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Vacation Timeshares: Paradise or Problem?

Q: What is a timeshare?
A: 
A timeshare is a form of ownership that grants the right to use a certain property, typically a resort area condominium unit, for a certain period of time (usually a week or two).The ownership of the timeshare unit is “shared” with other such weekly owners.

Q:  What is the difference between a deeded and a non-deeded timeshare?
A: 
  Under a deeded timeshare, typically the owner receives an actual deed for the ownership time period, which is considered a true real property interest in the particular unit. A non-deeded (“right to use”) timeshare is typically based on a lease or contractual arrangement where the purchaser may use the unit for a designated time period, but is not its legal owner. Under certain leasehold arrangements this “right to use” may be indefinite or continued only for a specific number of years, after which the right to use expires and the owner’s interest reverts to the unit’s legal owner, as in a lease arrangement. Title insurance can usually be obtained for deeded timeshare titles, but generally not for non-deeded timeshares.

Q: Must I use the timeshare during the same week each year that I “own” the unit?
A:
 Some arrangements require you to use the same week each year, while others allow you to choose a week between certain dates or rotate availability to allow all owners a chance to use the most desirable weeks. Make sure you understand how the usage arrangement will affect your ability to use the timeshare.

Q: What are the advantages of owning a timeshare?
A: 
Advantages of owning a timeshare include:
• the ability to lock in a furnished, known vacation venue for a week or two for a relatively small initial investment;
• freedom from maintenance, management, control and upkeep normally associated with a vacation home;
• the ability (under some timeshare structures) to swap weeks in the same resort or at a different resort managed by the same developer.

Q: What are the disadvantages? 
A:
 The disadvantages of owning a timeshare are numerous and include the following:
• Up to 50 percent of the initial purchase price of a timeshare includes organizational, marketing and commission costs.
• The value of the timeshare diminishes after purchase, so timeshare owners are unlikely to recoup their investment.
• Because of the costs and restrictions involved in timeshare arrangements, it may be less expensive and more convenient to use motels or hotels when vacationing.
•  Timeshares maintenance fees may escalate, and the timeshare owner may also be assessed for remodeling or improvements. Generally, unpaid maintenance fees or  assessments can result in foreclosure and loss of the timeshare, and the owner may even be personally liable for failure to pay.
• Timeshares are difficult to finance, especially non-deeded leasehold or right to use arrangements. There is little resale market today for most timeshares. The Federal Trade Commission has reported (see ftc.gov and search “timeshares”) that complaints about companies allegedly specializing in timeshare re-sales have tripled. The Ohio Attorney General has noted on its website (www.ohioattorneygeneral.gov) that fraudulent or illegal timeshare resale scams reached number four in the top ten scams for 2010. The typical scam involves high pressure tactics initiated by an alleged re-seller requiring up-front fees ranging from $300 to $3000 to sell your timeshare. In most cases, no service is provided and the timeshare owner loses the fee.

Q: How can I minimize my risk of falling victim to a timeshare scam?
A: 
1)  Do your homework. Look at the realistic re-sale market for the type of unit and location you are considering. Is the timeshare deeded or non-deeded? How is occupancy and use scheduled? Is there flexibility if conflicts arise? What are the current maintenance fees and under what circumstances might they escalate? Can special assessments be levied? Is the owner personally liable for unpaid dues, maintenance fees and assessments or are they only a lien on the unit? Assuming the timeshare is not deeded, when will the leasehold interest or the right to use revert back to the real unit owner? Can you rent the unit to others yourself and control the rental amount you charge? You should consult with an attorney who is knowledgeable about timeshares in the state where the timeshare is located.        
 2)  Don’t buy on a whim. Understand the laws of the particular state, especially regarding the right to rescind. Most states allow you a minimum of three days and up to 15 days to rescind a timeshare purchase after you sign a contract. In Ohio, you must rescind within three business days of signing the contract, while Florida allows ten. Once the rescission period passes, you have little chance of getting out of a timeshare purchase, unless you can prove fraud.  
 3)  Avoid scams. Investigate the persons and entities with whom you are dealing. Check with the Better Business Bureau (www.bbb.com), the attorney general’s office in your home state and in the state where the property is located (www.govengine.com), and with local consumer protection agencies (www.consumeraction.gov). Also check with the state real estate commission to determine if the person with whom you are doing business is properly licensed. Under Ohio law, anyone who attempts to sell a timeshare to an Ohio resident must be licensed in Ohio, regardless of where the timeshare is located.

7/4/2011

This “Law You Can Use” column was provided by the Ohio State Bar Association (OSBA). It was prepared by Cleveland-area attorney Michael F. Waiwood.

Articles appearing in this column are intended to provide broad, general information about the law. Before applying this information to a specific legal problem, readers are urged to seek advice from an attorney.

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