BILL ANALYSIS Ó
SENATE JUDICIARY COMMITTEE
Senator Hannah-Beth Jackson, Chair
2015-2016 Regular Session
AB 634 (Calderon)
Version: April 28, 2015
Hearing Date: June 28, 2016
Fiscal: No
Urgency: No
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
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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.
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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
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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
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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
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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
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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).
2.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
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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
[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.
3.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
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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.
4.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
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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
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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
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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)
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