Timeshare
The term "timeshare" was coined in the United Kingdom in the early 1960s, expanding on a vacation system that became popular after World War II.
This concept was mostly used by related families because joint ownership requires trust and no property manager was involved.
British businesses decided to go one step further and divide a resort room into 1/50th ownership, have two weeks each year for repairs and upgrades, and charge a maintenance fee to each owner.
The first timeshare in the United States was started in 1974 by Caribbean International Corporation (CIC), based in Fort Lauderdale, Florida.
The contract was simple and straightforward: The company, CIC, promised to maintain and provide the specified accommodation type (a studio, one bedroom, or two bedroom unit) for use by the "license owner" for a period of 25 years (from 1974 to 1999, for example) in the specified season and number of weeks agreed upon, with only two extra charges: a $15.00 per diem (per night) rate, frozen at that cost for the life of the contract, and a $25.00 switching fee, should the licensee decide to use their time at one of the other resorts.
The timeshare concept in the United States caught the eye of many entrepreneurs due to the enormous profits to be made by selling the same room 52 times to 52 different owners at an average price in 1974–1976 of $3,500.00 per week.
This meant that in addition to the price of the owner's vacation week, a maintenance fee and a homeowners association had to be initiated.
Cancellations, or rescission, of the timeshare contract, remain the industry's biggest problems to date;[citation needed] the difficulty has been the subject of comedy in popular entertainment.
[4] On May 17, 2010, Mexico’s Ministry of Economy through the General Directorate of Standards established new regulations and requirements for developers of timeshare services.
The following institutions were involved during the new standardization: NOM is officially called: "NOM-029-SCFI-2010, Commercial Practices and Information Requirements for the Rendering of Timeshare Service".
If the timeshare provider does not follow the rules decreed in NOM, the consequences may be substantial, and may include financial penalties that can range from $50 to $200,000.
Owners can elect to stay at their resort during the prescribed period, which varies depending on the nature of their ownership.
With deeded contracts the use of the resort is usually divided into week-long increments and are sold as real property via fractional ownership.
The owner is also liable for an equal portion of the real estate taxes, which usually are collected with condominium maintenance fees.
The owner can potentially deduct some property-related expenses, such as real estate taxes from taxable income.
The right to use may be lost with the demise of the controlling company, because a right to use purchaser's contract is usually only good with the current owner, and if that owner sells the property, the lease holder could be out of luck depending on the structure of the contract, and/or current laws in foreign venues.
Units normally include fully equipped kitchens with a dining area, dishwasher, televisions, DVD players, etc.
Timeshare sales staffs often provide incentives, including free or deeply discounted hotel rooms, tickets, and gifts, for the prospective buyer to take a tour of the property.
After a warm-up period and some coffee or snack, a podium speaker welcomes the prospects to the resort, and shows a promotional video.
The U.S. Federal Trade Commission mandates a "cooling-off period" that allows people to cancel some types of purchases without penalty within three days.
For example, upon resale of most Holiday Inn Club Vacations properties, the new owner can no longer use the allotted point value to make reservations at any HICV resort.
Likewise, small units in destinations saturated by timeshares, or with expensive maintenance fees compared to the value of offered points in their respective system, will have no resale value at all.
If that is a case, each owner is required to submit their purchase agreement contract to the developer and ask for a waiver.
The developer may decide to exercise ROFR to purchase the subject property, thus refusing the sale to the original buyer.
[citation needed] A transaction is typically exempted from ROFR if the purchaser is a direct family member.
Many timeshare owners complain about the annual maintenance fee (which includes property taxes) being too high.
Many owners also complain that the increasing cost of timeshares and accompanying maintenance and exchange fees are rising faster than hotel rates in the same areas.
[25] "The discounted price I quoted you is only good if you buy today", is the industry standard's pitch to close the sale on the first visit to the resort.
While some timeshare exit specialists are legitimate, the business is plagued by scammers who cold-call owners and solicit payment in advance for nonexistent services.
[26][27] In 2017, Spanish police arrested 35 people in connection with a fraudulent timeshare resale operation on the Costa del Sol that had taken an estimated £11m profit from 500 victims.
