55-374.2 - Exchange programs.
§ 55-374.2. Exchange programs.
A. Any exchange company which offers an exchange program in the Commonwealthshall prepare and register with the Board a disclosure document including,but not limited to, the following:
1. The name and address of the exchange company;
2. The names and addresses of the top three officers, all directors, and, ifthe exchange company is privately held, all shareholders owning five percentor more interest in the exchange company;
3. Whether the exchange company or any of its officers or directors has anylegal or beneficial interest in any developer or managing agent for anytime-share program participating in the exchange program and, if so, the nameand location of the time-share project and the nature of the interest;
4. Unless the exchange company is also the developer or an affiliate, astatement that the purchaser's contract with the exchange company is acontract separate and distinct from the sales contract;
5. Whether the purchaser's participation in the exchange program is dependentupon the continued affiliation of the time-share project with the exchangeprogram;
6. Whether the purchaser's membership or participation, or both, in theexchange program is voluntary or mandatory;
7. A complete and accurate description of the terms and conditions of thepurchaser's contractual relationship with the exchange company and theprocedure by which changes in the terms and conditions of the exchangecontract may be made;
8. A complete and accurate description of the procedure to qualify for andeffectuate exchanges;
9. A complete and accurate description of all limitations, restrictions, orpriorities employed in the operation of the exchange program including, butnot limited to, limitations on exchanges based on seasonality, unit size, orlevels of occupancy, expressed in boldfaced type, and, in the event that suchlimitations, restrictions, or priorities are not uniformly applied by theexchange program, a clear description of the manner in which they are applied;
10. Whether exchanges are arranged on a space available basis and whether anyguarantees of fulfillment of specific requests for exchanges are made by theexchange program;
11. Whether and under what circumstances an owner, in dealing with theexchange company, may lose the use of occupancy of his time-share in anyproperly applied for exchange, without being provided with substituteaccommodations by the exchange company;
12. The fees or range of fees for participation by owners in the exchangeprogram, a statement of whether any such fees may be altered by the exchangecompany, and the circumstances under which alterations may be made;
13. The name and address of the site of each time-share property,accommodation or facility participating in the exchange program;
14. The number of units in each property participating in the exchangeprogram which are available for occupancy and which qualify for participationin the exchange program, expressed within the following numerical groupings:1-5, 6-10, 11-20, 21-50, and 51 and over;
15. The number of owners with respect to each time-share program or otherproperty who are eligible to participate in the exchange program, expressedwithin the following numerical groupings: 1-100, 101-249, 250-499, 500-999,and 1,000 and over, and a statement of the criteria used to determine thoseowners currently eligible to participate in the exchange program;
16. The disposition made by the exchange company of time-shares depositedwith the exchange program by owners eligible to participate in the exchangeprogram and not used by the exchange company in effecting exchanges;
17. The following information, which, except as provided in subsection B ofthis section, shall be independently audited by a certified public accountantor accounting firm in accordance with the standards of the AccountingStandards Board of the American Institute of Certified Public Accountants andreported for each year no later than July 1 of the succeeding year, beginningno later than July 1, 1985:
a. The number of owners enrolled in the exchange program. Such numbers shalldisclose the relationship between the exchange company and owners as beingeither fee paying or gratuitous in nature;
b. The number of time-share properties, accommodations or facilities eligibleto participate in the exchange program;
c. The percentage of confirmed exchanges, which shall be the number ofexchanges confirmed by the exchange company divided by the number ofexchanges properly applied for, together with a complete and accuratestatement of the criteria used to determine whether an exchange request wasproperly applied for;
d. The number of time-shares for which the exchange company has anoutstanding obligation to provide an exchange to an owner who relinquished atime-share during the year in exchange for a time-share in any future year;
e. The number of exchanges confirmed by the exchange company during the year.
18. A statement in boldfaced type to the effect that the percentage describedin subdivision 17 c of this subsection is a summary of the exchange requestsentered with the exchange company in the period reported and that thepercentage does not indicate a purchaser's or owner's probabilities of beingconfirmed to any specific choice or range of choices, since availability atindividual locations may vary.
B. The information required by subsection A shall be accurate as of a datewhich is no more than 30 days prior to the date on which the information isdelivered to the purchaser, except that the information required bysubsection A, subdivisions 2, 12, 13, 14, 15, and 16 shall be accurate as ofDecember 31 of the preceding year if the information is delivered betweenJuly 1 and December 31 of any year; information delivered between January 1and June 30 of any year shall be accurate as of December 31 of the year priorto the preceding year. At no time shall such information be accurate as of adate which is more than eighteen months prior to the date of delivery. Allreferences in this section to the word "year" shall mean calendar year.
C. In the event an exchange company offers an exchange program directly tothe purchaser, the exchange company shall deliver to such purchaser,simultaneously with such offering and prior to the execution of any contractbetween the purchaser and the exchange company, the information set forth insubsection A, above. The requirements of this subsection shall not apply toany renewal of a contract between a purchaser and an exchange company.
D. Each exchange company must include the statement set forth in subdivision18 of subsection A on all promotional brochures, pamphlets, advertisements,or other materials disseminated by the exchange company which also containthe percentage of confirmed exchanges described in subdivision 17 c ofsubsection A.
E. An exchange company shall, on or before July 1 of each year, file with theBoard and the association for the time-share program in which the time-sharesare offered or disposed, the information required by this section withrespect to the preceding year. If the Board determines that any of theinformation supplied fails to meet the requirements of this section, theBoard may undertake enforcement action against the exchange company inaccordance with the provisions of Article 6 (§ 55-396 et seq.) of thischapter. No developer shall have any liability arising out of the use,delivery or publication by the developer of written information provided toit by the exchange company pursuant to this section. Except for writteninformation provided to the developer by the exchange company, no exchangecompany shall have any liability with respect to (i) any representation madeby the developer relating to the exchange program or exchange company, or(ii) the use, delivery or publication by the developer of any informationrelating to the exchange program or exchange company. The failure of theexchange company to observe the requirements of this section, or the use byit of any unfair or deceptive act or practice in connection with theoperation of the exchange program, shall be a violation of this section.
F. The Board may establish by regulation reasonable fees for registration ofthe exchange company disclosure document. All fees shall be remitted by theBoard to the Treasurer of the Commonwealth, and shall be placed to the creditof the Common Interest Community Management Information Fund establishedpursuant to § 55-529.
(1985, c. 517; 1998, c. 460; 2008, cc. 851, 871.)