We’ve all heard outrageous stories of hard-sale tactics on timeshare sales. Boozy parties with attractive sales representatives; offers of free televisions, theme park and concert tickets; steep discounts on destination activities; reduced cost vacations with the condition of sitting thru 90-minute sales presentations that turned into half day marathons. Years later after a legislative clean-up on timeshares, there is still a perception that hard sale tactics are the norm and that timeshares are not worth the hassle and the yearly maintenance fees. According to the American Resort Development Association (“ARDA”) in 2016 there were 1,558 timeshare resorts in the United States with over nine million owners and globally there are more than 5,000 timeshare resorts spread out over 121 countries. With so many people participating in timeshares, why do timeshares continue to carry a negative impression?
The answer is simple: many people lack knowledge about timeshares and end up purchasing something they don’t understand how to use, and which doesn’t fit their needs. At its most basic, a timeshare is a room or a suite at a vacation resort where the owner has a 1/52nd interest in a Unit which entitles the owner to use the Unit for one week per year. The concept first arose in Europe in the 1960’s and first appeared in the United States in Hawaii in 1969. By the mid- 1970’s the timeshare industry was taking root as one way to deal with overbuilt condominium projects. The appeal of a timeshare is in the cost comparison of vacations a family may take over the course of their lifetime. According to ARDA, a family of four spends on average $3,000.00 for a one-week vacation, which includes hotel and meals out. As an owner of a timeshare, your vacations are pre-paid by paying for multiple uses thru the purchase price. Even factoring in yearly maintenance fees, the timeshare owner is paying less for vacations over the same number of years than the non-owner.
...there is still a perception that hard sale tactics are the norm and that timeshares are not worth the hassle and the yearly maintenance fees.
While there can be other variations, but most timeshares fall into four categories:
1. Deeded property - the majority of time shares are deeded real estate, which allows the owner to sell, leave to heirs or “bank” the week and exchange it thru an interval exchange program in order to travel to other resorts. The week may be fixed (same week each year) or floating, where the owner can choose a week within a specified season. Some weeks can be biennial where the owner can use every other year, often referred to even/odd.
2. Lease or license - the owner still purchases a right to use period. The owner of a lease interval may be able to sell or bequeath, depending on the owner’s operating agreement. For licenses, the usage rights will revert to the resort at the end of the term. Owners can also exchange usage rights through exchange programs.
3. Vacation Clubs – is a membership within a timeshare or a resort developer. The organization may be a hotel chain like Marriott or Wyndham, or can be an organization that either owns or holds usage rights at multiple timeshare resorts for it members to use. Interests in the vacation club are sold to members either by deed, license or points and an owner can vacation at any resort within the club. Depending on the operating agreement, owners may be allowed to exchange their weeks in an exchange program.
4. Points Program – a buyer pays into a program for a specified dollar amount of points to be exchanged for usage at various other properties in the program on the same point scale or lower. The programs are most often run by hotel chains, well-known resort companies and resort destinations like Disney. Owners may receive a deed or license for a specific resort which is their “home-resort” but owners never need to actually vacation at their home resort. The appeal of the points program is that they offer more flexibility than standard timeshares as you can use your points for one vacation or divide your points for more frequent vacations or shorter stays per year. Many points programs also allow points to be used for other things such as airline tickets, car rentals or cruises.
No matter which type of timeshare you purchase, the timeshare is established according to its state law and operates under its constituent documents. For example, in Massachusetts, you first establish the condominium pursuant to MGL c. 183A and then submit the condominium to the timeshare statute under c. 183B. There is a Master Deed, Declaration of Trust or By-Laws and an Operating Agreement (the name of this document will vary) that explains the daily operations of the timeshare and the responsibilities and liabilities of owners. Read the Operating Agreement. Also understand that all timeshares come with a yearly maintenance fee, which similar to common expense fees in a residential condominium, are the personal obligation of the owner to pay and is a covenant that attaches to the property. Under a Resort’s Operating Agreement, it states that owners must be a member in good standing to use their timeshare. To be a member in good standing, you must be current on payment of the maintenance fees. Should you fail to pay the maintenance fees, then depending on the provisions of the Resort documents, and whether you purchased via license, lease or deed, the Resort can either revoke, terminate or foreclose your timeshare. In Massachusetts, Resorts can foreclose the lien on your timeshare through public auction.
Depending on the type of timeshare purchased and the operating agreements, timeshare owners can purchase memberships in exchange companies to visit other time share resorts worldwide. And yes, owners must pay a fee to join an exchange company. A condition of the exchange companies is that you are a member in good standing of your home resort – which as stated above, means you are current on the maintenance fees.
What buyers forget, or fail to realize, when purchasing a time share is the need for flexibility in vacationing. If the goal is to use the time share during school vacation weeks, keep in mind that you aren’t the only owners looking to use for these weeks. Weeks become open to reserve a year in advance. Many owners aren’t ready to plan a vacation a year in advance and when they are ready, they are disappointed to learn that the particular week they want is no longer available. If they are not flexible in their schedule, they become frustrated at not being able to “use” their timeshare. Additionally, time shares do not appreciate in value. Most weeks sell for less than half of its value upon resell.
So how can a buyer be a smart buyer? Research and reflection. When I was a child, my parents called a family meeting. We could either install a swimming pool in our backyard and not go on vacations or buy a trailer and go camping for vacation. We reasoned that sitting by a pool all day wasn’t something that we found satisfying. As my older brother stated - with a trailer we could visit pools all over the country. To make sure we enjoyed camping, we borrowed a friend’s pop-up camper for a weekend. My parents slept on one side, my brothers had the other, and I got stuck with the floor. It rained most of the weekend, I was miserable sleeping on the floor, and my mother was frustrated with cooking on a camp stove. My mother declared that she would only camp if we had a trailer. So, we bought a 27-foot trailer that slept 5 and had a kitchen, fridge and shower. Best decision my family ever made (thank you Mom!). So, do your research and take a moment to reflect on what type of vacationer you are. Are you a winter person who loves to snowboard or ski? Or are you a beach person, able to spend hours at a time next to the water? Are you an adventurer looking to enjoy the great outdoors, an avid golfer, or are you more inclined to take in an area’s cultural offerings? There are timeshare resorts to cover all types. So before deciding on a resort or vacation club, make sure it has what the family wants. Does the resort have enough to keep all family members occupied and happy? Does the vacation club have enough resorts within it to appease your interests? This is also where exchange companies come in as they can greatly expand your vacation options and cover every family member’s interests.
Next, become an educated buyer. You don’t buy a car without taking it for a test drive, and you don’t buy a house without viewing it, having it inspected and checking out the town and its schools. Check out the resorts online in advance. The better timeshare resorts, including the hotels and vacation clubs will be happy to speak with potential buyers in advance and answer any questions prior to your visit or promotional stay. Resorts are established by state condominium and timeshare laws. The documents establishing the condominium and the timeshare component are required to be recorded and are therefore, public records. Review the documents in advance or have your counsel review so that you can have your questions prepared in advance. Speak with family and friends who own timeshares for their experiences, both good and bad. Maybe your good friend or family member will even let you use their timeshare or visit them to get a feel for the resort way of vacationing. Most resorts offer reduced price promotional vacation stays in exchange for you listening to their sales-pitch. It’s a great way to be able to check out the resort and give it a test drive.
Things to look for:
How is the ownership interest conveyed – deed, lease or license? Can the owner sell or bequeath the time share to heirs? If the owner can sell, does the Resort have a right of first refusal?
Does the Resort have a resale or buy-back program? If there is none, realize that it may be difficult to sell on your own. Many resorts have resale programs, but you must be an owner in good standing (meaning that you are current on the yearly maintenance fees) to participate. Check the language on buyback programs – the resort may have the right to suspend a buyback program.
Are you looking to purchase at a tropical resort? Review the documents as to maintenance and repair if the resort sustains damage due to extreme weather such as tornados and hurricanes – who pays for repairs? Surprise! Even if the resort is owned by an international hotel chain, it can be the interval owners who fit the bill for repairs through increased maintenance fees. What happens to your week if you are unable to use it because of storm damage or threat of hurricane?
Check to see if the resort, vacation club, exchange company and closing agent is a member of the American Resort Development Association – ARDA. ARDA was established as the trade association representing the vacation ownership and resort development industries to combat marketing abuses and promote the growth and development of the timeshare industry and is actively involved in local, state and national governmental affairs. It also established the industry’s Code of Ethics. All members of ARDA must agree to abide by this code and ARDA tracks complaints against both members and non-members. This firm is a member of ARDA. Knowing that a resort is an ARDA member adds a measure on assurance for a buyer. Check out their website at arda.org. There is a lot of information for buyers including timeshare terminology, purchase and resale scams and other consumer alerts to be aware of, and a section that lists resorts and companies fraudently claiming to be ARDA members.
For some, purchasing a timeshare directly from the developer or resort after the resort presentation is not always a well thought out decision and leaves a bad taste, especially when they discover they could have purchased for less in the resale market. By purchasing for less, a buyer can forego having to finance their purchase. There are many websites for resales where owners sell direct to buyers. One of the largest websites, BuyaTimeshare.com offers excellent information on timeshares and explanations on terminology. It also offers a listing of timeshares for sale both by owner and licensed real estate broker and provides information on the resorts. The resale market beats sitting through the timeshare sales presentation and feeling pressured to make a purchase. The ARDA website provides other member websites for resales.
Closings on the resale market differ from the standard residential closing as the parties and the property in question are all located in different states. Because of logistics it takes longer to perform the title search, prepare documentation and transfer title. Some resorts can recommend local counsel to handle transactions. Chicago Title and First American Title Insurance Companies have national timeshare divisions which handle timeshare closings, provide escrow services and disburse funds after closing.
Provided a buyer has answered the questions as to where to go, when, for how long and at which resort prior to purchasing, they will feel much better about their purchase decision and enjoy a much more pleasurable vacation experience for years to come.