TimeshareU 101: Deeds & Right-To-Use
In this article we focus on what exactly you are buying, and the differences between traditional deeds vs. right-to-use interests.
Deeds: The Traditional Timeshare Model
The original timeshare model is based on fractional ownership of real estate property. Imagine a 2BR, 2BA condo. This property can be bought and sold like any piece of real estate, and each transaction involves the seller signing a deed in favor of the purchaser. The deed is then recorded at the local county recorder's office and is a public record. Each year the county sends a property tax bill to the condo's owner of record.
A traditional deeded timeshare works the same way, except the condo is split up into 52 week-long intervals. If you buy a deeded timeshare, the deed you receive will not only have a physical description of the property, it will also describe when you have the right to occupy and use the property. The deed is also recorded in the county records, and you may receive a property tax bill each year.
Timeshare properties that are bought and sold with deeds are under management of a Homeowners' Association (HOA) that is responsible for maintaining the properties, administering check-in/check-outs, and providing amenities for the owners. Each year the HOA sends a bill to the owners, called a "maintenance fee." The maintenance fees are used to pay for upkeep, salaries of employees, the cost of providing amenities to owners, and other expenses.
Examples of timeshares on the resales market that are deeded timeshare properties include the Lawrence Welk Resort Villas, Carlsbad Inn and Red Wolf Lodge
Vacation Club Memberships & Right-To-Use
Deeded ownership worked well for many years, but the traditional model has many limitations for both the timeshare owners and the management companies. The owners were limited to using a single property during a single week of the year. The management companies were limited by what they could charge, and the HOAs remained subject to control by the property owners, who could theoretically fire and replace the management companies if enough of the owners voted to do so.
Vacation club memberships changed all this. Under the club membership model, the resort property is not owned by the timeshare owners, but instead by a large company. This company then sells vacation club memberships, oftentimes in the form of points packages. The company determines how many points per week (or day) each unit will cost to use. More spacious units cost more points. Popular vacation times such as summer weeks for beach properties, or winter weeks for ski properties, also cost more points. When a buyer purchases a points package, they are purchasing a legal Right-To-Use ("RTU") the company's properties according to their published points schedule, subject to availability. Points packages are priced according to: 1) the amount of points purchased (more points, more right-to-use); 2) the times during the year when the points can be used; and sometimes 3) the times when bookings can be made at each property, usually reflected by a "home resort" designation. Club members pay an annual membership fee, usually on a per-point basis, which are also usually referred to as "maintenance fees."
Let's use an example to illustrate. In the Disney Vacation Club, the number of points required for a 2BR villa at the Grand Californian costs 342 points for the last week in January ("Adventure" season), and 646 points for the Christmas week ("Premier" season). If the Grand Californian is your "home resort" on your membership, you can reserve bookings up to 11 months in advance of your stay, whereas DVC members with non-Grand Californian home resorts can only book up to 7 months in advance. DVC members with a Grand Californian membership pay $5.15 per point per year in "maintenance fees."
Got it? Then...
CLICK HERE for TimeshareU 201: Buying and Selling
Deeds: The Traditional Timeshare Model
The original timeshare model is based on fractional ownership of real estate property. Imagine a 2BR, 2BA condo. This property can be bought and sold like any piece of real estate, and each transaction involves the seller signing a deed in favor of the purchaser. The deed is then recorded at the local county recorder's office and is a public record. Each year the county sends a property tax bill to the condo's owner of record.
A traditional deeded timeshare works the same way, except the condo is split up into 52 week-long intervals. If you buy a deeded timeshare, the deed you receive will not only have a physical description of the property, it will also describe when you have the right to occupy and use the property. The deed is also recorded in the county records, and you may receive a property tax bill each year.
Timeshare properties that are bought and sold with deeds are under management of a Homeowners' Association (HOA) that is responsible for maintaining the properties, administering check-in/check-outs, and providing amenities for the owners. Each year the HOA sends a bill to the owners, called a "maintenance fee." The maintenance fees are used to pay for upkeep, salaries of employees, the cost of providing amenities to owners, and other expenses.
Examples of timeshares on the resales market that are deeded timeshare properties include the Lawrence Welk Resort Villas, Carlsbad Inn and Red Wolf Lodge
Vacation Club Memberships & Right-To-Use
Deeded ownership worked well for many years, but the traditional model has many limitations for both the timeshare owners and the management companies. The owners were limited to using a single property during a single week of the year. The management companies were limited by what they could charge, and the HOAs remained subject to control by the property owners, who could theoretically fire and replace the management companies if enough of the owners voted to do so.
Vacation club memberships changed all this. Under the club membership model, the resort property is not owned by the timeshare owners, but instead by a large company. This company then sells vacation club memberships, oftentimes in the form of points packages. The company determines how many points per week (or day) each unit will cost to use. More spacious units cost more points. Popular vacation times such as summer weeks for beach properties, or winter weeks for ski properties, also cost more points. When a buyer purchases a points package, they are purchasing a legal Right-To-Use ("RTU") the company's properties according to their published points schedule, subject to availability. Points packages are priced according to: 1) the amount of points purchased (more points, more right-to-use); 2) the times during the year when the points can be used; and sometimes 3) the times when bookings can be made at each property, usually reflected by a "home resort" designation. Club members pay an annual membership fee, usually on a per-point basis, which are also usually referred to as "maintenance fees."
Let's use an example to illustrate. In the Disney Vacation Club, the number of points required for a 2BR villa at the Grand Californian costs 342 points for the last week in January ("Adventure" season), and 646 points for the Christmas week ("Premier" season). If the Grand Californian is your "home resort" on your membership, you can reserve bookings up to 11 months in advance of your stay, whereas DVC members with non-Grand Californian home resorts can only book up to 7 months in advance. DVC members with a Grand Californian membership pay $5.15 per point per year in "maintenance fees."
Got it? Then...
CLICK HERE for TimeshareU 201: Buying and Selling
