Posted on December 30, 2020
With the introduction of points-based timeshare programs, the difference between deeded and non-needed timeshares has become more prominent. This difference isn’t necessarily a problem, since many owners may not notice an obvious difference in their timeshare usage, depending on what they purchased. This is more of an issue when the owner wants to travel beyond their home resort, decides to sell their timeshare or chooses to become involved in the policies governing the operation of the timeshare resort.
Deeded timeshare ownership goes back to the foundation of the timeshare industry. Based on the standard real estate model, early timeshare resorts were mainly converted hotels or condos that were subdivided into ownership shares, reflected in deeded ownership of a share of a unit. These units were divided into weekly ownership shares, where one unit could be theoretically owned by 52 owners. Each owner would have a registered deed for their ownership and own an actual share in the resort.
While the security of deeded real estate ownership has its benefits – especially for fixed week owners in high demand resort locations such as Hawaii timeshare, there can also be limitations. Many deeded timeshares are at single-site resorts, either fixed to a specific week or in a float/flex ownership. These owners would need to use outlets such as exchange companies like RCI or Interval International to gain more flexible use options at other resorts.
This is one reason why the exchange companies created their own points programs, where points overlay the deeded ownership. This gives deeded owners the ability to use avenues such as RCI Points in order to expand their travel options.
Deeded timeshare ownership also gives the owner the ability to serve on the HOA Board of their resort, similar to the way an HOA Board operates with residential real estate. Owners can also vote on measures related to the management of the resort, depending on the structure of the resort’s constitution or by-laws. This gives owners more influence over the policies that can determine the viability of the resort.
Non-deeded products such as Right-to-Use timeshare ownership or points-based programs tend to give the owners more flexibility within their ownership. WorldMark is a good example, as owners buy points, otherwise known as credits, which can be used at any resort within the WorldMark network of nearly 100 resorts across the U.S., Canada and Mexico. Depending on the ownership, credits may also be used at resorts in Asia and Europe.
Timeshare products that are non-deeded allow for vacation ownership in places such as Mexico, where the Right-to-Use model is used almost exclusively due to Mexican foreign ownership laws.
Non-deeded ownership products are primarily structured within a trust, where points are held and assigned to the owner and a certificate of ownership is assigned to the buyer. The certificate is recorded with the timeshare company and functions more like a membership program, where the owner can book their vacation and use any additional benefits that may come with the ownership such as travel concierge service.
Because non-deeded products are typically assigned a limited timeframe for use, such as 25 years with Disney Vacation Club, this impacts the resale process as well. Deeded timeshare is owned in perpetuity, meaning the owner owns it until they either sell it, give it away or it is transferred through a legal action such as a foreclosure or estate transfer. With non-deeded products, the clock can run out on ownership unless it is extended by purchasing additional time through the resort or on the timeshare resale market.
When it comes to resales, some non-deeded owners may be happy to let their ownership expire. Others can sell the remaining time on their contract for a prorated amount, or they can purchase more time and sell it on the resale market. For deeded timeshare, this operates similar to other real estate transactions in that the share is sold to a new buyer, who will take over the full ownership and associated obligations of the timeshare until they make their own decision to sell.
Another difference between deeded and non-deeded timeshares regards responsibilities that come with the ownership. Both ownership models require owners to pay annual fees for the maintenance, taxes, insurance and associated costs of the resort. Where this can differ is if the resort encounters difficulty with long-term viability.
For instance, if a resort encounters a problem such as in the financial operation of a timeshare and the resort goes into bankruptcy, deeded ownership allows for the resort to be sold and the owners to recoup some of the proceeds. This is a rare example, but it can happen such as in the case of Carriage Hills and Carriage Ridge resorts in Ontario, Canada. In a Right-to-Use model, owners can be absolved of their ownership with no recourse but to walk away.
Some programs, such as Disney Vacation Club, operate a type of hybrid model in that their points are deeded ownership products deeded to a particular resort, but the points function similar to the way a non-deeded program operates. Disney timeshare points have a specific value that is deeded to the respective resort, with the owner enjoying home resort privileges such as an early booking window to reserve vacation dates. But because it is a point-based system, the points can also be used to book a vacation at other Disney timeshare resorts within the network.
When it comes to selling a timeshare, the advantages for a deeded timeshare are the certainty of the usage in a given week or season as well as being an actual owner of the resort. The disadvantage is in the closing process, as this requires a closing company and, depending on the state in which the resort is located, a legal review. This can take time, in some cases 90-120 days to close, and added cost.
For a non-deeded timeshare, the advantages are in the flexibility of the product and the ease of transfer when the timeshare sells. The ownership can usually be used at different times of the year, which comes in handy for owners with schedules that can change based on variables such as work schedules. This also allows for different types of vacations – one year can be a beach-based summer vacation and another could be a winter ski vacation. Because the ownership is in trust, the resort handles the transfer in a matter of days when the sale is completed. The resort may require a transfer fee to complete the process.
Hopefully this answers some of the questions regarding deeded and non-deeded timeshare ownership. If you have any questions, our licensed agents are able to assist and are only a phone call away at 877-624-6889.