The Vacation Ownership and Time-share Act of 2004 requires all records of a time-share plan maintained by a time-share association to be made available for inspection and copying by any member for a purpose reasonably related to membership in the association. Existing law requires the time-share association to maintain among its records a complete list of the names and addresses of all owners of time-share interests in the time-share plan, as specified. Existing law prohibits an association from publishing the owners list or providing a copy of it to any time-share interest owner or to any 3rd party or using or selling the list for commercial purposes, except as provided in the time-share instruments.

This bill would require the owner addresses in the list to be mailing addresses, and would prohibit the association from publishing the list of owners or providing a copy of it to any time-share interest owner or to any 3rd party or using or selling the list for commercial purposes, except to accomplish legitimate association business, as defined. purposes. The bill would require the association to provide a copy of the list to an owner for a purpose reasonably related to membership in the association, except as specified. The bill would require the association board or managing entity to mail to those persons listed on the owners list a communication requested in writing by an owner, if the mailing would address legitimate association business. require, if a time-share interest owner makes a request to communicate by mail with the membership of the association for a purpose reasonably related to membership in the association, the communication to be made within 30 days of receipt of the request and payment of actual costs in performing the mailing. The bill would require, if the purpose is not reasonably related, the board of administration of the association or the managing entity to notify the requesting owner of the rejection. The bill would authorize a court to summarily order the distribution of the requested communication if it is not distributed within 30 days after receipt of a request from an owner and payment of actual costs. The bill would also specify that certain provisions of the Nonprofit Mutual Benefit Corporation Law pertaining to the list of names, addresses, and voting rights of members of a nonprofit mutual benefit corporation do not apply to time-share associations under the Vacation Ownership and Time-share Act of 2004.

The Vacation Ownership and Time-share Act of 2004 requires all records of a time-share plan maintained by a time-share association to be made available for inspection and copying by any member for a purpose reasonably related to membership in the association. Existing law requires the time-share association to maintain among its records a complete list of the names and addresses of all owners of time-share interests in the time-share plan, as specified. Existing law prohibits an association from publishing the owners list or providing a copy of it to any time-share interest owner or to any 3rd party or using or selling the list for commercial purposes, except as provided in the time-share instruments.

This bill would require the owner addresses in the list to be mailing addresses, and would prohibit the association from publishing the list of owners or providing a copy of it to any time-share interest owner or to any 3rd party or using or selling the list for commercial purposes. purposes, except to accomplish legitimate association business, as defined. The bill would provide methods for time-share interest owners to communicate with the entire membership of the association through a written request to the association, if the association determines that the communication would advance legitimate association business, as specified. require the association board or managing entity to mail to those persons listed on the owners list a communication requested in writing by an owner, if the mailing would address legitimate association business. The bill would also specify that certain provisions of the Nonprofit Mutual Benefit Corporation Law pertaining to the list of names, addresses, and voting rights of members of a nonprofit mutual benefit corporation do not apply to time-share associations under the Vacation Ownership and Time-share Act of 2004.

The Vacation Ownership and Time-share Act of 2004 requires all records of a time-share plan maintained by a time-share association to be made available for inspection and copying by any member for a purpose reasonably related to membership in the association. Existing law requires the time-share association to maintain among its records a complete list of the names and addresses of all owners of time-share interests in the time-share plan, as specified. Existing law prohibits an association from publishing the owners list or providing a copy of it to any time-share interest owner or to any 3rd party or using or selling the list for commercial purposes, except as provided in the time-share instruments.

This bill would require the owner addresses in the list to be mailing addresses, and would prohibit the association from publishing the list of owners or providing a copy of it to any time-share interest owner or to any 3rd party or using or selling the list for commercial purposes. The bill would provide methods for time-share interest owners to communicate with the entire membership of the association through a written request to the association, if the association determines that the communication would advance legitimate association business, as specified. The bill would also specify that certain provisions of the Nonprofit Mutual Benefit Corporation Law pertaining to the list of names, addresses, and voting rights of members of a nonprofit mutual benefit corporation do not apply to time-share associations under the Vacation Ownership and Time-share Act of 2004.

 THIRD READING  

Bill No: AB 634

Author:

:

Vote:

SENATE JUDICIARY COMMITTEE: 7-0, 6/28/16

AYES: Jackson, Moorlach, Anderson, Hertzberg, Leno, Monning, Wieckowski

ASSEMBLY FLOOR: 79-0, 5/11/15 - See last page for vote

SUBJECT:

SOURCE: American Resort Development Association

DIGEST: This bill amends the Vacation Ownership and Time-Share Act of 2004 (VOTA) to prohibit a time-share owner’s association from publishing its list of owners or providing a copy of that list to any time-share interest owner or to any third party, or from using or selling the list for commercial purposes. This bill requires the association to provide a copy of the list to an owner for a purpose reasonably related to membership in the association, as specified, and enacts procedures to govern the processing of requests to receive copies of the list.

ANALYSIS:

Existing law:

1. States, subject to specified restrictions, that a member of a nonprofit mutual benefit corporation may do either of the following:

• inspect and copy the record of all the members’ names, addresses and voting rights, at reasonable times, upon five business days’ prior written demand upon the corporation which demand shall state the purpose for which the inspection rights are requested; or
• obtain from the secretary of the corporation, upon written demand stating the purpose for which the list is requested and tender of a reasonable charge, a list of the names, addresses and voting rights of those members entitled to vote for the election of directors, as of the most recent record date for which it has been compiled or as of a date specified by the member subsequent to the date of demand. (Corp. Code Sec. 8330(a).)

1. Specifies that the rights set forth in the above provision may be exercised by any member, for a purpose reasonably related to such person’s interest as a member. Existing law specifies that where the corporation reasonably believes that the information will be used for another purpose, it may deny the member access to the list. (Corp. Code Sec. 8330(b).)
2. Permits the corporation to deliver to the person or persons making the demand a written offer of an alternative method of achieving the purpose identified in said demand without providing access to or a copy of the membership list, provided the alternative method reasonably and in a timely manner accomplishes the proper purpose set forth in the demand. (Corp. Code Sec. 8330(c).)
3. Regulates, under VOTA, the creation and sale of time-share interests in a time-share plan, and the creation and operation of exchange programs that facilitate the voluntary exchange of time-share interests. (Bus. & Prof. Code Sec. 11210 et seq.)
4. States that the books of account, minutes of members and governing body meetings, and all other records of the time-share plan maintained by the association or the managing entity shall be made available for inspection and copying by any member, or by his or her duly appointed representative, at any reasonable time for a purpose reasonably related to membership in the association. (Bus. & Prof. Code Sec. 11273(a).)
5. Specifies that the records shall be made available for inspection at the office where the records are maintained. Upon receipt of an authenticated written request from a member along with the fee prescribed by the governing body to defray the costs of reproduction, existing law directs the managing entity or other custodian of records of the association or the time-share plan to prepare and transmit to the member a copy of any and all records requested. (Bus. & Prof. Code Sec. 11273(b).)
6. Provides that every governing body member shall have the absolute right at any time to inspect all books, records, and documents of the association and all real and personal properties owned and controlled by the association. (Bus. & Prof. Code Sec. 11273(d).)
7. Requires the association to maintain among its records a complete list of the names and addresses of all owners of time-share interests in a time-share plan. Existing law provides that the association shall update this list no less frequently than every six months, and that unless otherwise provided in the time-share instruments, the association may not publish this owner’s list or provide a copy of it to any time-share interest owner or to any third party or use or sell the list for commercial purposes. (Bus. & Prof. Code Sec. 11273(e).)

This bill:

1. Provides that the association shall not publish the list of names and mailing addresses of owners of time-share interests in the time-share plan or provide a copy of it to any third party, or use or sell the list for commercial purposes.
2. States that the association shall provide a copy of the list to a member for a purpose reasonably related to membership in the association, unless the association reasonably believes that the recipient of the list will use the list for another purpose or provide a copy or disclose the contents to another party.
3. States that if an owner of a time-share interest in the time-share plan makes a request to the association to communicate by mail with the membership of the association for a purpose reasonably related to membership in the association, and the board of administration of the association or the managing entity determines that the mailing pertains to a purpose reasonably related to membership in the association, the requested mailing shall be made within 30 days after receipt of a request and payment by the owner of actual costs. If the board or managing entity determines that the requested mailing does not pertain to a purpose reasonably related to membership in the association, the board or the managing entity shall, within 30 days after receipt of the request, notify the requesting owner in writing and shall indicate the reasons for the rejection.
4. Requires the association to make a good faith effort to minimize the costs of the mailing, including the use of a less expensive delivery method, including electronic delivery.
5. States that if the board of administration or managing entity does not distribute the requested communication within 30 days after receipt of a request from an owner and payment of actual costs, the superior court in the county where the time-share plan is located may, upon application from the requesting owner, summarily order the distribution of the requested communication.
6. Specifies that Section 8330 of the Corporations Code shall not apply to time-share associations.
7. Makes related findings and declarations.

Background

Time-shares, or vacation ownerships, are terms that generally describe a system where owners occupy a property for short periods of time each year while on vacation. This contrasts with more traditional common interest developments, like condominiums and residential subdivisions, which are usually occupied year-round. The regulation of timeshares began in earnest in 1981 when the industry was widely perceived as being prone to high-pressure sales tactics and rampant consumer fraud (an era now half-jokingly referred to as the “crime-share” days). Stringent state regulations for time-shares were built into the Subdivided Lands Law that regulated common interest developments. Although time-share regulations and references are now found throughout state law, they are principally located in VOTA. (Bus. & Prof. Code Sec. 11210 et seq.)

Under current law, both VOTA and related provisions in the Corporations Code governing nonprofit mutual benefit corporations grant members of time-share plans the right to inspect the plan’s business records, including membership lists, contact information, and allocations of voting rights, for specified purposes. Recently, the Court of Appeal for the Third Appellate District reviewed this grant of access to time-share plan records in WorldMark, The Club v. Wyndham Resort Development Corp. (Cal. App. 3d Dist. 2010) 187 Cal.App.4th 1017. In that case, the owner of an interest in a vacation time-share requested access to time-share resort owner WorldMark’s membership records, including the e-mail addresses of its members, so the owner could circulate a petition proposing amendments to the corporation’s bylaws. The petition at issue “expressed a concern over the domination of WorldMark’s board of directors by current or former Wyndham executives, the failure to conduct meetings at which member motions could be raised and voted upon, the absence of any independent owners on the board, and the lack of meaningful member representation in the governance of WorldMark.” (Id. at 1023.) According to the court, the proposed amendments, if adopted would have revised WorldMark’s bylaws to address these concerns. (Id.) WorldMark denied the owner’s request, and instead offered to mail copies of the petition at the owner’s expense to all other owners at a cost in excess of $260,000. WorldMark’s correspondence to the owner denying his request cited “privacy concerns,” the membership record’s “tremendous commercial value,” as well as WorldMark’s “serious concerns about the detrimental effect the petition measures would have on the Club if implemented.” (Id. at 1025.) Rejecting WorldMark’s contention that existing law did not require it to produce the e-mail addresses of its members, the court held that Section 8330 of the Corporations Code required the disclosure to allow the owner of a time-share interest to communicate with other members about the corporation’s business.

This bill, sponsored by the American Resort Development Association, amends VOTA to, among other things, prohibit a time-share owner’s association from providing a copy of its list of owners to any time-share interest owner except for a purpose reasonably related to membership in the association, as specified, and would enact procedures to govern the processing of requests to receive copies of the list. This bill also expressly states that Section 8330 of the Corporations Code shall not apply to time-share associations governed under VOTA.

Comments

The author states:

Section 11273(e) of the Business and Professions Code, which is part of the time-share law, was written to protect the privacy of the names and addresses of the owners of time-share interests within time-share plans, such that the owner’s association of a time-share plan could not be required to publish or provide a copy of the list of owners to any time-share interest owner or third party or use or sell the list for commercial purposes.

In 2010, the Court of Appeals of the State of California, Third Appellate District, held that California Corporations Code Section 8330 – not the time-share law -- applies to those time-share associations that are organized as non-profit corporations. Since many of the time-share associations are organized as non-profit corporations, the court decision meant that those time-share owners lost the privacy rights that had been accorded them under the time-share law. Section 8330 . . . grants members of a nonprofit mutual benefit corporation the right to inspect and copy, or obtain for a reasonable charge, the record of names, addresses, and voting rights of the members of the corporation upon 10 days written notice, provided it is for a purpose [reasonably] related to the person’s interest as a member.

As a result of the ruling any time-share owner (belonging to an association organized as a nonprofit mutual benefit corporation) can easily get their association’s lists and sell those lists to any third party. The fact is, time-share associations frequently have a membership list that can easily be in excess of ten thousand members. Such a list on the open market would easily be of substantial value, particularly to unscrupulous parties who prey upon time-share owners. Specifically, these lists end up in the hands of companies that claim they can sell time-share units. Typically they demand an up-front fee and then usually fail to sell the time-share. In addition, dissemination of such a list can expose personally identifiable information of owners to third parties, which information might not otherwise be publically available (keeping in mind that a timeshare is not an owner’s primary residence, and the information provided in many cases is not public information).

Related/Prior Legislation

AB 905 (Gaines, Chapter 88, Statutes of 2015) amended the Vacation Ownership and Time-share Act of 2004 to provide that required copies of public reports pertaining to time-share interests and required copies of disclosures pertaining to exchange programs may be provided in a digital format at the discretion of the purchaser. This bill also exempted licensed real estate brokers or salespersons from the duty to conduct a reasonably competent and diligent visual inspection of a time-share property and to disclose all facts materially affecting the value or desirability of the property to a prospective purchaser when, as a condition of transfer, the prospective purchaser would receive a copy of the public report, provided the property has not been previously occupied.

AB 126 (Hall, 2013) would have required a time-share association to obtain a time-share plan member’s consent before sharing their contact information with another owner, and would have provided an alternate method for owners to communicate with other members in the time-share plan. This bill died in the Assembly Judiciary Committee.

AB 2290 (Hill, 2012) would have prohibited a time-share association from publishing a list of owners or providing a copy of the list to time-share interest owners. This bill would have established a protocol for an owner of a time-share interest to communicate with the membership of a time-share association about legitimate association business without providing access to, or a copy of, the association membership list to the requesting owner. This bill died in the Assembly Judiciary Committee.

AB 2518 (Hall, 2012) was gutted and amended to be substantially similar to AB 2290. This bill died in the Senate Rules Committee.

AB 2252 (Montanez, Chapter 697, Statutes of 2004) consolidated and revised the body of time-share vacation property law, streamlined the regulatory approval process of time-share plans, and added new consumer protections and disclosures to create the Vacation Ownership and Time-share Act of 2004.

FISCAL EFFECT: Appropriation: Fiscal Com.: Local:

SUPPORT: (Verified 8/2/16)

American Resort Development Association (source)

American Resort Development Association -- Resort Owner’s Coalition

OPPOSITION: (Verified 8/2/16)

Two Individuals

ASSEMBLY FLOOR: 79-0, 5/11/15

AYES: Achadjian, Alejo, Travis Allen, Baker, Bigelow, Bloom, Bonilla, Bonta, Brough, Brown, Burke, Calderon, Campos, Chang, Chau, Chávez, Chiu, Chu, Cooley, Cooper, Dababneh, Dahle, Daly, Dodd, Eggman, Frazier, Beth Gaines, Gallagher, Cristina Garcia, Eduardo Garcia, Gatto, Gipson, Gomez, Gonzalez, Gordon, Gray, Grove, Hadley, Harper, Roger Hernández, Holden, Irwin, Jones, Jones-Sawyer, Kim, Lackey, Levine, Linder, Lopez, Low, Maienschein, Mathis, Mayes, McCarty, Medina, Melendez, Mullin, Nazarian, Obernolte, O'Donnell, Olsen, Patterson, Perea, Quirk, Rendon, Ridley-Thomas, Rodriguez, Salas, Santiago, Steinorth, Mark Stone, Thurmond, Ting, Wagner, Waldron, Weber, Wilk, Williams, Wood

NO VOTE RECORDED: Atkins

Prepared by:

8/3/16 18:06:33

**** END ****

SENATE JUDICIARY COMMITTEE

Senator Hannah-Beth Jackson, Chair

2015-2016 Regular Session

Bill No: AB 634 (Author:Calderon)

Version: April 28, 2015

Hearing Date: June 28, 2016

Fiscal: No

Urgency: No

Consultant: TH

SUBJECT

Vacation Ownership and Time-Shares: Owners List

DESCRIPTION

This bill would amend the Vacation Ownership and Time-Share Act of 2004 to prohibit a time-share owner’s association from publishing its list of owners or providing a copy of the list to any time-share interest owner or to any third party, or from using or selling the list for commercial purposes, except to accomplish legitimate association business, as defined.

BACKGROUND

Time-shares, or vacation ownerships, are terms that generally describe a system where owners occupy a property for short periods of time each year while on vacation. This contrasts with more traditional common interest developments, like condominiums and residential subdivisions, which are usually occupied year-round. The regulation of timeshares began in earnest in 1981 when the industry was widely perceived as being prone to high-pressure sales tactics and rampant consumer fraud (an era now half-jokingly referred to as the “crime-share” days). Stringent state regulations for time-shares were built into the Subdivided Lands Law that regulated common interest developments. Although time-share regulations and references are now found throughout state law, they are principally located in the Vacation Ownership and Time-share Act of 2004 (VOTA). (Bus. & Prof. Code Sec. 11210 et seq.)

Under current law, both VOTA and related provisions in the Corporations Code governing nonprofit mutual benefit corporations grant members of time-share plans the right to inspect the plan’s business records, including membership lists, contact information, and allocations of voting rights, for specified purposes. Recently, the Court of Appeal for the Third Appellate District reviewed this grant of access to time-share plan records in WorldMark, The Club v. Wyndham Resort Development Corp. (Cal. App. 3d Dist. 2010) 187 Cal.App.4th 1017. In that case, the owner of an interest in a vacation time-share requested access to time-share resort owner WorldMark’s membership records, including the e-mail addresses of its members, so the owner could circulate a petition proposing amendments to the corporation’s bylaws. The petition at issue “expressed a concern over the domination of WorldMark’s board of directors by current or former Wyndham executives, the failure to conduct meetings at which member motions could be raised and voted upon, the absence of any independent owners on the board, and the lack of meaningful member representation in the governance of WorldMark.” (Id. at 1023.) According to the court, the proposed amendments, if adopted would have revised WorldMark’s bylaws to address these concerns. (Id.) WorldMark denied the owner’s request, and instead offered to mail copies of the petition at the owner’s expense to all other owners at a cost in excess of $260,000. WorldMark’s correspondence to the owner denying his request cited “privacy concerns,” the membership record’s “tremendous commercial value,” as well as WorldMark’s “serious concerns about the detrimental effect the petition measures would have on the Club if implemented.” (Id. at 1025.) Rejecting WorldMark’s contention that existing law did not require it to produce the e-mail addresses of its members, the court held that Section 8330 of the Corporations Code required the disclosure to allow the owner of a time-share interest to communicate with other members about the corporation’s business.

This bill, sponsored by the American Resort Development Association, would amend VOTA to, among other things, prohibit a time-share owner’s association from providing a copy of its list of owners to any time-share interest owner except as required to accomplish legitimate association business. This bill would define “legitimate association business” to include a proxy solicitation for any purpose, including, but not limited to, the recall of one or more of the board members elected by the owners, the discharge of a manager or management entity, or disposition of time-share interests acquired by the association. This bill would also expressly state that Section 8330 of the Corporations Code shall not apply to time-share associations governed under VOTA.

CHANGES TO EXISTING LAW

Existing law states, subject to specified restrictions, that a member of a nonprofit mutual benefit corporation may do either of the following:

• inspect and copy the record of all the members’ names, addresses and voting rights, at reasonable times, upon five business days’ prior written demand upon the corporation which demand shall state the purpose for which the inspection rights are requested; or
• obtain from the secretary of the corporation, upon written demand stating the purpose for which the list is requested and tender of a reasonable charge, a list of the names, addresses and voting rights of those members entitled to vote for the election of directors, as of the most recent record date for which it has been compiled or as of a date specified by the member subsequent to the date of demand. (Corp. Code Sec. 8330(a).)

Existing law specifies that the rights set forth in the above provision may be exercised by any member, for a purpose reasonably related to such person’s interest as a member. Existing law specifies that where the corporation reasonably believes that the information will be used for another purpose, it may deny the member access to the list. (Corp. Code Sec. 8330(b).)

Existing law permits the corporation to deliver to the person or persons making the demand a written offer of an alternative method of achieving the purpose identified in said demand without providing access to or a copy of the membership list, provided the alternative method reasonably and in a timely manner accomplishes the proper purpose set forth in the demand. (Corp. Code Sec. 8330(c).)

Existing law, the Vacation Ownership and Time-share Act of 2004, regulates the creation and sale of time-share interests in a time-share plan, and the creation and operation of exchange programs that facilitate the voluntary exchange of time-share interests. (Bus. & Prof. Code Sec. 11210 et seq.)

Existing law states that the books of account, minutes of members and governing body meetings, and all other records of the time-share plan maintained by the association or the managing entity shall be made available for inspection and copying by any member, or by his or her duly appointed representative, at any reasonable time for a purpose reasonably related to membership in the association. (Bus. & Prof. Code Sec. 11273(a).)

Existing law specifies that the records shall be made available for inspection at the office where the records are maintained. Upon receipt of an authenticated written request from a member along with the fee prescribed by the governing body to defray the costs of reproduction, existing law directs the managing entity or other custodian of records of the association or the time-share plan to prepare and transmit to the member a copy of any and all records requested. (Bus. & Prof. Code Sec. 11273(b).)

Existing law provides that every governing body member shall have the absolute right at any time to inspect all books, records, and documents of the association and all real and personal properties owned and controlled by the association. (Bus. & Prof. Code Sec. 11273(d).)

Existing law requires the association to maintain among its records a complete list of the names and addresses of all owners of time-share interests in a time-share plan. Existing law provides that the association shall update this list no less frequently than every six months, and that unless otherwise provided in the time-share instruments, the association may not publish this owner’s list or provide a copy of it to any time-share interest owner or to any third party or use or sell the list for commercial purposes. (Bus. & Prof. Code Sec. 11273(e).)

This bill directs a time share owner’s association not to publish the list of owners or provide a copy of it to any time-share interest owner or to any third party, or use or sell the list for commercial purposes, except as required to accomplish legitimate association business.

This bill states that if an owner of a time-share interest in the time-share plan makes a request to the owner’s association to communicate by mail with the membership of the association, the board of administration of the owners’ association or the managing entity shall do the following:

• determine whether the requested mailing pertains to legitimate association business.
• if the requested mailing pertains to legitimate association business, the requested mailing shall be made within 30 days after receipt of the request and payment by the owner of actual costs.
• if the requested mailing will not advance legitimate association business, the board or the managing entity shall, within 30 days after receipt of the request, notify the requesting owner in writing and shall indicate the reasons for the rejection.

This bill states that the owner who requests the mailing shall pay the association in advance for the association’s actual costs in performing the mailing, and that the association shall make a good faith effort to minimize the costs of the mailing, including by use of a less expensive delivery method with respect to those owners who have previously consented to the less expensive delivery method.

This bill provides that if the requested mailing is a proxy solicitation to recall one or more board members elected by the owners or to discharge the manager or managing entity, and the board of administration or managing entity does not complete the requested mailing within 30 days after receipt of a request from an owner and payment of actual costs, the superior court in the county where the time-share plan is located may, upon application from the requesting owner, summarily order the requested mailing.

This bill provides that in the event the court orders the mailing, it may order the board or managing entity to pay the owner’s costs, including attorney’s fees reasonably incurred to enforce the owner’s rights, unless the board or the managing entity can prove it refused to distribute the materials in good faith because of reasonable doubt about whether the requested mailing pertained to legitimate association business.

This bill states that it is unlawful for the board of administration of the association or managing entity to refuse to distribute a communication requested by an owner if the requested mailing would address legitimate association business.

This bill defines “legitimate association business” to include a proxy solicitation for any purpose, including, but not limited to, the recall of one or more of the board members elected by the owners, the discharge of a manager or management entity, or the disposition of time-share interests acquired by the association.

This bill specifies that Section 8330 of the Corporations Code shall not apply to time-share associations.

This bill makes other technical and conforming changes, and related legislative findings and declarations.

COMMENT

1. Stated need for the bill

The author states:

Section 11273(e) of the Business and Professions Code, which is part of the time-share law, was written to protect the privacy of the names and addresses of the owners of time-share interests within time-share plans, such that the owner’s association of a time-share plan could not be required to publish or provide a copy of the list of owners to any time-share interest owner or third party or use or sell the list for commercial purposes.

In 2010, the Court of Appeals of the State of California, Third Appellate District, held that California Corporations Code Section 8330 – not the time-share law -- applies to those time-share associations that are organized as non-profit corporations. Since many of the time-share associations are organized as non-profit corporations, the court decision meant that those time-share owners lost the privacy rights that had been accorded them under the time-share law. Section 8330 . . . grants members of a nonprofit mutual benefit corporation the right to inspect and copy, or obtain for a reasonable charge, the record of names, addresses, and voting rights of the members of the corporation upon 10 days written notice, provided it is for a purpose [reasonably] related to the person’s interest as a member.

As a result of the ruling any time-share owner (belonging to an association organized as a nonprofit mutual benefit corporation) can easily get their association’s lists and sell those lists to any third party. The fact is, time-share associations frequently have a membership list that can easily be in excess of ten thousand members. Such a list on the open market would easily be of substantial value, particularly to unscrupulous parties who prey upon time-share owners. Specifically, these lists end up in the hands of companies that claim they can sell time-share units. Typically they demand an up-front fee and then usually fail to sell the time-share. In addition, dissemination of such a list can expose personally identifiable information of owners to third parties, which information might not otherwise be publically available (keeping in mind that a timeshare is not an owner’s primary residence, and the information provided in many cases is not public information).

1. Maintaining Owner Privacy

The right to privacy is a fundamental right protected by Article I, section 1 of the California Constitution. The Legislature has expressly declared that “all individuals have a right of privacy in information pertaining to them,” and has found that “[t]he right to privacy is being threatened by the indiscriminate collection, maintenance, and dissemination of personal information and the lack of effective laws and legal remedies.” (Civ. Code Sec. 1798.1.) This bill seeks to build upon the fundamental right to privacy by setting strict limits on the ability of time-share owners to obtain the names and addresses of other owners in a time-share plan. This bill would limit the release of a time-share plan’s membership list only for those requests involving legitimate association business, which would include such things as proxy solicitations for the recall of one or more of the board members elected by the owners, the discharge of a manager or management entity, or the disposition of time-share interests acquired by the association. This bill would also prohibit any party from selling the membership list or using it for commercial purposes.

Recent news stories indicate that fraudulent time-share buyback and remarketing firms acquire time-share plan membership lists in order to find potential clients, and then use high pressure sales tactics to convince time-share owners that their firm could sell the owner’s time-share interest at a profit. According to one news report:

[One such company] would tell timeshare owners that the company had a buyer ready and waiting to purchase their timeshare, they just had to pay a small closing fee that would be returned to them with the payment for the timeshare within 60 to 90 days. The closing fee ranged from $1,500 to $3,000 depending on how desperate the timeshare owner was to sell. According to [a federal prosecutor], “the sole objective . . . was to get your credit card number.”

[The company would then] stall customers past the time they could challenge the deal paid with their credit card, . . . [and] employees [would] read from a script and [keep] a “log of lies” in a spreadsheet in order to keep track of which part of the script had already been told. An employee told investigators in a videotaped statement that, “they kept the lie going by stating that the buyer had backed out, they got a new offer on the property. It’s going to take at least another 30 to 60 days.” (Andrea Day and Valerie Patriarca, Dream Vacations Turned Timeshare Nightmares <http://www.cnbc.com/id/101488801> [as of Jun. 17, 2015].)

By restricting the ability of time-share interest owners to obtain a copy of their time-share plan’s membership list, this bill could help prevent unscrupulous firms from obtaining these lists and using them for marketing purposes.

1. Preserving the Ability to Communicate

While this bill would help protect the privacy of time-share plan members and could potentially shield them from unwanted marketing, it would also remove the ability for members to identify and communicate with each other except in very narrow circumstances. As currently drafted, this bill would prohibit a time-share management association from disclosing its membership list to any party except for requests involving legitimate association business, which, as described in Comment 2 above, is limited to certain types of proxy solicitations. In effect, this bill may leave owners with no practical alternative for communicating with each other about issues of common concern, such as discussing the need to amend their time-share plan’s bylaws, as was the case in WorldMark v. Wyndham Resort Development Corp.

In WorldMark, the court noted, “[a] danger exists in allowing too free an access to membership lists; however, the potential for abuse must be balanced against a member’s legitimate needs and rights to utilize lists in election contests and for purposes reasonably related to a member’s interest.” (187 Cal.App.4th at 1030.) The challenge is to “draw a proper balance between a member’s need for adequate access to membership lists and the need of a corporation to protect itself from wrongful exploitation of an important asset.” (Id. at 1031.)

The policy question raised by this bill is how to find the appropriate balance between maintaining an owner’s privacy, protecting a valuable corporate asset, and preserving the ability for owners to effectively communicate with one another. As drafted, this bill arguably favors the interests of the management of a time-share plan and of a time-share plan association too heavily. With this bill, management or an association may be able to effectively prevent the delivery of messages it does not agree with by denying owners – who likely will never meet each other – the resources they need to contact each other.

To re-balance the preservation of privacy against the legitimate need for owners to communicate with one another, the Committee may wish to consider amendments that would permit a time-share association to share its membership list with an owner only for a purpose reasonably related to their interest as an owner, and that would authorize the association to withhold the list if it reasonably believed the recipient would use the list for a different purpose or disclose its contents to another party.

1. Owner Mailing Addresses

One of the changes to the Vacation Ownership and Time-share Act proposed in this bill is to insert the word “mailing” before “addresses” in a provision that requires an association to maintain among its records a complete list of the names and addresses of all owners of time-share interests in a time-share plan. (See Bus. & Prof. Code Sec. 11273(e).) As the court explained in the WorldMark case, some associations have attempted to use similar statutory language to limit the disclosure of time-share plan owners’ e-mail addresses in an effort to frustrate inexpensive and swift communication among owners about matters of common concern.

In WorldMark v. Wyndham Resort Development Corp., WorldMark argued, among other things, that Section 8330 of the Corporations Code, which requires nonprofit mutual benefit corporations to allow members to “[i]nspect and copy the record of all the members’ names, addresses and voting rights,” did not require WorldMark to grant time-share owners access to other owners’ e-mail addresses because the word “address,” as used in Section 8330, was not sufficiently broad enough to include electronic mail addresses. (See WorldMark, 187 Cal. App. 4th at 1034.) Rejecting WorldMark’s argument, the court interpreted the phrase “address” as encompassing such things as e-mail addresses, and ruled that WorldMark’s proposed alternative to contact other owners using postal mail at a cost to the requestor in excess of $260,000 was an unreasonable effort to frustrate owner communication. (See Id., at 1030-37.) The court held that “WorldMark may not thwart a member’s legitimate attempt to communicate via e-mail” through narrow interpretations of the word “address.” (See Id. at 1037.)

Since the scope of the word “address” has been a previous source of confusion, it is important to note that the addition of the word “mailing” before “address,” as proposed in this bill, would not change the fact that member or owner e-mail addresses are part of a time-share plan’s records for the purposes of the Vacation Ownership and Time-share Act, and would be subject to disclosure to other owners under the provisions of that Act. To the extent time-share plan managers and administrators collect e-mail addresses from owners or members as part of their regular business practices, these addresses would either constitute “mailing addresses” subject to disclosure as a record of an owner’s address, or “other records of the time-share plan maintained by the association or the managing entity” that must be “made available for inspection and copying by any member.” (See Bus. & Prof. Code Sec 11273(a).) Further, since one of the functions of the Act is to facilitate relevant communication among time-share interest owners, a time-share association would have to consider the use of e-mail addresses and similar forms of electronic delivery when carrying out its obligation under this bill to mail communications on behalf of an owner using a less expensive delivery method than postal mail where feasible.

Support: American Resort Development Association -- Resort Owner’s Coalition

Opposition: Two Individuals

HISTORY

Source: American Resort Development Association

Related Pending Legislation: None Known

Prior Legislation:

AB 905 (Gaines, Ch. 88, Stats. 2015) amended the Vacation Ownership and Time-share Act of 2004 to provide that required copies of public reports pertaining to time-share interests and required copies of disclosures pertaining to exchange programs may be provided in a digital format at the discretion of the purchaser. This bill also exempted licensed real estate brokers or salespersons from the duty to conduct a reasonably competent and diligent visual inspection of a time-share property and to disclose all facts materially affecting the value or desirability of the property to a prospective purchaser when, as a condition of transfer, the prospective purchaser would receive a copy of the public report, provided the property has not been previously occupied.

AB 126 (Hall, 2013) would have required a time-share association to obtain a time-share plan member’s consent before sharing their contact information with another owner, and would have provided an alternate method for owners to communicate with other members in the time-share plan. This bill died in the Assembly Judiciary Committee.

AB 2290 (Hill, 2012) would have prohibited a time-share association from publishing a list of owners or providing a copy of the list to time-share interest owners. This bill would have established a protocol for an owner of a time-share interest to communicate with the membership of a time-share association about legitimate association business without providing access to, or a copy of, the association membership list to the requesting owner. This bill died in the Assembly Judiciary Committee.

AB 2518 (Hall, 2012) was gutted and amended to be substantially similar to AB 2290. This bill died in the Senate Rules Committee.

AB 2252 (Montanez, Ch. 697, Stats. 2004) consolidated and revised the body of time-share vacation property law, streamlined the regulatory approval process of time-share plans, and added new consumer protections and disclosures to create the Vacation Ownership and Time-share Act of 2004.

Prior Vote:

Assembly Floor (Ayes 79, Noes 0)

Assembly Privacy and Consumer Protection Committee (Ayes 11, Noes 0)

**************

ASSEMBLY THIRD READING

ATR Bill Id:AB 634

Author:(Calderon)

As Amended Ver:April 28, 2015

Majority vote

SUMMARY: Provides a process for a time-share property owner to communicate with other owners within a time-share association on matters related to legitimate association business, without requiring the release of the owner list. Specifically, this bill:

1. Prohibits a time-share association from publishing a list of owners or providing a list of it to any time-share interest owner or to any third party, or use or sell the list for commercial purposes, except to accomplish legitimate association business, as specified.

2. Requires the board of administration (board) or managing entity of a time-share owner's association to determine whether a request from an owner to communicate by mail with the membership of the association pertains to legitimate association business, as defined.

3. Requires the board or managing entity to make the requested mailing within 30 days of receipt of the request and payment for actual costs if the mailing pertains to legitimate association business.

4. Requires the board or managing entity to notify the requesting owner in writing with reasons for rejection if the board or managing entity determines that the requested mailing will not advance legitimate association business.

5. Requires the requesting owner to pay the association in advance for the actual costs of the mailing.

6. Requires the association to make a good faith effort to minimize the costs of the mailing, including the use of a less expensive delivery method with respect to those owners who have previously consented to such methods.

7. Where the requested mailing is a proxy solicitation related to a board recall or management discharge, and the board of administration or managing entity does not complete the requested mailing within 30 days after receipt and payment, the requesting owner may petition a local court on an expedited basis to order the mailing.

8. Authorizes the court to order the board or managing entity to pay the owner's costs, including attorney’s fees, unless the board or the managing entity can prove it refused to distribute the materials in good faith because of reasonable doubt about whether the requested mailing pertained to legitimate association business.

9. Reiterates that proxy solicitations must comply with the provisions of this bill and existing law.

10. Prohibits the board or managing entity from refusing to distribute a communication requested by an owner if the requested mailing would address legitimate association business.

11. Declares that provisions relating to the right of inspection of records and reports of nonprofit mutual benefit corporations do not apply to time-share associations regulated under the Vacation Ownership and Time-share Act of 2004.

12. Makes findings and declarations related to the need to provide privacy protections for time-share association membership lists and other technical or non-substantive changes.

FISCAL EFFECT: None. This bill is keyed non-fiscal by the Legislative Counsel.

COMMENTS:

1. Purpose of this bill. This bill is intended to protect time-share owner privacy by creating a process for owners to communicate with one another about legitimate association business without requiring the association to release the owner list, and exempting time-share associations from existing requirements for the sharing of member lists that apply to certain types of nonprofits. This bill is sponsored by the American Resort Development Association and its related resort owner coalition.

2. This bill in practice. While explicitly exempting time-shares from the general record access provisions in the Corporations Code pertaining to non-profit mutual benefit corporations, the most recent version of this bill has some additional protections for owners and requesters added to it. In practice, this bill would generally prohibit the sharing of the owner's list with any owner or third party, except for legitimate association business. It requires the board to make mailings requested by owners within 30 days of the request and payment of costs, and further requires the association to provide any rejection in writing to the requester with an explanation of the reasons for the denial. This bill would also require the association to make a good faith effort to minimize the cost of a mailing, which could include the use of email for those owners who have consented. In cases where the requested mailing relates to a proposed recall of board members or discharge of the management company, a requester may seek expedited action from a local court if the association does not act within 30 days. The court may also order the payment of the requester's court costs if the association cannot show that its refusal was reasonable and in good faith.

Analysis Prepared by: Hank Dempsey / P. & C.P. / (916) 319-2200 FN: 0000302

Date of Hearing: May 5, 2015

ASSEMBLY COMMITTEE ON PRIVACY AND CONSUMER PROTECTION

Mike Gatto, Chair

ABPCA Bill Id:AB 634

Author: (Calderon) – As Amended Ver:April 28, 2015

SUBJECT: Vacation ownership and time-shares: owners list

SUMMARY: Provides a process for a time-share property owner to communicate with other owners within a time-share association on matters related to legitimate association business, without requiring the release of the owner list. Specifically, this bill:

1. Prohibits a time-share association from publishing a list of owners or providing a list of it to any time-share interest owner or to any third party, or use or sell the list for commercial purposes, except to accomplish legitimate association business, as specified.

2. Requires the board of administration or managing entity of a time-share owner's association to determine whether a request from an owner to communicate by mail with the membership of the association pertains to legitimate association business.

3. Requires the board or managing entity to make the requested mailing within 30 days of receipt of the request and payment for actual costs if the mailing pertains to legitimate association business.

4. Requires the board or managing entity to notify the requesting owner in writing with reasons for rejection if the board or managing entity determines that the requested mailing will not advance legitimate association business.

5. Requires the requesting owner to pay the association in advance for the actual costs of the mailing.

6. Requires the association to make a good faith effort to minimize the costs of the mailing, including the use of a less expensive delivery method with respect to those owners who have previously consented to such methods.

7. Where the requested mailing is a proxy solicitation related to a board recall or management discharge, and the board of administration or managing entity does not complete the requested mailing within 30 days after receipt and payment, the requesting owner may petition a local court on an expedited basis to order the mailing.

8. Authorizes the court to order the board or managing entity to pay the owner's costs, including attorney’s fees, unless the board or the managing entity can prove it refused to distribute the materials in good faith because of reasonable doubt about whether the requested mailing pertained to legitimate association business.
   
   
   

9. Reiterates that proxy solicitations must comply with the provisions of this bill and existing law.

10. Prohibits the board or managing entity from refusing to distribute a communication requested by an owner if the requested mailing would address legitimate association business.
    
    
    

11. Defines “legitimate association business” as including, but not limited to, a proxy solicitation for any purpose, which includes the recall of one or more of the board members elected by the owners, the discharge of a manager or management entity, or disposition of time-share interests acquired by the association.

12. Declares that provisions relating to the right of inspection of records and reports of nonprofit mutual benefit corporations do not apply to time-share associations regulated under the Vacation Ownership and Time-share Act of 2004 (VOTA).

13. Makes findings and declarations related to the need to provide privacy protections for time-share association membership lists.

14. Makes other technical or non-substantive changes.

EXISTING LAW:

1. Requires, pursuant to the VOTA, all records of a time-share plan maintained by a time-share association to be made available for inspection and copying by any member for a purpose reasonably related to membership in the association. (Business and Professions Code (BPC) Sections 11210-11288).

2. Requires the time-share association to maintain among its records a complete list of the names and addresses of all owners of time-share interests in the time-share plan, as specified, and prohibits an association from publishing the owners list or providing a copy of it to any time-share interest owner or to any third party or using or selling the list for commercial purposes, except as provided in the time-share instruments. (BPC 11273(e))

3. Authorizes a member of a nonprofit mutual benefit corporation to inspect and copy member contact records within five days of request, or obtain a copy of member contact records within ten days of request, for a purpose reasonably related to such person’s interest as a member, unless the corporation provides a reasonable alternative. (Corporations Code (CORP) Section 8330(a))

4. Requires that a requesting member tender a reasonable charge if the member requests a list of the information. (CORP 8330 (a))

5. Permits the corporation to deny the member access to the list where it provides a reasonable alternative, or if the corporation reasonably believes that the information will be used for another purpose unrelated to the requesting member's interest as a member. (CORP 8330 (b))
   
   
   

6. Authorizes a corporation to offer a requesting member any alternative method of achieving his or her purpose without providing access to or a copy of the membership list so long as the alternative method reasonably and in a timely manner accomplishes the requesting member's proper purpose. (CORP 8330 (c))

FISCAL EFFECT: None. This bill is keyed nonfiscal by the Legislative Counsel.

COMMENTS:

1. Purpose of this bill. This bill is intended to protect time-share owner privacy by creating a process for owners to communicate with one another about legitimate association business without requiring the association to release the owner list, and exempting time-share associations from existing requirements for the sharing of member lists that apply to certain types of nonprofits. This bill is sponsored by the American Resort Development Association (ARDA) and its related resort owner coalition.

2. Author's statement. According to the author, the existing law regulating time-share properties "was written to protect the privacy of the names and addresses of the owners of time-share interests within time-share plans, such that the owner’s association of a time-share plan could not be required to publish or provide a copy of the list of owners to any time-share interest owner or third party or use or sell the list for commercial purposes."
   
   "In 2010, the Court of Appeals of the State of California, Third Appellate District, held that California Corporations Code Section 8330 – not the time-share law – applies to those time-share associations that are organized as non-profit corporations. Since many of the time-share associations are organized as non-profit corporations, the court decision meant that those time-share owners lost the privacy rights that had been accorded them under the time-share law. Section 8330 law grants members of a nonprofit mutual benefit corporation the right to inspect and copy, or obtain for a reasonable charge, the record of names, address, and voting rights of the members of the corporation upon 10 days written notice, provided it is for a purpose reasonably related to the person’s interest as a member.
   
   "As a result of the ruling any time-share owner (belonging to an association organized as a nonprofit mutual benefit corporation) can easily get their association’s lists and sell those lists to any third party. The fact is, time-share associations frequently have a membership list that can easily be in excess of ten thousand members. Such a list on the open market would easily be of substantial value, particularly to unscrupulous parties who prey upon time-share owners. Specifically, these lists end up in the hands of companies that claim they can sell time-share units. Typically they demand an up-front fee and then usually fail to sell the time-share. In addition, dissemination of such a list can expose personally identifiable information of owners to third parties, which information might not otherwise be publically available (keeping in mind that a timeshare is not an owner’s primary residence, and the information provided in many cases is not public information)."

3. The time-share property industry. Time-share ownership generally describes a system where owners hold a legal right to occupy a property for short periods of time each year (and in some cases, a property ownership right as well), usually for recreational purposes. This is in contrast to more traditional "common interest developments," like condominiums and residential subdivisions, that are usually occupied year-round and more akin to traditional home ownership.

The regulation of time-shares in California is said to have begun in earnest in 1981, when the industry was widely perceived as being prone to high-pressure sales tactics and rampant consumer fraud (an era now facetiously referred to as the "crime-share" days). Restrictions on time-shares were built into the Subdivided Lands Law that regulated common interest developments, although in 2004 the Legislature passed VOTA, which consolidated and revised the various relevant provisions into a single chapter.

As a form of real estate, time-share advertising, disclosure, sales and management are regulated by the Bureau of Real Estate within the Department of Consumer Affairs. Time-share interests in any time-share project, also known as a time-share plan, to be sold in California are subject to regulation under the VOTA.

4. Voting rights, nonprofit associations, and time-share owners. As noted in the author's statement above, a 2010 court case in California (Worldmark v. Wyndham Resort Development Corporation) held in part that time-shares which are organized as nonprofit corporations must abide by the general requirements of the law pertaining to a certain type of nonprofits – despite the fact that some of those requirements regarding the release of owners' contact information appeared to conflict with the existing time-share law.
   
   This particular corporate form, the mutual-benefit nonprofit corporation, is one organized for a mission that benefits only a select group of people, such as a union, local chamber of commerce or a homeowner's association, but shares the same underlying structure as the more well-known public-benefit corporation. Under existing law, these corporations are generally required to allow members to inspect and copy member contact records within five days of request, unless a reasonable and timely alternative is provided. Access to the list can be denied if the corporation reasonably believes that the information will be used for a purpose unrelated to the requesting member's interest as a member. Violations are remedied by damages, disgorgement of profits, court costs and attorney's fees, as well as punitive damages for fraudulent or malicious violations.
   
   By comparison, the existing time-share law simply says that records shall generally be made available for inspection and copying for a purpose reasonably related to the membership of the association, but the association may not publish the owner's list or provide a copy of it. As a result of the Worldmark decision, it appeared that nonprofit time-share associations would have to provide such lists, despite the prohibition in their own statute.
   
   Bills similar to this one have failed passage over the question of whether or not time-share nonprofits should be held to the record release standards of nonprofits generally, or whether their special circumstances justify a different approach. The logic behind provisions for the release of member contact information is that it allows members to communicate, organize and take action if there are problems with the management of the corporation – a form of democratic self-policing that has justified a lower level of oversight from the state Attorney General. This leads to a tension with the countervailing interest in owner privacy, which could be disturbed by unwanted solicitations.
   
   The Worldmark court noted this tension, saying "A danger exists in allowing too free an access to membership lists; however, the potential for abuse must be balanced against a member's legitimate needs and rights to utilize lists in election contests and for purposes reasonably related to a member's interest."
   
   It bears noting that the Worldmark case involved a time-share owner who sought to circulate a petition to other owners concerning an amendment to the corporation's bylaws, which raised multiple issues with the management of the corporation. When Worldmark refused to circulate the petition, citing its potentially detrimental effect on association, the plaintiff asked for the membership records to do the mailing himself but was refused, and Worldmark instead offered the "reasonable alternative" of doing the mailing for the plaintiff – at a cost of over $260,000. The court ultimately ordered disclosure of the owner list.
   
   

5. This bill in practice. While explicitly exempting time-shares from the general record access provisions in the Corporations Code pertaining to non-profit mutual benefit corporations, the most recent version of this bill has some additional protections for owners and requesters added to it.
   
   In practice, this bill would generally prohibit the sharing of the owner's list with any owner or third party, except for legitimate association business. It requires the board to make mailings requested by owners within 30 days of the request and payment of costs, and further requires the association to provide any rejection in writing to the requester with an explanation of the reasons for the denial. This bill would also require the association to make a good faith effort to minimize the cost of a mailing, which could include the use of email for those owners who have consented to communication by email.
   
   In cases where the requested mailing relates to a proposed recall of board members or discharge of the management company, a requester may seek expedited action from a local court if the association does not act within 30 days. The court may also order the payment of the requester's court costs if the association cannot show that its refusal was reasonable and in good faith.

6. Arguments in support. According to the sponsor, the American Resort Development Association, "AB 634 will prevent timeshare owners from having their personal information sold to third parties – including those entities that use the information to market fraudulent time-share services….AB 634 solves this problem by using language from a Florida state statute designed to protect the privacy of time-share owners in that state. (Florida has more time-shares than any other state). That law, and this bill, creates a process for time-share owners to communicate with association members without the disclosure of the lists. In addition, the committee has added language that insures the cost of the mailing is reasonable."

7. Previous legislation. AB 126 (Hall) of 2013 would have required a time-share association to maintain a complete list of the names and postal addresses of all owners of time-share interests in the time-share plan, and also require the association to obtain an owner’s consent to the sharing of their contact information. AB 2290 was held in the Assembly Judiciary Committee.
   
   AB 2290 (Hill) of 2012 would have required a time-share association to maintain a complete list of the names and post office addresses of all owners of time-share interests in the time-share plan, and would prohibit the association from publishing the owners list or providing a copy of it to any time-share interest owner or to any 3rd or using or selling the list for commercial purposes. AB 2290 was held in the Assembly Judiciary Committee.
   
   AB 2518 (Hall) of 2012 was substantially similar to AB 2290 of 2012. AB 2518 was held in the Senate Rules Committee.
   
   AB 2252 (Montanez), Chapter 697, Statutes of 2004, established VOTA, consolidated and revised the entire body of time-share vacation property law, streamlined the regulatory approval process, and added new consumer protections.
   
   

REGISTERED SUPPORT / OPPOSITION:

Support

American Resort Development Association (sponsor)

American Resort Development Association, Resort Owner Coalition (sponsor)

Opposition

None on file.

Analysis Prepared by: Hank Dempsey / P. & C.P. / (916) 319-2200