follows:
Sec. 221.041. PURCHASER'S RIGHT TO CANCEL. (a) A purchaser
may cancel a purchase contract [to purchase a timeshare interest]
before the sixth day after the date the purchaser signs and receives
a copy of the purchase contract or receives the required timeshare
disclosure statement, whichever is later [contract is signed].
(b) [If a purchaser does not receive a copy of the contract
at the time the contract is signed, the purchaser may cancel the
contract to purchase the timeshare interest before the sixth day
after the date the contract is received by the purchaser.
[(c)] A purchaser may not waive the [his] right of
cancellation under this section. A contract containing a waiver is
voidable by the purchaser.
Sec. 221.042. NOTICE; REFUND. (a) If a purchaser elects to
cancel a purchase contract under Section 221.041 [201.041], the
purchaser [he] may do so by hand-delivering notice of cancellation
to the developer, [seller or] by mailing notice by prepaid United
States mail to the developer [seller] or to the developer's
[seller's] agent for service of process, or by providing notice by
overnight common carrier delivery service to the developer or the
developer's agent for service of process.
(b) Cancellation is without penalty, and all payments made
by the purchaser before cancellation must be refunded on or before
the 30th [21st] day after the date on which the developer [seller]
receives a timely notice of cancellation or on or before the fifth
day after the date the developer receives good funds from the
purchaser, whichever is later.
Sec. 221.043. CONTRACT REQUIREMENTS. (a) Each purchase
contract [Attached to each contract shall be a separate page
identified as Exhibit A. Exhibit A shall be provided to each
purchaser at the time the contract is signed and] shall contain the
following information. The statements required by this subsection
[Subdivisions (1)] and Subsection (c)(8) [(3)] shall be provided in
a conspicuous manner and in the exact language set forth in this
section with the developer's [seller's] name and address, the date
of the last day of the fiscal year, and the address of the managing
entity inserted where indicated:
[(1)] "PURCHASER'S RIGHT TO CANCEL.
"(1) [(A)] BY SIGNING THIS CONTRACT YOU ARE INCURRING
AN OBLIGATION TO PURCHASE A TIMESHARE INTEREST. YOU MAY, HOWEVER,
CANCEL THIS CONTRACT WITHOUT PENALTY OR OBLIGATION BEFORE THE SIXTH
DAY AFTER THE DATE YOU SIGN AND RECEIVE A COPY OF THE PURCHASE
CONTRACT, OR RECEIVE THE REQUIRED TIMESHARE DISCLOSURE STATEMENT,
WHICHEVER IS LATER [THE CONTRACT. IF YOU DO NOT RECEIVE A COPY OF
THE CONTRACT AT THE TIME THE CONTRACT IS SIGNED, YOU MAY CANCEL THIS
CONTRACT WITHOUT PENALTY OR OBLIGATION BEFORE THE SIXTH DAY AFTER
THE DATE YOU RECEIVE A COPY OF THE CONTRACT].
"(2) [(B)] IF YOU DECIDE TO CANCEL THIS CONTRACT, YOU
MAY DO SO BY EITHER HAND-DELIVERING NOTICE OF CANCELLATION TO THE
DEVELOPER, [SELLER OR] BY MAILING NOTICE BY PREPAID UNITED STATES
MAIL TO THE DEVELOPER [SELLER] OR THE DEVELOPER'S [SELLER'S] AGENT
FOR SERVICE OF PROCESS, OR BY PROVIDING NOTICE BY OVERNIGHT COMMON
CARRIER DELIVERY SERVICE TO THE DEVELOPER OR THE DEVELOPER'S AGENT
FOR SERVICE OF PROCESS. YOUR NOTICE OF CANCELLATION IS EFFECTIVE ON
THE DATE SENT OR DELIVERED TO (INSERT NAME OF DEVELOPER [SELLER]) AT
(INSERT ADDRESS OF DEVELOPER [SELLER]). FOR YOUR PROTECTION, SHOULD
YOU DECIDE TO CANCEL YOU SHOULD EITHER SEND YOUR NOTICE OF
CANCELLATION BY CERTIFIED MAIL WITH A RETURN RECEIPT REQUESTED OR
OBTAIN A SIGNED AND DATED RECEIPT IF DELIVERING IT IN PERSON OR BY
OVERNIGHT COMMON CARRIER.
"(3) [(C)] A PURCHASER SHOULD NOT RELY ON STATEMENTS
OTHER THAN THOSE INCLUDED IN THIS CONTRACT AND THE DISCLOSURE
STATEMENT."
[(2) A statement disclosing the amount of the
timeshare fees, on a monthly or annual basis, which are being
assessed currently against or collected from the owners of a
timeshare interest. Immediately following the timeshare fee
disclosure statement shall be a statement that the timeshare fees
collected by the managing entity may be used to pay for the
administrative and operating expenses of the property; and
[(3) "AS A TIMESHARE OWNER YOU HAVE A RIGHT TO REQUEST
A WRITTEN ANNUAL TIMESHARE FEE AND EXPENSE STATEMENT. THIS
STATEMENT IS PREPARED ANNUALLY BY THE MANAGING ENTITY AND WILL BE
AVAILABLE NO LATER THAN THE 90TH DAY FOLLOWING (INSERT THE DATE OF
THE LAST DAY OF THE FISCAL YEAR). YOU MAY REQUEST THE STATEMENT BY
WRITING TO (INSERT ADDRESS OF THE MANAGING ENTITY)."]
(b) Immediately following the required statements in
Subsection (a) [on Exhibit A] shall be a space reserved for the
signature of the purchaser. [The seller shall obtain the
purchaser's signature on Exhibit A at the time the contract is
signed.]
(c) The purchase contract must also include the following:
(1) the name and address of the developer [seller] and
the address of the timeshare property or the address of any
available timeshare interest being offered [unit];
(2) an agreement describing the cancellation policy
prescribed by Section 221.041 [whether the purchaser visited the
location of the timeshare unit before signing the contract];
(3) [an agreement by the seller that if the purchaser
timely exercises the right of cancellation under the contract, all
payments made by the purchaser to the seller in connection with the
contract shall be returned to such purchaser before the 21st day
after the seller receives notice of cancellation;
[(4)] the name of the person or persons primarily
[actively] involved in the sales presentation on behalf of the
developer [seller];
(4) a statement disclosing the amount of the periodic
assessments currently assessed against or collected from the
purchasers of the timeshare interest, immediately followed by a
statement providing that collected assessments will be used by the
managing entity to pay for expenditures, charges, reserves, or
liabilities relating to the operation of the timeshare plan or
timeshare properties managed by the managing entity;
(5) a statement disclosing [warranty] that the
timeshare common properties are not mortgaged, unless the mortgage
contains a nondisturbance clause which fully protects the use and
enjoyment rights of each timeshare owner in the event of
foreclosure; [and]
(6) in the event such timeshare interests are sold
under a lease, right to use, or membership agreement where free and
clear title to the accommodation [timeshare unit] is not passed to
the purchaser [buyer], then the purchase contract must contain a
statement [warranty] that the timeshare is free and clear; or if
subject to a mortgage, the mortgage must contain a nondisturbance
clause which fully protects the use and enjoyment rights of each
timeshare owner in the event of foreclosure;
(7) the date the purchaser signs the contract; and
(8) the following statement:
"AS A TIMESHARE OWNER, YOU HAVE A RIGHT TO REQUEST A WRITTEN
ANNUAL TIMESHARE FEE AND EXPENSE STATEMENT. THIS STATEMENT IS
PREPARED ANNUALLY BY THE MANAGING ENTITY AND WILL BE AVAILABLE NOT
LATER THAN FIVE MONTHS AFTER (INSERT THE DATE OF THE LAST DAY OF THE
FISCAL YEAR). YOU MAY REQUEST THE STATEMENT BY WRITING TO (INSERT
NAME AND ADDRESS OF THE MANAGING ENTITY)."
(d) The information required to be provided by this section
may be provided in the purchase contract or in an exhibit to the
purchase contract, or it may be provided in part in both if all of
the information is provided.
SECTION 9. Section 221.052, Property Code, is amended to
read as follows:
Sec. 221.052. LIABILITY OF DEVELOPER AND EXCHANGE COMPANY.
(a) A developer does not incur any liability arising out of the
use, delivery, or publication [by the developer] to a [the]
purchaser of written information or audio-visual materials
provided to it by the exchange company in accordance with
Subchapter D, unless [. A developer is subject to liability arising
out of the use, delivery, or publication to the purchaser of
materials provided by the exchange company if] the developer knows
or has reason to know that the materials are inaccurate or false.
(b) No exchange company shall have any liability with
respect to any violation under this chapter arising out of the use
by a developer of information relating to an exchange program other
than that provided to the developer by the exchange company.
(c) An exchange company that denies exchange privileges to
an owner whose use of accommodations in the owner's timeshare plan
is denied is not liable to any member of the exchange company or
exchange program or any third party because of the denial of the
owner's exchange privileges.
SECTION 10. Subchapter G, Chapter 221, Property Code, is
amended by amending Sections 221.061, 221.062, and 221.063 and
adding Section 221.064 to read as follows:
Sec. 221.061. ESCROW OR TRUST ACCOUNT REQUIRED. (a) A
[The] developer or escrow agent of a timeshare plan [other person
acting on its behalf] shall deposit in [establish] an escrow or
trust account in a federally insured depository 100 percent of all
funds received during the purchaser's cancellation period [with an
escrow agent for the purpose of protecting deposits made by
purchasers in connection with proposed dispositions of timeshare
interests].
(b) An escrow agent owes the purchaser a fiduciary duty.
(c) The escrow agent and the developer shall execute an
agreement that includes a statement providing that:
(1) funds may be disbursed to the developer from the
escrow or trust account by the agent only:
(A) after the purchaser's cancellation period
has expired; and
(B) as provided by the purchase contract, subject
to this subchapter; and
(2) if the purchaser cancels the purchase contract as
provided by the contract, the funds must be paid to:
(A) the purchaser; or
(B) the developer if the purchaser's funds have
been refunded previously by the developer.
(d) If a developer contracts to sell a timeshare interest
and the construction of the building in which the timeshare
interest is located has not been completed when the cancellation
period expires, the developer shall continue to maintain all funds
received from the purchaser under the purchase agreement in the
escrow or trust account until construction of the building is
completed. The documentation required for evidence of completion
of construction includes:
(1) a certificate of occupancy;
(2) a certificate of substantial completion;
(3) evidence of a public safety inspection equivalent
to Subdivision (1) or (2) from a government agency in the applicable
jurisdiction; or
(4) any other evidence acceptable to the commission.
Sec. 221.062. [ESCROW AMOUNT. Fifty percent of any deposit
obtained from a purchaser shall be placed in the escrow account.
[Sec. 221.063.] RELEASE OF ESCROW. (a) The funds or
property constituting the escrow or trust deposit may be released
from escrow only in accordance with this section.
(b) If the purchaser cancels the purchase contract as
provided by the contract, the funds shall be paid to:
(1) the purchaser; or
(2) the developer if the purchaser's funds have been
refunded previously by the developer.
(c) If the purchaser defaults in the performance of
obligations under the terms of the purchase [a] contract [to
purchase a timeshare interest], the funds shall be paid to the
developer [or other person legally entitled to the escrow deposit
shall file an application with the escrow agent requesting release
of the applicable amount. The application for release of the escrow
deposit must be verified and must include:
[(1) a concise statement by the applicant that the
purchaser has materially defaulted in the performance of
obligations under the terms of a contract to purchase a timeshare
interest and that the applicant and the developer have complied
with all terms and obligations of that contract;
[(2) a complete explanation of the nature of the
purchaser's material default under the contract and of the date of
its occurrence;
[(3) a statement that pursuant to the terms of the
purchase contract the applicant is entitled to the escrow deposit;
[(4) a statement that the developer has no knowledge
of a dispute between the purchaser and developer and a statement
that the purchaser has not, to the applicant's knowledge, made a
demand for the return of the deposit; and
[(5) a statement that the purchaser has not exercised
a right of cancellation under Subchapter E].
(d) If the developer defaults in the performance of
obligations under the purchase contract, the funds shall be paid to
the purchaser.
(e) If the funds of the purchaser have not been disbursed
previously as provided by Subsections (a)-(d), the funds may be
disbursed to the developer by the escrow or trust agent if
acceptable evidence of completion of construction is provided.
(f) If there is a dispute relating to the funds in the escrow
or trust account, the agent shall maintain the funds in the account
until:
(1) the agent receives written directions agreed to
and signed by all parties; or
(2) a civil action relating to the disputed funds is
filed.
(g) If a civil action is filed under Subsection (f)(2), the
escrow or trust account agent shall deposit the funds with the court
in which the action is filed.
Sec. 221.063. ALTERNATIVE TO ESCROW OR TRUST ACCOUNT:
FINANCIAL ASSURANCE. (a) Instead of the deposit of funds in an
escrow or trust account as provided by Section 221.061, the
commission may accept from the developer a surety bond, irrevocable
letter of credit, or other form of financial assurance, including
financial assurance posted in another state or jurisdiction.
(b) The amount of the financial assurance provided under
this section must be an amount equal to or more than the amount of
funds that would otherwise be placed in an escrow or trust account
under Section 221.061(a).
(c) The amount of the financial assurance provided under
this section for timeshare property under construction as provided
by Section 221.061(d) must be the lesser of:
(1) an amount equal to or more than the amount of funds
that would otherwise be placed in an escrow or trust account under
that subsection; or
(2) the amount necessary to assure completion of the
building in which the timeshare interest is located.
Sec. 221.064. DOCUMENTATION REQUIRED. The escrow or trust
account agent or developer shall make documents related to the
escrow or trust account or the financial assurance provided
available to the commission at the commission's request.
[(c) Notwithstanding the other provisions of this section,
the escrow agent may release the escrow deposit to the applicant on
presentation to the escrow agent of:
[(1) an affidavit by the developer that the timeshare
unit is substantially complete and that no applicable right of
cancellation of the contract has been exercised by the purchaser;
[(2) if funds were placed in the escrow account in
connection with the proposed disposition of a timeshare estate, a
true and correct copy of the instrument transferring ownership of
the timeshare estate to the purchaser free and clear of all liens
and encumbrances, except for any encumbrance created by purchaser
financing; and
[(3) if funds were placed in the escrow account in
connection with the proposed disposition of a timeshare use, a true
and correct copy of a properly executed and recorded nondisturbance
agreement executed by the developer and all holders of a lien
recorded against the timeshare property and providing that
subsequent owners or foreclosing holders of a lien shall take title
to the timeshare property subject to the rights of prior purchasers
under their contracts of sale.
[(d) A deposit may not be released from escrow until the
escrow agent has provided the purchaser written notice of intent to
release the escrow at least 14 days before the release.]
SECTION 11. Section 221.071, Property Code, is amended by
amending Subsection (a) and adding Subsections (c) and (d) to read
as follows:
(a) A developer [seller] or other person commits a false,
misleading, or deceptive act or practice within the meaning of
Subsections (a) and (b) of Section 17.46 of the Texas Deceptive
Trade Practices-Consumer Protection Act (Article 17.46 et seq.,
Business & Commerce Code), by engaging in any of the following acts:
(1) failing to disclose information concerning a
timeshare interest required by Subchapter D;
(2) making false or misleading statements of fact
concerning the characteristics of accommodations or amenities
available to a consumer;
(3) predicting specific or immediate increases in the
value of a timeshare interest without a reasonable basis for such
predictions;
(4) making false or misleading statements of fact
concerning the duration that accommodations or amenities will be
available to a consumer;
(5) making false or misleading statements of fact
concerning the conditions under which a purchaser of a timeshare
interest may exchange the right to occupy a unit for the right to
occupy a unit in the same or another timeshare property;
(6) representing that a prize, gift, or other benefit
will be awarded in connection with a promotion with the intent not
to award that prize, gift, or benefit in the manner represented;
(7) failing to provide a copy of the purchase contract
to the purchaser at the time the contract is signed by the
purchaser[, unless the purchaser requests in writing that the
contract be mailed, and the contract is mailed to the purchaser
before the end of the next business day];
(8) failing to provide the annual [timeshare fee and
expense] statement as required by Section 221.074(a) [221.074]; or
(9) exceeding a one-to-one purchaser-to-accommodation
ratio for a timeshare plan during a consecutive 12-month period, as
determined under Subsection (c) [furnishing false information in
the annual timeshare fee and expense statement as required by
Section 221.074].
(c) A developer complies with the one-to-one
purchaser-to-accommodation ratio referred to in Subsection (a)(9)
if the total number of purchasers eligible to use the
accommodations of the timeshare plan during a consecutive 12-month
period never exceeds the total number of accommodations available
for use in the timeshare plan during that same period. A
purchaser-to-accommodation ratio is computed by dividing the
number of purchasers eligible to use an accommodation in a
timeshare plan on any given day by the number of accommodations
within the plan available for use on that day. For purposes of
computing the purchaser-to-accommodation ratio:
(1) each purchaser is counted at least once each
consecutive 12-month period;
(2) each accommodation is counted not more than 365
times each consecutive 12-month period, excluding a leap year, in
which each accommodation may be counted 366 times; and
(3) a purchaser who is delinquent in paying timeshare
assessments is considered eligible to use timeshare plan
accommodations.
(d) If a developer has substantially complied with this
chapter in good faith, a nonmaterial error or omission is not
actionable. Any nonmaterial error or omission is not sufficient to
permit a purchaser to cancel a purchase contract after the period
provided for cancellation expires under this chapter.
SECTION 12. Section 221.072, Property Code, is amended to
read as follows:
Sec. 221.072. INSURANCE. Before the disposition of any
timeshare interest, the developer or managing entity shall maintain
the following insurance with respect to the timeshare property:
(1) property insurance on the timeshare property and
any personal property for use by purchasers, other than personal
property separately owned by a purchaser, insuring against all
risks of direct physical loss commonly insured against, in a total
amount, after application of deductibles, of the full replacement
cost of the accommodations and amenities of the timeshare property;
and
(2) liability insurance covering all occurrences
commonly insured against for death, bodily injury, and property
damage arising out of or in connection with the use, ownership, and
maintenance of the timeshare property.
SECTION 13. Sections 221.073(a) and (b), Property Code, are
amended to read as follows:
(a) A developer [or seller] subject to this chapter commits
an offense if the developer [or seller] offers or disposes of a
timeshare interest in a timeshare property which has not been
registered with the commission.
(b) It is not a violation of this section for a developer [or
seller] subject to [the provisions of] this chapter [Act] to accept
reservations and deposits from prospective purchasers in
accordance with Section 221.021(b) or (d) [the provisions of
Subsection (b) of Section 221.021 of this Act].
SECTION 14. Section 221.074, Property Code, is amended to
read as follows:
Sec. 221.074. ANNUAL TIMESHARE FEE AND EXPENSE STATEMENT.
(a) Notwithstanding any contrary [a] provision of the required
timeshare [promotional] disclosure statement, project instrument,
timeshare instrument, or bylaws adopted pursuant to a timeshare
instrument, the managing entity shall make a written annual
accounting of the operation of the timeshare properties managed by
the managing entity to each purchaser who requests an accounting
not later than five months [the 60th day] after the last day of each
fiscal year [the managing entity shall make available to each owner
a written annual accounting of the operation of the timeshare
property or timeshare system]. The statement shall fairly and
accurately represent the collection and expenditure of assessments
and include:
(1) a balance sheet;
(2) an income and expense statement [which complies
with generally accepted accounting principles and reflects the
collection and expenditure of timeshare fees];
(3) the current [operating] budget for the timeshare
property, timeshare properties managed by the same managing entity,
or multisite timeshare plan [system] required by Section
221.032(b)(12) [221.032(b)(6)]; and
(4) [an accounting identifying any unfunded reserves
for capital improvements and maintenance and upkeep of the
timeshare property; and
[(5) the name and address of each member of the board
of directors of the council of purchasers or the owners'
association, if one exists, and] the name, address, and telephone
number of a designated representative of the managing entity.
(b) On the request of an owner, the [The] managing entity of
the timeshare plan shall provide the owner with the name and address
of each member of the board of directors of the owners' association,
if one exists [make the fee statement available to owners of record
of a timeshare interest as of the last day of the fiscal year as
reflected in the managing entity's records].
(c) A developer or managing entity shall have an annual
independent audit of the financial statements of the timeshare plan
or timeshare properties managed by the managing entity performed by
a certified public accountant or an accounting firm. The audit must
be:
(1) conducted in accordance with generally accepted
auditing standards as prescribed by the American Institute of
Certified Public Accountants, the Governmental Accounting
Standards Board, the United States General Accounting Office, or
other professionally recognized entities that prescribe auditing
standards; and
(2) completed not later than five months after the
last day of the fiscal year of the timeshare plan or timeshare
property. [The statement shall be delivered in person or by mail to
each person on the board of directors of the council of purchasers
or the owners' association, if one exists.]
(d) Knowingly furnishing false information in the annual
timeshare fee and expense statement is a violation of the Deceptive
Trade Practices-Consumer Protection Act (Section 17.41 et seq.,
Business & Commerce Code).
(e) The managing entity of any accommodation located in this
state shall post prominently in the registration area of the
accommodations [each timeshare property] the following notice,
with the date of the last day of the current fiscal year and the
address of the managing entity inserted where indicated:
"AS A TIMESHARE OWNER YOU HAVE A RIGHT TO REQUEST A WRITTEN
ANNUAL TIMESHARE FEE AND EXPENSE STATEMENT. THIS STATEMENT IS
PREPARED ANNUALLY BY THE MANAGING ENTITY AND WILL BE AVAILABLE NO
LATER THAN FIVE MONTHS [THE 90TH DAY] FOLLOWING (INSERT THE DATE OF
THE LAST DAY OF THE CURRENT FISCAL YEAR). YOU MAY REQUEST THE
STATEMENT, BY WRITING TO (INSERT ADDRESS OF THE MANAGING ENTITY)."
[(e) If a request for the statement is received by the
managing entity prior to the date by which the statement is
available, the statement shall be provided no later than one week
after the date the statement becomes available. If a request for
the statement is received by the managing entity after the date the
statement becomes available, the statement shall be provided no
later than two weeks after the date the request is received by the
managing entity. For the purposes of this section, the statement
shall be deemed provided if it is deposited in the mail, properly
addressed, with postage prepaid.
[(f) A managing entity shall provide a separate annual
timeshare fee and expense statement for each timeshare property
unless the property is part of a timeshare system. A managing
entity may provide a consolidated statement for all timeshare
properties comprising a timeshare system.]
SECTION 15. Sections 221.075(a) and (d), Property Code, are
amended to read as follows:
(a) On receipt of a written request filed with the
commission by a managing entity before the date on which the
statement required by Section 221.074 must be made available, the
commission for good cause shown may grant the managing entity an
extension of no more than 30 days in which to provide the statement.
(d) A managing entity may not assess against or collect from
the purchasers [owners] of a timeshare property the amount of a
penalty incurred under this section.
SECTION 16. Sections 221.076 and 221.077, Property Code,
are amended to read as follows:
Sec. 221.076. MANAGING ENTITIES THAT MANAGE MORE THAN ONE
TIMESHARE [SYSTEM OR] PROPERTY. (a) A managing entity that manages
two or more single-site timeshare plans [properties which are not
participants of the same timeshare system] may [not] commingle the
assessments [timeshare fees] collected from purchasers [owners] of
one timeshare plan [property] with the assessments [timeshare fees]
collected from purchasers [owners] of any other single-site plan
for which it is the managing entity only if the practice is
disclosed in the timeshare disclosure statement for each timeshare
property and the appropriate statement is included in the
declaration for each timeshare property as required by Subchapter
B.
(b) [A managing entity that manages two or more timeshare
systems may not commingle the timeshare fees collected from owners
participating in one timeshare system with the timeshare fees
collected from owners participating in any other timeshare system.
[(c)] A managing entity which manages a multisite timeshare
plan [system] may deposit assessments [timeshare fees] collected
from purchasers [owners] of one timeshare property into a common
account with assessments [timeshare fees] collected from
purchasers [owners] of other timeshare properties participating in
the same multisite timeshare plan [system] only if the practice is
disclosed in the timeshare disclosure statement for each timeshare
property in the multisite timeshare plan [system] and the
appropriate statement is included in the declaration for each
timeshare plan [regime] as required by Subchapter B.
(c) Nothing in this section shall be construed to allow a
managing entity to commingle assessments [the timeshare fees] of a
multisite timeshare plan with the assessments of a separate
multisite timeshare plan or a timeshare plan that is not a part of
the multisite timeshare plan[:
[(1) separate timeshare systems;
[(2) separate timeshare properties which are not part
of a timeshare system; or
[(3) a timeshare system with the timeshare fees of a
separate timeshare property which is not a participant in the
timeshare system].
Sec. 221.077. AVAILABILITY OF BOOKS AND RECORDS; RECORDS
RETENTION. (a) A developer or managing entity, on written request
of an owner, shall make available for examination at its registered
office or principal place of business and at any reasonable time or
times the relevant books and records relating to the collection and
expenditure of assessments [timeshare fees].
(b) A developer or managing entity shall maintain in its
records a copy of each purchase contract for an accommodation sold
by the developer for a timeshare period unless the contract has been
canceled. If a sale of the timeshare estate is pending, the
developer shall retain a copy of the contract until a deed of
conveyance, agreement for deed, or lease is recorded in the real
property records of the county in which the timeshare property is
located.
SECTION 17. This Act applies to timeshare plans created on
or after January 15, 2006, and to any developer who offers or
disposes of an interest in a timeshare plan and a managing entity
that manages a timeshare property under Chapter 221, Property Code,
as amended by this Act, on or after that date.
SECTION 18. If a timeshare plan is registered with the Texas
Real Estate Commission before January 15, 2006:
(1) the registration expires 24 months after the last
anniversary of the date the timeshare plan was registered;
(2) a developer may renew the registration as provided
by Section 221.023, Property Code, as amended by this Act; and
(3) the developer may continue to use the timeshare
disclosure statement for the timeshare plan as approved by the
Texas Real Estate Commission prior to January 15, 2006, so long as
the registration is amended from time to time to disclose any
materially adverse changes as required by Section 221.023, Property
Code, as amended by this Act.
SECTION 19. This Act takes effect January 15, 2006.
______________________________ ______________________________
President of the Senate Speaker of the House
I certify that H.B. No. 1045 was passed by the House on April
7, 2005, by a non-record vote; and that the House concurred in
Senate amendments to H.B. No. 1045 on May 23, 2005, by the following
vote: Yeas 141, Nays 0, 1 present, not voting.
______________________________
Chief Clerk of the House
I certify that H.B. No. 1045 was passed by the Senate, with
amendments, on May 19, 2005, by the following vote: Yeas 31, Nays
0.
______________________________
Secretary of the Senate
APPROVED: __________________
Date
__________________
Governor