4.7 Time-Shares

Time-Shares

Time-share ownership is a fee or leasehold interest in a property where owners or tenants agree to use the property on a scheduled, non-overlapping basis. Time-shares are common for vacation or resort properties and provide for equal sharing of property expenses among owners.

• Time-share lease: The tenant rents the property on a scheduled basis (usually by week or month) for a set number of years. The use schedule and lease duration are pre-arranged.
• Time-share freehold (interval ownership): Tenants in common own undivided interests in the property. Each owner pays a share of the purchase price and annual expenses, and has use of the property for a specific period each year (e.g., one month out of twelve). Rules for usage and expenses are set by agreement. Owners usually waive the right of partition.
• Regulation: Time-share sales and development are increasingly regulated. Laws often require developers and brokers to provide detailed disclosures about costs and risks, allow a “cooling-off” period after contract signing, and require registration of advertising.

Example: The Blackburns buy a one-twelfth interest in a Colorado time-share for $20,000, giving them use of the property for one month each year and obligating them to pay one-twelfth of the annual expenses.

Check-In Questions

• What is a key characteristic of a time-share?
  Owners use the property on a scheduled, non-overlapping basis
  Owners all live there at the same time
  Only corporations can own time-shares
  The property cannot be sold
  Show Answer

  Correct Answer: Owners use the property on a scheduled, non-overlapping basis
  Time-shares allow each owner to use the property for a set time, with no overlap.
• What is the main difference between a time-share lease and a time-share freehold?
  Leaseholders own the property forever
  Freehold owners have an ownership interest, leaseholders have a right to use
  Only leaseholders pay expenses
  Freehold time-shares cannot be sold
  Show Answer

  Correct Answer: Freehold owners have an ownership interest, leaseholders have a right to use
  Freehold (interval) owners hold actual ownership, while leaseholders have a temporary right to use.