Timeshare 101

All shared ownership resort interests come in two basic forms: a deeded interest in real estate and a right-to-use, or non-deeded, interest. These two basic forms are called by many names—some required under state law and others adopted for marketing purposes. However, the majority of shared ownership resorts today convey a use right backed by a deeded interest in real property—by whatever name it may be called. Deeded real estate interests are usually called “timeshare estates” under state law, and non-deeded interests are “timeshare uses” or “timeshare licenses” officially, but may also be called “memberships.”

Vacation ownership is highly regulated -- The various products must comply with strict standards set forth in state timeshare laws as well as several federal laws before being offered to consumers. For nearly 40 years, ARDA members have worked with federal and state governments to support consumer protection legislation. As a result, purchasers have a five- to seven-day rescission period in most states that allows them time to cancel a purchase contract for any reason and get their money back.

Further, most state timeshare laws require truth in advertising, protect purchasers’ timeshares from the developer’s debt, and assure that purchasers receive detailed information about the timeshare plan they are buying, including the type of timeshare interest, how to use the product, management and budget information and much more. State timeshare laws usually apply whether the vacation product is called a timeshare, fractional, private residence club, vacation club or points product.

Know what you are buying. ARDA and its member companies urge consumers to know what vacation product they are purchasing by reading the contract carefully and asking questions about their vacation purchase. For more information and consumer tips, please visit ARDA at www.ARDA.org.

 FAQs

1. What is timeshare?
2. How do I know if timeshare is right for me?
3. What are the costs involved with owning a timeshare?
4. Are there ways to test it out before I buy?
5. Are there consumer regulations? What are my protections?
6. Why not just book a hotel for my family vacation?
7. Can I resell my timeshare?
8. If resale companies are unregulated, how do I find a reputable company?
9. What is the difference between buying directly from the developer or from a resale company?
10. Are timeshares a good investment?

1. What is timeshare?
Timeshare and vacation ownership are often used as interchangeable terms. Timeshare may be purchased through deeded property ownership, right-to-use or a points-based program. Owners purchase a villa, usually in one-week increments, within a fixed (same week each year) or “floating” system. Floating time allows the owner to schedule each year’s vacation for the desired week within a specified season. Vacation ownership may also be used to describe the three main options of shared use: timeshare, fractionals, and private residence clubs.

2. How do I know if timeshare is right for me?
A timeshare is best suited for people who take at least one week of vacation a year and who want more space and options than what is commonly offered in a hotel room. The most popular timeshare units are fully, even luxuriously, furnished and offer two bedrooms, two baths, an equipped kitchen, and living room. Families enjoy having both privacy and home-like common areas to enjoy vacationing together. If you seldom take a vacation or are looking for a real estate investment, timeshare is NOT the right option for you.

3 . What are the costs involved with owning a timeshare?
Purchase prices vary, depending on the size of the unit, location, amenities, and season of use. Once you are an owner, you will pay an annual maintenance fee to cover the costs of running the resort, including daily management and upkeep. You also pay a percentage of annual real estate property taxes either as part of the maintenance fee or billed separately. The annual maintenance fee and taxes are divided up among all owners based on the size of your unit, amount of vacation time purchased, and season of use. 

4 . Are there ways to test it out before I buy? 
Most resorts offer the option of renting a timeshare, based on availability. If you are interested in renting a particular resort or property, inquire with that resort or visit the website of the resort company to learn more about their rental policies. Most timeshare companies also offer a deeply discounted stay at a resort in return for attending a sales presentation. According to the 2009 Vacation Timeshare Owners Report, conducted by the ARDA International Foundation (AIF), about half of recent purchasers rented a timeshare prior to buying. 

5 . Are there consumer regulations? What are my protections?
Vacation ownership companies must comply with strict standards set forth in state timeshare laws. As a result, purchasers have a five- to seven-day rescission period in most states that allow them time to cancel their purchase contract for any reason and get their money back. 

Timeshare regulations require truth in advertising, protect purchasers’ timeshares from the developer’s debt, and assure that purchasers receive detailed information about the timeshare plan they are buying, including the type of timeshare interest, how to use the product, management and budget information and much more. State timeshare laws usually apply whether the vacation product is called a timeshare, fractional, private residence club, vacation club or points product. Be aware that when purchasing a resale property or resort outside of the U.S, these protections most likely do not apply.

6 . Why not just book a hotel for my family vacation?
Owning a timeshare offers families and friends some of the most flexible and enjoyable vacation alternatives. In most cases, timeshares allow you the flexibility to choose different locations, unit sizes, and even different times of the year in which to spend your vacation. 

Most timeshare units include spacious floor plans, fully-equipped kitchens, a dining area and more home-like common areas to enjoy a meal or family time together. In a timeshare, you won’t have to sit on the bed eating your pizza out of a box instead you will have quality family time together with the comforts of home but luxury of a resort.

7 . Can I resell my timeshare?
Yes. If you are interested in selling your timeshare, check first with the resort developer or resort management company to see if either offers a resale program or is affiliated with a licensed broker that handles resales. 

If you decide to sell it yourself, there are several websites and other ways to offer your timeshare to potential buyers. Just remember, a timeshare is a “use product,” not a real estate investment, so set a realistic resale price. 

8 . If resale companies are unregulated, how do I find a reputable company?

The American Resort Development Association (ARDA) released four advisories to help consumers and timeshare owners navigate through the secondary market, which includes timeshare resellers, internet advertisers and other resale companies, to ensure a safe and positive selling experience. The advisories were developed to help dispel the growing misinformation and confusion in the secondary marketplace by providing specific tips on reviewing timeshare resale companies, their practices, costs and services in the marketplace.

Resales Advisory IV: ARDA advises consumers of the most recent resale precautions.

Resale Advisory V: ARDA has become aware of a deceptive solicitation practice, commonly referred to as transfer or repurchase solicitations, being used by some unethical transfer companies aimed at timeshare owners. 

9 . What is the difference between buying directly from the developer or from a resale company?
Timeshares bought from a developer usually come with closing incentives, such as a year’s free membership with the resort’s exchange company, exchange within the company’s family of resorts, additional time at the resort or other benefits. There will usually be a difference in price, similar to purchasing a new car versus a pre-owned one. Also, timeshare developers are regulated by the states, which require stringent consumer protections, such as a right of rescission, financial assurance, and many other things. The resale market is lightly regulated, if at all, and therefore does not offer the same consumer protections or benefits as regulations within the primary market. If you decide to sell or purchase a timeshare through a resale company make sure it is a well-established, reputable company (see question 8 above). Also, be especially cautious about upfront fees and exactly what services are or are not included. 

10 . Are timeshares a good investment?
Buying a timeshare is a lifestyle investment in order to enjoy better vacations with family and friends. The “dividend” is a lifetime of memories and vacation experiences together. And, because of its pre-paid nature, timeshare gives people the discipline of taking time from hectic schedules to relax and recharge with high-quality accommodations year after year. Timeshares should not be purchased as a traditional real estate investment. 

Timeshare Terminology

Amenities: Properties or resorts offer extra desirable features that increase the value of one’s stay. Resort amenities often include swimming pools, tennis courts, Jacuzzi, spa and fitness facilities, golf, boating, skiing, water sports, amusement park discounts and various planned children’s activities. Many amenities are standard features and others carry an additional cost (such as golf, spa services, watersport equipment, etc.), depending on the resort.

American Resort Development Association (ARDA): The professional association representing the vacation ownership and resort development industries. Members range from privately held companies to publicly traded companies and international corporations with expertise in shared ownership interests in leisure real estate. The membership also includes timeshare owner associations (HOAs), resort management companies, and consumer owners through the ARDA Resort Owners Coalition (ARDA-ROC). ARDA has a Code of Ethics that defines key elements of the vacation ownership and community-development business and outlines appropriate practices that each individual and member company is required to follow. Please visit www.ARDA.org for more information.

Biennial: A vacation ownership product that provides a week’s worth of accommodations every other year. These owners are often referred to as either “odd” or “even” year owners.

Bonus Weeks: In an effort to increase travel to certain destinations, resort and exchange companies offer bonus weeks to their members for a modest rental fee, without requiring the members to relinquish a week in return. Developers may also offer unreserved weeks to their owners in a similar fashion.

Closing Costs or Fees: Expenses paid by the buyer and/or seller at the time of closing. Typically applies to deeded purchases, as with any real estate transaction.

Condo Hotel: Condo hotels offer of a portion of their hotel room inventory for sale to the public. The owner may use it for vacation or corporate housing needs, or place it in a rental program typically managed by the hotel.

Condominium: A type of ownership of real property where there is ownership of an individual unit (or week) within a multiple-unit building or complex. Individual owners get fee title to the space as well as a percentage ownership interest in the balance of the project, including surrounding recreational facilities.

Deed: The document used to convey an interest in real property, where title to the real property transfers from one party to another.

Destination Club: Members are not buying a specific property/real estate, but rather the right to use at any of a portfolio of homes owned or operated by the club company. With few exceptions, they offer a non-equity based membership emphasizing a broad selection in vacation home experiences.

Developer: The party or company owning the property, unit/weeks or club memberships. The developer is responsible for constructing the accommodations and amenities on-site, selling the product and in many cases, providing management services for the property.

Exchange: An exchange company allows existing owners to trade their timeshare interests for comparable accommodations and travel-related services. Most resorts are affiliated with an exchange company, and many resort companies also offer an internal exchange mechanism that allows owners to exchange to resorts within their resort group. If an internal resort exchange is mandatory or long-term, it is usually considered to be a vacation club. Fractional and private residence club resorts may offer exchange opportunities for their owners as well. Some exchange companies have a special program for fractionals and private residence clubs.

Fixed Ownership: A type of timeshare ownership in which the owner knows the specific week(s) within a given year in which he has access to the accommodation year after year.

Floating Ownership: A timeshare arrangement in which owners reserve each year’s vacation time on a first-come, first-served basis. At most resorts with a floating program, unit allocation also floats, assuring owners comparable accommodations but not necessarily the same unit each year. Access may float within a season or year round.

Fractional/Private Residence Club: Resort accommodations with related use rights in increments of more than two weeks and sometimes as long as three months (quarter share). This type of ownership is almost always deeded and is a more affordable alternative to a second home. This product segment enjoys a high level of service and is considered the luxury tier of shared ownership.

Homeowners’ Association (HOA): All the owners of a property that are responsible for operating, managing and administering the project and may also own the common areas and elements jointly. Membership in the owners association generally is mandatory and operates at the direction of an elected board of directors. In most deeded resorts, the HOA will ultimately be responsible for managing the resort and usually hires a management company (including the developer) to operate the resort on a day to day basis.

Home resort: The resort location where a new purchaser owns or has a designated week in a club or points-based program. Ownership is usually tied to this home resort and generally involves priority reservation rights in that location.

Interval or Weekly Interval: The set number of days and nights of annual use,usually one week. by which vacation ownership is measured.

Lock-off: A type of timeshare unit consisting of multiple living and sleeping quarters designed to function as two discrete units for purposes of occupancy and exchange. The unit can be combined to form one large unit or can be split or “locked-off” into two or more separate units, allowing the owner to split the vacation into multiple stays or bank all or a portion for exchange purposes.

Maintenance Fee: Also called an annual assessment. A fee that timeshare owners are required to pay, usually on an annual basis, to cover the costs of running the resort, including daily management, upkeep, and improvements. Real property taxes may be included in the fee or billed separately.

Plan Year: The 365-day period within which an annual allotment of points must be used.

Points: A “currency” that provides highly flexible scheduling. Purchasers buy points based upon their estimated vacation needs, then use those points as they desire in any given year to reserve different combinations of accommodation sizes, locations and seasons, and may also acquire a variety of travel related services depending on the rules of the resort company. Resort accommodations are assigned a point “value” based upon unit size, length of stay, locations and seasonality. Points are used by some resort companies for both internal and external exchange.

Points Conversion Program: An offering whereby owners of a timeshare interval(s) pay(s) a fee to convert their interval for the equivalent in points.

Private Residence Club: See Fractional/Private Residence Club

Rescission: The period of time granted under state law during which a purchaser can cancel the purchase contract without penalty and receive a complete and full refund of all monies paid to the seller. Dictated by state statute and company policy, timeshare rescission periods vary from state to state, but range from three to 10 days, the most common being five days.

Resort Company: The company owning the resort, usually responsible for building and selling the accommodations and amenities. See “developer.”

Right-to-Use: A timeshare owner’s right to occupy a unit at a resort for a specified number of years and where no real estate interest is conveyed. Right-to-use owners do not receive a deed.

Timeshare Documents: Called by various names under state law (including project instruments) and depending on the project’s structure, these are the legal documents which establish and structure the vacation ownership resort or club. These documents may include a declaration, owners association articles and bylaws as well as rules and regulations.

Timeshare: Traditional timeshares regardless of whether they are backed by a deed or not, allow buyers to purchase an increment of time, typically one week, in a condominium, villa or apartment type of furnished vacation accommodation. Timeshare owners receive either a fixed week or a floating time reservation arrangement that may vary by unit type and season. More than two-thirds of timeshare interests today are deeded.

Trial Membership: An opportunity to experience the developer‘s primary vacation ownership product and services within a defined period of time after the initial sales tour.

Unit or Villa: The portion of a timeshare condominium, fractional, or club membership that is for the owners’ use.

Unit Week: The basic form of vacation ownership accommodations, consisting of the use of a dwelling unit for a seven day period from check-in to checkout.

Vacation Club: A marketing term often used to describe various types of timesharing that usually involves use or access to more than one resort location. Real estate ownership or points are included in this type of timeshare vacation club, and provides vacation flexibility to the owner. However, the term may also be used to describe travel clubs that offer discounts on hotels and other travel related services.

Vacation Ownership: A term often used to describe resort timesharing and other forms of shared ownership of leisure real estate, such as a fractionals and private residence clubs.

Owner's Rights

According to industry research, trust is a key purchase motivation cited by satisfied timeshare buyers. ARDA resort companies include some of the world’s most-recognized names in hospitality as well as established independent resort developers.

For almost 40 years, ARDA members have worked with federal and state government officials in support of legislation to protect consumers. As a result, in most states, you have a right of rescission—a period of time typically five to seven days during which you may cancel a purchase contract for any reason without a penalty. In addition, most states have laws or rules that ensure truth in advertising, that your timeshare interest is protected from any financial problems that may affect the developer, and that you receive detailed information about the timeshare plan you are purchasing. Each state protects consumers in different ways, so make sure you understand your rights and responsibilities before you decide to purchase.

Ownership is a major benefit of timeshare. You own a piece of your resort, and you can help shape the decisions of your property.

Timeshare Homeowners Associations (HOAs) operate in the same manner that any community or condominium HOA operates. You and your fellow members elect officers who oversee expenses, upkeep and the selection of the manager or management company.

You may also want to become active in ARDA’s Resort Owners’ Coalition (ARDA-ROC) to ensure that your homeowner’s rights are protected. For more information, visit www.ardaroc.org.