A timeshare (sometimes called a vacation ownership or vacation club) is a property with a divided form of ownership or use rights. These properties are typically resort condominium units, in which multiple parties hold rights to use the property, and each owner of the same accommodation is allotted their period of time. Units may be sold as a partial ownership, lease, or "right to use", in which case the latter holds no claim to ownership of the property. The ownership of timeshare programs is varied, and has been changing over the decades.
The term "timeshare" was coined in the United Kingdom in the early 1960s, expanding on a vacation system that became popular after World War II. Vacation home sharing, also known as holiday home sharing, involved four European families that would purchase a vacation cottage jointly, each having exclusive use of the property for one of the four seasons. They rotated seasons each year, so each family enjoyed the prime seasons equally. This concept was mostly used by related families because joint ownership requires trust and no property manager was involved. However, not many families vacation for an entire season at a time; so the vacation home sharing properties were often vacant for long periods.
British businesses decided to go one step further and divide a resort room into 1/50th ownership, have two weeks each year for repairs and upgrades, and charge a maintenance fee to each owner. It took almost a decade for timeshares in Europe to evolve into a smoothly run, successful business venture.
The first timeshare in the United States was started in 1974 by Caribbean International Corporation (CIC), based in Fort Lauderdale, Florida. It offered what it called a 25-year vacation license rather than ownership. The company owned two other resorts the vacation license holder could alternate their vacation weeks with: one in St. Croix and one in St. Thomas; both in the U.S. Virgin Islands. The Virgin Islands properties began their timeshare sales in 1973.
The contract was simple and straightforward: The company, CIC, promised to maintain and provide the specified accommodation type (a studio, one bedroom, or two bedroom unit) for use by the "license owner" for a period of 25 years (from 1974 to 1999, for example) in the specified season and number of weeks agreed upon, with only two extra charges: a $15.00 per diem (per night) rate, frozen at that cost for the life of the contract, and a $25.00 switching fee, should the licensee decide to use their time at one of the other resorts. The contract was based on the fact that the cost of the license, and the small per diem, compared with the projected increase in the cost of hotel rates over 25 years to over $100.00 per night, would save the license owner many vacation dollars over the span of the license agreement. Between 1974 and 1999, in the United States, inflation boosted the current cost of the per diem to $52.00, validating the cost savings assumption. The license owner was allowed to rent, or give their week away as a gift in any particular year. The only stipulation was that the $15.00 per diem must be paid every year whether the unit was occupied or not. This "must be paid yearly fee" would become the roots of what is known today as "maintenance fees", once the Florida Department of Real Estate became involved in regulating timeshares.
Cancellations, or rescission, of the timeshare contract, remain the industry's biggest problems to date; the difficulty has been the subject of comedy in popular entertainment.
The industry is regulated in all countries where resorts are located. In Europe, it is regulated by European and by national legislation. In 1994, the European Communities adopted "The European Directive 94/47/EC of the European Parliament and Council on the protection of purchasers in respect of certain aspects of contracts relating to the purchase of the right to use immovable properties on a timeshare basis", which was subject to recent review, and resulted in the adoption on January 14, 2009, on European Directive 2008/122/EC.
To make the new regulations applicable to any person or entity that provides timeshares, the definition of a timeshare service provider was substantially extended and clarified. If the timeshare provider does not follow the rules decreed in NOM, the consequences may be substantial, and may include financial penalties that can range from $50 to $200,000.
Due to the promise of exchange, timeshares often sell regardless of the location of their deeded resort. What is not often disclosed is the difference in trading power depending on the location, and season of the ownership. If a resort is in a prime vacation region, it will exchange extremely well depending on the season and week that is assigned to the particular unit trying to make an exchange. However, timeshares in highly desirable locations and high season time slots are the most expensive in the world, subject to demand typical of any heavily trafficked vacation area. An individual who owns a timeshare in the American desert community of Palm Springs, California, in the middle of July or August will possess a much reduced ability to exchange time, because fewer come to a resort at a time when the temperatures are in excess of 110 F (43 C).
A variant form of real estate-based timeshare that combines features of deeded timeshare with right-to-use offerings was developed by Disney Vacation Club (DVC) in 1991. Purchasers of DVC timeshare interests, whom DVC calls members receive a deed conveying an undivided real property interest in a timeshare unit. Each DVC member's property interest is accompanied by an annual allotment of vacation points in proportion to the size of the property interest. DVC's vacation points system is marketed as highly flexible and may be used in different increments for vacation stays at DVC resorts in a variety of accommodations from studios to three-bedroom villas. DVC's vacation points can be exchanged for vacations worldwide in non-Disney resorts, or may be banked into or borrowed from future years.
DVC's deeded/vacation point structure, which has been used at all of its timeshare resorts, has been adopted by other large timeshare developers including the Hilton Grand Vacations Company, the Marriott Vacation Club, the Holiday Inn Club Vacations, the Hyatt Residence Club and Accor in France.
The prospects are then invited to take a tour of the property. Depending on the resort's available inventory, the tour will include an accommodation that the tour guide or agent feels will best fit the prospect's family's needs. After the tour, the group returns to the hospitality room for a verbal sales presentation. During the presentation, they are handed the resort exchange book from RCI, Interval International, or whatever exchange company is associated with that particular resort property. The prospects are asked about the places they would like to visit if they were timeshare owners. The rest of the presentation is designed around the responses the prospective buyers give to that question.
U.S. Federal Trade Commission mandates a "cooling off period" that allows people to cancel some types of purchases without penalty within three days. Additionally, almost all U.S. states have laws that specifically govern cancellation of timeshare contracts. In Florida, a new timeshare owner can cancel the purchase within ten days. The law differs by jurisdiction as to whether out-of-state purchasers are subject to the rescission period of their state of residence, or the rescission period of the state where the timeshare purchase was made.
Another common practice is to have the prospective buyer sign a "cancellation waiver", using it as an excuse to lower the price of the timeshare in exchange for the buyer waiving cancellation rights (or paying a penalty, such as losing 10% of the purchase price, if the sale is cancelled). However, such a waiver is not legally enforceable anywhere in Mexico or the United States.
A resale value of a timeshare unit varies between the timeshare systems and properties. While it's possible for certain units in certain timeshare systems to appreciate in value over time, this is a rather rare event. Most properties in most timeshare systems are worth a fraction of the original price after the purchase, and often carry no value at all.
Deeds with no resale restrictions may carry some resale value, depending on the location, season, unit size, or the allotted points value. For example, large units in mountain resorts during ski season and large penthouse units in popular destinations will have some resale value. Likewise, small units in destinations saturated by timeshares, or with expensive maintenance fees compared to the value of offered points in their respective system, will have no resale value at all.
Most timeshare companies retain the right of first refusal for most of their properties. If that is a case, each owner is required to submit their purchase agreement contract to the developer and ask for a waiver. The developer may decide to exercise ROFR to purchase the subject property, thus refusing the sale to the original buyer. A transaction is typically exempted from ROFR if the purchaser is a direct family member.
The United States Federal Trade Commission provides consumers with information regarding timeshare pricing and other related information. Also known as Universal Lease Programs (ULPs), timeshares are considered to be securities under the law.
Timeshare developers contend that pricing compared to staying at hotels in the long term is projected to be lower to the timeshare owner. However, a hotel guest does not have a monthly vacation mortgage payment, upfront cost, fixed schedule, maintenance fees, and preset vacation locations. Many owners also complain that the increasing cost of timeshares and accompanying maintenance and exchange fees are rising faster than hotel rates in the same areas. 041b061a72