Marriott Vacation Club's timeshare sales are actually an
illegal "racketeering" scheme, a new proposed class-action lawsuit says.
The lawsuit takes aim at Marriott's points program, which replaced traditional sales of timeshare weeks at specific resorts in 2010. According to the suit, Marriott timeshare customers pay fees associated with owning real estate — such as closing costs and recording fees — but don't actually own any real estate.
The suit also targets First American Title Company -- the trustee for Marriott's land trust -- and Orange County and Orange County Comptroller Martha Haynie. The plaintiffs are two timeshare buyers, Anthony and Beth Lennen.
The lawsuit says Marriott timeshare buyers "are being duped into believing they are obtaining title to a real-property interest … when, in fact, they are merely getting a right-to-use license," the lawsuit says.
Haynie said she only became aware of the suit when a Sentinel reporter asked her about it. She said her office has no enforcement authority, and has very little ability to turn down a request to record a deed.
"Recording a document doesn't make it legal, if it wasn't illegal to begin with," Haynie said. "We only review deeds to make sure they are in proper form, compliant with Florida law."
Haynie said her office reports any suspicious transactions to authorities, if it becomes aware of problems, but nobody has previously suggested Marriott transactions are illegal.
Edward Kinney, spokesman for Marriott Vacation Club, said the company will defend itself in court. He said the timeshare industry is highly regulated.
"We sense the people behind this lawsuit have a misunderstanding of how our product works. But we follow every aspect of the state regulatory compliance for vacation ownership sales,” Kinney said. “Everything we do as far as sales, is reviewed by the state.”
Marcus Ginnaty, spokesperson for First American, said, "Though it is First American’s policy not to comment on pending or active litigation, we look forward to the opportunity to defend our rights through the Florida legal system."
Despite not actually being real estate owners, the lawsuit says, buyers are still paying closing costs, recording fees, title policy premiums and real estate taxes.
According to the lawsuit, deeds that are recorded in Orange County for Marriott timeshares have completely meaningless codes that only refer to contracts with Marriott, and not to actual real property, which makes them illegal.
The lawsuit seeks to abolish Marriott's points program, which attorneys said is unique among timeshare companies. It also seeks the return of fees and costs paid by buyers. Lawyers who filed the case in Orlando federal court say they are not sure how many timeshare buyers could become part of the class, if a judge approves a class action. The racketeering charge also requires separate judge's approval; but if approved, racketeering can result in tripling any damage award.
Since 2010, customers have bought points that can be used at a variety of locations. The points program is intended to offer more flexibility, but critics of the program complain that the basis for determining value of points at various properties can be arbitrary or disputed.
Before 2010, Marriott's week-based program allowed customers to purchase a week of ownership at a specific location or resort. They could trade, but only with other specific locations.
"There have been hundreds of thousands of buyers in the points program," said Jeffrey Norton, with New York-based Newman Ferrara. He declined to estimate what each buyer's costs or losses might be.
The lawsuit charges that Marriott and First American are engaged in a racketeering scheme to make money illegally from the fees charged on timeshare transactions, under the federal Racketeer Influenced and Corrupt Organizations Act.
"Marriott and First American created a RICO criminal enterprise for … the purpose of allowing Marriott to make withdrawals from [an] escrow account … in connection with sales of invalid timeshare estates, providing First American with a robust revenue stream of escrow fees and title insurance premiums despite the absence of title," the lawsuit states.
It's the relationship with First American and the way Marriott set up their trust and escrow that are unique, according to timeshare industry sources.
Besides Norton's firm, two other attorneys are working on the case: Soomi Kim, of North Carolina; and Christopher S. Polaszek of Tampa.
Orlando-based Marriott Vacations Worldwide Corp. (NYSE: VAC) says it has 61 properties with 12,807 vacation ownership villas and about 410,000 owners in the United States and 8 other countries. The company pools its timeshare resorts into the real estate trust handled by First American.
It's not the first time Marriott has faced lawsuits aimed at its points program, but it's the first time they are sued under real estate law and racketeering statutes.
In 2014, a proposed class action targeted the points program under consumer-protection laws. But that lawsuit, filed under the Marriott owner name of Salvatore Desantis, was tossed out by Orlando U.S. District Judge Gregory Presnell.
Desantis, of New Jersey, alleged that the value of his timeshare ownership dropped when Marriott introduced its points program, because the points program depleted the number of people swapping weeks at Marriott's timeshare resorts. But Presnell ruled that Desantis "got what he was promised" and that Marriott was only "responding to a change in the timeshare market."
pbrinkmann@orlandosentinel.com or
407-420-5660
The lawsuit takes aim at Marriott's points program, which replaced traditional sales of timeshare weeks at specific resorts in 2010. According to the suit, Marriott timeshare customers pay fees associated with owning real estate — such as closing costs and recording fees — but don't actually own any real estate.
The suit also targets First American Title Company -- the trustee for Marriott's land trust -- and Orange County and Orange County Comptroller Martha Haynie. The plaintiffs are two timeshare buyers, Anthony and Beth Lennen.
The lawsuit says Marriott timeshare buyers "are being duped into believing they are obtaining title to a real-property interest … when, in fact, they are merely getting a right-to-use license," the lawsuit says.
Haynie said she only became aware of the suit when a Sentinel reporter asked her about it. She said her office has no enforcement authority, and has very little ability to turn down a request to record a deed.
"Recording a document doesn't make it legal, if it wasn't illegal to begin with," Haynie said. "We only review deeds to make sure they are in proper form, compliant with Florida law."
Haynie said her office reports any suspicious transactions to authorities, if it becomes aware of problems, but nobody has previously suggested Marriott transactions are illegal.
Edward Kinney, spokesman for Marriott Vacation Club, said the company will defend itself in court. He said the timeshare industry is highly regulated.
"We sense the people behind this lawsuit have a misunderstanding of how our product works. But we follow every aspect of the state regulatory compliance for vacation ownership sales,” Kinney said. “Everything we do as far as sales, is reviewed by the state.”
Marcus Ginnaty, spokesperson for First American, said, "Though it is First American’s policy not to comment on pending or active litigation, we look forward to the opportunity to defend our rights through the Florida legal system."
Despite not actually being real estate owners, the lawsuit says, buyers are still paying closing costs, recording fees, title policy premiums and real estate taxes.
According to the lawsuit, deeds that are recorded in Orange County for Marriott timeshares have completely meaningless codes that only refer to contracts with Marriott, and not to actual real property, which makes them illegal.
The lawsuit seeks to abolish Marriott's points program, which attorneys said is unique among timeshare companies. It also seeks the return of fees and costs paid by buyers. Lawyers who filed the case in Orlando federal court say they are not sure how many timeshare buyers could become part of the class, if a judge approves a class action. The racketeering charge also requires separate judge's approval; but if approved, racketeering can result in tripling any damage award.
Since 2010, customers have bought points that can be used at a variety of locations. The points program is intended to offer more flexibility, but critics of the program complain that the basis for determining value of points at various properties can be arbitrary or disputed.
Before 2010, Marriott's week-based program allowed customers to purchase a week of ownership at a specific location or resort. They could trade, but only with other specific locations.
"There have been hundreds of thousands of buyers in the points program," said Jeffrey Norton, with New York-based Newman Ferrara. He declined to estimate what each buyer's costs or losses might be.
The lawsuit charges that Marriott and First American are engaged in a racketeering scheme to make money illegally from the fees charged on timeshare transactions, under the federal Racketeer Influenced and Corrupt Organizations Act.
"Marriott and First American created a RICO criminal enterprise for … the purpose of allowing Marriott to make withdrawals from [an] escrow account … in connection with sales of invalid timeshare estates, providing First American with a robust revenue stream of escrow fees and title insurance premiums despite the absence of title," the lawsuit states.
It's the relationship with First American and the way Marriott set up their trust and escrow that are unique, according to timeshare industry sources.
Besides Norton's firm, two other attorneys are working on the case: Soomi Kim, of North Carolina; and Christopher S. Polaszek of Tampa.
Orlando-based Marriott Vacations Worldwide Corp. (NYSE: VAC) says it has 61 properties with 12,807 vacation ownership villas and about 410,000 owners in the United States and 8 other countries. The company pools its timeshare resorts into the real estate trust handled by First American.
It's not the first time Marriott has faced lawsuits aimed at its points program, but it's the first time they are sued under real estate law and racketeering statutes.
In 2014, a proposed class action targeted the points program under consumer-protection laws. But that lawsuit, filed under the Marriott owner name of Salvatore Desantis, was tossed out by Orlando U.S. District Judge Gregory Presnell.
Desantis, of New Jersey, alleged that the value of his timeshare ownership dropped when Marriott introduced its points program, because the points program depleted the number of people swapping weeks at Marriott's timeshare resorts. But Presnell ruled that Desantis "got what he was promised" and that Marriott was only "responding to a change in the timeshare market."
pbrinkmann@orlandosentinel.com or
407-420-5660
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