Suit filed against Marriott alleges illegal timeshare scheme, seeks class action

Suit relates to timeshares in 44 cities in 11 states including Florida

May.May 20, 2016 12:00 PM

An Indiana couple who owns two timeshare weeks in Marco Island, Florida, has just filed suit against Marriott companies and others, alleging an illegal scheme that violates the Florida Vacation and Timeshare Act.

Anthony Lennen and Beth Lennen filed suit Friday against Orlando-based Marriott Ownership Resorts, Marriott Vacations Worldwide Corp. d/b/a Marriott Vacation Club, Marriott Resorts Travel Company, d/b/a/ MVC Exchange Company, Marriott Title Insurance, MVC Trust Owners Association, First American Financial, First American Trust, First American Title Company, Orange County, Florida, and Orange County Comptroller Martha O. Haynie.

The suit, filed in Orlando District Court, where Marriott’s vacation companies are located, alleges that through “a series of convoluted and patently illegal transactions” Marriott engaged in a scheme to convey “illusory real property ownership interests” to purchasers of Marriott’s points-based timeshare product. While a purchase of a Marriott Vacation Club timeshare is said to convey both title to a Florida timeshare estate and a beneficial interest in a Florida land trust, it, in fact, conveys neither, the suit alleges.

“At bottom, the [Marriott Vacation Club] product conveys to its purchasers nothing more than a use license for selected corporately-owned timeshare estates in 44 locations in 11 different states,” the suit says. “For defendants, however, the façade of the [Marriott Vacation Club] product provides significant opportunities for revenue that would not otherwise exist in connection with an awards program” or with the type of timeshares Marriott had sold for decades.

The Lennens bought their timeshare weeks at Marriott’s Crystal Shores in Marco Island in 2008. In addition to Florida, the lawsuit also cites timeshare locations such states as South Carolina, New Jersey, Arizona, Colorado and Hawaii, and seeks class action status.

The suit does not seek a specified amount, but according to the Lennens’ attorney Jeffrey Norton of the New York law firm Newman Ferrara LLP, “based on the number of class members and the relief sought, the potential damages are in the hundreds of millions [of dollars].”

A request for comment from a Marriott Vacation Club spokesperson was not immediately returned.

According to the suit, when the real estate market collapsed in 2008, Marriott found itself in possession of a rapidly increasing inventory of unsold and foreclosed timeshares held in its condominium resorts around the country. As the carrying costs associated with holding tens of thousands of timeshare properties skyrocketed, “Marriott devised a way to monetize its inventory” of the timeshares and avoid costs through a new points-based program, the Marriott Vacation Club.

The product was sold and packaged as a Florida timeshare estate in real property, coupled with a beneficiary interest in a Florida land trust, according to the suit.

The owners “are 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 suit says. Meanwhile, they are paying such costs associated with ownership as closing costs, recording fees, title policy premiums, taxes and various operational and maintenance fees and dues, according to the suit.

The Marriott Vacation Club product differs from traditional timeshares that Marriott had been selling since 1984, the suit says. While those timeshares entitle the purchaser to a fractional interest in real property in the form of a specific week or weeks at a designated timeshare condo, Marriott Vacation Club owners are allotted increments of points that can be used to book days at units at various condos that are contained in the land trust that forms the basis for the Marriott Vacation Club product, the suit says.

The case is “about a profit-driven scheme developed by Marriott and First American to sell illusory real property interests through an unlawful timeshare points program,” Newman Ferrara attorney Norton said via email. “The formality of the transactions, which include the issuance and recording of deeds and require the purchase title insurance, disguise the fact that the product is nothing more than a simple awards program.”

Purchasers “acquire no bona fide interest in real property and yet are burdened with all the costs associated with such an interest,” he said. “The scheme also harms owners of Marriott’s traditional week-to-week timeshares whose interests have been subordinated in favor of the far more profitable and competing points program. In fact, those traditional timeshare owners must now also buy into the points program in order to take advantage of exchange rights they used to enjoy.”

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