Newly introduced legislation in the Florida House of Representatives, currently known as “HB 5005,” proposes to significantly deregulate various industries, professions and occupations. The 281-page cost-cutting effort would, among other things, eliminate nearly all of the Florida licensing and registration requirements relating to the sale of timeshare and fractional interests.
Sweeping Regulatory Change
Under HB 5005, existing condominium, cooperative and timeshare filing requirements (including component site and multisite timeshare plans), exchange company offerings, reservation programs, incidental benefit filings, and gift and promotional offerings are eliminated. The bill also proposes to eliminate the requirement for the managing entity of a condominium or timeshare association be a licensed Community Association Manager under Chapter 468, Florida Statutes. Perhaps most dramatic, the bill would eliminate the Division of Florida Condominiums, Timeshares, and Mobile Homes, the arm of the Florida Department of Business and Professional Regulation responsible for reviewing registrations and enforcing of Florida’s condominium and timeshare laws.
It appears that HB 5005 haphazardly slashes provisions of Florida law in an effort to reduce costs and to effectuate sweeping deregulation. A close reading of the bill leads the reader to the conclusion that the drafting is not precise and that mistakes, omissions and the failure to understand the nuances of the affected laws would create uncertainty and difficulty for those seeking to comply. For example, the complete deletion of §721.07, Florida Statutes, not only removes the requirement to file public offering statements with the Division, but also removes the detailed list of items that are required to be included in the public offering statement that developers are still required to provide to all prospective purchasers of timeshare and fractional interests. Confusingly, the companion provisions for multisite public offering statements continue to include an itemization of the specific disclosures and content required to be included in a multisite public offering statement.
In addition to the significant revisions to Florida’s condominium, cooperative and timeshare acts, HB 5005 also repeals Florida’s Seller of Travel Act. Under the existing Seller of Travel Act, sellers of travel (such as vacation certificates and travel services) are required to provide for a cancellation period and disclosures, as well as post a surety bond of up to $50,000. If HB 5005 were to be adopted, consumers of short-term vacation products would lose these specific protections and the number of incidents of fraud and complaints would potentially expand significantly. According to Jason Garcia at the Orlando Sentinel, Florida has received more than 13,000 complaints about sellers of travel during the past five years. To the extent Florida does repeal its Seller of Travel Act, it would be following in the footsteps of Nevada, which on July 1, 2009, disbanded the Consumer Affairs Division of the Nevada Department of Business and Industry.
Help or Harm?
No one with development experience in Florida would argue that the existing timeshare/fractional regulatory regime couldn’t be amended to improve oversight and eliminate cost inefficiencies. However, does a sledge-hammer approach actually improve the situation for developers? Should HB 5005 become law, there is serious concern that it would lead to confusion and uncertainty among developers of condominium, cooperative and timeshare products, management companies and those selling legitimate travel products. Publicly-traded development companies would be particularly affected since they would no longer be able to rely on Division approval letters to show compliance with the applicable laws.
In addition, the removal of regulation and an agency with specifically designated enforcement powers will potentially provide unscrupulous groups with a greater ability to evade compliance, leaving consumers to struggle for redress through uneven enforcement, presumably available by private rights of action or by an already overwhelmed attorneys general office. The resulting damage to the reputation of the vacation ownership and travel industries could set those industries back to the position that they were in during the 1970’s and early 1980’s, before newly-adopted regulation provided a healthy environment for growth and respectability. One developer representative was quoted in the Orlando Sentinel as saying:
"Florida has what some people would call a colorful history of land fraud that goes back 100 years. Others would call it a lurid history of land fraud. The division [of condominiums, time shares and mobile homes] was put together to force the bad actors out of these areas of activity. We think it'd be a terrible mistake for you all to deregulate those areas of the division. We strongly oppose it.