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Timeshare lawyer advisory for timeshare developers, owners and operators. Impact of new ADA rules on your timeshare project.

22 February 2010

Under the Bush Administration, the Department of Justice issued proposed modifications to the ADA regulations that would increase the obligations of certain commercial property owners and operators under the ADA Accessibility Guidelines and include time share developments within the definition of “public accommodations.” These amendments, if passed in their current proposed form, may impose significant burden on an industry that cannot realistically comply with certain operating requirements meant to ensure accessibility within the transient hospitality world. This at a time when time share is already hurting.

After President Obama was elected, the proposed modifications were placed on hold. We expect that before the modifications to the ADA are passed, the Department of Justice will issue a Notice of Proposed Rule Making and open another comment period. This may occur soon, so you should get and stay informed about the proposed modifications now before you need to comply with new burdensome regulations.



Americans with Disabilities Act (ADA):
How Proposed Revisions May Affect Your Timeshare Projects

By David Sudeck and Jim Abrams, Esq.,
Senior members of JMBM ‘s Global Hospitality Group®
specializing in issues facing timeshare

Look for changes in the ADA Accessibility Guidelines (ADAAG). In 2008, the Department of Justice (DOJ), under the former presidential administration, issued a Notice of Proposed Rule Making in connection with the proposed modification of the accessibility standards of the Americans with Disabilities Act (ADA). The proposed modification would (1) result in the adoption by the DOJ of revisions to the ADAAG, developed by The Architectural and Transportation Barriers Compliance Board (the “Access Board”) in 2004; and (2) amend the ADA regulations regarding the application of the ADA to certain buildings and public spaces (including, for example, timeshare properties). Therefore, the revised rules proposed by the DOJ would address whether the ADA is applicable to timeshare and other vacation ownership properties meeting certain definitions and require certain properties to make modifications to their physical plant and operating procedures to meet the modified guidelines (if adopted without revision). Because of the unique nature of a timeshare property (with units typically owned by the individual interval owners), a timeshare property may not be able to comply with many of the traditional transient lodging rules of the ADA or the proposed revisions to the ADAAG. Because it appears that the modifications will eventually be adopted in one form or another, those in vacation ownership should prepare for the application of the revised guidelines and understand the impact that they may have on our industry.

Application of ADA to Time Share

Those in the vacation ownership industry should prepare for the application of the revised guidelines and understand the impact that they may have on us.

There has been a long-standing debate among ADA professionals, groups promoting accessibility, and the courts about whether certain types of lodging properties –including timeshare — should be included within the definition of “public accommodations” for purposes of ADA compliance, or if they should be regulated instead by the Department of Housing and Urban Development (HUD) under the Fair Housing Act, as “residential facilities”. The proposed modifications from the DOJ include a revised definition for “places of lodging” that encompasses facilities intended for short-term stays (e.g., one or two weeks), to which the user has no right to return to a specific room at the conclusion of his or her stay, and that offers certain amenities, such as reservation and housekeeping services, and the acceptance of reservations without a prior lease or security deposit. Similar parameters have been referenced in applicable past case law and advisory letters from governmental authorities.

In an early 1990s advisory letter relating to the applicability of the ADA to the vacation ownership system of Marriott Ownership Resorts, Inc., the Attorney General’s letter provided the following:

…the analysis turns on whether any given resort is a ‘place of lodging’ such as an inn, hotel, or motel. Obviously, a deeded fee interest differs from the interest normally conveyed to the patron of a hotel or motel. However, if…the fee interest conveyed is subject to recorded restrictive covenants that substantially restrict the ‘traditional possessory rights of ownership’ . . . timeshare facilities are more likely to be treated as places of lodging.

Through the proposed revisions to the guidelines, the DOJ is looking to address how the ADA should apply to “hybrid facilities” that have attributes of both residential dwellings and transient lodging facilities, like some timeshares, through a revised definition of “places of lodging” (the current definition is found in Section 36.104 of the Act). Those facilities that fall within the parameters of the revised definition would be subject to ADA accessibility guidelines, as revised, and those that do not meet that definition would not be subject to the ADA but would be regulated under the Fair Housing Act (FHA).

Some properties that have a mix of uses or a variety of legal structures may be governed by both the ADA and the FHA. The FHA imposes its own set of very significant accessibility and design requirements on owners and builders of multifamily properties (in many respects more burdensome and less clear than the ADA guidelines, and FHA requirements apply to all units rather than to a percentage of units). In general terms, under relevant case law, the applicability of FHA to a vacation ownership project is determined on a case-by-case basis–the more the project resembles a multi-family residential project (e.g., by allowing a fixed-time, fixed-unit, deeded interest), the more likely the project may become subject to FHA regulations. In contrast, the more a timeshare project resembles transient lodging, the more likely the requirements will be covered by ADA instead of FHA regulations. The application of ADA guidelines versus FHA regulations should be preferable to owners and operators of vacation ownership properties.

How will Timeshare owners, operators and developers be Impacted?

Newly constructed projects that are subject to the revised ADA regulations will need to be constructed to conform to the revised ADAAG requirements, once adopted, and existing projects that are governed by the ADA may be required to remove barriers to accessibility pursuant to the new ADAAG guidelines to the extent that it is “readily achievable” to do so.

Timeshares that meet the definition of “places of lodging” under the proposed regulations would be subject to ADA accessibility requirements, as revised.

As referenced above, the DOJ proposes to adopt the ADAAG guidelines developed in 2004 for the definition of a “barrier.” The 2004 ADAAG includes standards to provide for optimum accessibility, thereby imposing higher hurdles and possibly greater compliance expense for owners and operators of existing vacation ownership properties. Even more problematic for timeshare property owners and operators are any suggestions by the DOJ that accessible units be available for use on the same basis as accessible rooms of hotels. Unlike most hotels, where the property is owned by a single ownership entity, each unit in a timeshare facility is typically owned by multiple individual owners, who have no obligation to offer their unit (whether accessible or not) for rent; and when they do elect to rent, they may choose to do so on their own or using one of many rental agencies.

ARDA (see www.arda.org) submitted a comprehensive letter during the comment period to the DOJ addressing the proposed revisions to the ADA regulations and guidelines and how they may be applied to timeshare projects. The letter formally requested that the DOJ adopt a revised definition of “place of lodging” that more accurately reflects the nature of a timeshare property and includes proposed language. The letter also sought to describe how certain other proposed revisions to the regulations and guidelines may be tailored to address the needs of vacation ownership (and golf course) property owners and operators; it requested that the DOJ clarify that vacation ownership projects meeting ARDA’s proposed definition of a “timeshare project” be exempt from the application of the FHA and its additional, stringent, and often incompatible accessibility requirements. The American Hotel & Lodging Association (AH&LA) also submitted comments to the DOJ that emphasized the differences between hotels and timeshare and requested that the DOJ adopt revisions that address the differences.

While the applicability of the ADA to timeshare properties has not been settled pursuant to the proposed revised regulations, owners and operators of these properties are currently defending claims from plaintiffs who are asserting that the projects are subject to and not in compliance with ADAAG guidelines. These cases are very fact-sensitive, but certain courts have found in favor of the property owner and operator where, for example, there was evidence that the plaintiff was engaged in a rash of ADA compliance suits and where the property owner was making efforts to comply with ADA guidelines.

Failure to comply with ADA guidelines may expose the property owner(s) and operator to both civil actions and fines. The DOJ has been conducting enforcement “sweeps” of hotel properties, and we expect that they will do the same with timeshare and other vacation ownership properties.

This is Jim Butler, author of www.HotelLawBlog.com and hotel lawyer, signing off. We’ve done more than $60 billion of hotel transactions and have developed innovative solutions to unlock value from troubled hotel transactions. Who’s your hotel lawyer?

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Our Perspective. We represent hotel lenders, owners and investors. We have helped our clients find business and legal solutions for more than $60 billion of hotel transactions, involving more than 1,000 properties all over the world. For more information, please contact Jim Butler at jbutler@jmbm.com or 310.201.3526.

Jim Butler is a founding partner of JMBM and Chairman of its Global Hospitality Group®. Jim is one of the top hospitality attorneys in the world. GOOGLE “hotel lawyer” and you will see why.

JMBM’s troubled asset team has handled more than 1,000 receiverships and many complex insolvency issues. But Jim and his team are more than “just” great hotel lawyers. They are also hospitality consultants and business advisors. For example, they have developed some unique proprietary approaches to unlock value in underwater hotels that can benefit lenders, borrowers and investors. (GOOGLE “JMBM SAVE program”.)

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