Lawsuit leaves timeshare owners big losers

Lawsuit leaves timeshare owners big losers

Judge's gavelA recent court case has ended with a disappointing ruling for timeshare owners. Not only do they lose their ownership rights (which was what they were fighting for), but they also need to pay the other side's legal fees in the case.

It's a nightmare no timeshare owner wants to face. The timeshare you purchased evaporates, leaving you with nothing to show for it, and there's nothing you can do. Here's what happened...

Pool and beach view at the Caravanserai With a beach and a view like that, what's not to love?

Trouble in paradise

It's not hard to see why somebody would want a timeshare on the beach in St. Maarten. You're on vacation in a tropical island paradise, relaxing on the beach with an umbrella drink in hand. The resort has everything you want, and you can easily envision returning here, year after year...

Unfortunately for owners at the Caravanserai Beach Resort, things didn't work out so well. The resort got into financial trouble. Owners had difficulty getting the RCI points they were supposed to get. Promises were made and broken, and owners were increasingly frustrated, but still had hope that things would turn out.

Scotiabank held the mortgage on the resort, and eventually foreclosed on it. The bank was left owning the resort, and continuing to run the operations. As time went by, conditions deteriorated. The elevators were broken for months, the hot water was unreliable, and the AC was sometimes out of service.

...Timeshare owners waited to see what would happen next...

New owners nullify timeshares

In August 2014, Scotiabank sold the Caravanserai Beach Resort to Alegria at a public auction. Alegria paid $14 million US for the property.

After Alegria purchased the property, they said that Endless Vacation NV (the timeshare company) was no longer involved in the hotel and timeshare operations. They further stated that Alegria would not be bound by any of the timeshare agreements that Endless Vacation made.

On Sept 30, Alegria sent about 2,200 timeshare owners at the resort a letter, saying their ownership rights were nullified.

Alegria denied any responsibility for this loss of ownership, but said they sympathised with the owners. They offered disenfranchised owners "a hotel room usage agreement, which would allow usage of a hotel room and facilities at the resort against an annual fee to cover part of the operational cost of the resort."

The owners were given a deadline of Nov. 1 - just one month to research their situation and decide how to respond.

Happy hour at the swim up bar Happy hour isn't so happy anymore for Caravanserai owners

On the surface, the Alegria offer sounds a lot like a timeshare, so what's the difference between this and what the owners had before?

  • They don't own a timeshare anymore, and have no ability to sell it. Their purchase price is lost.
  • They lost their exchange privileges, which are an important part of timeshare ownership.
  • They were offered use of a hotel room, rather than whatever type of unit they used to own.
  • If you paid $20,000 for a 3-bedroom timeshare, thinking you could use it, exchange it, or sell it if you wanted, this wouldn't seem like a very attractive offer.

One unhappy owner commented

...in November we received an e-mail from new owner Sidholm/Alegria telling us our timeshare rights were null and void. He plans to "tear down" the existing facilities and build a luxury hotel - oh, and too bad for the 2200 timeshare owners.

Lawsuit and results

The owners quickly created a group called TOCA (Timeshare Owners at Caravanserai Beach Resort). TOCA's position was that this offer was unacceptable, and that it was an unjust breach of contract to simply annul their timeshare agreements in this way.

This group hastily filed an injunction just days before the deadline, to try to protect their rights. They demanded that Alegria revoke the letter, and honor the owners' rights.

In a hearing the day before the deadline, a judge gave the parties another month to come to an agreement. When that didn't happen, he issued his ruling.

Judge's gavel And the verdict was...

The court sided with the new owner, Alegria, because the timeshare owners' agreements were not with Alegria, or with the former property owner, but with Endless Vacations NV. The judge said that Alegria was not bound by any agreements that Endless Vacation made, and was entitled to nullify the people's ownership rights like they did. Read about the ruling...

Not only did the owners lose their timeshares, but adding insult to injury, TOCA has to pay Alegria's legal fees.

Final thoughts

  • Deeded should be safer. I'm no lawyer, but it seems to me that if your timeshare gives you deeded ownership, you should be safer from a situation like this. If you actually own some deeded real estate, then it shouldn't be so simple for some company to simply decide you no longer own it.
    .

    On the other hand, if your timeshare is non-deeded, then really it's just a contractual arrangement that gives you the rights to use that timeshare, and optionally exchange it. If the other party to the contract goes under, then you could be left with nothing, like these unfortunate owners.

  • Owners upset with St. Maarten. Angry owners (many of whom lost tens of thousands of dollars) say that the island of St. Maarten didn't adequately protect their interests. One person said
  • Manek profited. Caravanserai profited. Endless Vacation profited. Scotiabank profited. Alegria profited. The island of St. Maarten profited by repeat visitors and spending. The only losers were the tourists. Just a horrible blight on the island. How can anyone ever feel the same about it?

  • Could this happen here? I would be irate if I was caught in a similar situation, but I'm not sure how it would be different if this happened in the US instead of St. Maarten. What would the legal situation be here? Are there any lawyers out there? I'd love some informed insight into this.
  • Still renting. Meanwhile, Endless Vacation Rentals still has this resort listed on their site. Here's how they describe it.

    Set on Burgeaux Bay Beach, the resort offers an irresistible blend of elegance, excitement, and natural island beauty. Wind surf and scuba dive at the beach, or relax and sun by the swimming pool. The on-site restaurant offers a selection of flavorful cuisine, and live entertainment lights up the night.

    This is at Endless Vacation Rentals, a part of RCI. Are they renting units there, even though the owners have been denied use of the units they paid for? Or is this still there due to an oversight?.

    * I'm not aware of a connection between Endless Vacation NV (the timeshare company whose owners were left with nothing), and Endless Vacation Rentals (part of RCI), though the names are remarkably close.

  • This may not be over. A post on the group's Facebook page says

    The Caravanserai court battles have just begun. This is FAR from over. Let's not make any decisions based upon the first round of the first fight in a long series of battles. NOT over by a long shot.

    I wish them all the best in their battle.

Comments? Questions?

Do you know anything more about this case? I'd love to hear from anybody who's familiar with the case. It's such a tough situation, and my heart goes out to all the owners affected. If you have any additions, comments or updates, please leave them in the Reply section below.Consumer Awareness Guide to Timeshares

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Timeshares can be great, but obviously they can have serious pitfalls too. What happened here is a worst-case situation, which illustrates the principle that the more you put into a timeshare, the more you could lose. If you're considering buying a timeshare, buying a bargain can help you minimize your risk. Check out our free Consumer Awareness Guide to Timeshares before you go any further.
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Hi! I'm Deanna, founder of Winning the Timeshare Game, and author of the books. After running an international tour company, I'm now into the fascinating world of timeshares. I enjoy sharing all the tips I discover, and I'd love to see everyone have as much fun with their timeshares as we do!

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3 Comments

  1. Been a Broker in and around the business for 30 yrs loved it till I found this site a while back works better no ownership fees or fee to cancel no maintenance and if i dont go i dont pay

  2. Gary Buonano

    I was sent an email to be part of TOCA, but would have to wire $1500 with-in a couple of days, which is To help cover the legal fees. I believe they only had 62 members. Not sure if that is what they paid to get TOCA started.

    • Hi Gary -
      Thanks for your comment! I'm so sorry to hear about your situation. Of course, fighting something like this does cost $$ for legal fees, so I can understand why they want owners to chip in on that. On the other hand, be absolutely, positively 100% sure who your money is going to, and how it will be spent, before you send anything. I'd hate to see you lose any more if some scammer was trying to take advantage of the situation.

      I do hope that there is some better solution for the owners there. It seems really unfair the way things worked. I'd love to hear any updates if you feel like sharing what happens.

      Thanks, and best of luck with it! - Deanna.
      Deanna Keahey recently posted...Florida bill aims to weaken timeshare protections

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