There are three basic types of Timeshare Programs: Fee simple, Leasehold Right-to-Use (‘RTU’). Also included in the mix are Points systems, which are essentially a type of RTU, and fractional/private residence clubs.
Fee Simple: In this system you purchase an actual deeded interest in real estate, which is recorded with the land court or other proper authorities and for which you receive a title in perpetuity.
Leasehold: This ownership option provides the same basic ownership rights, protections, obligations and interests, etc. as the Fee Simple system with the primary exception being that Leasehold, unlike Fee Simple, is not in perpetuity and has a specified expiration date (which may include a first right to renew the ownership interest prior to the expiration of the leasehold). This type of ownership has been common in Hawaii for many years, though it is becoming less common as resort companies purchase full ownership rights to the land underlying the resorts.
Right-to-Use (‘RTU’): In this system you purchase the right to use a particular unit or unit size each year, but you do not have an ownership interest in the real estate. Traditionally, your right to use that property will expire after a stated number of years (usually 20-30), and the property will revert to the developer or the owner of the leasehold property. Legal ownership is typically vested in a trust company. This is the prevailing type of timeshare ownership in the UK and Mexico and many other countries outside of the USA, where it is illegal to sell timeshare as a deeded entity.
Within those types of timeshare, there are a few sub-types:
Fixed week: Where you own rights to a specific week, often in a specific condo/villa (this is called fixed week/fixed unit). This is your “home resort” , which you can either return to every year (same week every year) or trade through an exchange system for something similar in another part of the world, though not necessarily in the same week that you own. The advantage to fixed week/fixed unit ownership is the assurance that your specific timeshare unit will be waiting for you faithfully at the same time each year.
- An example of fixed unit/fixed week would be that you purchase Christmas week in Unit 152B– every year you automatically have that week in that unit assigned to you.
- An example of a fixed week that is not in a fixed unit would be that every year during Christmas week you get the size of unit you purchased (i.e. a 2-bedroom ocean view), but not necessarily Unit 152B.
Floating (or Flex) time: Instead of owning a specific week, you own a week (or a time period which may be longer than a week) within a specific range of time. Usually you will not purchase a specific unit (i.e. Unit 152B) but instead will purchase a unit size (i.e. a 2-bdrm 2-bath). It is then your responsibility to contact your resort each year to book the week you want to use. This works on a first-come-first-served basis, subject to availability, so the most desirable weeks are taken up quickly and it behooves you to make your plans as early as your resort allows. Also, if you intend to exchange your week through one of the exchange companies, you must first reserve your time at your resort before the exchange companies will accept it for deposit in the “exchange bank”.
- An example of floating time would be that you choose a 2-bedroom villa (not necessarily a specific unit) that is available to you any time between, say, June 1 and September 1.
Points/Club Membership: Under a traditional points system, each unit/week of time is appointed a specific number of points based on its location, size, desirability, time of year, etc. These points are then “spent” like money to reserve a unit for your next vacation. Owners can use, for instance, 3 days here and 4 days over there rather than spending an entire week at the same resort. The number of points you own determines what, where and when you can go.
Originally points were tied to a deed (and most still are), with the underlying deeds being held in common either by the resort developer or by the timeshare owners themselves, collectively. This meant that only a set number of points could be sold, corresponding to the number of units in a timeshare development.
When buying into that kind of points system, a buyer should make sure they know what they are getting. Developers often maintain sales rooms at sold-out resorts, selling the entire resort system to potential owners. You may think you are getting a deeded interest at a specific resort, which is what you want, only to find out later that your deeded interest is for another resort in the system entirely. Most of the time this really should make no difference, but occasionally it can be a problem for the owner.
- An example of a traditional points program would be that you choose a 2-bedroom ocean view unit during Christmas week in a popular location. That property and time period is then converted to a predetermined number of points, which you can use to purchase vacation time during any time of year, at any of the company’s resorts, in any available unit (subject to availability).
More recently some developers have moved to a “pure” points system, wherein the number of points available is not tied to a deed. This is more like a vacation club membership*, with the developer maintaining ownership control of all the properties/weeks/units, etc. and people purchasing a “membership” that gives them a certain number of points to use at any of the company’s resorts where “time” is available. This provides greater flexibility, but one of the downsides is that the developer can add or remove resort properties from the system at his/her whim without member input or recourse, provided the total number of points available to members still corresponds to the total number of units available.
Pure points systems also often include the opportunity to use points to purchase airline tickets, hotel rooms and other travel-related items.
*Note that this type of “vacation club” differs from the “pseudo” vacation/travel/holiday clubs offered in that the pseudo clubs do not own their own inventory but use travel agencies and the Internet to book vacations for their members, with promised discounts being largely illusory and the ability to book the vacation of your choice problematical. Always check when you are approached to become a member of a travel club to make sure the company actually owns/leases its own resorts/inventory. (The inventor of the pure vacation club concept, and to this day the best example of one that really works, is Club Med— which is also the world leader of all-inclusive vacations.)
Fractional/Private Residence/Destination Clubs:
Fractional ownership offers individuals the opportunity to buy partial ownership of an upscale place in a resort area. If it sounds a lot like a timeshare, that’s because it is. The main difference is in the number of weeks sold and the quality of the property.
The arrangements for basic fractionals usually divide the ownership into fourths, eighths, or 13ths, with each owner having an equal number of days a year to use the unit. The owners typically buy their shares from a management company, which handles maintenance and schedules everyone’s time.
One of the biggest differences between regular timeshares and fractional ownership properties are prices, financing and fees. While timeshares can be had for a few thousand dollars, fractional ownerships routinely run $100,000 or much more per fraction purchased, with maintenance fees to match. Fractional properties also are typically (but not always) much more luxurious than ordinary timeshares, with amenities to match.
The lines differentiating Residence Clubs and Destination Clubs, meanwhile, have become increasingly blurred, with the designations often used almost interchangeably.
A Private Residence Club takes fractionals one step further. These are usually ultra-luxury properties which offer a wide array of special services to club owners, well above and beyond what is typically offered by high-end condominium resorts. This concept establishes exclusivity and a sense of belonging, similar to the country club lifestyle. Depending on the individual property, services typically might include having a luxury car at your disposal while visiting a staff to stock your kitchen with groceries, run errands and do the housekeeping your own private splash pool and hot tub, preferred tee times, a butler and/or personal concierge, private chefs, nannies, fly-fishing guides, etc. Owners of PRCs own a deeded fractional interest in a specific resort, though some offer exchange opportunities among other locations either within their group or with affiliated resorts.
Destination Clubs operate much like Residence Clubs, with the exception that most of them (but not all) provide memberships that do not include equity ownership. With a few exceptions, members do not actually own any interest in real estate, nor is their membership vested in a specific property. Destination Clubs typically own or lease a portfolio of luxury homes in a variety of exclusive locations and all members of the Club have access to all those properties, subject, of course, to availability. This provides a great deal of flexibility for vacationers, depending on the number of destinations provided.