CA Bill Pits Privacy Rights Against Access Rights

California Bill Pits Timeshare Owners’ Privacy Rights Against Their Rights to Access and Use Membership Rosters to Communicate with Fellow Owners

By Jeff Weir
A low-profile bill in the California Legislature has put the privacy rights of timeshare owners on a collision course with their just-as-legal rights to access and use HOA membership rosters to communicate with other owners.

Assembly Bill 634 is sponsored by the Wyndham timeshare chain and the American Resort Development Association (ARDA), the Washington D.C.-based lobbying organization for all major US timeshare developers.  Introduced in 2015 and now awaiting action in the state Senate, the bill attempts to redefine the process by which owners can access member rosters in order to communicate about legitimate association business, most typically election contests and proxy issues.  The question at hand is whether the process enables communications — or makes them impossible.

It’s a complicated subject because developers and HOA boards are required under state and federal laws to protect the privacy of owner data.  At the same time, according to most HOA bylaws, boards are required to foster owner-to-owner communications.  Moreover, in one major California case, the appellate courts have ruled that owners do, indeed, have the legal right to access owner rosters.

These issues typically surface when HOA boards and management companies begin to have problems with members over issues such as elections, recalls, rising maintenance fees, reservation problems, or repairs that aren’t happening.  And in most cases, when owners try to get hold of owner rosters so they can launch their own communications, the boards and managers close ranks and unanimously say ‘absolutely not.’

Owner advocates say that developers and HOAs should adopt transparent communication plans that enable owners to easily contact other owners.  HOA boards, well aware of their legal fiduciary duty to protect owner data, usually adopt restrictive procedures that are designed to prevent owner rosters from falling into the hands of timeshare scammers who would solicit owners, relentlessly, to dump their timeshares for an upfront fee.

The issue has gotten much higher visibility in recent years as a result of a landmark court case in California, where an appellate court ruled in 2010 that an owner had the right to inspect, copy and use membership rosters to communicate with other owners about a petition to change the bylaws at a Worldmark resort.  The resort’s management company was Wyndham Resort Development Corp.

While not delving into many details of the case, which generated a 20-page appellate court ruling, it is fair to observe that the court did not like the fact that Worldmark took extensive steps to block disclosure of the membership list, even though disclosure was authorized by the association’s own bylaws.  The court also rejected Worldmark’s contention that the owner should pay $260,000 to subsidize the snail-mailing of his petition to Worldmark’s 260,000 members.   Finally, the court dismissed Worldmark’s claim that it could not share owner email addresses because it did not “own” the emails, even though it uses email addresses to handle owner reservations and online proxy voting for elections.  Worldmark claimed that Wyndham, the management company, “owned” the email lists.

The ruling in ‘Miller vs. Worldmark’ sent tremors throughout the developer industry — because it opened the door for timeshare owners to start communicating and organizing, on their own, to investigate issues at their resorts.  Prior to this, and even to this day, many HOA boards tend to be closely held clubs dominated by developers or their management company allies and, as a result, they can control all communications that are distributed to owners.

The pending California bill, promoted as a consumer protection measure, attempts to redefine disclosure procedures in the aftermath of the Worldmark ruling. Under AB 634, a timeshare owner would have to submit a request-to-communicate to the board and/or management company, then pay for the ‘reasonable’ cost of sending (or emailing) that communication to members of the HOA.  The board and/or management company would also have to determine that the communication involved legitimate association business (such as a board recall petition or a proposed amendment to HOA bylaws, as in the Worldmark case). The bill also provides an appeals procedure for members to go to court to compel disclosure of owner records.

The purpose of the bill and its procedure for disclosure, according to ARDA officials, is to prevent owner rosters from falling into the hands of third party companies that could use them to solicit business.  ‘This bill creates a process for timeshare owners to communicate with association members without the disclosure of the lists,’ ARDA said.  It is modeled after a statute in Florida (home to 25 percent of US timeshare resorts and headquarters for most, if not all, timeshare developers).

‘Our goal is to make it as hard as possible’ for the scammers to obtain owner data, said Christ Stewart, a legislative consultant for ARDA-ROC, the Resort Owner Coalition that advocates owner issues in many states.  He acknowledged, however, that the potential cost of complying with the proposed procedures could be daunting for rank-and-file owners.  ‘There only two options for paying. You pay for it or everyone else (in the association) pays it.’

Owner advocates have a different view of the legislation.  Owner communication, they say, is one key to a healthier timeshare industry.

‘When people need answers to questions about what’s happening at their resort, they deserve to get them,’ said Greg Crist, CEO of the National Timeshare Owners Association, based in Florida.  ‘I am sensitive to the fact that there are bad operators out there seeking to take advantage of consumers by obtaining board data records, but there are legitimate reasons why members should be able to circumvent their boards and communicate independently.

According to the bill’s author, Assemblyman Ian Calderon (D-Whittier), ‘As a result of the (Worldmark) ruling, any timeshare owner can easily get their association’s lists and sell those lists to any third party.  Such a list on the open market would easily be of substantial value, particularly to unscrupulous parties who prey upon timeshare owners.’

ARDA’s and Calderon’s positioning is ironic, Crist says, because timeshare scammers are the only groups that ALREADY appear to have access to plenty of owner records.  The only way they could have gotten them is from the companies that hold the records (most typically, by bribing someone in the organization to release owner data) or through highly sophisticated Internet searches.

An Assembly committee analysis of the bill notes: ‘Bills similar to this have failed passage over the question of whether or not timeshare nonprofits should be held to the record-release standards of nonprofits generally.  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..’

In the Worldmark ruling, the appellate court said timeshare entities need to strike a balance between protecting owner privacy while allowing owners to exercise their First Amendment rights to communicate with other owners.  ‘A danger exists in allowing too free an access to membership lists,’ the court said.  ‘However, the potential for abuse must be balanced against a member’s legitimate need and rights to utilize lists in election contests and for purposes reasonably related to a member’s interest.’

Crist says the proposed legislation does not satisfy the competing contest between owner privacy and disclosure.

‘This bill may be well intentioned, because protecting owner privacy is extremely important, but it sets up a process for owner communications that is so cumbersome and expensive that it effectively blocks the communications.  And that’s no accident.  This bill was deliberately drafted to accommodate the wishes of developers who want to maintain total control over owner communications,’ Crist said.

AB 634 sailed through the California Assembly without a single objection and was sent to the state Senate on a 79-0 vote on May 11.  It is now in the hands of the state Senate Judiciary Committee, where it is stalled.  Why?  Because the committee chairwoman, Sen. Hannah-Beth Jackson (D-Santa Barbara), has had personal experiences with timeshares (according to Calderon’s office) that made her very sensitive to the bill’s competing issues: owner privacy vs. disclosure.

‘We are trying to thread the needle between making (owner lists) confidential for certain purposes but not for people to legitimately talk to each other,’ said an analyst familiar with the bill. ‘Sometimes owner information should be shared.  If you’re an owner who has legitimate ideas, there is no way to communicate except through the management company, but they might have a conflict of interest.  Right now, there is now way to check on this, because no one is overseeing it.’

The California Legislature reconvenes in January.  Calderon’s bill will come up for reconsideration in the Senate Judiciary Committee in 2016 while both sides work on alternate language to resolve the competing issues in the bill.  Both sides say they are optimistic.

Shep Altshuler, an industry veteran, publisher of TimeSharing Today magazine and organizer of the Timeshare Board Members Association, said there are alternatives to resolve the disclosure dilemma.
“The tension over denying owners access to the owner rosters for legitimate purposes has been going on for decades. The majority of owners know that, while they are denied access, fraudulent operators appear to have unfettered access. Denying access and suppressing free speech through legislation are further examples as to what taints the image of timeshare ownership. A mechanism should be put in place, where owners can disseminate legitimate communications through an independent third party not controlled by the developer or HOA. Third party companies that administer ballots already exist. Why not use them?”

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By TST February 12, 2016 24 Comments