The notion of a timeshare was originally created in Europe in the 1960s. A ski resort developer in the FrenchAlps innovatively marketed his resort by encouraging guests to "stop renting a room" and instead "buy the hotel". The developer was successful in increasing occupancy and the idea spread worldwide. While a useful tool for many, the timeshare industry has also become a magnet for attracting illegal and barely legal methods for the sale and resale of property.
Methods of Use
Timeshare is a business model whereby a company buys something and sells small timeslices of it to customers. This concept is most frequently used for vacation condominiums/homes, but it has also been used for high end private jets. In general, "timeshare" refers to the former rather than the latter.
Timeshare owners may elect to:
- Use their usage time
- Rent out their owned usage
- Give it as a gift
- Exchange internally within the same resort or resort group
- Exchange externally into thousands of other timeshare resorts
Recently, with most point systems, owners may elect to:
- Assign their usage time to the point system to be exchanged for airline tickets, hotels, travel packages, cruises, amusement park tickets;
- Instead of renting all their actual usage time, rent part of their points without actually getting any usage time and use the rest of the points;
- Rent more points from either the internal exchange entity or another owner to get a larger unit or more vacation time or at a better location;
- Save or move points from one year to another.
Some developers, however, may limit which of these options are available at their properties.
Timeshare owners can elect to stay at their resort during the prescribed period, which varies depending on the nature of their ownership. In many resorts, they can rent out their week or give it as a gift to friends and family.
Timeshares offer owners the possibility of exchanging their week, either independently or through several exchange agencies, to stay at one of the thousands of other resorts worldwide. There are many exchange agencies, of which the three largest are Resort Condominiums International, Interval International and Trading Places International. All three have resort affiliate programs and members can only exchange to affiliate resorts. It is rare to find a dual affiliate resort; it is more common for a resort to be affiliated with only one of the larger exchange agencies. Together they have over 7,000 resorts. The timeshare resort one purchases determines which of the major exchange companies can be used to make exchanges. RCI, II & TPI all charge membership fees and exchange fees. They also bar members from renting weeks for which they already have exchanged.
Timeshare owners may also arrange a direct exchange. This requires locating a timeshare owner with the location and weeks both mutually desire. This form of exchange is rare but since it can save in exchange fees it is often sought after. Several bulletin boards have been created to help timeshare owners meet others and swap.
Timeshares take different forms depending on the seller. The vast majority consist of one week of ownership, i.e. 1/52 year, but some developers sell point based systems that are a different form of vacation currency that allow hotel stays, car rentals, and stays at large networks of resorts.
Kinds of Time Shares
Fixed Week Ownership
The most basic timeshare unit is a fixed week; the resort will have a calendar enumerating the weeks roughly starting with the first calendar week of the year. As an owner you may own a deed to use a unit for a single specified week. For example week 26 normally includes the Fourth of July Holiday. If you owned Week 26 at a resort you could use your week every year.
Sometimes a timeshare is sold as floating weeks. The ownership will be specific on how many weeks you own and from which weeks you may select for your stay. An example of this, a timeshare may be a floating summer week where the owner may request any week during the summer season generally weeks 22 through 36. In this example there would be competition for prime holidays such as the weeks of Memorial Day, Fourth of July and Labor Day. The weeks when schools may still be in session would not be so high in demand. Some floating contracts exclude major holidays so they may be sold as fixed weeks.
Some timeshares are sold as rotating weeks. In an attempt to give all owners a chance for the best weeks, the weeks are rotated forward or backward through the calendar, so one year the owner may have use of week 25, then week 26 the next year and then week 27 the year after that. This method does give each owner a fair opportunity for prime weeks but it is not flexible.
Deeded vs. Right to Use
A major difference in types of timeshare ownership is that between deeded and right to use contracts. With deeded contracts the use of the timeshare resort is usually divided into week long increments and these are sold as fractional ownership and are real property. As with any other piece of real estate you may use your week, rent your week, give it away, or leave it to your heirs. While this form of ownership can offer additional security to the owner as a form of physical ownership, deeded timeshare ownership can be as complex as outright property ownership in that the structure of deeds varies according to local property laws. Leasehold deeds are common and offer ownership for a fixed period of time after which the ownership reverts to the Freeholder. Occasionally, leasehold deeds are offered in perpetuity however many do not convey ownership of the land but merely the apartment or 'unit' of accommodation.
With right to use, the timeshare purchaser has the right to use the property in accordance with the contract but at some point the contract ends and all rights revert to the property owner. In other words, the right to use contract grants the right to use the resort for a specific number of years. In many countries there are severe limits on foreign property ownership, so this is a common method for developing timeshare resorts in countries such as Mexico. Disney Vacation Club is also sold as a right to use. Care should be taken with this form of ownership as the right to use often takes the form of 'club membership' or right to use the reservation system. Where the reservation system is owned by a Company not in the control of the owners, the right of use may be lost with the demise of the controlling Company.
Vacation clubs are organizations that may own timeshare units in multiple resorts in different locations. Some clubs consist only of individual weeks at other developer's resorts. They are sold both as deeded or right to use and club members may reserve vacation time at any of the owned resort units based on availability. Vacation clubs cater to a wide range of economic backgrounds and income levels.
Resort based points programs are also sold as deeded and as right to use. Points programs annually give the owner an amount of points equal to the level of ownership. The timeshare owner in a points program can then use these points to make travel arrangements within the resort group. Many points programs are affiliated with large resort groups offering a large selection of options for destination. Many resort point programs provide flexibility from the traditional week stay. Resort point program members, such as Worldmark, may request from the entire available inventory of the resort group.
Exchange company point programs are not a method of ownership nor are specifically associated with one resort or resort group. With the exchange company points programs the members may be limited to exchanging for weeks deposited by other members.
A points program member may often request fractional weeks as well as full or multiple weeks stays. The number of points required to stay at the resort will vary based on a points chart. The points chart will allow for factors such as:
- The popularity of the resort;
- The size of the accommodations;
- The number of nights;
- The popularity of the season;
- and the specific nights requested.
There is flexibility as well as complexity in point programs.
Important Note on Ownership
- With any of the above mentioned ownership methods, a timeshare owner is legally and contractually tied to that ownership.
- A timeshare owner has rights, responsibilities and legal obligations. Once the timeshare contract is made it is not easily ended.
- These contracts and obligations belong to the timeshare owner until the timeshare is sold or ownership is transferred through some other means.
- Points and floating systems do require the owner to determine their vacation time in advance in order to get the time they want. A high demand week may require the owner to book the reservation on the first minute of the first day lest it be booked by another, more aggressive owner.
- Use a timeshare resales company that has a solid reputation, read about industry warnings and use a good closing company to complete your property transaction.
In many developer contracts (and often required by government statutes and/or regulations) there may exist a Rescission period. The Rescission period outlines how many days after a timeshare purchase, from a developer, that a buyer has an opportunity to change their mind and cancel the purchase. The Rescission period is usually only a few days long and the buyer must follow the cancellation procedure exactly or risk the request to rescind being ignored.
Mexico requires a five-day rescission period on all time share contracts, as stated in article 56 of the Mexican Federal Law for Protection of the Consumer.Some Mexican resorts have drawn up contracts declaring that there is no rescission period, but any such claims are fraudulent.