Sometimes to get through a long, cold winter Canadians dream about a sunny destination vacation. This may mean going on a cruise, taking an all-inclusive trip or owning a vacation home. Other people may consider buying a timeshare, sometimes referred to a vacation plan or vacation club. Before you purchase a timeshare it is a good idea to know the facts.
What is a Timeshare?
A timeshare is a shared property ownership where a person buys the right to occupy a piece of property, such as a condominium in a resort area, for a set period of time. These are also referred to as vacation plans or vacation clubs.
In a timeshare, the property is divided among many owners so the cost of its maintenance and upkeep is also divided. Yet unlike standard real estate investments, timeshares can lose value over time, especially where there is an oversupply of property and time share options.
Timeshares are special types of contracts, and therefore fall under provincial and territorial jurisdiction. But many timeshare purchases take place in another country, so you should find out about what laws apply. The laws and regulations of a foreign country may be very different than those in Canada.
Before You Buy
Many timeshare offers are legitimate, but some use high-pressure selling tactics. Here are a few tips:
- Be wary of sales pitches that offer big prizes such as free vacations, cash and new cars just for attending a timeshare seminar
- Resist hard-sell tactics that offer a discount for buying in immediately. Always take information with you and think about it
- Obtain legal advice about rights and obligations in both the location of the timeshare and in Canada before you sign any contract. Consult with a lawyer who is independent of the company selling the timeshare
- Get advice from the local real estate board before agreeing to anything if you are purchasing a timeshare outside of Canada
- Be realistic. Make your decision based on how much you will use the property
- Compare the total annual cost of the timeshare with your normal vacation expenses
- Ask about availability during your vacation periods. Ask what other timeshares or properties you can use with your membership
- Talk to people who have already bought from the company about services, availability, upkeep and reciprocal rights to use other facilities
- Check with the Better Business Bureau for any complaints against the company, seller, developer or management company
- Check that the property complies with local and provincial or territorial laws for things like smoke detectors, fire exits and fire proofing. Never sign anything before you have seen the property and make sure it actually exists and meets your requirements
- Research the property’s popularity as a vacation spot
- Find out if and when you can sell your timeshare
Always read the fine print. Sometimes even the “free” prizes can have some sort of fee attached to them.
Knowing Your Options
There are two main categories of timeshares: the deeded timeshare (where you buy the property outright) and the right-to-use timeshare.
A deeded timeshare divides the property value like a pie–each owner gets a deed to a “slice”. You buy the right to use a specific unit at a specific time every year. The deed allows the owner to use the property and to assume part of the financial responsibility of the property—both in relation to the “slice” the owner purchases. The owner is also responsible for a share of maintenance and upkeep.
A deeded timeshare can be an option if you plan to keep it for a lifetime and use it often. Because you own the property you can use the property yourself, rent it out, or give the time away to friends or family. You can even leave the timeshare as an inheritance, like you would a home or other properties.
You can also have a “right-to-use” timeshare, which refers to a lease-like agreement. In this type of timeshare your lease expires after a specified time and you have no property ownership rights in the property. A “right-to-use” timeshare may include the following options:
- Fixed timeshare: This kind of timeshare is only for a particular week or days of the year. The rest of the year, other owners use the same unit in a similar manner.
- Floating timeshare: A floating timeshare is for a fixed period of time such as one or two weeks, but there are no specific dates determined in advance. For example, if the owner is eligible to stay for a week in the summer, they can choose the week.
- Rotational timeshare units: This combines the benefits of both the fixed and the floating type of timeshare. The rotation of holiday stays can go either backwards or forward in the season or calendar, giving opportunity to all owners to stay during various times of the year. For example, if your stay is in June one year, it could be in July or even December the next year. Availability of units is something to keep in mind when investigating this option.
- Lockoff or Lockout: You occupy a portion of the unit and offer the remaining space for rental or exchange. These units typically have two to three bedrooms and baths.
- Points-based programs: These timeshares allow owners to trade units for a set time with another owner who has a unit of equal size at a resort owned by the same company. The point-based timeshare may allow you to stay at a wide range of sites without being fixed to a certain season or the same resort. Some point-based timeshares may allow you to save your points for up to two years. In most cases, you can use your points to buy in to larger units or more time at a more popular resort depending on availability. Most exchange companies charge a fee when units get traded.
Note: You are likely expected to pay fees and taxes no matter whether you use your unit or someone else’s unit. Maintenance fees can cost from $200 up to $1000 per year depending on the location and resort. Property taxes are also rated on the type of timeshare property you have, its location and the resort.
Buying a Timeshare
You may choose to buy a timeshare outright, or pay for it over time like a mortgage. Here are some things to keep in mind:
- Interest rates are usually higher for timeshares, and most timeshares depreciate in value over time
- Watch for transfer fees and legal fees
- Compare prices of other timeshares nearby and find out what perks are offered. Make sure there are terms in the contract about the maintenance of the property
- If you are purchasing an undeveloped property, use an “escrow” account where an independent trusted third party makes payments as project milestones are met. Make sure there is a “non-disturbance” and “non-performance” clause to ensure you’ll be able to use your unit if the developer or management firm goes bankrupt or defaults on their financing. Contact a real estate attorney who can provide you with more information and advice about these types of arrangements
- Get everything in writing and make sure spoken promises are in the written contract and make sure there are no blanks on papers you sign
- Ensure that cancellation rights and the cooling-off period are outlined in the contract before you sign. This period allows you time to cancel the contract if you change your mind for any reason
Selling a Timeshare
Many factors will influence the resale value of your timeshare, including location, resort quality, flexibility of usage, season, demand and, of course, price. Here are some tips:
- Consider listing your timeshare a month or two before vacation season to attract buyers
- Price your timeshare competitively. Take the time to compare prices with other similar timeshare units. You can try to sell your timeshare on your own or enlist the help of a real estate broker or resell company. If you use a broker, you will be charged a commission. Fees will also be charged if you use a resale company
- Factor in related costs. These may include: deed preparation, escrow of funds, timeshare estoppel certificate, closing statements and recording
- Be sure that you have your paperwork in order
An estoppel certificate is a letter from the timeshare resort that explains the status of the property in question. It can explain any outstanding maintenance fees, loans and details any special rules or conditions of use for the property.
This document was created with information from the following organizations. For further information, please visit:
- Consumer Protection BC (video only)
- Service Alberta (PDF 208Kb)
- Ontario Ministry of Consumer Services
- Office de la protection du consommateur (in French only)
- US Federal Trade Commission
- Better Business Bureau
Provincial and Territorial Consumer Affairs Offices
Service Alberta, Consumer Contact Centre
Edmonton, Alberta T5J 4L4
Consumer Protection BC
Victoria, British Columbia V8W 9J2
Consumer Protection Office, Manitoba Justice
Winnipeg, Manitoba R3C 0B6
Financial and Consumer Services Commission
Fredericton, New Brunswick E3B 1E1
Newfoundland and Labrador
St. John’s, Newfoundland and Labrador A1B 4J6
Consumer Affairs, Department of Municipal and Community Affairs
Yellowknife, Northwest Territories X1A 2L9
Service Nova Scotia and Municipal Relations, Public Enquiries
1505 Barrington Street
Halifax, Nova Scotia B3J 3K5
Consumer Affairs, Department of Community and Government Services
Baker Lake, Nunavut X0C 0A0
Consumer Protection Ontario, Ministry of Government and Consumer Services
Toronto, Ontario M3M 1J8
Prince Edward Island
Consumer Services, Department of Justice and Public Safety
PO Box 2000
Charlottetown, Prince Edward Island C1A 7N8
Office de la protection du consommateur
Québec, Quebec G1K 8W4