A nationwide class action has been filed against ILX Resorts, Inc. on behalf of purchasers of vacation ownership interests in the Los Abrigados timeshare resort in Sedona, Arizona, or the Premiere Vacation Club operated by the company alleging that ILX and its subsidiaries sell their properties to more people than could actually use them, siphon off maintenance fees as profits instead of using them for their stated purpose, and conduct bait-and-switch selling tactics in violation of Arizona's Consumer Fraud and the Real Estate Timeshare Acts. The action seeks compensatory damages, disgorgement of all ill-gotten profits, punitive damages, and an order that will force the company to stop using its allegedly deceptive sales tactics.
The action alleges that ILX engages in a pattern of deception and has bilked named plaintiffs Kenneth Reed of Calgary, Canada, and George Cates of Oro Valley, Arizona, and thousands of other timeshare members out of millions of dollars. Unlike many timeshare businesses, ILX allegedly does not sell time-locked shares, but is set up so that timeshare owners must schedule the week that they desire to use their timeshare. This reservation feature, characterized as convenience feature to prospective buyers, allegedly allows the company to make illegitimate profits. The contract signed by buyers does not guarantee that their timeshare will be open on any particular week. If owners cannot schedule a week during a particular year, their contract states that they lose their privilege without any compensation. The contract also contains a clause that allows ILX to let out unreserved timeshares as though they are hotel rooms, to people who have no timeshare ownership.
Though the timeshare contract contains a clause that gives timeshare owners preference over hotel-type guests, the action alleges that owners are often unable to reserve time because available rooms have already been allocated to guests who do not own timeshares. This increases the profit margin of the business by adding hotel-type profits to the amounts already made through the sale of timeshares in the same rooms, and leaves the timeshare owners with no option but to forfeit their use of their timeshare.
The allegations do not stop there. Allegedly, the 9,100 timeshares at the Los Abrigados resort were initially sold only to people who had the opportunity to stay at the resort annually or bi-annually. In 1998, ILX added its Premier Vacation Club, which allows vacationers to buy a timeshare package that will allow them to stay in any of a number of ILX resorts instead of limiting them to one facility. The action alleges that when ILX started the new program, all timeshares at Los Abrigados had already been sold, so anyone who was a member of the Premier Vacation Club that wanted to stay in Los Abrigados would have to compete with a timeshare owner whose contract was solely for stays at Los Abrigados and hotel-type guests as well.
The action also alleges that those people who invested in the timeshare can't sell the timeshares back without losing a substantial amount of money because ILX's contract does not state specifically enough what ownership interest buyers have. Since their ownership is not well-described, companies that deal in the sale of property will not generally handle ILX properties. This leaves ILX timeshare owners with a reduced market for the sale of their property, or no market at all.
The action alleges that, regardless of whether timeshare owners get any use in a given year, they are charged maintenance and management fees in excess of $4 million at the Los Abrigados resort alone. The timeshare contract allegedly states that 90% of these fees is to be used for the upkeep of the living facilities, and 10% for other areas such as dining facilities. Allegedly, the living facilities are in poor condition, and the fees are clearly not being used for maintenance of the living areas.
Finally, the action alleges that ILX shows upgraded rooms to prospective buyers without letting them know that the rooms available to timeshare owners are smaller, less well-appointed, and often in shoddy condition. The timeshare contract allegedly contains language that does indicate that not all rooms are represented by the "show" room, but it of course doesn't state the dimensions and condition of a typical room. And, of course, prospective buyers allegedly do not get to see the kind of room that they will get once they bite the hook and buy in, nor are they allowed to know how hard it will be to ever use their investment.