What is timeshare?
This is apparently the most challenging question in the business of timeshare.
Timeshare is also known as “vacation ownership”. It is ownership of a particular property for a specific time range. This is the most basic definition of timeshare. The knowledge of timeshares just became popular but timeshares have existed since the early 1960s. While the legal structure of timeshare ownership in the United States provides for “ownership,” what is actually owned is time usage. Timeshare Purchase Agreements are complicated and, many times, one-sided. The contracts give Timeshare Developers and the Resort Management Company much of the power in the relationship. Prospective shareowners should exercise caution before buying a timeshare.
A little history about timeshare.
Timeshares began in the United Kingdom in the early 1960s. This system of vacation became popular after the Second World War. During this time different families purchased a property and shared it among themselves for different seasons of the year. It was just a way for every family to get a feel of the place at the season of their choice.
Over the years, this simple home sharing venture has grown to become one of real estate’s biggest business strategies in different parts of the world.
Timeshares were first introduced into the United States in the year 1973 by the Caribbean International Corporation (CIC). It offered 25-year vacation licence rather than an outright ownership. CIC assured maintenance of specific accommodation which was provided in the specified season and time interval agreed upon. The contract between CIC and their client attracted the sum of $15 per night which was to be paid according to the terms of the contract. The contract also contained a $25 switching fee, which was charged if the client decided for any reason to switch resorts location.
In the past, the fee paid was reasonable and fair compared to the amount that would have been spent if the clients had chosen to stay in a hotel with standards provided by CIC timeshare services. In 1999, due to inflation of the dollar, the cost-per-night of the timeshare increased to $52. Clients were allowed to gift or rent out their timeshare accommodation. Irrespective of how occupied the timeshare is during the period stipulated to a client or otherwise, the client is expected to pay the sum of $15 per night as agreed. This “per-night” payment is what is known as the maintenance fee today. With the benefit of hindsight and experience, the average timeshare owners’ maintenance fees have increased dramatically, making timeshare ownership more of a burden, than a benefit.
Over time, the concept of timeshares caught the eye of many entrepreneurs businessmen. The idea of selling a room 52 times to 52 different owners at the average price of $7,000 – $25,000 per week was absolutely mind blowing. Sooner or later, it was expected that the real estate developers would step in, and that is exactly what happened. The Florida Real Estate Developers stepped in to create legislation which would define timeshare ownership in Florida and make them fee simple ownership transactions (which attracted additional fees. It’s no secret that timeshare developers love additional fees). The home owners associations were also initiated. The fee simple ownership transaction paved the way for timeshare location exchange companies to be created. Companies such as Interval International and RCI where spawned so timeshare owners could exchange their week with other timeshare owners in any given area.
To date, cancellation and rescission of timeshare contracts by timeshare owners are still the industry’s biggest problems.
Reference sites: www.wikipedia.org, www.forbes.com