In a timeshare, multiple owners have a right to use a certain property, such as a condominium or a houseboat, for a certain period each year. Sometimes each timeshare owner will have a deeded interest, which means that they have a share of the ownership in the property. In other situations, each owner will have a right-to-use interest, which does not provide any ownership rights and resembles a lease. If you take out a mortgage to purchase your interest in a timeshare, you will need to keep up with your mortgage payments to the same extent that you would with your primary residence. Otherwise, you can face foreclosure (if you have a deeded interest) or repossession (if you have a right-to-use interest) by the lender.
A foreclosure also may occur if an owner fails to keep up with fees and assessments. Similar to people who live in common interest developments governed by HOAs, timeshare owners must pay periodic maintenance fees to the timeshare association for maintenance, security, landscaping, and other routine costs. You will need to pay these fees even if you do not use the timeshare during your allocated time. Special assessments go beyond the regular fees to cover major one-time costs. You must pay assessments even if they do not directly benefit you. Finally, you may need to keep up with utility bills and property taxes during the time that you use the timeshare.
Liens and Foreclosures Based on Timeshare Fees and Assessments
A Declaration of Covenants, Conditions, and Restrictions will provide the governing rules of the timeshare. A provision in this document can allow the timeshare association to impose a lien on an owner’s interest if they fail to keep up with the required fees and assessments. The lien will include the missed payments in addition to interest, penalties, and any applicable fines and attorney fees. It is independent from any mortgage or other lien on the timeshare, so you may still face a foreclosure by the timeshare association if you keep up with your mortgage payments or purchased the timeshare without a loan.
The timeshare association can record the lien with the county records office, but usually the lien takes effect automatically without being recorded. The Declaration probably will provide the process for pursuing a foreclosure based on the lien. State laws also might impose certain requirements to protect the due process rights of the timeshare owner. For example, the state might allow the timeshare owner a certain period of time, such as a year, to get caught up on the missed payments. Or it might not allow the timeshare association to start the foreclosure process until a certain amount of debt accumulates.
Assuming that the Declaration and state law permit, the timeshare association can use either a judicial or a non-judicial foreclosure process. A judicial foreclosure involves going to court with a formal lawsuit and getting a judgment that allows the timeshare association to sell the owner’s interest in the timeshare. If the association chooses to pursue a non-judicial foreclosure, it will need to comply with technical requirements under state law, but it will not need to go to court.