CHAPTER 514E

TIME SHARING PLANS

SECTION
514E-1 Definitions
514E-1.5 Time share administrator; duties
514E-2 Status of property
514E-2.5 Licensing of sales agents and acquisition agents
514E-2.6 Repealed
514E-3 Taxation
514E-4 County authority
514E-5 Geographic limitations
514E-6 Time sharing in projects
514E-6.5 Voting rights for time share units
514E-7 Maintenance charges
514E-8 Mutual right to cancel
514E-8.5 Classes of time share interests
514E-8.6 One-to-one use-right to use-night requirement
514E-9 Disclosure statement
514E-9.5 Exchange program; general provisions
514E-9.8 Time share interest owner referrals
514E-10 Registration required; developer, acquisition agent, plan manager, and exchange
agent
514E-10.3 Time share owners association; budgets and reserves
514E-10.5 Consultant review of developer filing
514E-11 Prohibited practices
514E-11.1 Deceptive trade practices
514E-11.2 Power to enjoin
514E-11.3 Remedies; sales voidable; when and by whom
514E-11.4 Defense to action
514E-12 Civil penalty; suspension or revocation of registrations
514E-12.5 Statutory or common-law remedies
514E-13 Authority of director
514E-14 Preexisting time share units and plans
514E-15 Severability
514E-16 Deposit of purchaser's funds, notes, and contracts into escrow
514E-17 Release of purchaser's funds, notes, and contracts from escrow without a
closing
514E-18 Release of purchaser's funds, notes, and contracts from escrow upon closing
514E-19 Protection of purchasers from blanket liens
514E-20 Effect of recording a nondisturbance agreement
514E-21 Effect of recording a notice of time share plan

Amended 0602 1
 514E-22 General requirements for trusts

Amended 0602 1
 514E-23 Requirements for trustees
514E-24 Additional requirements for lien payment trusts
514E-25 Lien payment deposit
514E-26 Termination of a trust
514E-27 Alternative arrangements for purchaser protection
514E-28 Requirements for surety bonds and letters of credit
514E-29 Association; lien for delinquent assessments
514E-30 Scope of chapter
514E-31 Private right of action

§514E-1 Definitions. As used in this chapter, unless the context otherwise requires:
"Acquisition agent" means any person, other than a developer or sales agent, who, for
compensation, solicits or encourages others to attend a time share sales presentation or to contact a
time share sales agent or developer; provided that this term shall not include individuals who perform the
stated activities and are employed by or in contract with:
(1) A real estate broker who is licensed under chapter 467; or
(2) An acquisition agent registered pursuant to section 514E-10.
"Association" means the time share owners association.
"Blanket lien" means any mortgage, deed of trust, option to purchase, vendor's lien or interest
under a contract or agreement of sale, or any other lien or encumbrance which (i) affects more than one
time share interest either directly or by reason of affecting an entire time share unit or the property upon
which the time share unit to be used by the purchasers is located, and (ii) secures or evidences the
obligation to pay money or to sell or convey the property and which authorizes, permits, or requires the
foreclosure and sale or other defeasance of the property affected; provided, however, that for the
purpose of this chapter, the following shall not be considered blanket liens:
(1) The lien of current real property taxes;
(2) Taxes and assessments levied by public authority;
(3) A lien for common expenses under chapter 514A or a lien for similar expenses in favor
of a homeowners or community association;
(4) An apartment lease or condominium conveyance document conveying a single
condominium apartment or a lease of a single cooperative apartment; and
(5) Any lien for costs or trustee's fees charged by a trustee holding title to time share units
pursuant to a trust created under section 514E-19.
"Commission" means the real estate commission established under section 467-3.
"Developer" means any person, partnership, or corporation which creates a time sharing plan or
is in the business of selling time share units.
"Director" means the director of commerce and consumer affairs.
"Exchange agent" means a person who operates an exchange program.
"Exchange program" means a plan or program in which the owners or holders of time share
interests in a time share plan may exchange occupancy rights among themselves or with the owners or
holders of time share interests in other time share plans or with the owner or holders of units in other
projects.

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 "Negotiable instrument" means any check, draft, bill of exchange, certificate of deposit, note,
and any other document which is an "instrument" within the meaning of article 3 of chapter 490,
including instruments subject to said article pursuant to section 490:3-805.
"Nondisturbance agreement" means an instrument by which the holder of a blanket lien agrees
that its rights in the property shall be subordinate to the rights of owners. Every nondisturbance
agreement shall contain a covenant by the lienholder that the lienholder, its successors, and anyone who
acquires the property through the blanket lien shall not use, or cause or permit the property to be used
in a manner which prevents the owners from using the time share units in the manner contemplated by
the time share plan. The lienholder's agreement not to disturb an owner may require as a continuing
condition that the owner perform all obligations and make all payments due under any purchase money
contract and, if the time share interest or unit is held as a leasehold, under the lease.
"Notice of time share plan" means an instrument executed by the holder of the legal and
equitable title to the fee or long-term leasehold interest in a time share unit, and which provides notice of
the existence of the time share plan and of rights of owners. The notice of time share plan must identify
the use period for each time share interest and the name of the initial purchaser thereof. If the time share
unit is located outside the State, the notice shall be contained in a declaration of covenants, conditions,
and restrictions which provide that the notice shall, as a matter of covenant, have the effects described in
section 514E-21. The declaration of covenants, conditions, and restrictions must be prepared so as to
(i) constitute a covenant running with and an equitable servitude upon the time share units for the
duration of the time share plan, and (ii) have the effects described in section 514E-21.
"One-to-one use-right to use-night requirement" means that the sum of the nights which owners
are entitled to use in a given year shall not exceed the number of nights available for use by those
owners during that year.
"Owner" means any person who owns a time share interest; provided, however, that to the
extent and for such purposes as are provided in any agreement of sale, the vendee under such
agreement of sale shall be considered the owner of the time share interest.
"Plan manager" means a person who undertakes the duties, responsibilities, and obligations of
managing a time share plan.
"Project" means property that is subject to project instruments, including but not limited to
condominiums and cooperative housing corporations.
"Project instrument" means one or more documents, including any amendments to the
documents, by whatever name denominated, containing restrictions or covenants regulating the use or
occupancy of a project.
"Purchase money contract" means any note, negotiable instrument, agreement of sale, installment
sales contract, or other contract which evidences or embodies a debt arising from a purchase money
loan made to a purchaser by the developer or a creditor (i) who is affiliated with the developer by
common control, contract, or business arrangement, or (ii) to whom the developer referred the
purchaser.
"Purchaser" means any person who has contracted to acquire a time share interest.
"Purchaser money lien" means a lien on a time share interest that is:
(1) Taken or retained by the developer to secure payment by the purchaser of a time share
interest of all or part of its price; or

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 (2) Given by a purchaser to a person who provides financing to the purchaser to enable the
purchaser to buy the time share interest.
The rights of a seller of a time share interest under an agreement of sale shall be considered a purchase
money lien for the purpose of this section.
"Record, recorded, etc." means to record in accordance with chapter 502, or to register in
accordance with chapter 501.
"Sales agent" means a person who sells or offers to sell for compensation a time share interest in
a time share plan, except a person who acquired a time share interest for the person's own occupancy
and later offers it for resale.
"Time share instrument" means one or more documents, by whatever name denominated,
creating or regulating any time share plan.
"Time share interest" means any interest in a time share unit or plan which entitles the owner or
holder thereof to the use, occupancy or possession of a time share unit on a periodically recurring basis.
"Time share plan" means any plan or program in which the use, occupancy, or possession of
one or more time share units circulates among various persons for less than a sixty day period in any
year, for any occupant. The term time share plan shall include both time share ownership plans and time
share use plans, as follows:
(1) "Time share ownership plan" means any arrangement whether by tenancy in common,
sale, deed or by other means, whereby the purchaser receives an ownership interest
and the right to use the property for a specific or discernible period by temporal
division.
(2) "Time share use plan" means any arrangement, excluding normal hotel operations,
whether by membership agreement, lease, rental agreement, license, use agreement,
security or other means, whereby the purchaser receives a right to use accommodations
or facilities, or both, in a time share unit for a specific or discernible period by temporal
division, but does not receive an ownership interest.
"Time share unit" means the actual and promised accommodations, and related facilities, which
are the subject of a time share plan.
"Transient vacation rentals" means rentals in a multi-unit building to visitors over the course of
one or more years, with the duration of occupancy less than thirty days for the transient occupant.
"Unit owner" means the holder of the fee of a unit not used as a time share unit; except that if the
fee is encumbered by a lease of at least five years duration, then the person entitled to possession shall
be deemed to be the unit owner.

§514E-1.5 Time share administrator; duties. The director shall appoint a time share
administrator, who shall not be subject to chapters 76 and 77, to administer this chapter. The
administrator shall be responsible for the performance of the duties conferred upon the director by this
chapter. (Effective July 1, 2002, "chapters 76 and 77" changed to "chapter 76".)

§514E-2 Status of property. (a) The temporal division of any interest in real property shall
not, in and of itself, affect its status as real property.

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 (b) Whether a time share plan is a time share ownership plan or time share use plan, for
purposes of chapter 467 a time share interest shall constitute "real estate" and the offer or sale thereof
shall constitute the offer or sale of an interest in real property.

§514E-2.5 Licensing of sales agents and acquisition agents. (a) Except as provided in
section 467-2, no sales agent shall act or assume to act as a real estate salesperson or a real estate
broker without a license previously obtained under and in compliance with chapter 467 and the rules
and regulations of the real estate commission.
(b) Except as provided in section 467-2, no acquisition agent shall solicit or encourage
others to attend a time share sales presentation or to contact a time share sales agent or developer
except as otherwise provided for by rules adopted by the director pursuant to chapter 91 without a real
estate broker’s license previously obtained under and in compliance with chapter 467 and the rules and
regulations of the real estate commission or without registering as required by section 514E-10.
(c) The director shall adopt rules limiting the activities of and governing sales agents and
acquisition agents, regardless of whether such persons are also licensed under chapter 467. The rules:
(1) May authorize an acquisition agent, whether or not licensed under chapter 467, and its
employees and independent contractors, whether or not licensed under chapter 467, to
invite others to attend a time share sales presentation or an entertainment function
offered in connection therewith, so long as the invitation is made from a principal place
of business, branch office, or other real estate place of business, or from a booth
operated in accordance with state and county laws by the acquisition agent;
(2) May authorize an acquisition agent, whether or not licensed under chapter 467, and its
employees and independent contractors, whether or not licensed under chapter 467, to
extend invitations from a principal place of business, branch office, or other real estate
place of business, or from a booth, without requiring the physical presence of a person
licensed under chapter 467; provided that the acquisition agent's employees remain in
the principal place of business or the booth at all times;
(3) Shall provide that any individual, who for compensation solicits or encourages others to
attend a time share sales presentation or to contact a time share sales agent or
developer, shall be employed, either directly or as an independent contractor, by a sales
agent or acquisition agent;
(4) Shall provide that a real estate broker or acquisition agent who employs, either directly
or as an independent contractor, an individual who is not licensed under chapter 467, to
solicit or encourage others to attend a time share presentation or to contact a time share
sales agent or developer, shall be responsible for the acts of the employee;
(5) Shall establish rules and conditions strictly regulating and, if legally permissible,
prohibiting telephone solicitation of guests in hotels; and
(6) Shall establish such other rules as the director deems to be in the public interest.
(d) If the director determines, after notice and a hearing, that an acquisition agent has
violated any provision of this chapter or any rule or regulation adopted by the director pursuant to this
chapter, the director may suspend or revoke the registration of such person as an acquisition agent.

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 (e) If the real estate broker's license, issued under chapter 467, of an acquisition agent or
sales agent is forfeited, suspended, revoked, terminated, or placed on inactive status, the acquisition
agent or sales agent shall not act as an acquisition agent or sales agent under this chapter.

§514E-2.6 REPEALED.

§514E-3 Taxation. (a) The plan manager, if any, shall collect and pay real property and
transient accommodations taxes due on the time share units or occupants under the plan manager's
authority as the agent of the owners of the individual units or temporal divisions thereof. The liability of
the individual owners of the units, or temporal division thereof, for real property taxes, shall be primary
to all parties except the plan manager. The right to contest or appeal any real property or transient
accommodations tax assessment shall apply to the plan manager and any person having an interest in a
time share unit.
(b) The acquisition agent and sales agent shall maintain records pertaining to the general
excise tax of any independent contractors employed by them, their addresses and commissions paid
during each calendar year. The plan manager shall maintain records of the general excise and transient
accommodations taxes due and owing with respect to any occupants or time share units under the plan
manager's management. The records for any year shall be retained for at least two years and be
available for inspection by the director or the director of taxation.

[§514E-4] County authority. The several counties shall, by amendment of their zoning
ordinances, limit the location of time share units, time share plans and other transient vacation rentals,
within such areas as are deemed appropriate.

§514E-5 Geographic limitations. Except as provided in this section, time share units, time
share plans, and transient vacation rentals are prohibited.
(1) Existing time share units, time share plans, and transient vacation rentals are not
impaired by the provisions of this section.
(2) Time share units, time share plans, and transient vacation rentals are allowed:
(A) In areas designated for hotel use, resort use, or transient vacation rentals,
pursuant to county authority under section 46-4, or where the county, by its
legislative process, designates hotel, transient vacation rental, or resort use;
(B) In a hotel where the county explicitly approves such use, in advance, as a
nonconforming use; or
(C) In a county with a population in excess of five hundred thousand, in an existing
hotel which is a valid non-conforming use under county ordinance; provided that
the property shall have at least sixty units and at least forty per cent of the units,
upon completion of sales of the time share intervals in the project, shall be made
available for sale as residential apartments or rented as residential apartments.

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 §514E-6 Time sharing in projects. (a) If the project in which the time share unit or time
share plan is to be created contains an existing time share unit or time share plan, then time share units
and plans shall be regulated according to the terms of the project instruments.
(b) If the project in which the time share unit or time share plan is to be created is not a
hotel and does not contain time share units or a time share plan, then such use may be created only if
such use is explicitly and prominently authorized by the project instruments, or the project instruments
are amended by unanimous vote of the unit owners to explicitly and prominently authorize time sharing.
(c) Any condominium project in an area not designated for hotel use, resort use, or
transient vacation rentals that:
(1) Contains one or more transient vacation rental units may be classified as a hotel use; or
(2) Contains more than ninety-five per cent transient vacation rental units shall be classified
as a hotel.
The foregoing shall not limit the individual counties in zoning for or defining hotels.

[§514E-6.5] Voting rights for time share units. Voting rights for any apartment units
designated or sold as time share units shall be as provided in rules adopted by the director of the
department of commerce and consumer affairs; provided the rules shall seek to provide reasonable
protection for persons who own partial interests in or rights to occupy the units.

[§514E-7] Maintenance charges. If time share units, or transient vacation rentals are
located in the same project as private residential units, charges for the maintenance of common elements
assessed against time share and transient vacation rental units may exceed the charges assessed against
other units by as much as fifty per cent; provided that such charges do not exceed those assessed
against units in the project accommodating transient vacationers with stays of thirty days or less, and
such charges are in proportion to extra maintenance expenses actually attributable to the time share and
transient vacation rental units.

§514E-8 Mutual right to cancel. Within seven calendar days after the execution of the
contract to purchase an interest in a time share plan, or within seven calendar days after the purchaser's
receipt of a disclosure statement required by this chapter, whichever occurs later, either party may
cancel the contract without penalty by mailing or delivering a notice of cancellation to the other party at
an address specified on the contract. The notice of cancellation shall be effective upon mailing or
delivery to the other party at the address specified on the contract.

[§514E-8.5] Classes of time share interests. (a) A time share plan may establish classes of
time share interests defined by characteristics as the developer shall determine, including but not limited
to season, unit size, location, view, or otherwise.

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 (b) If one or more of the time share units will not be available for the entire duration of the
time share plan then, in addition to other characteristics as the developer shall determine, the time share
interests shall be classified by duration.

[§514E-8.6] One -to-one use-right to use-night requirement. (a) A developer shall not
offer or dispose of a time share unit or a time share interest unless the one-to-one use-right to use-night
requirement is currently satisfied and will continue to be satisfied for the duration of the time share plan.
(b) The time share instruments shall contain provisions assuring satisfaction of the one-to-
one use-right to use-night requirement for the duration of the time share plan except during temporary
periods of noncompliance due to casualty or condemnation.
(c) The following criteria shall be considered in determining whether the one-to-one use-
right to use-night requirement is satisfied:
(1) If the time share plan has more than one class of time share interest, then the
requirement must be satisfied within each class;
(2) Only use nights available and protected from blanket liens for the duration of the time
share plan shall be counted; provided that if time share interests are classified by
duration, then as to each class, only use nights available and protected from blanket
liens for the entire duration of that class shall be counted;
(3) A use night counted to satisfy the requirement for one class may not also be counted to
satisfy the requirement for a competing class;
(4) No individual time share unit may be counted as providing more than three hundred
sixty-five use nights per calendar year (or more than three hundred sixty-six use nights
per leap year);
(5) The use rights of each owner shall be counted without regard to whether the owner's
use rights have been suspended for failure to pay assessments or otherwise. Use rights
attributable to unsold time share interests shall be counted;
(6) Use rights of nonowners shall be counted. Use rights of the developer and its affiliates
in excess of those attributable to unsold time share interests shall be counted;
(7) Use nights reserved by the association or plan manager for the purpose of performing
maintenance and repairs to a time share unit shall not be considered;
(8) Use rights borrowed from a subsequent year or carried over from a prior year shall not
be considered; provided that such practice is not established for the purpose of evading
the requirements of this section; and provided further that any such acceleration or
deferral of use rights is appropriately balanced and restricted; and
(9) The director may adopt rules identifying additional criteria to be used to calculate
whether the one-to-one use-right to use-night requirement is satisfied.
(d) This section shall not be deemed to prohibit the time share instruments from including
provisions permitting rental by the association or the developer, or reservation and use by owners, of
use nights which remain unreserved as of sixty or fewer days in advance of the use night. Any such use
rights shall not be considered in determining whether the one-to-one use-right to use-night requirement
is satisfied.

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 §514E-9 Disclosure statement. (a) Any offering of a time sharing plan to the public shall
disclose:
(1) The name and address of the developer and of the time share units;
(2) The name and address of the plan manager, if any, and a description of the plan
manager's responsibilities and authority;
(3) A description of the time share units, including the developer's schedule for completion
of all buildings, units and amenities and dates of availability;
(4) If the time share plan is located in a condominium property regime, a description of the
project and any pertinent provisions of the project instruments;
(5) Any restraints on the transfer of the buyer's time share interest in the time share units or
plan;
(6) Whether the time share plan is a time share ownership plan or a time share use plan,
along with a description of the rights and responsibilities under said plan;
(7) A statement that there is a seven-calendar-day period of mutual rescission;
(8) A statement that pursuant to section 514E-11.3, every sale or transfer, made in
violation of this chapter is voidable at the election of the purchaser;
(9) Notice of any liens, title defects or encumbrances on or affecting the title to the units or
plan;
(10) Notice of any pending or anticipated suits that are material to the time share units or
plan, of which the developer has, or should have, knowledge;
(11) The total financial obligation of the purchaser, which shall include the initial price and any
additional charges to which the purchaser may be subject;
(12) An estimate of the dues, maintenance fees, real property taxes, and similar periodic
expenses, and the method or formula by which they are derived and apportioned; and
(13) Other disclosures required by the director, as provided by rules adopted pursuant to
chapter 91.
(b) The requirements of this section shall not apply to the following transactions:
(1) Any transaction pursuant to order of any court;
(2) Any disposition by a government or governmental agency;
(3) Normal hotel operations; or
(4) Any gratuitous transfer.
(c) A developer or sales agent shall promptly amend or supplement the disclosure
statement to report any material change in the information required by this section.
[§514E-9.5] Exchange program; general provisions. (a) An exchange agent (including the
developer if it is also an exchange agent) shall distribute not less than annually to each purchaser of a
time share interest participating in the exchange program materials containing written information which
shall include the following:
(1) The manner in which the program is operated, the identity of the persons operating the
program, and the affiliation between the persons operating the program and the
developer;
(2) Whether membership, participation, or both, in the program are voluntary or
mandatory;

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 (3) The costs or ranges of costs of membership and participation in the program as of a
specified date, not more than one year before the disclosure statement is delivered to
the purchaser, and the person to whom those costs are payable;
(4) Whether and how any of the costs specified in paragraph (3) may be altered, which
costs are to be fixed on a case-by-case basis, and the manner in which they are to be
fixed in each case;
(5) A description of the availability of time share units represented to be participating in the
exchange program;
(6) The reservation and confirmation or other procedures to effectuate the exchange of
occupancy rights; and
(7) Other disclosures required by the director as provided by rules adopted pursuant to
chapter 91.
(b) A copy of the most current written materials supplied by the exchange agent pursuant to
subsection (a) of this section shall be delivered to each purchaser simultaneously with the delivery of the
disclosure statement.
(c) If the exchange agent is not the developer, a subsidiary of the developer, controlled by
the developer, or affiliated with the developer, then:
(1) The developer shall have no liability for the publication or distribution by the developer
of the most current written materials supplied to the developer by the exchange agent
pursuant to this section or the rules adopted by the director; and
(2) The exchange agent shall have no liability with respect to any violation of this chapter or
the rules adopted by the director arising out of the use by a developer of information
relating to an exchange program other than that provided to the developer by the
exchange agent.

[§514E-9.8] Time share interest owner referrals. (a) An owner of an interest in a time
share plan duly registered under this chapter who is not licensed under chapter 467 and provides the
name and address of a prospective purchaser or otherwise refers a prospective purchaser of an interest
in the same time share plan to a developer, sales agent, or resale agent of the time share plan shall be
exempt from licensing requirements under chapter 467; provided that:
(1) Any fee paid to the owner shall be in the form of a credit or other nonmonetary
compensation and shall not exceed $1,000 per project during any twelve-month
calendar period;
(2) The owner shall be limited to providing the name and address of the prospective
purchaser and the owner shall not advertise or promote the time share plan or the
referral provided to developers, sales agents, or resale agents under this section; and
(3) The developer, sales agent, or resale agent shall provide the owner who received a
referral fee with a written receipt that identifies and provides the value of the
compensation given.
(b) Nothing in this chapter or in chapter 467, including section 467-14(14), shall be
construed to prohibit or prevent a developer, sales agent, or resale agent from entering into a transaction
with a time share interest owner prusuant to this section.

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 §514E-10 Registration required; developer, acquisition agent, plan manager, and
exchange agent. (a) A developer shall not offer or dispose of a time share unit or a time share interest
unless the disclosure statement required by section 514E-9 is filed with the director pursuant to the time
specified in this chapter, or the development is exempt from filing, and the time share plan to be offered
by the developer is accepted by the director for registration under this chapter. The director shall not
accept a developer's time share plan if the developer does not possess a history of honesty, truthfulness,
financial integrity, and fair dealing.
(b) An acquisition agent (including the developer if it is also the acquisition agent) shall
register under this chapter by filing with the director a statement setting forth the time sharing plan for
which it is providing prospective purchasers, its address, the telephone number, other information
required by the director as provided by rules adopted pursuant to chapter 91, and, if the acquisition
agent is not a natural person, the name of the responsible managing employee; provided that an
acquisition agent licensed under chapter 467 as a real estate broker shall not be required to register
under this chapter. All acquisition agents not licensed under chapter 467 shall be approved by the
director. The director shall not approve any acquisition agent who is not of good character and who
does not possess a reputation for honesty, truthfulness, and fair dealing. The acquisition agent shall
furnish evidence that the acquisition agent is bonded as required by rules adopted by the director
pursuant to chapter 91 to cover any violation by the acquisition agent of any solicitation ordinance or
other regulation governing the use of the premise or premises in which the time share plan is promoted;
provided that the acquisition agent shall be separately bonded for each time share plan for which it is
providing prospective purchases.
(c) A plan manager (including the developer if it is also the plan manager) shall register
under this chapter by filing with the director a statement setting forth the time sharing plan that it is
managing, its principal office address, telephone number, and responsible managing employee. The plan
manager shall furnish evidence that the plan manager is bonded as required by rules adopted by the
director pursuant to chapter 91 to cover any default of the plan manager and any of its employees of
their duties and responsibilities; provided that the plan manager shall be separately bonded for each time
share plan under the management of the plan manager.
(d) An exchange agent (including the developer if it is also an exchange agent) shall register
under this chapter by filing with the director a statement setting forth the time sharing plan for which it is
offering exchange services, its principal office address and telephone number, and designate its
responsible managing employee.
(e) Any plan manager or developer registration required in this section shall be renewed by
December 31 of each even-numbered year, and any acquisition agent or exchange agent registration
required in this section shall be renewed on December 31 of each odd-numbered year; provided that
this subsection shall not relieve the person required to register from the obligation to notify the director
promptly of any material change in any information submitted to the director, nor shall it relieve the
developer of its obligation to promptly file amendments or supplements to the disclosure statement, and
to promptly supply the amendments or supplements to purchasers of time share interests.

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 [§514E-10.3] Time share owners association; budgets and reserves. (a) For each fiscal
year, the plan manager, or the board of the association if there is no plan manager, shall adopt an
operating budget and distribute copies to all members of the association. The budget shall contain at
least the following:
(1) The estimated revenues and operating expenses of the association;
(2) Information as to whether the budget has been prepared on a cash or accrual basis;
(3) The total cash reserves of the association as of the date of the budget;
(4) The estimated cash reserves the association will require to maintain the property;
(5) A general explanation of how the estimated cash reserves are computed; and
(6) The amount the association must collect for the year to fund the estimated cash
reserves.
(b) The plan manager, or the board of the association if there is no plan manager, shall
arrange for an annual independent audit of the association's financial accounts conducted by a public
accountant in accordance with generally accepted auditing standards. Upon request, a copy of the audit
shall be provided to the director, to any member of the association, and any prospective purchaser.
The audit report shall include such information as provided by rules adopted by the director pursuant to
chapter 91.

§514E-10.5 Consultant review of developer filing. The director may contract with private
consultants in connection with the review of the filing required of time share developers pursuant to
section 514E-10(a) and (f). The cost of contracting private consultants shall be borne by the developer;
provided that the consultant review required under this section shall not affect the scope of the review
under section 514E-27 that the director may request for filings that encompass alternative arrangements
for purchaser protection. The consultant shall be asked to thoroughly review the filing for the purpose
of examining its compliance with the requirements of this chapter and any rule adopted by the director,
including the documentation and other provided materials. Upon completing the review, the consultant
shall provide a written analysis of the filing and an opinion of the nature and extent to which it complies
with this chapter and adopted rules. The director may adopt rules pursuant to chapter 91 to further
delineate the duties of the consultant in undertaking the review and analysis required pursuant to this
section.

§514E-11 Prohibited practices. It is a violation of this chapter for any sales agent or
acquisition agent of time share units or plans to:
(1) Fail to comply with the disclosure requirements set forth in section 514E-9 or any rule
adopted pursuant thereto;
(2) Use any promotional device, including but not limited to entertainment, prizes, gifts, food
and drinks, games, transportation, luaus, ocean recreational activities, land recreational
activities, aerial recreational activities, or tours, or other inducements, or make any offer
thereof, without fully disclosing orally and as provided in paragraph (3) that the device
is being used or offered for the purpose of soliciting sales of time share units or interests;

13
 (3) Offer a prospective purchaser a prize or gift as part of any time share advertising or
sales promotion plan, if in order to claim the prize, the prospective purchaser must
attend and complete a sales presentation, unless written disclosure is furnished to the
prospective purchaser at the time the prospective purchaser is notified of the prize or
gift; provided that the written disclosure is written or printed in a size equal to at least
ten-point bold type and contains all of the following:
(A) A full description of the exact prize or gift won by the prospective purchaser
including its cash value;
(B) All terms and conditions attached to the prize or gift;
(C) A statement that the consumer must attend and complete a sales presentation;
and
(D) An identification of the time share project to be offered for sale including type of
ownership, exchange privileges, limitations, and price ranges of the time share
interests in that project;
(4) Misrepresent or deceptively represent any material fact concerning the time share plan
or time share unit;
(5) Make any representation that a time share interest is an investment, including but not
limited to the value of the interest at resale;
(6) Fail to honor and comply with all provisions of a contract or reservation agreement with
the purchaser;
(7) Include, in any contract or reservation agreement, provisions purporting to waive any
right or benefit provided for purchasers pursuant to this chapter;
(8) Receive from any prospective purchaser any money, property (including but not limited
to a credit card), or other valuable consideration prior to signing a contract or
reservation agreement for the purchase of a time share plan or unit;
(9) Make any agreement or contract with a purchaser before delivering, furnishing, or
tendering to that prospective purchaser any promised promotional device or other
instrument;
(10) Distribute any promotional or disclosure material separately if the material was filed in a
consolidated form;
(11) Use any unregistered time share booth, or fail to display at all times a conspicuous,
clear, and unobstructed sign of a permanent nature:
(A) Containing no artwork or text except:
(i) The name of the time share plan or plans with which the booth is
affiliated, which must be printed in capital, block-style letters at least
one inch tall using bold black lettering against a white background; and
(ii) At least one inch beneath the name of the time share plan or plans, the
words "TIME SHARE", which must be printed in capital, block-style
letters at least three and one-half inches tall using bold black lettering
against a white background;
(B) With minimum dimensions of nine inches by twenty-four inches, excluding any
frame;

14
 (C) Permanently affixed to each side of the booth facing the public, in an upright
position, perpendicular to the ground, and easily visible to passersby; and
(D) Consistent with such rules as the director may adopt pursuant to this chapter
and consistent also with county ordinances.
As used in this paragraph, "sign of a permanent nature" specifically excludes banners,
grease boards, marker boards, handwritten signs, or signs constructed of temporary
materials such as paper, poster board, or cardboard;
(12) Misrepresent the amount of fees to be charged, including management fees, or the
structure for future fee increase; or
(13) Sell, offer for sale, or advertise for sale, by any person, partnership, firm, corporation,
joint stock company, or other association engaged in marketing time share plans within
the State, any tourist activity, including but not limited to land, aerial, or water
recreational activities, at less than the actual cost of the activity paid for by the licensee
thereof to such vendor or give, offer to give, or advertise with the intent to give away
any such tourist activity with the purpose or effect of inducing the prospective purchaser
to purchase a time share plan or to attend a time share marketing event.
Any violation of this section shall also constitute an unlawful or deceptive practice within the
meaning of section 480-2; provided that in addition violations of section 514E-31 or of
paragraph (11) shall result in a fine of not less than $50 for each separate offense for a
maximum aggregate amount of $500.

§514E-11.1 Deceptive trade practices. It shall constitute an unfair or deceptive practice,

within the meaning of chapter 480, for any developer, acquisition agent, or sales agent of time share
units or plans to:
(1) Use any promotional device, including but not limited to entertainment, prizes, gifts, food
and drinks, games, or other inducements without fully disclosing that the device is being
used for the purpose of soliciting sales of time share interests;
(2) Offer a prospective purchaser a prize or gift, in writing, as part of any time share
advertising or sales promotion plan, if to claim the prize or gift, the prospective
purchaser must attend a sales presentation, unless the written disclosure described in
section 514E-11(3) is furnished to the prospective purchaser at the time the prospective
purchaser is notified of the prize or gift; provided that the written disclosure is written or
printed in a size equal to at least ten-point bold type;
(3) Fail to inform each purchaser orally and in writing, at the time the purchaser signs the
contract, of the purchaser's seven-day right to cancel or void the contract to purchase a
time share interest in a time share plan or unit;
(4) Misrepresent in any manner the purchaser's right to cancel or void any contract to
purchase a time share interest in a time share plan or unit;
(5) Include in any contract or document provisions purporting to waive any right or benefit
to which the purchaser is entitled under this chapter;
(6) Fail or refuse to honor any valid notice of cancellation of the contract by the purchaser
and, within fifteen business days after receipt of such notice, fail or refuse to refund all

15
 payments made under the contract or sale; or fail or refuse to cancel and return any
negotiable instrument executed by the buyer in connection with the contract or sale and
take any appropriate action to terminate promptly any mortgage, lien, or other security
interest created in connection with the transaction;
(7) Fail to include above the signature line of any sales contract or, if no sales contract is
used, above the signature line of any agreement with the purchaser, in conspicuous bold
type and capital letters, the following: "Any purchaser has, under the law, a seven-day
right of rescission of any time sharing sales contract";
(8) Misrepresent the amount of time or period of time the time share unit will be available to
any purchaser;
(9) Misrepresent or deceptively represent the location or locations of the offered time share
unit;
(10) Misrepresent the size, nature, extent, qualities, or characteristics of the offered time
share units;
(11) Misrepresent the nature or extent of any services incident to the time share unit;
(12) Misrepresent the conditions under which a purchaser may exchange the purchaser's
occupancy rights to a time share unit in one location for occupancy rights to a time share
unit in another location;
(13) Fail to orally disclose during the initial oral contact with a prospective purchaser that any
promised entertainment, prizes, gifts, food and drinks, games, or other inducements are
being offered for the purpose of soliciting sales of time share interests in time share units
or plans; or
(14) Fail to include in promotional literature and other printed or written material a disclosure
that the product or activity involves time share. The director may by rule prescribe the
nature of the disclosure.

§514E-11.2 Power to enjoin. (a) Whenever it shall appear to the director, upon complaint or
otherwise, that any person has engaged in, is engaged in, or is about to engage in any act, practice or
transaction in violation of this chapter or the rules of the director adopted pursuant thereto, the director
may conduct an investigation of the matter. Whenever the director finds that such person has engaged
in, is engaged in, or is about to engage in any act, practice or transaction in violation of this chapter or
the rules of the director adopted pursuant thereto, the director may, in addition to any other remedies,
bring suit in the name and on behalf of the State against such person and any other person or persons
concerned in, or in any way participating in, or about to participate in such act, practice or transaction in
violation of this chapter or rules adopted pursuant thereto, to enjoin such person and such other person
or persons from continuing such act, practice or transaction, or engaging therein, or doing any act or
acts in furtherance thereof or in violation of this chapter or rules adopted pursuant thereto.
(b) The court shall give priority to the expeditious processing of suits under this section.
(c) The remedies under this section are in addition to any other remedy provided by this
chapter or by law.

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 [§514E-11.3] Remedies; sales voidable; when and by whom. Every sale or transfer
made in violation of this chapter shall be voidable at the election of the purchaser. Without limiting any
other remedy of the purchaser, the person making the sale or transfer and every director, officer, or
agent of or for the seller, if the director, officer, or agent has personally participated or aided in any way
in making the sale, transfer, or solicitation, shall be jointly and severally liable to the purchaser in any
action at law in any court of competent jurisdiction upon tender of the time share interest sold, or of the
contract made, for the full amount paid by the purchaser, with interest at the rate of ten per cent a year
from the date of payment by the purchaser, together with all taxable court costs and reasonable
attorney's fees, less a pro rata portion of the amount paid representing the portion of any benefits the
purchaser actually received or had the right to receive during the time preceding tender.

[§514E-11.4] Defense to action. In the event a purchaser of a time share interest brings an
action for damages under this chapter or under chapter 480, pursuant to section 514E-11.1, it shall be a
defense to the action that:
(1) The seller offered in writing to cancel the sale of the time share interest within fifteen
days of receipt of written notification by the purchaser of an alleged violation of this
chapter or chapter 480, pursuant to section 514E-11.1;
(2) The seller simultaneously with the offer of cancellation offered in writing to refund the full
amount paid by the purchaser, together with interest thereon at the rate of ten per cent a
year from the date of payment by the purchaser until the date of repayment, less a pro
rata portion of the amount paid representing the portion of any benefits the purchaser
actually received or had the right to receive during the time preceding cancellation; and
(3) The purchaser refused or failed to accept the written offer of cancellation and refund
within thirty days from the date the purchaser received the seller's written offer of
cancellation and refund.

§514E-12 Civil penalty; suspension or revocation of registrations. (a) For any cause
authorized by law, including but not limited to a determination by the director that any person has
violated any provision of this chapter or any rule adopted by the director pursuant to this chapter, or
that a person has authorized, directed, ordered, or personally participated in any violation of this chapter
or any rule adopted by the director pursuant to this chapter, in addition to any other actions authorized
by law, the director:
(1) May fine the person a sum of not less than $500 nor more than $25,000 for each
separate offense; provided that each date of violation shall constitute a separate offense;
and
(2) May issue an order suspending or revoking the registration of the person and the right of
the person to offer or sell time share interests or otherwise engage in time share
activities.
(b) If the director makes a finding of fact in writing that the public interest will be irreparably
harmed by delay in issuing an order the director may issue a temporary cease and desist order. Prior to
issuing the temporary cease and desist order, the director whenever possible by telephone or otherwise

17
shall give notice to the person of the proposal to issue a temporary cease and desist order. Every
temporary cease and desist order shall be effective for a period of ten days and shall include in its terms
a provision that a hearing will be held promptly to determine whether or not it shall remain permanently
in effect following the expiration of the ten-day period; provided that if the person subject to the
temporary cease and desist order is granted a continuance of the hearing, the temporary cease and
desist order shall remain in effect throughout the period of such continuance. If the director determines
that any person has failed to comply with a temporary cease and desist order issued by the director,
then the director may subject such person to the penalties set forth in subsections (a)(1) and (a)(2) of
this section.

[§514E-12.5] Statutory or common-law remedies. Nothing in this chapter shall limit any
statutory or common-law right of any person to bring any action in any court for any act involved in the
development, sale, exchange, or purchase of a time share interest, or right of the State to punish any
person for any violation of law.

[§514E-13] Authority of director. The director and the several counties may adopt rules and
forms, pursuant to chapter 91, to effectuate the purpose of this chapter and to implement its provisions.
The director shall submit an annual report to the legislature.

[§514E-14] Preexisting time share units and plans. Time share units and time share plans
for existing units which were created in a project prior to June 29, 1980, shall, within six months after
June 29, 1980, comply with this chapter, except as to section 514E-5.

[§514E-15] Severability. If any provision of this chapter or the application thereof to any
person or circumstance, is held invalid, the invalidity thereof shall not affect other provisions or
applications of this chapter which can be given effect without the invalid provision or application. To
that end, the provisions of this chapter are severable.

§514E-16 Deposit of purchaser's funds, notes, and contracts into escrow. (a) All funds
and any negotiable instruments and purchase money contracts received before closing from or on behalf
of purchasers or prospective purchasers in connection with the purchase or reservation of time share
interests must be placed in an escrow account. However, the developer or a sales agent may hold, until
the expiration of the seven-day-cancellation period provided by section 514E-8 or any longer purchaser
cancellation period provided in the sales contract, a negotiable instrument, or purchase money contract
made by a purchaser:
(1) For which subsequent holders cannot claim holder in due course status within the
meaning of article 3 of chapter 490; or
(2) Where the payee is:

18
 (A) The escrow agent; or
(B) The trustee of a lien payment trust.
(b) The escrow agent must be a bank, savings and loan association, or a trust company
authorized to do business in the State under an escrow arrangement or a corporation licensed as an
escrow depository under chapter 449. However, in connection with sales made out of the State for the
use of time share units located in the State, the escrow agent may be located in and the purchasers'
funds, negotiable instruments, and purchase money contracts may be impounded in the jurisdiction
where the sale is made, if the law of such jurisdiction requires it. In such event, the out-of-state escrow
agent shall be subject to the approval of the director.
(c) The establishment of such an escrow account shall be evidenced by a written escrow
agreement between the developer and the in-state or out-of-state escrow agent. The escrow agreement
must provide for the handling of purchaser's funds, negotiable instruments, and purchase money
contracts as required by this chapter and must contain any provisions required by rules adopted by the
director pursuant to chapter 91.

§514E-17 Release of purchaser's funds, notes, and contracts from escrow without a
closing. A purchaser's funds, negotiable instruments, and purchase money contracts may be released
from escrow without a closing as follows:
(1) If a purchaser or developer gives a valid notice of cancellation of the contract pursuant
to section 514E-8, all of the purchaser's funds and any negotiable instruments and
purchase money contracts made by the purchaser shall be returned to the purchaser
within fifteen days after the notice of cancellation is received.
(2) If a purchaser or developer properly terminates a contract pursuant to its terms, or if a
developer or prospective purchaser terminates a reservation agreement, all of the
purchaser's funds and any negotiable instruments and purchase money contracts made
by the purchaser or prospective purchaser shall be delivered in accordance with the
contract or reservation agreement.
(3) If the purchaser defaults in the performance of the purchaser's obligations under the
contract, all of the purchaser's funds and any negotiable instruments or purchase money
contracts made by the purchaser under the contract shall be delivered in accordance
with the contract.
(4) If purchaser's funds are to be used for construction the funds may be disbursed by the
escrow agent from time to time to pay for:
(A) Construction costs of the buildings and improvements in proportion to the
valuation of the work completed by the contractor in accordance with the
contract documents, as certified by a registered architect or engineer and
approved for payment by the construction lender;
(B) Architectural, engineering, and interior design service fees in proportion to the
services performed within each phase of services, as approved by the
construction lender;
(C) The costs of purchasing furnishings and fixtures for the time share units, as
approved by the construction lender; and

19
 (D) Finance and legal fees, and other incidental expenses of constructing the time
share units or developing the time share plan as approved by the construction
lender;
provided that no such disbursements shall be made unless the developer first deposits
with the director (i) a copy of the executed construction contract, (ii) a copy of
executed performance and labor and material payment bonds in an amount which is not
less than one hundred per cent of the cost of construction and covering any changes to
the contract which do not in the aggregate increase the amount of the construction
contract by more than ten per cent, (iii) a verified statement showing all costs involved in
completing the project, and (iv) satisfactory evidence acceptable to the director of funds
sufficient to cover the total costs of constructing, furnishing, and completing the project
from purchaser's funds, equity funds, interim or permanent loan commitments or other
sources.

§514E-18 Release of purchaser's funds, notes, and contracts from escrow upon
closing. (a) Upon the closing of the escrow for the sale of a time share interest, the purchaser's funds
and any negotiable instruments and purchase money contracts made by the purchaser shall be delivered
by the escrow agent:
(1) To the trustee of a lien payment trust if a lien payment trust is established pursuant to
section 514E-19 to protect purchasers from blanket liens; or
(2) As provided by any alternative arrangements accepted by the director pursuant to
section 514E-27 where such alternative arrangements are used pursuant to section
514E-19 to protect purchasers from blanket liens; or
(3) To the developer only after the requirements of any other alternative under section
514E-19 for protecting purchasers from blanket liens have been satisfied.
(b) Notwithstanding any other provisions of this chapter, the escrow agent may not release
the purchaser's funds, negotiable instruments, and purchase money contracts from the escrow account
to or for the benefit of the developer or a sales agent or for construction until:
(1) The seven-day cancellation period under section 514E-8 expires as to the purchaser
whose funds are being released; and
(2) The escrow agent receives a sworn statement from the developer that:
(A) No cancellation notice postmarked on a date within the seven-day cancellation
period was received from the purchaser whose funds are being released; and
(B) No cancellation notice was otherwise received during the seven-day
cancellation period from the purchaser whose funds are being released.
§514E-19 Protection of purchasers from blanket liens. (a) An escrow for the sale of a
time share interest in a time share ownership plan may close only if the requirements of any one of the
following alternatives for protecting the purchaser have been satisfied:
(1) The time share interest is conveyed to the purchaser free and clear of any blanket liens.
(2) The time share unit is conveyed to a trustee:
(A) Free and clear of any blanket liens under a trust meeting the requirements of
sections 514E-22 and 23; or

20
 (B) Under a lien payment trust meeting the requirements of sections 514E-22, 23,
24, and 25.
(3) (A) The time share interest is conveyed to the purchaser subject only to blanket
liens:
(i) Where every person holding an interest in the blanket lien has executed
and recorded a nondisturbance agreement; or
(ii) For which the director's acceptance of a surety bond or an irrevocable
letter of credit meeting the requirements of section 514E-28 has been
recorded with respect to that time share unit; and
(B) If legal or equitable title will be held by anyone other than the purchaser, a
notice of time share plan is recorded.
(4) The requirements of any alternative arrangements accepted by the director have been
met.
(b) An escrow for the sale of a time share interest in a time share use plan may close only if
the requirements of any one of the following alternatives for protecting purchasers have been satisfied:
(1) The time share unit is conveyed to a trustee:
(A) Free and clear of any blanket liens under a trust meeting the requirements of
sections 514E-22 and 23; or
(B) Under a lien payment trust meeting the requirements of sections 514E-22, 23,
24, and 25.
(2) A notice of time share plan is recorded and either:
(A) Every person holding an interest in a recorded blanket lien against any time
share interests in that time share unit executes and records a nondisturbance
agreement; or
(B) The director's acceptance of a surety bond or an irrevocable letter of credit
meeting the requirements of section 514E-28 is recorded.
(3) The requirements of any alternative arrangements accepted by the director have been
met.
(c) A time share interest in any time share plan which satisfies the escrow and blanket lien
protection requirements of this chapter shall not be deemed a risk capital security under chapter 485,
and the offer or sale of a time share interest therein shall not be deemed the offer or sale of a security.

§514E-20 Effect of recording a nondisturbance agreement. When a nondisturbance

agreement has been executed by the lienholder and recorded, the lienholder, its successors, and anyone
who acquires the property through foreclosure or by a deed, assignment, or other transfer in place of
foreclosure, shall take the property subject to the rights of the owners.

§514E-21 Effect of recording a notice of time share plan. When a notice of time share
plan is recorded, claims by creditors of the developer and claims upon, or by successors to, the interest
of the title holder who executed the notice of time share plan, shall be subordinate to the interest of

21
owners whose purchase of time share interests in the time share plan is closed after the notice of time
share plan is recorded. The recording of a notice of time share plan shall not affect:
(1) The rights or lien of a lienholder whose lien was recorded prior to the notice of time
share plan;
(2) The rights of the holder of an option recorded before the notice of time share plan;
(3) The rights or lien of a lienholder having a purchase money lien on a time share interest.

§514E-22 General requirements for trusts. If time share units are required to be conveyed
to a trustee pursuant to section 514E-19, the trust instrument must provide for at least the following:
(1) Title to the time share units must be transferred to the trustee before the purchaser's
funds are disbursed by the escrow agent.
(2) The trustee shall not convey or transfer the time share units except for any units with
respect to which no owner has any further right of occupancy or as permitted in section
514E-26.
(3) The trustee shall be prohibited from encumbering the time share units unless the director
shall consent thereto. Such consent shall be given if the trust shall meet all of the
requirements of section 514E-24 or all requirements of one of the alternative provisions
in section 514E-19 are then satisfied.
(4) The association on behalf of the owners must expressly be made a third party
beneficiary of the trust.
(5) Notice of the intention of the trustee to resign must be given to the director at least
ninety days before the resignation takes effect.
(6) No amendment of the trust instrument adversely affecting the interests or rights of
owners may be made without the written approval of the association.
(7) Any other provisions required by the director as provided by rules adopted pursuant to
chapter 91.

§514E-23 Requirements for trustees. If time share units are conveyed to a trustee pursuant
to section 514E-19, the following requirements shall be met:
(1) The trustee must be a bank, savings and loan association, or a trust company meeting
the requirements of any rules adopted by the director pursuant to chapter 91.
(2) The trustee must at all times:
(A) Maintain fidelity bonds in a form approved by the director in such amounts and
providing coverage as required by rules adopted by the director pursuant to
chapter 91; and
(B) Maintain a policy of errors and omissions insurance in a form approved by the
director in such amounts and providing coverage as required by rules adopted
by the director pursuant to chapter 91.

22
 §514E-24 Additional requirements for lien payment trusts. (a) If a lien payment trust is
established to meet the requirements of section 514E-19, then in addition to the requirements of section
514E-22, the trust instrument shall:
(1) Require the deposit into trust of a lien payment deposit meeting the requirements of
section 514E-25, before closing the sale of the first time share interest.
(2) Require the deposit into trust before closing the sale of the first time share interest, and
the retention for the duration of the trust, of an installment payment reserve consisting of
funds in an amount at all times sufficient:
(A) To pay the total of three successive monthly installments of debt service on the
blanket lien(s); provided if the developer complies with section 514E-25(c), the
amount paid shall be a pro rata share of the amount required above, determined
in accordance with section 514E-25(c).
(i) If installments of debt service are due less frequently than monthly, the
funds retained in trust shall be sufficient to pay all installments becoming
due within the next succeeding six months, the next installment due.
(ii) If the payments of debt service are not payable in equal installments,
such additional funds shall be retained in the trust as the director shall
determine to be reasonably necessary to assure that the trustee will have
sufficient cash to pay any installments under the blanket liens when due.
(B) To create a sinking fund to extinguish the debt at its maturity if a blanket lien
against the trust property is an interest-only loan, contains a balloon payment
provision, or is otherwise not fully amortized under the terms for repayment.
(3) Authorize the trustee to sell, transfer, hypothecate, encumber, or otherwise dispose of
the purchase money contracts or other assets composing the lien payment deposit or
any portion thereof, if in the trustee's judgment, such action is necessary in order to
enable the trustee to make all payments required to be made under the blanket liens so
as to prevent any foreclosure thereof.
(4) Require the developer to replenish the funds and assets in the trust whenever the lien
payment deposit or the funds in the installment payment reserve fail to meet the
requirements set forth in this section.
(5) Provide that the trustee periodically shall disburse funds in the trust as follows: first, to
the payment of real property taxes, governmental assessments, and lease rent, if any;
second, to the payment of current payments then due on the blanket liens, in their order
of priority; third, to any sinking fund established for the payment of blanket liens,
including any prepayment penalties and release prices; fourth, to any service charges
and costs payable to the trustee and its collection agent, if any, pursuant to the trust
instrument; and fifth, to the developer or as directed by the developer.
(6) Contain any other provisions required by the director as provided by rules adopted
pursuant to chapter 91.
(b) If a lien payment trust is established to meet the requirements of section 514E-19, every
purchase money contract must contain the following provision in at least ten-point bold face type:

23
 NOTICE

Immediately upon demand by the trustee under the lien payment

trust for the time share plan, the holder of this document must
promptly deliver to the trustee all payments made by the
purchaser after the trustee mails or otherwise sends notice that
the funds and other assets in the trust are inadequate to meet the
requirements for the lien payment deposit. The holder must
continue to send the trustee the purchaser's payments until the
lien payment deposit is replenished.

§514E-25 Lien payment deposit. (a) The lien payment deposit shall consist of either (i)
nondelinquent purchase money contracts from purchasers of time share interests in the time share plan
or (ii) other assets deposited into trust by the developer and approved by the director.
(b)(1) The purchase money contracts must have an aggregate remaining principal balance of
not less than, and any other assets deposited must have a liquidated value of not less
than, one hundred ten per cent of the difference between (i) the aggregate remaining
principal balance owing under blanket liens against the time share unit or time share
interests in it, including any prepayment penalties, release prices, and similar charges, (ii)
the amount of money, or its equivalent, in the trust and available at any time to be
applied to the reduction of the principal balance of the blanket lien. The developer shall
have the burden of establishing to the satisfaction of the director the liquidated value of
assets other than purchase money contracts from purchasers in the time share plan.
(2) If the blanket lien payment deposit consists of purchase money contracts, the payments
required to be made by purchasers under the contracts shall:
(A) Be due on or before the dates on which payments become due on the blanket
liens;
(B) If paid when due, be equal to at least one hundred ten per cent of the amount
required to be paid on the blanket liens on such date; and
(C) Be sufficient to pay, in full, during the term of such contracts (i) all amounts
secured by the blanket liens, including prepayment penalties and release prices,
if any; and (ii) all service charges payable to the trustee, any collection agent,
and any other servicing agent pursuant to the trust instrument.
(3) If the developer proposes to deposit into trust assets other than purchase money
contracts, such assets must be sufficient to pay debt service installments on the blanket
lien as they become due and to create a sinking fund or other arrangement adequate to
extinguish the debt secured by the blanket lien at its maturity.
(c)(1) In lieu of the requirements of subsection (b), the developer may elect to follow the
requirements of paragraphs (2), (3), (4), and (5) of this subsection if the following
requirements are met:

24
 (A) The developer owns or leases under a lease for a term of not less than thirty
years all the noncommercial portions of a hotel, condominium, cooperative, or
other project;
(B) No more than seventy-five per cent of the appraised value of the project is
subject to a mortgage or other lien. The appraised value shall be based on the
use of the project prior to the creation of the time share plan;
(C) (i) As security for the obligations of the developer to the owners, the
developer executes and records a mortgage in favor of the trustee under
the lien payment trust or the association, in either case as trustee on
behalf of the owners, twenty-five per cent of the appraised value of the
project; or
(ii) The developer conveys or transfers the project to a trust meeting the
requirements of sections 514E-22 and 23, and under the terms of the
trust instrument the twenty-five per cent of the beneficial interest in the
trust is held for the benefit of, or conveyed or transferred to, the
association, acting as trustee for the owners, as security for the
obligations of the developer to owners; and
(D) The developer files a verified statement of the program of financing acceptable
to the director containing a cash flow analysis showing that the developer has
adequate funds to pay the debt service installments on the blanket liens on the
project during the sales period and to extinguish the debt secured by the blanket
lien at its maturity, whether from sales proceeds, loan commitments, income
from operations of the project, or other sources.
(2) The purchase money contracts must have an aggregate remaining principal balance of
not less than, and any other assets deposited must have a liquidated value of not less
than, one hundred ten per cent of the difference between (i) a pro rata share of the
aggregate remaining principal balance owing under blanket liens against the time share
unit or time share interests in it, including any prepayment penalties, release prices and
similar charges, (ii) a pro rata share of the amount of money, or its equivalent, in the
trust and available at any time to be applied to the reduction of the principal balance of
the blanket lien. The developer shall have the burden of establishing to the satisfaction
of the director the liquidated value of assets other than purchase money contracts from
purchasers in the time share plan.
(3) If the blanket lien payment deposit consists of purchase money contracts, the payments
required to be made by purchasers under the contracts must:
(A) Be due on or before the dates on which payments become due on the blanket
liens;
(B) If paid when due, be equal to at least one hundred ten per cent of a pro rata
share of the amount required to be paid on the blanket liens on such date; and
(C) Be sufficient to pay, in full, during the term of such contracts (i) a pro rata share
of all amounts secured by the blanket liens, including prepayment penalties and
release prices, if any; and (ii) all service charges payable to the trustee, any
collection agent, and any other servicing agent pursuant to the trust instrument.

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 (4) If the developer proposes to deposit into trust assets other than purchase money
contracts, such assets must be sufficient to pay a pro rata share of the debt service
installments on the blanket lien as they become due and to create a sinking fund or other
arrangement adequate to extinguish the debt secured by the blanket lien at its maturity.
(5) For purposes of this subsection, the term "pro rata share" means a share proportionate
to the ratio that the number of time share units in which the sale of time share interests
have been closed bears to the total number of time share units in the project. No more
than fifty-one weeks of use annually may be attributed to each time share unit in
determining the pro rata share.
(6) The developer may elect to terminate the use of the provisions of this subsection upon
satisfying all of the requirements of either subsection (b) or section 514E-26(c).
(d) For purposes of this section, a purchase money contract is deemed delinquent when an
installment payment is more than fifty-nine days past due.

§514E-26 Termination of a trust. (a) In the case of a time share use plan, the trust for the
time share units shall be irrevocable during the time that any owner of a time share interest has a right to
the occupancy of a time share unit, except as provided in subsection (c).
(b) In a time share ownership plan, the trust for a time share unit shall be irrevocable until all
blanket liens are extinguished, except as provided in subsection (c).
(c) The developer may elect to terminate the use of a trust for a time share unit if, at a later
date,
(1) The trustee records a notice of time share plan after the recording of either:
(A) Nondisturbance agreements executed by every lienholder who has a blanket
lien against the time share unit, or
(B) The director's acceptance of a surety bond or irrevocable letter of credit for that
unit; or
(2) The director approves alternative arrangements which permit the termination of the trust.

§514E-27 Alternative arrangements for purchaser protection. (a) In recognition of the

impossibility or impracticability of a proposed time share plan satisfying some of the requirements of
section 514E-19 because of factors over which the developer has little or no control, the director may
accept arrangements, other than those prescribed by section 514E-19, which in the judgment of the
director will give rights and remedies affording equivalent benefits and protections to time share owners
which are at least comparable in scope though not necessarily in nature to those designed to be afforded
by the section.
(b) Whenever the director is asked to accept alternative arrangements pursuant to this
section, the director may contract with an attorney or attorneys and may contract with any other private
consultants which the director or the attorney deems necessary or advisable, in connection with the
review of the proposed arrangements for protecting purchasers; provided that the cost of retaining such
attorneys and other consultants shall be borne by the developer. The attorney shall be asked to
thoroughly review the time share plan for the purpose of examining the purchaser protections, including

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the documentation used in connection therewith and the disclosure thereof in the developer's disclosure
statement. Upon completing the review, the attorney shall provide a written analysis of the proposal and
an opinion as to the nature and extent of the protections which the proposal affords purchasers against
blanket liens. The review of alternative arrangements pursuant to this section shall be in addition to the
consultant review required under section 514E-10.5 for all filings which are submitted by time share
developers.

§514E-28 Requirements for surety bonds and letters of credit. Any surety bond or
irrevocable letter of credit furnished to the director pursuant to section 514E-19 must be in an amount
which is not less than one hundred ten per cent of the remaining principal balance of every indebtedness
secured by a blanket lien related to the time share unit. Any such bond must be issued by a surety
authorized to do business in the State and having sufficient net worth to be acceptable to the director.
Any such letter of credit must be irrevocable and must be drawn upon a bank, savings and loan
association, or other financial institution authorized to do business in the State and having a sufficient net
worth to be acceptable to the director. The bond or irrevocable letter of credit shall provide for
payment (up to the limit of such bond or letter of credit) of all amounts secured by the blanket lien,
including costs, expenses, and legal fees of the lienholder, if for any reason the blanket lien is enforced.
The beneficiary of any such letter of credit and the obligee of any such bond shall be the director on
behalf of the owners. The bond or irrevocable letter of credit may be reduced periodically in proportion
to the reduction of the remaining principal balance of the indebtedness secured by the blanket liens.
Upon being furnished with a surety bond or irrevocable letter of credit satisfying the foregoing
requirements, the developer shall prepare and the director shall execute and acknowledge a document
in recordable form accepting such surety bond or irrevocable letter of credit and identifying the time
share units to which it applies.

§514E-29 Association; lien for delinquent assessments. (a) All time share plans shall
have an association which shall be a nonprofit corporation. Each owner shall be a member of the
association.
(b) The association may levy regular, special, and other assessments in accordance with its
governing documents. Any regular, special, or other assessment, and any late charges, interest, and
costs of collection, including reasonable attorneys' fees, assessed by the association in accordance with
its governing documents, shall be a debt of the owner of the time share interest at the time the
assessment or other sums are levied.
(c) The amount of the assessment, plus any late charges, interest, costs of collection, and
reasonable attorneys' fees, assessed by the association and chargeable to any owner of a time share
interest, shall be a lien on the owner's time share interest.
(d) Notice of any delinquent lien created pursuant to subsection (c) shall be recorded in the
bureau of conveyances and upon recordation shall be prior to all other liens, except:
(1) Liens for taxes and assessments lawfully imposed by governmental authority against the
time share interest;

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 (2) All sums unpaid on any mortgage of record encumbering the time share interest which
was recorded prior to the recordation of a notice of a lien by the association; and
(3) For a time share interest subject to a condominium property regime, the lien of the
association of apartment owners created pursuant to section 514A-90.
(e) A lien created pursuant to subsection (c) may be enforced by the association in any
manner permitted by law, including:
(1) Foreclosure by an action in like manner as a mortgage of real property; or
(2) Foreclosure under power of sale, if the power of sale is contained in the governing
documents of the association, or in the original deed of the time share interest;
provided that the procedures and notice requirements contained in chapter 667 shall govern. The plan
manager or board of directors of the association, acting on behalf of the owners, unless prohibited by
the project instruments, may bid on the time share interest at the foreclosure sale and acquire and hold,
lease, mortgage, and convey the same.
(f) Where the association or other purchaser obtains title to the time share interest as a
result of the foreclosure of the association's lien, the acquirer of title and the acquirer's successors and
assigns shall not be liable for the share of the expenses or assessments by the association chargeable to
the time share interest which became due prior to the acquisition of title to the time share interest by the
acquirer. Notwithstanding the immediately preceding sentence, the unpaid share of expenses or
assessments shall be deemed to be expenses collectible from all of the time share owners, including the
acquirer and the acquirer's successors and assigns.
(g) Nothing in this section prohibits the association from bringing an action to recover a
money judgment against the owner of a time share interest for unpaid assessments and expenses without
first either foreclosing or waiving the association's lien securing the same.

§514E-30 Scope of chapter. This chapter applies to the offer and sale in Hawaii of time
share interests in time share units located in Hawaii. If time share units are located outside of Hawaii,
but any offer or sale is made within the State, this chapter, except for sections 514E-3, 514E-4,
514E-5, 514E-6, 514E-7, and 514E-14, shall apply. As to the offer and sale outside of Hawaii of time
share interest in a time share plan which includes time share units located in Hawaii, this chapter, except
for sections 514E-2.5, 514E-8, 514E-9, 514E-10(b) and (c), 514E-11, and 514E-11.1 shall apply.

[§514E-31] Private right of action. Nothing in this chapter shall be construed to preclude a
person aggrieved by a violation of this chapter from filing an action in court for civil damages. A violation
of this chapter shall be deemed a cause of action for the purpose of the court action.

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