At some time or other you have probably seen the ads: “Luxury Lifestyle at Affordable Prices!”–“Vacation the World!”–“Trade for Exotic Climes!”–“Buy Your Own Vacation Dream Home!” These refer to the concept of timesharing.
Other commonly used terms synonymous with timesharing include: resort timesharing, vacation ownership, multi-ownership, interval ownership and shared vacation plan. The timeshare concept has been applied to numerous other areas such as recreational vehicle and mobile home parks.
The timesharing business originated in Europe in the 1960s. The concept then moved to Florida in the 1970s to facilitate the sale of the sluggish condominium industry. Since then, timeshares have grown rapidly, with thousands of resorts throughout Canada and the United States, and around the world. These resorts range from Ontario cottage country resorts, to Florida condos, to Mexican beach villas.
There are two main categories of timeshares: “right to use” and “fee simple” ownership.
Right to use
This concept is much like having a long-term lease, but with limited use for perhaps one, or maybe two weeks per year. It is similar to prepaying for a hotel room for a fixed period every year, 20 years in advance. In other words, you don’t have any portion of ownership in the property, you only have a right to use it for a fixed or floating time period every year. The “right to use” concept involves condominiums, recreational vehicle parks and other types of properties.
The opportunity for return on your money in a “right to use” timeshare is limited or non-existent. This is because there is generally very little demand in the after-sale market, as well as other restrictions on resale or pricing of the resale. In practical terms, timesharing is primarily a lifestyle choice.
Fee simple ownership
There are different formats. One involves owning a portion of the condominium (for example, one-fiftieth of the property). Each one-fiftieth portion would entitle you to one week’s use of the premises. Other people would also buy into the property. Normally you would be allocated a fixed week every year. In other instances, it could be a floating time, with the exact date to be agreed upon depending on availability. In some cases, you might purchase a one-quarter or one-half interest. If the property is sold, you would receive your proportional share of any increase in net after-sale proceeds. You would also normally be able to rent, sell or give your ownership portion to anyone you wished.
Here are some of the issues to be aware of:
You may tire of going to the same location every year, as your needs may change over time.
The timeshare programs that include an exchange option (i.e., switching for a week in a different location) are not always as anticipated, in terms of availability, flexibility, convenience, or upgrade fee.
Make sure you know what you are getting. Some people who purchase the “right to use” type think they are actually buying a “fee simple ownership” portion.
Be wary of hard-sell marketing. In most instances, you are offered “free” inducements (buffet, cruise, etc.) to convince you to listen to the sales pitch. The dream fantasy is heavily reinforced, and high-pressure sales pitches, given by teams of salespeople, can go on for hours and can be very persuasive–if not aggressive. Furthermore, very manipulative techniques are sometimes used to get you to sign a credit card slip as a deposit.
There is usually an ongoing management fee for maintaining the premises.
Timeshare sales in Canada and some U.S. states are sometimes covered by consumer protection, in terms of your right to get your money back by “rescinding”, or canceling the contract within a certain time period.
Timeshares are a dream for some, but a nightmare for others. Speak to at least three other timeshare owners in the project you are considering in order to get their candid opinion before you decide to buy. Never give out your credit card for any reason as a deposit, or sign any documents without first speaking with a local real estate lawyer. Obtain a lawyer’s name from the local lawyer referral service or provincial or state bar association. Don’t let yourself be pressured. Check with the local Better Business Bureau. Then sleep on it for some time. If the deal seems “too good to be true,” it probably is.
