What is Timeshare and how is it regulated in WA state?
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. 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.
Condominiums can be sold to allow occupancy for a specified period of time rather than purchasing an entire unit or a part ownership, which is a timeshare.
Most often properties that are timeshares are located in vacation hotspots where tourists come and go often, and they include things like pools, tennis courts and other vacation amenities. As an example, a property in a resort on the beach will sell the right to occupy one of the two-bedroom units for one week a year during a specified time (e.g., August 1-15).
Because timeshares allow people to purchase rights to occupancy, real property is regulated by the state of Washington. A person can sell timeshares in Washington without a real estate license, but they need to be registered as a timeshare salesperson. They have similar unprofessional conduct rules to real estate brokers to protect consumers and also must pay registration fees to the department of licensing.
Real estate brokers and managing brokers are exempt from registration as a timeshare salesperson. Just like real estate purchases, it is required that timeshares provide disclosures to purchasers. There is a legally required period of 7 days that the purchaser must be allowed to review the disclosure document. The purchaser is supposed to receive the disclosure prior to signing any agreement, but if they do not, the agreement is voidable by the purchaser until the disclosure is delivered and up to 7 days after. It is important to note that the purchaser may void the timeshare agreement up to 7 days after signing the agreement or receiving the disclosure statement, whichever is later.
How can owners use Timeshares?
Use their usage time
Rent out their owned usage
Give it as a gift
Donate it to a charity (should the charity choose to accept the burden of the associated maintenance payments)
Exchange internally within the same resort or resort group
Exchange externally into thousands of other resorts
Sell it either through traditional or online advertising, or by using a licensed broker. Timeshare contracts allow transfer through sale, but it is rarely accomplished.
Problems with Timeshares
Timeshare sales are often high pressure and fast moving. Some people sign a contract, then want to cancel it shortly thereafter. Cancellations, or rescission, of the timeshare contract, remain the industry's biggest problems to date.
The United States Federal Trade Commission provides consumers with information regarding timeshare pricing and other related information. Also known as Universal Lease Programs (ULPs), timeshares are considered to be securities under the law.
Many timeshare owners complain about the annual maintenance fee (which includes property taxes) being too high.
Timeshare developers contend that pricing compared to staying at hotels in the long term is projected to be lower to the timeshare owner. However, a hotel guest does not have a monthly vacation mortgage payment, upfront cost, fixed schedule, maintenance fees, and preset vacation locations. Many owners also complain that the increasing cost of timeshares and accompanying maintenance and exchange fees are rising faster than hotel rates in the same areas.
The industry's reputation has been severely injured by the comparison of the timeshare salesman to the used car salesman, because of the sales pressure put on the prospective buyer to "buy today". "The discounted price I quoted you is only good if you buy today", is the industry standard's pitch to close the sale on the first visit to the resort. Many have left a timeshare tour complaining of being exhausted by the barrage of salespeople they had to deal with before they finally exited the tour. The term "TO", or "turn over" man, was coined in the land industry, and quickly evolved to the timeshare industry. Once the original tour guide or salesman gives the prospective buyer the pitch and price, the "TO" is sent in to drop the price and secure the down payment.
Exiting a timeshare without the cooperation of the developer is not easy, and often requires the assistance of a specialist. This specialist may be a broker who works both sides of the market, or an attorney who can litigate the contract. While some timeshares exit specialists are legitimate, the business is plagued by scammers who cold-call owners and solicit payment in advance for nonexistent services. The original buyer of a timeshare generally takes a substantial loss when a timeshare is successfully resold.
Let me know if you have any questions.
Marina Zaric, Real Estate Pro