Nevada Timeshare License Practice Exam

Which clause protects prior purchasers if a Developer defaults on their project?

1. Indemnity clause

2. Non-disturbance clause

3. Rescission clause

4. Arbitration clause

The correct answer is: Non-disturbance clause

The non-disturbance clause is designed specifically to protect the rights of prior purchasers in the event that a developer defaults on their project. This clause assures purchasers that their ownership rights will not be disturbed or jeopardized, even if the developer faces financial difficulties or legal issues. Essentially, it provides a level of security for buyers, ensuring that their investment remains safe and that they can continue to enjoy their timeshare despite any potential problems that arise with the developer. This clause often works in conjunction with other agreements, such as a subordination agreement, ensuring that the purchasers' interests are maintained above the interests of other creditors in the event of a developer's bankruptcy or default situation. By having this protection in place, prior purchasers can feel more secure in their investment, knowing that they have legal recourse if the developer is unable to fulfill their obligations. Other clauses, such as indemnity, rescission, and arbitration, serve different purposes and do not specifically address the protection of prior purchasers' rights in the context of a developer's default. For instance, an indemnity clause generally relates to compensation for losses, and a rescission clause provides a way to cancel the contract, while an arbitration clause outlines the process for resolving disputes but doesn't inherently protect ownership rights