Essential Information for Timeshare Lease Agreements: What You Need to Know

Timeshare Lease Agreements: A Primer

A timeshare lease agreement, also referred to as a vacation ownership plan, is a contract between a developer and an owner or purchaser. Many timeshare agreements are structured in the form of a deed whereby the purchaser holds title to a fractional interest in a property. Like a traditional real estate transaction, many timeshare agreements provide that in exchange for the partial ownership interest, the purchaser is entitled to use of the property on certain dates each year.
Timeshare leases also can be a contractual right to use an apartment, a villa, a townhouse, a hospitability suite or hotel room, for a designated number of days within a five-to-seven year period at a property, resort or complex . Unlike condo owners, a timeshare owner does not purchase a permanent interest in the property. Instead, the individual agrees to pay an annual fee for a certain amount of time, often during specific weeks. Timeshare owners then share the expenses of maintaining the property. There are several types of timeshare payments:
Timeshare leases are different from owning a vacation property because timeshare owners are not responsible for all the related costs associated with the property, such as maintenance. While timeshare leases are less expensive than purchasing a vacation property, the original cost to purchase a timeshare can be significant.

The Components of a Timeshare Lease

Clearly, like any lease, a timeshare lease contains key terms relating to the duration of the lease, the rights and duties of the lessee, the amount of maintenance fees, etc. However, timeshare leases also contain unique terms that relate to an owner’s usage rights of the timeshare, such as:
-Possible requisite attendance at an orientation seminar, whereby rules and requirements are set forth to gain access to the timeshare;
-Use of annual, biennial or rotational time slots;
-Allocation of club points or other same time sharing system;
-Provision about concurrent timeshare holders (i.e. the right to have family members or friends use the timeshare);
-Right to sublet the timeshare;
-Reassignment of the timeshare to another unit in the event of an unavailability;
-Deposit of a security or reservation fee;
-Taxes and fees clear up to a specified percentage;
-Duty to pay dues and fees and remedies for non-payment;
-Timeshare Management obligations, including maintenance, insurance for casualty, and repairs and utilities.
Timeshare leases may contain any number of the above-mentioned specific terms that only apply to that particular timeshare.

Considerations and Legal Safeguards

The legal requirements for timeshare lease agreements can sometimes be overlooked. While the lease you are provided is likely to very clearly give you information about your obligations to the timeshare company to continue to pay your annual fees and restrictions on your use of the timeshare, you should also be aware of the protections provided in your jurisdiction with respect to all consumer leases.
Most states provide a rescission period where within a defined period of time after you sign a timeshare lease agreement you can simply walk away from the agreement without penalty. This rescission/stress period is often provided to timeshare owners as a means to ensure that owners entering into these leases have had time to obtain all necessary information to make a truly informed decision and separate from the emotional excitement of the moment of presentation with the timeshare facts and figures. The length of the rescission period, when it starts and what conditions attach to the rescission of a timeshare lease are set out by state law.
Consumer protection legislation also usually includes disclosure rules which require that all costs and fees associated with a timeshare lease be fully disclosed to prospective owners prior to signing. In addition, consumer protection laws often provide a right of rescission where the seller of the timeshare does not meet the disclosure requirements. There are generally no materiality requirements and the rescission is often available even if the seller of the timeshare was not aware of the non-disclosure.
Most states require that any disputes relating to a timeshare lease agreement be managed through an initial informal procedure such as conciliation. If the conciliation is unsuccessful, you are then usually required to proceed to either non-binding or binding arbitration.
Timeshare leasing companies are required to belong to a consumer protection service such as TICO which can provide oversight over your complaint against the company.

The Advantages and Disadvantages of Timeshare Leasing

There are both pros and cons to entering into a lease agreement. Since you don’t have some of the responsibilities associated with timeshare ownership, such as actual title or deed ownership to the property, the cost may be less than timeshare ownership. But as with most investments, when you spend less, you are usually giving up something in return.
With timeshare leasing, there is no assurance that the timeshare lease period will be renewed. If you enjoy going to the same place every year, but you are not an owner at that property, it could be difficult to find a similar timeshare property to rent once you arrive and find out your lease is up and you need to leave.
Further, the costs of the lease will probably go up every few years. That may be expected with all rental agreements, but since you are committing to a certain number of years, those costs are fixed. In the end, unless you know at the time of signing that you wish to remain at the same property indefinitely, you would be better off renting on a yearly or as-needed basis, as opposed to locking yourself into a long-term timeshare lease.

Selecting the Appropriate Timeshare Lease

When looking for the right timeshare lease for your needs, it is important to think critically about what you want from one of these arrangements. For starters, consider where you would like to spend your time and how often you plan on visiting. This will help you narrow down your options. For example, if you want to rent in a particular region for just a couple long weekends each year, you may be best served looking for a resort where you can obtain short-term terms rather than paying for a full year. Consider the type of unit in which you would like to stay. Compare the available options and try to locate one in a resort that is able to provide you with the style of unit you are seeking . Determine your budget and see if the costs fit within it. Look for specials in the offseason or early booking purchases and promotions. Research the resorts from which you are considering a lease. You may find reviews online to gauge how well previous tenants feel they have been treated by management and how much they enjoy the recreational facilities. Look for amenities that are important to you, such as nearby golf, a spa, a fitness center or a swimming pool. Find out how far away these are from your unit and whether it is easily accessible for you and your family. Research the company you are considering renting from as well. You want to choose one that has experience and is able to get rave reviews from clients across the board.

Advice on Negotiating a Timeshare Lease Agreement

Before entering into any timeshare lease agreement, take time to review the terms with your trusted advisor. When entering into a timeshare lease agreement, it’s important to understand you are taking on a long-term obligation. Since these leases can be quite complicated, understanding the terms will empower you to assert your rights and allow you to negotiate the most beneficial deal for yourself.
The biggest mistake most individuals make is thinking that all timeshare lease agreements are the same or that the terms can’t be negotiated. Many timeshare contracts contain provisions explaining which terms are set by the company and which terms are negotiable. Understanding the difference will allow you to recognize opportunities and capitalize on them.
Look out for terms related to the size and accommodation of the vacation property. For example, is it a one room villa or a two room villa? Does it accommodate pets? Is it accessible for people with disabilities? By understanding what is and isn’t possible with the property, you will be able to avoid costly mistakes down the line and align your investment with your current and future vacation needs.
In addition to issues with size and accessibility, make sure any restrictions on the use of the timeshare are clear to you before signing on. For example, some timeshare owners are not allowed to rent or sublease their property. Others are not allowed to have pets. Some owners are restricted in how often they can utilize the property within a given year. Make sure you understand these restrictions and agree with them before moving forward.
Timeshare leases will usually require timeshare owners to pay fees and levies to the company. All these fees should be clearly stated in the agreement prior to signature. Be on the lookout for additional or unexplainable fees that may be hidden in the agreement. For example, additional charges could include cleaning fees, laundry fees or repair fees. Make sure these types of costs are disclosed prior to executing the agreement to avoid unexpected costs later.
Some companies will offer individuals in-person tours of the property before executing the lease agreement. Take advantage of this opportunity whenever possible. The on-site tour will allow you to see other villas on the property and give you a chance to ask any questions you may have in-person about the lease terms.
When looking at timeshare lease options, think about your current situation and your future needs as well. Will you only need the property for a few more years, or do you plan to continue visiting until retirement? Examine the benefits of short-term versus long-term leases to see which benefits you more in the long-run or immediate future.

Avoiding Common Timeshare Lease Problems

One common pitfall from timeshare lease agreements is jumping into something that is not really a timeshare lease. Too often sellers have a completely different type of agreement, such as a lease-to-own agreement, or some other unknown type of agreement. The key to figuring out what type of agreement you have and determining your current and future financial commitments is reading everything tied to the original signing and following the laws governing those agreements. Sellers have many different formats for agreements due to the highly flexible range of practices in selling these units. Always check if the signature areas are dated and check the language on the agreement. The full agreement should be supplied with all pages intact. If partial pages are given, red flags are rising that something is wrong. In most states, all timeshare lease agreements must be filed in the local register of deeds office . One aspect to be aware of is the area of group deposit trust accounts or similar such accounts. If these years of deposits appear too complex to understand or be repaid, there is a very good chance the account is not properly constructed and the developer never made the time to set up the accounts correctly. Speak to an attorney who specializes in HOA law about the various types of accounts that must be set up in your state for these deposits. Most rarely ask for deposits back and do so through litigated actions in order to keep your funds invested in their ownership. Once you have been advised of this, make sure you track the percentage of your lease fees applied to the right account so that you don’t lose thousands in litigation defending your own money. In addition, if the complex sounds unmanageable, even as the seller promises a full management in future years, take a deep breath and remember "Caveat Emptor."