Late last month, Virginia governor Ralph Northam signed HB 674 into law, adding a surety bond provision for timeshare developers. The bill takes effect on July 1, 2018.
HB 674 modifies a portion of the Virginia Real Estate Timeshare Act. A timeshare is an arrangement wherein individuals own property in conjunction with other individuals on a floating or fixed schedule. The industry is regulated by the Common Interest Community Board, a division of the Department of Professional and Occupational Regulation (DPOR). Timeshare projects and programs need to be registered with the Board, and developers cannot accept any deposits until the project or program has been registered.
That’s where surety bonds come in. Under current law, when a timeshare developer begins accepting deposits, the funds need to be held in escrow until further action is taken. That is, until the cancellation period ends and the buyer can no longer cancel, until the buyer defaults on the contract, or until the deposit is refunded to the buyer. Requiring that the funds are held in an escrow account is a buyer protection measure, and this option is still available to developers to use.
HB 674’s passage means that developers now have another option that still protects buyers’ funds�a surety bond. If the timeshare project consists of 25 or more units, the developer can get a surety bond rather than holding the funds in escrow. If the total deposits equal less than $10,000, the developer needs surety bonds for each separate deposit. But, if the deposits exceed $10,000, they can get a blanket bond in varying amounts instead:
- More than $10,000 but less than $75,000�$75,000 bond
- More than $75,000 but less than $200,000�$200,000 bond
- $200,000 or more but less than $500,000�$500,000 bond
- $500,000 or more but less than $1,000,000�$1,000,000 bond
- More than $1,000,000�Bond equaling 100% of deposits
Timeshare developers are still on the hook for refunding deposits when necessary, and for refunding the surety for any claims it pays out.
Questions about HB 674? Get in touch with the Board. Questions about getting a Virginia surety bond? You’re in the right place�get in touch with Single Source Insurance!