A timeshare (sometimes called vacation ownership) is a property with a divided form of ownership or use rights. These properties are typically resort condominium units, in which multiple parties hold rights to use the property, and each owner of the same accommodation is allotted their period of time. The minimum purchase is a one week ownership, and the high season weeks demand the higher prices. Units may be sold as a partial ownership, lease, or “right to use”, in which case the latter holds no claim to ownership of the property. The ownership of timeshare programs is varied, and has been changing over the decades to accommodate the changing needs of the vacationing public who prefer timeshare ownership to the more conventional forms of accommodations such as resorts, hotels and motels.
A short HISTORY of Timeshares:
The term “timeshare” was coined in the United Kingdom in the early 1960s expanding on a vacation system that became popular after World War II. Vacation home sharing, also known as holiday home sharing, involved four European families that would purchase a vacation cottage jointly, each having exclusive use of the property for one of the four seasons. They rotated seasons each year, so each family enjoyed the prime seasons equally. This concept was mostly used by related families because joint ownership requires trust and no property manager was involved. However, few families vacation for an entire season at a time; so the vacation home sharing properties were often vacant for long periods.
Enterprising minds in England decided to go one step further and divide a resort room into 1/50th ownership, have two weeks each year for repairs and upgrades, and charge a maintenance fee to each owner. It took almost a decade for timeshares in Europe to evolve to a smoothly run, successful, business venture.
The first timeshare in the United States was started in 1974 by Caribbean International Corporation (CIC), based in Fort Lauderdale, Florida. It offered what it called a 25-year vacation license rather than ownership. The company owned two other resorts the vacation license holder could alternate their vacation weeks with: one in St. Croix and one in St. Thomas; both in the U.S. Virgin Islands. The Virgin Islands properties began their timeshare sales in 1973.
The contract was simple and straightforward. The company, CIC, promised to maintain and provide the specified accommodation type (a studio, one bedroom, or two bedroom unit) for use by the “license owner” for a period of 25 years (until 1999 from 1974, for example) in the specified season and number of weeks agreed upon, with only two extra charges: a $15.00 per diem (per night) rate, frozen at that cost for the life of the contract. The contract had a $25.00 switching fee, should the licensee decide to use their time at one of the other resorts. The contract was based on the fact that the cost of the license, and the small per diem, compared with the projected increase in the cost of hotel rates over 25 years to over $100.00 per night, would save the license owner many vacation dollars over the span of the license agreement. Between 1974 and 1999, in the United States, inflation boosted the current cost of the per diem to $52.00, validating the cost savings assumption. The license owner was allowed to rent, or give their week away as a gift in any particular year. The only stipulation was that the $15.00 per diem must be paid every year whether the unit was occupied or not. This “must be paid yearly fee” would become the roots of what is known today as “maintenance fees”, once the Florida Department of Real Estate became involved in regulating timeshares.
The timeshare concept in the United States caught the eye of many entrepreneurs due to the enormous profits to be made by selling the same room 52 times to 52 different owners at an average price in 1974–1976 of $3,500.00 per week. Shortly thereafter, the Florida Real Estate Commission stepped in, enacting legislation to regulate Florida timeshares, and make them fee simple ownership transactions. This meant that in addition to the price of the owner’s vacation week, a maintenance fee and a homeowners association had to be initiated. This fee simple ownership also spawned timeshare location exchange companies, such as Interval International and RCI, so owners in any given area could exchange their week with owners in other areas.
Cancellations, or rescission, of the timeshare contract, remain the industry’s biggest problems to date.