Is a Timeshare Considered Real Estate?

Is a Timeshare Considered Real Estate?

Although the term “timeshare” is commonly used, it can be difficult to grasp. Unlike the well-established legal concept of real estate, timeshares are a relatively new development that originated in the 1960s when European resort owners began offering customers the opportunity to vacation in homes in the Alps. Despite the industry’s growth and increasing complexity, the question of whether a timeshare is a form of real estate remains. This depends largely on where you acquire your timeshare and whether it has a physical location. Local regulations in various U.S. states and foreign countries typically determine whether a timeshare qualifies as real estate and who is permitted to sell them. It’s worth noting that in many cases, the individual attempting to sell you a timeshare may not be a licensed real estate agent, which can pose problems. If local law categorizes a timeshare as real estate, the seller generally must possess a license as a real estate agent or broker and adhere to legal duties and ethical obligations. Nonetheless, exercise caution since these standards are not always upheld in the timeshare sector, and a license does not necessarily ensure the seller’s reliability. Conversely, if a timeshare is not recognized as real estate, the seller may possess a less comprehensive license or none at all.

Is a Timeshare Considered Real Estate? Look at Your Timeshare Contract First

1. Fixed-Week Timeshares

In older and more traditional timeshare arrangements, a fixed-week ownership system is employed for fractional ownership. This approach is also utilized in most agreements offered by Hilton Grand Vacations. In this model, the timeshare property is physically divided into 52 units, each corresponding to a specific week of the year. For instance, if you purchase week 52 of a condominium, you have the right to utilize that unit during the last week of any year.

Fixed-week timeshares are usually considered real estate interests and are accompanied by real property deeds. It is worth mentioning that deeded ownership usually comes with property taxes. However, this type of timeshare is relatively infrequent in the modern industry.

2. Floating-Week Timeshares

Floating-week timeshares allow owners to stay at a particular resort for a week, similar to fixed-week timeshares. However, unlike fixed-week timeshares, floating-week timeshares do not have a predetermined week of occupancy and must be reserved separately. Although they are generally associated with a specific property, they are less specific than fixed-week units and therefore considered less precise. Nevertheless, floating-week timeshares are still more likely to be viewed as real estate interests.

3. Right-to-Use Timeshares

Modern timeshare developers, such as Marriott and Diamond Resorts, tend to sell non-deeded timeshares through point systems or “vacation clubs.” These types of timeshares are often referred to as “right-to-use” agreements, where you purchase a fixed number of points to reserve accommodations at various properties worldwide.

Since these point systems are not as closely tied to physical properties as other types of timeshares, they are less likely to be considered real estate. This can have implications for both the benefits you receive under the contract and the ability of timeshare developers to foreclose on your timeshare in response to unpaid fees that tend to increase over time.

Is a Timeshare Considered Real Estate in the State Where You Purchase, and How Might That Affect You?

It’s important to take into account the impact of local laws in the state or country where you purchased your timeshare. While it’s not surprising that the laws governing timeshares in a foreign country might differ from what you’re familiar with, you may not realize that property laws can also vary from state to state within the U.S.

One area where these differences are especially apparent is in the laws regarding salesperson licensure. In California, for example, both right-to-use and deeded timeshares are regulated by the Department of Real Estate, and all timeshare salespeople must work under a broker’s license. This is significant because licensed real estate professionals have legal and ethical responsibilities to protect buyers, even if these obligations aren’t always enforced.

In other states like Florida and Nevada, where there are many timeshare properties, licenses are required but not necessarily broker’s licenses. In Nevada, there is a lower-tier license for timeshare salespeople. These licenses don’t provide the same level of comprehensive protection as broker’s licenses, which can leave buyers with less legal recourse.

In Florida, the person selling you the timeshare may work under someone with a broker’s license, but enforcement of these requirements is often poor, which means there are few legal remedies available.

In states like Missouri, timeshares are treated as “merchandise,” and no specific timeshare or real estate license is necessary. This lack of regulation means that anyone can sell a timeshare in these states, and unethical individuals, including convicted felons, often target these areas.

Licensing requirements are crucial, as real estate brokers are fiduciaries with a special duty to protect your interests and ensure that you’re not taken advantage of. Without these requirements, unscrupulous timeshare companies can more easily trap you in an unfair and unsustainable timeshare contract.

Although it’s better to live in a state that mandates licenses, many states struggle to curb unethical practices by timeshare salespeople. Because timeshare products can be confusing, regulators may miss bad behavior that they would otherwise catch in traditional real estate sales.

Furthermore, timeshare salespeople often push the boundaries of what’s acceptable in high-pressure sales presentations, making it challenging for even the most conscientious states to protect the public from unethical timeshare sellers.

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