BILL ANALYSIS Ó
AB 634
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Date of Hearing: May 5, 2015
ASSEMBLY COMMITTEE ON PRIVACY AND CONSUMER PROTECTION
Mike Gatto, Chair
AB 634
(Calderon) - As Amended 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
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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
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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.
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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
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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
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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
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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
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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
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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
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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.
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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
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