Subordination instruments; alternate security arrangements.

(1) With respect to each accommodation or facility of a multisite timeshare plan, the developer shall provide the division with satisfactory evidence that one of the following has occurred with respect to each interestholder prior to offering the accommodation or facility as a part of the multisite timeshare plan:

(a) The interestholder has executed and recorded a nondisturbance and notice to creditors instrument pursuant to s. 721.08.

(b) The interestholder has executed a subordination and notice to creditors instrument and recorded it among the appropriate public records in the jurisdiction in which the subject accommodation or facility is located. The subordination instrument shall expressly subordinate the interest or lien of the interestholder in the subject accommodation or facility to the rights of purchasers of the multisite timeshare plan created with respect to such accommodation or facility by the timeshare instrument, and shall provide that:

1. If the party seeking enforcement is not in default of its obligations, the instrument may be enforced by both the seller and any purchaser of the multisite timeshare plan;

2. The instrument shall be effective as between the timeshare purchaser and interestholder despite any rejection or cancellation of the contract between the timeshare purchaser and developer as a result of bankruptcy proceedings of the developer; and

3. So long as a purchaser remains in good standing with respect to her or his obligations under the timeshare instrument, including making all payments to the managing entity required by the timeshare instrument with respect to the annual common expenses of the multisite timeshare plan, then the interestholder will honor all rights of such purchaser relating to the subject accommodation or facility as reflected in the timeshare instrument.

The subordination instrument shall also contain language sufficient to provide subsequent creditors of the developer and the interestholder with notice of the existence of the timeshare plan and of the rights of purchasers and shall serve to protect the interest of the timeshare purchasers from any claims of such subsequent creditors.

(c) The interestholder has transferred the subject accommodation or facility or all use rights therein to a nonprofit organization or owners’ association to be held for the use and benefit of the purchasers, which entity shall act as a fiduciary to the purchasers. Prior to such transfer, any lien or other encumbrance against such accommodation or facility shall be made subject to a subordination and notice to creditors instrument pursuant to either paragraph (a) or paragraph (b). No transfer pursuant to this paragraph shall become effective until the nonprofit organization or owners’ association accepts such transfer and the responsibilities set forth in subsection (2).

(d) The subject accommodation or facility is free and clear of the claims of any interestholder, and the purchasers’ rights in and to the subject accommodation or facility as described in and limited by the timeshare instrument are protected by a recorded instrument against the claims of any subsequent creditors of any owner of the underlying fee.

(e) The interestholder has transferred the subject accommodation or facility or all use rights therein to a trust that complies with this paragraph. If the accommodation or facility included in such transfer is subject to a lease, the unexpired term of the lease must be disclosed as the term of that component site pursuant to s. 721.55(4)(a). Prior to such transfer, any lien or other encumbrance against such accommodation or facility shall be made subject to a nondisturbance and notice to creditors instrument pursuant to paragraph (a) or a subordination and notice to creditors instrument pursuant to paragraph (b). No transfer pursuant to this paragraph shall become effective until the trust accepts such transfer and the responsibilities set forth herein. A trust established pursuant to this paragraph shall comply with the following provisions:

1. The trustee shall be an individual or a business entity authorized and qualified to conduct trust business in this state. Any corporation authorized to do business in this state may act as trustee in connection with a timeshare plan pursuant to this chapter. The trustee must be independent from any developer or managing entity of the timeshare plan or any interestholder of any accommodation or facility of such plan. The same trustee may hold the accommodations and facilities, or use rights therein, for one or more of the component sites of the timeshare plan.

2. The trust shall be irrevocable so long as any purchaser has a right to occupy any portion of the timeshare property pursuant to the timeshare plan.

3. The trustee shall not convey, hypothecate, mortgage, assign, lease, or otherwise transfer or encumber in any fashion any interests in or portion of the timeshare property with respect to which any purchaser has a right of use or occupancy unless the timeshare plan is terminated pursuant to the timeshare instrument, or the timeshare property held in trust is deleted from a multisite timeshare plan pursuant to s. 721.552(3), or such conveyance, hypothecation, mortgage, assignment, lease, transfer, or encumbrance is approved by vote of two-thirds of all voting interests of the timeshare plan. Subject to s. 721.552, a vote of the voting interests of the timeshare plan is not required for substitution or automatic deletion of accommodations or facilities.

4. All purchasers of the timeshare plan or the owners’ association of the timeshare plan shall be express beneficiaries of the trust. The trustee shall act as a fiduciary to the beneficiaries of the trust. The personal liability of the trustee shall be governed by ss. 736.08125, 736.08163, 736.1013, and 736.1015. The agreement establishing the trust shall set forth the duties of the trustee. The trustee shall be required to furnish promptly to the division upon request a copy of the complete list of the names and addresses of the owners in the timeshare plan and a copy of any other books and records of the timeshare plan required to be maintained pursuant to s. 721.13 that are in the possession of the trustee. All expenses reasonably incurred by the trustee in the performance of its duties, together with any reasonable compensation of the trustee, shall be common expenses of the timeshare plan.

5. The trustee shall not resign upon less than 90 days’ prior written notice to the managing entity and the division. No resignation shall become effective until a substitute trustee, approved by the division, is appointed by the managing entity and accepts the appointment.

6. The documents establishing the trust arrangement shall constitute a part of the timeshare instrument.

7. For trusts holding property in component sites located outside this state, the trust holding such property shall be deemed in compliance with the requirements of this paragraph, if such trust is authorized and qualified to conduct trust business under the laws of such jurisdiction and the agreement or law governing such trust arrangement provides substantially similar protections for the purchaser as are required in this paragraph for trusts holding property in a component site located in this state.

8. The trustee shall have appointed a registered agent in this state for service of process. In the event such a registered agent is not appointed, service of process may be served pursuant to s. 721.265.

(f) With respect to any personal property accommodations or facilities, the developer and any other interestholder have complied fully with the applicable provisions of s. 721.08.

(2) The nonprofit organization or owners’ association described in paragraph (1)(c) shall comply with the following provisions:

(a) The nonprofit organization or owners’ association shall not convey, hypothecate, mortgage, assign, or otherwise transfer or encumber in any fashion any portion of the timeshare property with respect to which any purchaser has a right of use or occupancy unless the timeshare plan is terminated pursuant to the timeshare instrument or the timeshare property held by the entity is deleted from a multisite timeshare plan pursuant to s. 721.552(3).

(b) The nonprofit organization or owners’ association shall notify the division and the managing entity of the multisite timeshare plan of any proposed transfer of the accommodations or facilities or use rights therein which is permitted by paragraph (a) at least 30 days prior to said transfer.

(c) All expenses reasonably incurred by the nonprofit organization or owners’ association in the performance of its duties, pursuant to paragraph (a), shall be common expenses of the timeshare plan.

(3) In lieu of the requirements of subsection (1) or subsection (2), the director of the division may accept other assurances from the developer with respect to the subject accommodation or facility, including, but not limited to, a surety or fidelity bond or an irrevocable letter of credit, based upon the value of the subject accommodation or facility as established by independent appraisal or other evidence acceptable to the director.