The majority of people believe that timesharing is something new which has only
developed over the last fifteen years or so, but in fact it is not really a new concept:
as far back as the eighteenth century, villagers were timesharing water in Cyprus
where there was no piped supply.
Property timesharing is believed to have started in the 1960s, when certain French
developers of ski apartments experienced difficulties in selling their leisure
accommodation outright, and decided instead to offer for sale the ownership of
weekly or fortnightly segments at the same time each year for ever.
The idea spread to other parts of Europe, including Spain. On the Costa Blanca, a
British company that was building apartments in Calpe offered co-ownership of
two-bedroomed flats in the main shopping street near the sea. Prices were as little
as £250 per week's usage in the
summer in perpetuity. Winter periods were even cheaper, at
£180 for a month, and easy terms were available on the
payment of a £50 deposit, with the balance payable at
£4.50 per month over three years.
The Americans soon recognised this form of holiday home ownership, and in the early
stages converted condominiums, motels and hotels - non-viable
in their original form - into time-share units. Often these had
rather basic facilities, and it is only in recent years that developers in Florida and
elsewhere have realised that top-quality homes with luxury facilities are the key to
successful multi-ownership.
It was not until 1976 that timesharing was launched in Britain. The first site was in a
beautiful loch-side location in the Highlands of Scotland. This was a luxury
development with excellent sporting facilities and prices were set from about
5,000 per week.
How it works
The aim of timesharing is to provide luxury accommodation in return for a once-only
capital sum is paid at current prices. Future holidays are secure without the need
to pay hotel bills or holiday rents - though buyers still need to pay
an annual sum to cover maintenance expenses and local taxes, as well as buying
flights and food. Timeshares are sold by a variety of methods, and prices vary
according to season and the quality of accommodation. In 1998, about
1.2 million European families owned timeshares. In 1996,
there were over 1,410 European resorts (4,500 world-wide), over
3.5 million owners world-wide and at least 108 resorts in the
UK itself. When a freehold is purchased, as in Scotland, the
period of time that you buy is yours to use forever, and you may let, sell, assign or
leave the property to your heirs. In England and Wales, the law permits ownership
only for a maximum of 80 years, but in many parts of the world ownership in
perpetuity is possible.
An alternative is membership of a club which grants the right to a club member to use
specified accommodation in a specified property for either specified weeks in the
timeshare calendar or for 'floating time' in the
high/medium/low season time band (selecting your weeks annually for a stated
number of years is an alternative scheme). Under this arrangement, the assets of
the property (i.e. buildings, lands and facilities) are conveyed (or leased) to
custodian trustees (often a bank or other institution), which holds the property for
the benefit of the club members. The rights of all owners collectively are regulated
by the club constitution. This legal structure works well both in the
UK and, with modifications, overseas.
A third alternative is to buy 'points' in a timeshare
club, which allows considerable flexibility for taking two short breaks of less than a
week's duration, for example, rather than owning a specified
week or weeks in a specified timeshare resort.
The formation of a public limited company, with the issue of ordinary shares varying in
price according to the season and apartment size, is another form of holiday
ownership, although not strictly a timeshare arrangement. Each share provides one
week's occupancy for a set period, usually 20 or 25 years. The
properties are sold on the open market and the proceeds divided among
shareholders.
One company uses capital contributed by participants to purchase land and build
holiday homes in various parts of Europe. Each member is entitled to holiday
points, to be used for a vacation of a week or more in a chosen development at
any time of year.
Another provides for the sums paid by participants to be converted into a single-
premium insurance policy. Part of that premium is invested in fixed-interest
securities and another portion is used to acquire properties (over 400 in about 20
locations). 'Bondholders' pay a user charge to
cover the maintenance cost of the property for each week's
holiday taken, on a 'points per week' basis
depending on the accommodation's size, location and season
chosen. Investors are permitted to cash their bonds (the price of which is quoted
daily in the financial press) at any time after two years. A capital sum is repaid on
the death of the bondholder, the amount being determined by the age at which the
holder took out the insurance policy. Such bond schemes are subject to legal
regulations which do not apply to timeshare arrangements.
Over the past few years, various schemes have sprung up that are not covered by
timeshare legislation. These include 'trial
packs', which act like a conventional timeshare but for a period of
only 35 months; holiday clubs, where buyers pay for holidays up to ten years in
advance and apply to the promoter for the accommodation they are interested in
(usually timeshare resorts); and holiday or travel packs, where buyers join a club,
paying around £3,000 for access to low-cost travel and
accommodation (again, usually in timeshare resorts). Check out these offers very
carefully: some promoters have been found to have no links with the resorts they
are offering, so it may be very difficult for them to book you the accommodation
you want, and if the promoter goes bust a few months after you have paid your
money up-front, your chances of receiving a refund are pretty slim.
Golden rules
The rules to remember when buying a timeshare home are:
·Do some research. Read up about the timeshare
concept and the resorts available in Europe. Compare resorts to find the most
suitable.
·Buy from a well-established developer or selling agent who has a
reputation for fair dealing and offering really successful schemes. Second-hand
timeshares bought from a reputable resale agency are usually considerably
cheaper than those bought from a developer.
·The location of the property is vital, so be sure to select a well-
situated development with adequate facilities and a quality atmosphere. Be sure
that it appeals to the whole family, so that you are all able to enjoy regular visits. If
you are likely to want to resell or exchange in the future, the location will prove
even more important to your choice.
·Remember that the UK Timeshare Act 1992
and the Timeshare Regulations of 29 April 1997 provide for a 14-day cooling-off
period for those who are in the UK when they sign a
purchase agreement (the actual location of the timeshare resort is irrelevant). The
regulations also ban the company concerned from taking any deposit from you
within those 14 days. However, the EU Directive on
timeshare, which came into force in the member states on 29 April 1997, provides
for a minimum ten-day cooling-off period rather than 14 days, and some member
states allow deposits to be taken by third parties (for example a trustee/escrow
account). Check what cooling-off period is allowed before signing any contract.
·Get the contract checked, preferably before you sign it. A solicitor
can check the wording of agreements relatively easily, but it will be a considerably
greater task - and thus more expensive - to
consider the occupation rights granted, the nature of the
developer's title, details of any mortgages or encumbrances on
the timeshare property, the granting of correct local planning permission, the legal
structure of the scheme in the context of that country's property
laws, the effects of jurisdiction, the safeguards for monies paid for an unbuilt or
incomplete property and the arrangements at the termination of the period of lease.
Your solicitor should also scrutinise the documentation and perform independent
checks regarding payments held in trust pending the issue of title documents, club
membership certificates and a licence to use. Is the trustee reputable?
·If all the amenities promised by sales staff are not already in
existence, obtain a written commitment from the vendors that they will be
completed, and by when.
·Check carefully the annual maintenance costs and be sure you know
what they cover. Part of the yearly charges should be accumulated in a sinking
fund by the management company to cover replacements, new furnishings and
regular major redecorations. Be careful of extra levies to cover refurbishments.
·Ascertain the rights of owners if the builder or management company
gets into financial difficulties, and ascertain if it is possible for the owners to appoint
a new management company if they are not satisfied with the service of the
original one. Show the constitution and management agreement to a specialist
lawyer to determine that the title is safeguarded and occupation rights protected.
Talk to other owners to find out their views on the relationship between the owners
and the management company.
·If you wish to have the flexibility to swap world-wide, the timeshare
resort should be affiliated to an exchange organisation, such as Resort
Condominiums International (RCI) or Interval International.
Check any claim to affiliation.
Investment
Timesharing is not a conventional money-making investment in property, although
some owners who purchased time in the earliest schemes have enjoyed
substantial capital appreciation over the past ten years. Essentially, you are
investing in leisure and pleasure, but you cannot expect inflation-proof holidays.
What you are buying is vacation accommodation at current prices. Expenditure on
travel, food and entertainment is likely to rise in future years according to the rise
of inflation.Owners who sell their timeshare a few years after buying are likely to
get back considerably less than they paid for it. The number of owners wanting to
sell their timeshare significantly exceeds the number of people wanting to buy; so if
you only want to hold a timeshare for a few years it would be worth comparing the
cost of alternatives.
Exchange facilities
It became clear a while ago that after a few years many timeshare owners may want
a change of scene for annual holidays; as a result, organisations grew up to
arrange exchange facilities for timesharing owners. There are exciting possibilities
for owners wanting to swap their seaside apartment in, say,
England's West Country, for a contemporary-style bungalow in
Florida or an Andalucian pueblo in Spain. Today there are two major exchange
organisations operating in the UK: RCI and Interval
International.
There is normally an annual membership fee payable by each family wishing to join
the exchange system. The developer usually pays this for each family for the first
two or three years as a purchase inducement. An additional fee is due when an
exchange is successfully organised.
Further information
Organisation for Timeshare Europe, 15/19 Great Titchfield
Street, London W1P 7FB, tel 020 7291
0901. This is the European trade association for timeshare,
representing the interests of developers, exchange organisations, resale
companies, marketing organisations and finance companies. It has a code of
ethics for members and offers an advisory and conciliation service to people
dealing with its members.
Timeshare Consumers Association, Hodsock, Worksop, Nottinghamshire
S81 0TF, tel 01909 591100, email
info@timeshare.org.uk, website
www.timeshare.org.uk. Produces useful fact
sheets offering advice on various aspects of timeshare.
The Department of Trade and Industry publishes The Timeshare
Guide, available free from its Consumer Publications order line on
0870 1502500 (quote reference URN
97/643). The text is available at
www.dti.gov.uk/access/timeshare.
