Deed-in-Lieu in Timeshare Foreclosure

Being an attorney is more than handling the day-to-day activities of litigation and moving the matter forward. The practice also includes providing advice and recommendations on future courses of action. “Counselor’s Corner” is our way of providing general recommendations based on the trends specific to our practice of recouping defaulted assets.

Today’s piece is about whether a Deed-in-Lieu of foreclosure (“DIL”) should be accepted when seeking to recoup a defaulted timeshare asset. Our recommendation is that a DIL should be accepted with no cost to the owner in the majority of circumstances.

Two coveted goals of recovering defaulted assets are certainty and efficiency. Clients want, and we strive to produce, the return of defaulted assets that are on solid footing to return to inventory in the most efficient manner possible. When working with courts and public auctions, however, there is always the inherent risk of the unknown. These risks increase both the time it takes to return the defaulted asset to inventory and the cost to do so. The DIL seeks to take control of the risk and limit the unknown as much as possible.

The average cost, including attorney’s fees, to recoup a defaulted asset in Florida is approximately $680 for the non-judicial process and $2,000 for the judicial process. The average time from referral to recorded deed for the non-judicial process is approximately 180 days and 330 days for the judicial process. A DIL can usually be processed within three weeks from the time the request is made to the time the deed is recorded and generally costs $150 plus recording fees.

Just by reviewing the numbers, the DIL can reduce significantly the cost of and time for recovering a defaulted asset, especially if the request comes early in the process. Additionally, the DIL can truncate the need for extensive litigation as a method of settlement.

DILs, however, are not a panacea. Hurdles include finding owners interested in working the process and addressing potential title issues. The biggest title issue hurdle is with a deceased owner. Often, if title is not held jointly with rights of survivorship, estate or probate practice is necessary to address interests held by heirs, known or unknown. In those situations, unfortunately, DILs are not the best options.

To help locate owners interested in working the DIL process, we recommend a robust solicitation campaign to owners in default. Clients often send letters asking owners to discuss loss mitigation. We recommend taking the solicitation a step further.  Include in the letter a pre-populated DIL package that can be executed and returned for processing. Additionally, before the foreclosure process starts, consider offering the owner cash, payable upon recording of a properly executed DIL. Finally, after the foreclosure process has started, consider waiving all fees for processing a DIL. Often, owners ask us for DILs only to end the conversation when told that fees must be paid.  Waiving those fees would likely have resulted in the defaulted asset returning to inventory significantly sooner than the foreclosure process would have.

DILs are a good way to return defaulted timeshare assets to inventory in an efficient manner that puts the client in control. We have developed a program to assist clients in this process, from targeting files ripe for the solicitation to processing and recording the DIL, and we are happy to discuss it further to see how it can benefit your recovery of defaulted assets.