Timeshare University

Vacation clubs are another timesharing variation. A vacation club is an organization that owns multiple timeshare properties in different locations. If you are a club member, you can reserve space at the various resorts that are part of the club in accordance with club rules. You pay annual fees, and there is an initial cost to join the vacation club. As with a right-to-use property, the vacation club contract will either contain the timeshare program documents or will incorporate them by reference.

Club memberships can usually be bought, sold or passed to heirs. There can be different levels of membership, with some membership levels receiving higher priority in reserving certain units or having access to larger units. Sometimes memberships may be associated with a “home” resort, with club members receiving priority in reserving space in their “home” resort.

Some vacation clubs operate through a Board of Directors elected by the membership. Conversely, other vacation clubs are simply companies that pre-sell vacations, and membership in such clubs does not include any right in the governing of the club.

Ownership of properties included in a club is usually structured in one of two ways:

• The developer (or its successors) owns the properties, with the club having access to the properties via a contractual relationship with the owner.

• The developer transfers ownership of the properties to the club after they are built. In this case, the properties would be owned by the club collectively and not by members individually. If your club membership also gives you a fractional ownership in the club, then you will own the properties indirectly through the club.

In either case, if the club ceases operations, you can easily lose your right to use the properties without compensation. In some clubs, the properties are placed into a trust that owns the properties on behalf of the club members. This arrangement provides some added security to the club members if the club ceases operations.

Some vacation clubs sell “deeded” memberships. If you own or are considering purchasing a “deeded” vacation club membership, you should read your documents to verify what your deed represents. With some “deeded” vacation club ceases operations, the deeded owner will still own that interval. In other cases, the “deed” may represent a fractional ownership of the vacation club. In yet other clubs, the “deed” is only a certificate for membership in the vacation club, without representing ownership of any real property.

Vacation clubs and right-to-use resort properties have many common features, and most of the cautions previously described for right-to-use projects also apply to vacation clubs. Overselling the program with some vacation clubs, just as it has been with some undeeded resorts.

© November 2000 by Stephen J. Nelson.  All rights reserved.

J.T. Calloway (Webmaster TDGMAC) Timeshare Division GMAC Real Estate 1-888-805-GMAC(4622) jt@gmactd.com

    Another major difference is whether the timeshare is a deeded interest or a “right-to-use” arrangement. Most deeded programs divided ownership of each unit into specific week increments, and as a buyer, you actually purchase a fractional ownership of the unit. For example, if you were to purchase the fraction of ownership associated with week 34 in Unit 253, you would receive a deed conveying to you ownership of that specific timeshare fraction; this deed is also recorded with the local governmental agency (such as a County Recorder or Assessor) that records deeds and maintains property ownership records. In some cases, the deed may simply convey a specific fractional ownership interest corresponding to the ownership period without tying the ownership to a specific week, for example, an undivided 1/52nd interest in Unit 253. Since your ownership is a “deeded” property you can sell the timeshare unit, give it away, or bequeath it to heirs, just as with other real property.  

• In a “right-to-use” program, you receive the right to use the unit for a specified number of years. At the end of that period, the usage rights revert to the property owner. Usually you can sell, donate, or bequeath a “right-to-use” contract, but the expiration date will remain the same. Because many countries either prohibit or servilely limit foreign ownership of real estate, a right-to-use program may be the only way to successfully develop a timeshare project in those countries.
• As part of the process of establishing a timeshare project, the developer also creates a set of legal documents describing the operation of the resort and the timeshare program. These documents are generally referred to as the “program documents”. For a deeded property, the program documents are usually in the form of Codes, Covenants and Restrictions (CCR) that attach to the ownership of each timeshare interval and are binding on all at the property ( including subsequent purchasers). For a right-to-use property, the right-to-use will either contain the program documents or will incorporate them by reference.
• Both “deeded” and “right-to-use” properties can operate with either fixed or floating week programs. In a deeded floating program, the CCR or program documents will specify that the owner's usage is a floating right that must be reserved, and that the owner does not receive any special preference to reserve the unit and week that appears on their deed.
• A critical difference between deeded and right-to-use properties involves ownership of the resort. With a deeded property the owners of the intervals collectively own the resort. When the resort is first opened, the developer owns the weeks and, hence, controls the project. As the developer sells timeshare units, the developer's ownership level declines, and control of the property usually transfers to the owners. If the property manager defaults or goes bankrupt, you and your fellow owners will still own the property as reflected in your deeds.
• In contrast, with a right-to-use property, the developer typically continues to own the property even after all of the intervals are sold. The developer usually retains the right to sell or transfer the property, including the timeshare program, to a third party. The developer may also be able to unilaterally change aspects of the timeshare program, increase annual fees, or impose special assessment. Owners of right-to-use intervals may have little or no ability to prevent or influence such actions by the developer or operator. Similarly, if owners are dissatisfied with the management of the property they may have little or no ability to to force changes in property management and operations. In addition, if the resort closes or the operator becomes defunct, you might lose your right-to-use without receiving any compensation. In a deeded property, a Homeowners Association (or similar organization) usually has overall responsibility for managing the property in accordance with the program documents, including setting annual fees and levying special assessments. When you own a week in a resort, you are automatically and mandatory a member of the Homeowners Association. The board of directors will usually hire a resort management company to operate the resort.Some unscrupulous developers of undeeded resorts have “oversold” the project; i.e., they have sold more intervals to owners than the resort can provide. (This is most likely to occur at an undeeded resort because the absence of deeds linking units sold to specific ownership interests makes it easier to oversell the resort.) When this happens, owners will find it very difficult to reserve a usage period. Accordingly, if you are purchasing a week at an undeeded floating time resort, you should determine whether you are adequately protected against overselling of the resort's inventory.

 © November 2000 by Stephen J. Nelson.  All rights reserved.

While all timeshare programs provide you, as the owner, a right to occupy a facility for a given period (usually one week every year or every other year), there are many differences in how this is done. This section discusses some of the major variations among timeshare programs.

1. Fixed, Floating and Rotating weeks

In a fixed week system, your occupancy right is for the same week, and usually the same unit, every year. For example, if your timeshare ownership were for week 34 in Unit 253 for the 34^th week of the year. (Note that most timesharing calendars count weeks from the check-in day. So, if the check-in day for Unit 253 is Saturday, then week 34 starts on the 34^th Saturday of the year, with check-out on the 35^th Saturday of the year.) As can be expected, some weeks are more popular than others; this is usually reflected in the purchase price for the timeshare unit.

In a floating week system, you have the right to use a unit during a specific period (the “float” season or “flex” time), but you must contact the resort to reserve a specific week during a specific period. A floating right is useful if you don't want your usage restricted to a given week every year. Since all other owners that share your float period can reserve any time during that period, if you delay making a reservation you might find that all of the units have already been reserved for the times that you wish to reserve. Then you may have to accept a week you may not want, or you may have to fore go your usage for the year.

Resorts set their own policies as to how far in advance their owners can reserve their floating week usages. This lead-time can be as little as nine months or as much as two years in advance of the check-in date. Many resorts will require advance payment of maintenance fees to reserve a float week, especially if you plan to use the week in a timeshare exchange.

When you reserve a week for exchange purposes, some floating week resorts will select the week to be deposited for exchange purposes or will restrict you to picking only certain weeks for deposit, whereas other resorts allow you to select and deposit any available week. Since the particular week deposited with an exchange company directly affects the exchange value of the deposit, the procedures your resort uses to assign floating weeks for exchange will influence the types of exchanges you can complete with your timeshare.

A few timeshare projects use a rotating week system, In this type of program, your usage week changes from year to year on a fixed schedule. For example, with a three-year rotating schedule, in Year 1 your usage might be for week 9, in Year 2 your usage would be for week 26, and in Year 3 your usage would be for week 43. In Year 4, the cycle would start all over again with week 9. Rotating weeks allow all owners an opportunity to use the resort during the most popular periods.

© November 2000 by Stephen J. Nelson.  All rights reserved.

A Timeshare is a program in which a group of people share use of a property by dividing among themselves the rights to use the property for specific periods. Although the property is usually a residential project such as a condominium, developers have applied the timesharing concept to other types of properties, such as houseboats, campgrounds, and recreational vehicle parks, etc. Virtually all timeshares are resort or vacation properties.

To set up the timeshare, the developer "divides" occupancy of each of the units into time-based intervals. The developer then sells these intervals to buyers, so each owner of an interval receives the right to use a specific unit for a specific time period corresponding to the interval they purchased. Each timeshare owner thus "shares" the usage of the property, along with all the owners. Through this shared usage, the owners have guaranteed accommodations in the property, without carrying the financial and property management burdens associated with a conventional ownership of such a property.

Timeshare intervals are normally one week long; a few timeshare projects, however, use other ownership fractions, such as one-tenth or one-quarter ownerships. Since almost all timeshare projects are based on one-week intervals, the words “week” or “timeshare week” are generally used in the timesharing community to mean a one-week timeshare interval. In keeping with this convention, through the rest of this course I usually refer to timeshare intervals as “timeshare weeks” or “weeks”.

In addition to the purchase price, timeshare owners also pay an annual fee for property up keep and management. Most timeshare projects also reserve one or two, one-weeks usage of each unit for maintenance and repairs.

Historically, many timeshare developers have used high-pressure and deceptive sales tactics, with misleading and inaccurate portrayals of what buyers could expect from their timeshare ownership. The timeshare industry has had its share of unethical and dishonest resort developers and operators. Consequently, timesharing has a bad reputation with many people. Although the timeshare industry has improved its sales presentations, consumer awareness and education is still essential for owners to avoid being misled and to obtain the most value from their timeshare purchases. This article is one effort in that process.

Despite these perceptions, timesharing is a good product for many people. Timeshare makes resort ownership possible for many people who otherwise would not be able to enjoy such facilities, and there are many satisfied timeshare owners. After buying one unit and enjoying it, many timeshare owners have purchased additional timeshares. In addition, many well-known hotel and resort operators (such as Marriott, Disney and Hilton) have developed timeshare products that have been successful and have greatly improved the image of timesharing.

Because of the bad impressions many people have of timesharing, timeshare developers have developed other names for timeshare projects, such as “Vacation Ownership” or “Fractional Ownership”. These programs are still timeshare projects, and many of the same principals apply.

© November 2000 by Stephen J. Nelson.  All rights reserved.

Here is a list of the most common Timeshare terms:

Amenities

Lease

Check-In Date

Lockout Unit

Check-In Time

Maintenance Fees

Closing Costs

Maximum Occupancy

Deeded Property

Odd or Even Year Usage

Escrow

Points

Exchange

Reserve Price

Exchange Company

Resort Ratings

Fixed Unit

Right to Use (RTU)

Fixed Week

Special Assessment

Floating Unit

Time Division

Floating Week

Trading Power

Interval

Unit Size

Interval Calendar

-Amenities: Features that add to the value of the property such as swimming pools, tennis courts, golf courses, boating, full kitchens, laundry facilities, etc. The more amenities a resort offers, the greater the increase in value and desirability of the property.

-Check-In Date: The assigned date. The interval week begins usually Friday, Saturday, or Sunday. The check-in day begins the seven-day interval week. [Example: If the interval week begins on Friday, the week ends on the following Friday]. The interval owner (or renter) need not check in on the specific check-in day; however, late check-in does not extend the interval week beyond the scheduled checkout day.

-Check-In Time: The assigned hour. An interval week begins usually 3:00 PM, 4:00 PM, or occasionally 5:00 PM local time. The interval owner need not check in at the precise time; however, late check in does not extend the interval week beyond the assigned check out time. Checkout time is normally 10:00 AM or 11:00 AM prevailing time on the seventh day following check-in. [Example: check-in on Saturday at 4:00 PM and checkout on the following Saturday at 10:00 AM].

-Closing Costs: The costs associated with the closing process usually including deed preparation or transfer of equity for right-to-use properties, recording costs, escrow fee, and administrative fees.

-Deeded Property: True property ownership with deed recorded in the county where the property exists. This type of property has the same rights of ownership accorded to it as other deeded real estate. The owner may sell, rent, bequeath, or give away the property.

-Escrow: A special secured account used to hold funds from the buyer and the seller related to closing of purchase and/or sale of any property.

-Exchange: The process of trading a week at one resort for a week at another resort when trading a specific week at the home resort for another week at the same resort. The exchange system allows an interval owner to trade their week with other interval owners thereby allowing each owner to travel and vacation throughout the world.

-Exchange Company: A company or organization that accepts weeks on deposit from it's interval members to establish a pool of weeks from which other members may select the resort and vacation times of their choice. When a member deposits their week with an exchange company, the company compares the week the depositor is asking for with weeks deposited by other members and provides a suitable match based on availability and value. Factors affecting the trading value are: the resorts' rating, the time division; i.e., low time versus prime time , the size of the unit desired, etc.

-Fixed Unit: Unlike a floating unit, an owner who owns a fixed unit at a resort will always vacation in the same physical unit each year he/she vacations at that resort. This type of ownership is particularly important if you have purchased, for example, an oceanfront property. A fixed unit property assures the owner that he/she will always have the exact unit they have purchased.

-Fixed Week: Referring to the interval calendar, the purchase of a fixed week property assures the owners that they will always have the same week each year; i.e., week 26. Alternatively, an owner of a floating week may choose another week within their time division or may elect to upgrade or downgrade to another time division to meet their annual vacation schedule. Upgrading to a higher time division usually incurs an additional cost.

-Floating Unit: Unlike a fixed unit, interval owners of a floating unit at a resort may not vacation in the same physical unit each year they vacation at their home resort. Interval owners may request a specific unit and, if available for that particular week, the resort normally will honor the request.

-Floating Week: The purchaser of a floating week has the flexibility of scheduling their vacation interval with yearly variations in accordance with the resort's guidelines. Typically, resorts will accept requests for specific weeks by the owner as soon as the annual maintenance fees are paid. Therefore, the earlier the maintenance fees are paid, the better the chance that the owner can pick a specific week.

-Interval: An assigned period. Based on the interval calendar where fifty-two weeks of the year are numbered sequentially: Week 01 through Week 52 or Week 53. A specific interval week is a seven-day period encompassing one of those fifty-two weeks.

-Interval Calendar: An annual calendar depicting the fifty-two or fifty-three weeks of each calendar year showing starting days of Friday-to-Friday, Saturday-to-Saturday, and Sunday to Sunday, check in dates.

-Lease: Some states and some foreign countries do not allow deeded ownership of timeshares. Alternatively, a lease ownership or Right-To-Use ownership grants the leaser the right to use the property for a specified period usually from 20 to 99 years. The resort developer or management company holds ownership of the physical property.

-Lockout Unit: Typically, a unit that has the capability of being divided to create two separate but complete sections. If an owner buys a lockout unit, he can divide the unit and either stay in one-half of the unit and rent the other half or rent both halves to different parties.

-Maintenance Fee: A fee paid annually to cover the costs of maintaining the grounds, units, and facilities of the resort and the management thereof. These fees vary from resort to resort and with the type and size of the unit purchased.

-Maximum Occupancy: The maximum number of persons a unit will accommodate; usually from 2 to 10 persons. Maximum occupancy is typically expressed in conjunction with "private occupancy" referring to the number of persons the unit will sleep privately and the number of bedrooms within the unit. For example: a two bedroom unit with a sleeping capacity of 4 persons and a maximum occupancy of 6 persons would typically have a double bed in each of the two bedrooms and a pullout sofa in the living area; thereby allowing four persons private sleeping arrangements and two persons less than private sleeping arrangements. Configurations of units vary from resort to resort.

-Odd or Even Year Usage: Use of the property is restricted to either odd years (Ex. 2001) or even years (Ex.2002). Obviously, the ownership of this type of interval is valued at one-half the value of a full ownership property since the use is restricted to one-half of the annual usage.

-Points: Programs offered to interval owners by resorts, which allow the owners choice and control over when and where they vacation, or for how long or short they stay. Points are a symbolic unit of measure having no intrinsic value separate and apart from interval ownership.

-Resort Ratings: A system of comparison of resort quality, amenities, and location. The two foremost rating systems are Resort Condominiums International (RCI), Interval International (II). RCI and II rate their affiliated resorts based upon predetermined criteria of exacting standards of quality and services provided by the resort as well as the availability of amenities at or near the resort. RCI uses the Gold Crown designation for their highest quality resorts and Resorts of International Distinction for second-level resorts. II designates their top resorts as 5-Star resorts.

-Reserve Price: Used primarily in auctions indicating the asking price requested by the seller. In the event the highest bid received does not meet or exceed the reserve price, the offer is conveyed to the seller for acceptance, decline, or negotiation.

-Right To Use (RTU): Some states and some foreign countries do not allow deeded ownership of timeshares. Alternatively, a lease ownership or Right-To-Use ownership grants the leaser the right to use the property for a specified period usually from 20 to 99 years. The resort developer or management company holds ownership of the physical property. However, during the right-to-use period, the owner may rent, transfer, or bequeath the remaining years of their right-to-use property.

-Return to the Top of the PageSpecial Assessment: A fee over and above the annual maintenance fee assessed by the resort to interval owners. This fee is, when assessed, intended to defray expenses related to major repairs and refurbishing of resort equipment, facilities, and units.

-Time Division: A system of establishing the value of a week typically based upon season. For example: a week 3 (Mid January) purchased at a New England beach resort would not hold the same value as a midsummer week at the same resort due to the fact that the season in January is not conducive to vacationing on the beach. Time divisions are expressed as high time or red time meaning prime time, white time or medium time meaning medium desirability, or blue time or low time meaning the least desirable time.
Some resorts such as Hawaiian resorts consider all weeks as prime time since their tropical climate permits pleasant vacations throughout the calendar year. Aditionally, many resorts offer year-round activities, often referred to as four season resorts, in which the owner may participate in a variety of seasonal activities. Other factors that affect the interval weeks desirability would be holidays and special local events.

-Trading Power: The assessed value of an interval week when trading or exchanging for another week within the same resort or at a different resort. In some situations, the owner of a red week at an RCI Gold Crown resort can trade that week for two or more weeks at a resort of leaser distinction or for weeks in a lower time division. Supply and demand rules prevail in this type of exchange and the owners can greatly enhance their trading power with high demand weeks and resorts.

-Unit Size: Normally expressed as hotel unit, studio unit, efficiency unit or by number of bedrooms. Hotel units, studio units, and efficiency units typically are a single room with sleeping accommodations and perhaps a small built in kitchen and sleep from two to four persons. One, two, or three or more bedroom units are usually condominium style accommodations and feature a partial or full kitchen and other living areas.