The Timeshare Arbitration Clause: What Is It?

If you own a timeshare, you know that there are lots of terms in your timeshare contract that aren’t exactly fair. Timeshare developers write contracts that contain provisions for ever-increasing annual maintenance fees; rescission clauses with hyper-specific, onerous conditions; and numerous other legalisms that are designed to stack the deck against you.

When people learn how bad many of these contracts are, they understandably get angry and want to take their timeshare companies to court. Before you hire a lawyer, though, consider that you might have already signed away your ability to sue. That’s how many timeshare owners discover the arbitration clause in their contracts.

Arbitration clauses are an increasingly common method that many companies use to keep their legal costs down by taking disputes with customers out of court. These companies then often use their knowledge of the process to get a tactical advantage over their customers, denying them their day in court and railroading them through an unfair and arcane process.

This article will take a look at what arbitration is, how it works, and what the risks are for timeshare owners who find themselves stuck with arbitration clauses. We’ll also examine how an experienced timeshare exit company like Centerstone Group, in tandem with our law firm and attorney partners, might be able to help if you find yourself in this situation.

What Is Arbitration, and How Does it Work?

Arbitration is a kind of alternative dispute resolution, meaning that it is a way for parties to resolve their legal disputes without having a trial in a court of law. This is accomplished by submitting that dispute to a third-party neutral, known as an arbitrator, who usually has specific legal training or expertise in the area of the dispute. There are several different companies that have arbitrators for hire, like the American Arbitration Association and JAMS ADR.

Before examining how arbitration specifically affects timeshare contracts, let’s examine how arbitration functions in practice and why anybody would choose it rather than going to court.

What Do Arbitration Proceedings Look Like?

The process of arbitration can vary widely depending on several factors. Sometimes it might look almost exactly like a courtroom trial, with the arbitrator ruling on evidence in much the same way a judge would. Of course, even in the most extreme cases, an arbitration would likely only resemble a bench trial, where a judge decides the issues of law and fact without a jury.

Other times, an arbitration might just be a more informal type of proceeding that takes place in a conference room. Sometimes, there isn’t a hearing at all, and an arbitrator will just ask both sides to draft briefs explaining their positions.

Whatever the exact procedure used, the arbitration process ends with a decision (more often known as an “arbitration award”) in favor of one of the parties. Whether or not the ruling is enforceable like a court judgment (whether it’s “binding arbitration” or “non-binding arbitration”) is again up to the terms of the contract, but almost all arbitration provisions in timeshare contracts will be for binding arbitration.

Once arbitration awards have been made, they are very difficult to undo. While it is sometimes possible to ask a court to set aside or vacate arbitration decisions, the law severely limits those possibilities. Depending on state law, you could be liable for the other side’s legal costs or attorneys’ fees, in addition to arbitration fees, if you mount a losing challenge.

Why Would You Pick Arbitration Over Filing a Court Case?

Most ordinary people probably wouldn’t sign an arbitration agreement if they had any choice in the matter. But big companies, such as timeshare developers, like arbitration because it saves them money and time. Lawsuits are expensive, and if you are a big corporation that gets sued often, arbitration represents a good way to save money on legal costs.

Some unscrupulous companies also use arbitration because they feel it gives them a strategic advantage in their legal disputes. Because consumers very rarely use arbitration and large companies are often “repeat players,” companies may feel that they have a tactical advantage by forcing consumers to litigate before arbitrators who are familiar with the companies. Many times, these “repeat players” do indeed boost higher win rates before arbitrators than they would otherwise have in court.

From the description above, you may be thinking that arbitration doesn’t sound like a very good deal for timeshare owners, and you would be right. But judges aren’t very sympathetic to consumers’ positions on this, and successful court proceedings challenging arbitration are rare.

The Federal Arbitration Act (FAA) strongly encourages arbitration and, in 2023, the FAA was even found to preempt a California law that tried to outlaw arbitration in some cases. Big companies love arbitration, and most of the time, they have the law on their side.

How to Know If You Have an Arbitration Clause in Your Contract

People have a right to bring their disputes to court, so you can’t be forced into arbitration unless you have made a contract to do so. If you bought a timeshare, though, you probably didn’t have a choice. Most, if not all, modern timeshare contracts will have some sort of mandatory arbitration clause. 

Most timeshare owners likely don’t know that they have arbitration clauses in their contracts because timeshare salespeople often rush them through the contract signing without any opportunity for review. The terms of such arbitration clauses vary from case to case, but they will generally look like this example from the Atlanta International Arbitration Society:

“Any controversy or claim arising out of or relating to this contract, or the breach thereof, shall be determined by arbitration administered by the International Centre for Dispute Resolution in accordance with its International Arbitration Rules.” 

These provisions will often have bold or capitalized language telling you that such dispute resolution clauses constitute a waiver of your right to a trial, and they may even require you to sign or initial separately to affirm the waiver.

A nasty surprise you might also find in your arbitration clause is a forum selection provision. This language could require you to arbitrate where the timeshare company is located, or anywhere else the company wants. 

Timeshare companies, like other big companies that get sued a lot, will often drop these into contracts. It gives them a kind of “home field advantage” regarding state law and the courts that would hear any challenge to them.

Let’s say, for example, that you live in Idaho, but your timeshare company is in Florida. If the arbitration clause says you must go to Florida to arbitrate, then you are bound by that language. Get ready to spend extra time and money fighting over your contract.

Do Arbitration Clauses Always Hurt Timeshare Owners?

Arbitration clauses don’t always hurt consumers; many arbitrators are former judges and lawyers who try their best to be fair. But the hard fact is that such clauses are much more likely to work in the companies’ favor. That’s why timeshare developers like them so much.

If you have an arbitration clause in your contract, you will most likely be kept out of court. This means that if you sue your timeshare company, their lawyers will simply file a motion telling the judge to dismiss your case because of the arbitration clause. Most of the time, judges will do exactly that.

Also, keep in mind that the rules of the arbitration might be very different from what you expect. You know you’ve already lost your day in court, but now you might even lose your ability to have an arbitration hearing or present adequate evidence. The bottom line is that the timeshare company will almost certainly have an advantage over you from the beginning of the process through the end.

How Should You Handle It If Your Timeshare Contract Has an Arbitration Clause?

If your contract has mandatory arbitration language, it is important to consult with a trusted professional as soon as possible. As the premier timeshare exit company, Centerstone Group has collective decades of experience dealing with timeshare contracts and arbitration clauses. We know how timeshare companies exploit these clauses, and we can help you make sure that you’re not taken advantage of.

Also, remember that not all contracts are legal. If there is a problem with your timeshare contract or its execution, we will work tirelessly with our legal partners to handle the legal issues and ensure that timeshare companies don’t twist the law to get an unfair advantage against you. 

And most importantly, we will also work in other ways, like through our proprietary pressure campaign, to force your timeshare developer to negotiate in good faith and help you get out of your contract.

Centerstone Group is consistently among the most trusted and well-regarded timeshare exit companies. We are accredited by the Better Business Bureau with an A+ rating and 4.81 out of 5 stars on nearly 200 customer reviews. We have the experience and the know-how to help you get out of your contract.

Know Your Rights

Timeshare contracts are long, complicated documents that are designed to confuse you and prejudice your rights. Sadly, many don’t find this out until it’s too late. But you don’t have to go through this alone. We know exactly how timeshare companies work, and we can fight back when they try to use these contracts against you.

Please contact us today for a free consultation and case evaluation.