Selling a Timeshare Unit: What Does a Right of First Refusal (ROFR) Clause Mean?
Timeshare owners may not even know that a Right of First Refusal clause exists on their unit until they attempt to sell it. It is then that it is usually discovered and the owner must begin the process of understanding his obligation to the timeshare management company. An ROFR clause can have a significant impact on the sales process.
A timeshare can be the perfect investment for the person who likes to travel or wants to visit the same region every year and have a definitive place in which to vacation. However, there are times when a timeshare owner may have to sell his or her property, for a whole host of potential reasons. In today’s tough economy, many people choose to sell their units because they cannot keep up with the maintenance fees. Many owners, when this situation arises, try to sell their timeshare quickly — particularly if they are in a difficult spot financially. However, at the time of purchase many timeshare owners may not realize that they have a clause on their contract that states that the management company has the right to refuse any sale. This is also known as a “Right of First Refusal,” or ROFR, clause.
Owning a timeshare unit is in fact owning a piece of real estate. It is a title to own a portion of a condominium unit for an allotted increment of time. This may be similar to a lease in some respects, but the owner has rights similar to a condominium owner for an apportioned time. Because of this, selling the unit is not unlike selling any other piece of real estate. However, timeshare condominiums do include many restrictions on their sale since their ownership is shared. The transfer or sale of an owner’s apportioned time should be considered a legal transaction, so deed and sale restrictions should be examined by a qualified attorney before the unit is actually bought or sold.
Basically, timeshare unit owners share their unit with 51 other owners, if each owner has one week out of the year; the specific number of owners can vary from one property to another. Therefore, all parties involved are impacted any time someone sells their ownership share. This in part is why there are such restrictions as Right of First Refusal clauses. The sale price of a person’s unit of time affects all other owners of that unit and can negatively impact the entire complex if it is sold too cheaply.
A timeshare Right of First Refusal clause gives the timeshare management company the right to buy a timeshare unit at the same price for which the owner is selling the unit on the open market to a private buyer. If the timeshare management company were to exercise their right to purchase the allotted one week portion of the unit, this would nullify any existing contract the seller has. In this case, the timeshare owner becomes the timeshare management company, rather than the private buyer.
A company may choose to do this simply to buy a prime week unit so they can rent it out themselves for a profit, or sell it for a higher price. In most cases, however, the timeshare management company simply wishes to maintain a certain value on units for sale for the benefit of the complex at large.
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