California Timeshare Foreclosure and Right to Cancel Laws

If you buy a timeshare and regret it, most states have a "cooling-off" law. These laws let you get cancel a timeshare contract if you act quickly, usually within three to ten days. In California, the deadline to cancel a timeshare contract is usually seven calendar days after you get the public report (see below) or sign the purchase contract, whichever is later.

But you still need to be cautious when buying a timeshare. And you should understand that if you take out a mortgage loan to buy a deeded timeshare and stop making the payments, the lender, usually the resort developer, will probably foreclose.

Also, timeshare owners typically must pay annual maintenance fees and special assessments. If, as an owner, you don't pay the fees and assessments, you might face a lawsuit for a money judgment or a foreclosure of your timeshare. (With a right-to-use timeshare, people generally sign a contract and agree to make monthly payments. While a developer may foreclose a deeded timeshare, a right-to-use timeshare is typically repossessed, which is a different legal process than a foreclosure.)

How Long Do I Get to Cancel a Timeshare Contract in California?

Again, in California, you have the right to rescind a timeshare contract within seven calendar days, or a longer period as provided in the agreement, after the latter of:

• the receipt of the public report or
• the execution (signing) of the purchase contract. (Cal. Bus. & Prof. Code § 11238).

The purchase contract must give notice of the cancellation period, along with the name and mailing address to which any notice of cancellation must be delivered. Notice of cancellation is considered timely if given not later than midnight of the seventh calendar day. (Cal. Bus. & Prof. Code § 11238).

What Is a "Public Report" in a California Timeshare Transaction?

Before marketing or selling timeshare interests in a timeshare plan in California, a developer must obtain a public report that the California Bureau of Real Estate issues, which discloses many important aspects of the timeshare property, like:

• the covenants, conditions, and restrictions that govern the use of property
• the costs and assessments for maintaining homeowners' associations and common areas, and
• other material disclosures.

The public report must be given to each prospective purchaser. (Cal. Bus. & Prof. Code §§ 11238, 11239).

Information about how to cancel the purchase and receive a refund must be attached to the face page of the public report. (Cal. Bus. & Prof. Code §§ 11238, 11239).

How Do I Cancel a Timeshare Contract in California?

To exercise your right of cancellation, you must give a written notice to cancel to the developer at their place of business, which must be included in the purchase contract. (Cal. Bus. & Prof. Code § 11238).

Canceling by mail. If you send your notice of cancellation by U.S. mail, a rebuttable presumption exists that notice was given on the date it's postmarked. (Cal. Bus. & Prof. Code § 11238). (A "rebuttable presumption means that a court will assume something is true unless someone proves otherwise.) So, you should send your cancellation notice by some method that shows when you sent it, like certified mail, return receipt requested.

Canceling by another method. If you give notice by means of a writing sent other than by U.S. mail, like by hand-delivery, the notice is considered as given at the time of delivery at the place of business that the developer designates. (Cal. Bus. & Prof. Code § 11238). If a question later arises about when you gave your cancellation notice, you'll need to be able to prove when and how you delivered it.

How Do Timeshare Foreclosures Work in California?

In California, if you take out a loan to purchase an interest in a deeded timeshare and fail to make your mortgage payments, the lender (again, typically, the developer) might foreclose. In addition to monthly mortgage payments, timeshare owners are ordinarily responsible for maintenance fees, special assessments, utilities, and taxes, collectively referred to as "assessments." You might also face a foreclosure in California if you fall behind in the timeshare assessments.

The foreclosure can be either judicial or nonjudicial. Judicial foreclosures are administered through the state court system, while nonjudicial foreclosures have no court supervision and are handled by a trustee.

Can the Lender Get a Deficiency Judgment for a Timeshare Foreclosure in California?

In a foreclosure, the total debt that the borrower owes sometimes exceeds the price that the property brings in at a foreclosure sale. The difference between the total debt and the sale price is called a "deficiency." For example, say the total mortgage debt owed on a deeded timeshare is $15,000, but it sells for $10,000 at a foreclosure sale. The deficiency is $5,000.

State law governs deficiency judgments after timeshare foreclosures. In some states, the lender may get a deficiency judgment (a personal judgment) against the borrower for the deficiency amount. Whether you'll face a deficiency judgment after a timeshare foreclosure depends on state law.

Deficiency judgments aren't allowed after timeshare foreclosures in California. According to the California Department of Real Estate (DRE) Time-Share Manual, California's anti-deficiency judgment provisions of the state's Code of Civil Procedure (specifically, Cal. Code Civ. Proc. § 580b) apply to sales of timeshare interests. (See page 27.) The DRE further states, "Each such contract or financing instrument should contain a statement where the subdivider declares he will not seek a deficiency judgment in the event of a default by a purchaser."

So, you won't face a deficiency judgment after the foreclosure of a California timeshare.

How Can I Avoid a Timeshare Foreclosure in California?

A few of the various options to avoid a timeshare foreclosure include:

• paying what you owe in full
• negotiating with the developer to reduce the amount you owe
• selling the timeshare
• donating the timeshare to a charity (not all charities will take a timeshare, but some might, and you'll have to get current on payments first)
• arranging a repayment plan, or
• working out a deal to give the timeshare back to the resort (called a "deed in lieu of foreclosure" or "deedback").

Be aware that you might have trouble selling or donating the timeshare or completing a deedback. These options are usually difficult to complete or are at the discretion of the developer. You might have better luck working out a settlement. Talk to an attorney to learn more or get assistance in working out a resolution to avoid a timeshare foreclosure.

Learn More About California Timeshares

To learn more about California's timeshare laws, visit the California Department of Real Estate website.

You can report timeshare sales and timeshare resale scams to the FTC, the California Attorney General's office, and the Better Business Bureau.

Talk to a Lawyer

If you want more information about timeshare laws in your state or need assistance canceling a timeshare, consider talking to a real estate attorney. Contact a foreclosure attorney if you're facing a timeshare foreclosure and have questions about the process or your options.