Complaints Abound Over High-Pressure Sales Tactics, Hidden Contract Clauses : Time-Share Condos Enjoy New Upswing, But Old Problems Linger

Rent a car at the Orlando airport and you’re likely to get a booklet of discount coupons, including one good for two tickets to Walt Disney World, the attraction that draws 7 million visitors here each year.

Those “freebies” could end up costing you $14,000.

That’s about what you would pay if you walked in for your free tickets and walked out with a contract from the “time-share” resort that placed the ad in the coupon book. The free tickets are the lure that gets people in the door. The salesman has 90 minutes to get a signature on the dotted line.

Time-sharing--buying the use of at a resort condominium for one week each year--is an idea that is gaining a second wind. New resorts are planned, developers such as the Marriott chain are getting involved, and the Disney real estate subsidiary, Arvida, is showing interest.

In the past, the time-sharing arrangement was a tool of fly-by-night operators who grossly misrepresented what they were selling. Today, even with special legal protections for the consumer in effect in most states, a close look still reveals some unscrupulous sales practices.

Problems Down the Road

Although the basic idea is sound, time-shares for thousands of buyers can be like time bombs full of hidden problems, such as rising taxes and maintenance costs and a nonexistent resale market.

The idea behind time-sharing is simple: You can’t afford your own vacation house or condominium, so you buy a “share” of a condo, usually for one week each year. In the most common arrangement, you get a deed for your share that represents a lifetime of vacations.

The units, some in cities but most at mountain or seashore resorts, are well-appointed. They have kitchen utensils and appliances, usually two television sets and access to a pool and whirlpool.

If you get tired of going back to the same place every year, you can exchange your week for time at another resort, although exchanges are not guaranteed.

The idea began in the French Alps in the 1960s, and has grown in the United States from eight resorts in 1973 to about 1,000 today--half of them in Florida.

Sales of time-shares have soared in the United States, to $1.8 billion last year from $10 million in 1972. About 800,000 people now own time-shares, and there is optimism within the industry that the abuses that gave it a black eye are a thing of the past.

Complaints Still Numerous

Although promoters say that the industry is concerned about the problems and is aggressively pursuing remedies, serious abuses continue. Many of the problems stem from aggressive sales practices.

Nowhere is this more apparent than in the complaint files of the Florida Bureau of Time-Share, which is charged with regulating the 500 time-share resorts in the state.

“Time-share is a good product. The bad thing is the way it’s marketed,” said Hugh Owen, who heads the time-share bureau.

“It’s been run with a very heavy sales and commission orientation, which would tend to cause abuse,” said John Temple, president of Arvida.

Owen’s office receives about 1,000 complaints each year, often in the form of handwritten notes on personal stationery:

“I was enticed, conned and duped by fast-talking sales people into purchasing a time-share unit,” wrote Rhonda Heath of Chicago.

“Things were not as the salesman had promised,” wrote Kay Wells of Jenkinsburg, Ga.

No Time to Consider

“We decided to think about it before making a decision, and when we told them this, one salesman got real pushy,” wrote Tudor Robinson of Apollo Beach, Fla.

An examination of what Owen presented as public files of complaints showed that a lot of things can go wrong:

--Mary and Tudor Robinson bought one week a year at the Bali International Resort Club, near Disney World, for $6,750. They said they wanted to pay cash but the saleswoman gave them a better option: pay 10% down, half the balance in 30 days and the remainder within a year, at no interest.

But the Robinsons found themselves with a seven-year mortgage at 17% interest, and the note carried a penalty for early payoff.

It was right in their contract. The Robinsons knew it, but said they were told that everyone had to sign the same mortgage documents as “a matter of formality.”

The developer said that the Robinsons had misunderstood the financing arrangements, and that there was no record of the zero-interest agreement. The Time-Share Bureau dismissed the complaint.

Dog Permit Revoked

--Leslie and June Wilson of Birmingham, Ala., bought two weeks at the Panama City Beach Club for $10,195 and received written permission to bring with them Princess, their Pekingese. Later, the builder was replaced by a new developer who revoked their pet permit.

“I would not have bought the place if there was any question about my dog,” June Wilson wrote to the Time-Share Bureau. She enclosed a snapshot of Princess. The bureau told her the new developer was within his rights.

--Norma and Otis Newsome Jr. of Jacksonville, Fla., complained that they weren’t told in advance that they must tour the Magic Tree Resort to get their free tickets to Disney World. Harris Parker had a similar complaint and so, apparently, did others. The developer said that its former advertising agency had made a mistake in its ad campaign, and had violated a law that requires developers to disclose such conditions. The Time-Share Bureau fined the developer $2,000.

--Frank Maranto of Potomac, Md., complained about the $46 check he received for touring the Bali International club. It bounced. Twice. The Time-Share Bureau closed the case when Bali paid up. It blamed an accounting error for the bad checks.

--Patricia and Mark Cook of Grand Rapids, Mich., also had a beef with the Magic Tree Resort. They said that the salesman told them they would be able to rent their week to others at $100 a day. When they found no takers, they complained to the Time-Share Bureau. The developer denied that promises had been made and produced a paper signed by the Cooks, an “owner-confirmation interview” acknowledging that the seller made no guarantees about rental, resale or investment values. The complaint was dismissed.

Terms Must Be in Writing

“We tell them, ‘Read the contract.’ It’s all in there,” Owen said.

But it’s not that simple. The sales documents run 60 pages or more and would take hours to read. The sales people want a signature on the day of the visit.

That’s why Florida gives time-share customers 10 days to cancel a contract. The cancellation period varies from state to state, but consumers generally have at least three days to change their minds.

The documents are a consumer’s best protection. If a buyer goes by the letter of the contract and views the purchase as nothing more than a prepaid vacation, there would be fewer problems. Too many people just skim-read the contract and believe the salesman’s patter.

Florida time-share contracts once warned against believing the sales agents, but today’s contract may not contain that clause. Under the most recent time-share act, sales personnel are barred from promising anything that is not in the contract. They are required to tell the truth.

But because time-share presentations are rarely done in groups, such promises can be made in private conversations. Those talks can come back to haunt the owners.

“We haven’t been successful filing actions against any marketers,” Owen said. “The marketers are too flighty. They can close up shop today and be gone.”

Free-Lance Sales Agents

Many sales agents are free-lance operators who travel from resort to resort and are paid on a commission basis. They are given loose rein by the developers, provided that they are successful and their actions don’t generate too many complaints, Owen said.

Under Florida law, developers are legally responsible for the actions of their sales teams, but the Time-Share Bureau rarely moves against a sales staff accused of questionable practices.

In case after dismissed case, the Time-Share Bureau tells the buyers, “Please understand that oral representations are very difficult to prove.”

Only when a pattern of complaints against a developer is detected does the bureau pursue legal action, Owen said. He explained that many people never complain, either because they don’t think it’s worth the trouble or they are embarrassed.

The bureau rarely initiates investigations. While it is generally considered to have the best time-share regulations in the nation, Florida has only seven investigators, and they are overworked.

“When they come in here, they’re really pro-consumer,” Owen said. “Then they see some questionable complaints. . . . After they have a few of those, they start leaning to the developer’s side.”

Other States’ Problems

The problems are not confined to Florida:

--Hawaii, which once considered banning time-share developments, now closely regulates them. Broken promises and sales pressure are the most common of the 351 complaints received in the last three years. The islands have 38 licensed time-share resorts.

--In Colorado, the attorney general’s office received 110 complaints in the first 10 months of 1985. Most dealt with the descriptions of prizes used to entice people to visit the resorts. In one case, the developer advertised a “frost-free refrigerator” that turned out to be a six-pack-sized cooler.

--In South Carolina, which has 70 registered projects, regulators get about 150 complaints a year, most of them about sales practices. “The marketing people come up with what they think is a good idea, and we tell them, ‘No, you can’t do that.’ It’s a cat-and-mouse game,” said Kenneth Hagreen of the South Carolina Real Estate Commission.

A time-share vacation can be an excellent purchase, however. The state regulations, although they offer little protection from aggressive sales pitches, have all but rid the industry of developers who vanish overnight.

Time-sharing offers a prepaid vacation in surroundings generally more luxurious than a hotel, and the one-time purchase price protects buyers against inflation.

Taxes, Upkeep Can Rise

There are hidden costs, however, and they are rising.

Maintenance fees in 1984 averaged $195 annually, up from $119 in 1980. Property taxes are assessed, too.

Maintenance fees can rise dramatically when a developer finishes a project. In Florida, maintenance increases are limited to 15% a year while a developer still controls a resort, but all limits are off once the tenant organization assumes control.

Resorts, by their very nature, are expensive to maintain, but time-share owners face an additional expense: The wear and tear on a condo and its furnishings can be staggering when 52 families are using one unit.

In addition, if a buyers stops paying maintenance fees and taxes, the other owners are asked to make up the difference. If owners don’t pay their assessments, they could find a lien against their units. About 20% of time-share owners in Florida don’t pay their taxes, Owen said.

“It’s a major problem, and I don’t know the solution to it,” Owen said.

Such rising costs have many people trying to sell, but the time-share resale market is depressed. There are simply far more time-shares on the market--more than a million weeks in Florida resorts alone--than there are people to buy them.

Resale May Be Slow

A dozen companies that specialize in time-share resales have sprouted around the country in the last two years, as more people try to unload their shares. They commonly charge an up-front listing fee of $50 to $400, but they don’t guarantee sale, and their success rate is poor.

Mario Collura, president of MDR Telecom of Marina del Rey, Calif., said that his company each year sells about 15% of its 2,000 time-share listings, slightly better than average for resales. Owners who are able to sell usually get back about half of what they paid for their time-share, Collura said.

Owen recommended that potential buyers do their homework: Check the background of the developer. Call regulatory agencies. Read the contract before signing it. Make sure you like the resort enough to return, year after year.