Reasonable Timeshare lifespan

[pfrank4127]

What is a reasonable life span of a timeshare? Many timeshares are deeded ownership for life and even transfer to kids but are people really going to want to visit in 50 or 60 years. Is there any track record on this sort of thing?

 

[totalfarkuser]

What is a reasonable life span of a timeshare? Many timeshares are deeded ownership for life and even transfer to kids but are people really going to want to visit in 50 or 60 years. Is there any track record on this sort of thing?

I have always wondered this. My personal guess would be the occasional special assessment remodels the unit, but after like you said, 50 to 60 years, I would think you would need to rebuild.

/I just noticed these were my first two posts -- but I have been following this board for several years now, however, I have just started my first contract process on some odd year FF points, so I am a little more interested at this point

 

[bilfbr245]

Dissolution

Some timeshares are located on very valuable real estate, especially those with ocean access. In many cases this value is not reflected in resale timeshare prices. I think that as these timeshare age and become more expensive to maintain, there will be pressure to dissolve the timeshare legal framework and divide the proceeds from sale to permit other development. In many cases this will be profitable for timeshare owners, particularly in cases where timeshare ownership is not an economically efficient use of valuable land.

 

[vacationtime1]

This is a interesting and significant issue. Very few fifty year old timeshares will remain desirable properties, even if they are in prime locations. Owners will face the quandary of massive special assessments to update and rebuild older properties vs. keeping a functionally obsolete facility with increasing maintenance costs. Some owners would be willing to pay the assessments; others would find them an extraordinary hardship (such as those who bought in cheaply because it was what they wanted at a price they could afford).

I, for one, would favor a sunset clause in every new development: the development will be sold as a package in "x" years (probably 40 - 50 years from initial development) and the proceeds divided among the owners, UNLESS the owners vote to extend. The extension vote would need to be a super-majority (66-75% ?), perhaps ten years before the scheduled termination date. Extensions could be on a ten year rolling basis.

Without such a clause in the original documentation, it would be difficult to get the owners to agree on anything and the property manager, who has a vested interest in continuing to run the project and get paid for doing so, has no incentive to push for a sale and dissolution.

This would provide an exit strategy for everyone. Disney does this by selling a RTU, but then Disney gets the reversion right. The reversion right would be cheap at the outset (the original buyers would pay only its discounted value as of their purchase) and it keeps the owners, not the developer, in charge.

JMHO

 

[richardm]

This type of decision generally has to be made with every condominium- be it timeshare or whole ownership.. If you check your Condominium Declaration or original deed- you will see that Condominium Declaration (the legal framework for a Condo Association) have a specific expiration date. Just prior to that date, the HOA has to determine if the Declaration will be renewed or if the Condominium will be dissolved..

If the resort is not a developer controlled property, the choice is actually up to the owners of record.

Dissolution is very rare, but can occur if there have been management issues or a large number of vacant ownerships which make the condo financially unviable. Upon dissolution, the property is normally sold or taken over by another entity. Understand, however, that generally when the property is sold- there are often very little proceeds that remain to be disbursed to interval owners.. Almost certainly far less than was originally paid.....Financial gain from a timeshare ownership is very, very rare!

As always, the value to a timeshare owner is in the actual usage..

 

[OCsun]

The Royal Resorts in Cancun have a similar arrangment which provide the owners with their original purchase amount at the end of the use period. The Royals sell or retain the property providing each unit owner the right to apply the original selling price to re-purchase their unit or take their money and run. Pam

 

[timeos2]

Welcome to my 130 year timeshare. Isn't it great?

Without such a clause in the original documentation, it would be difficult to get the owners to agree on anything and the property manager, who has a vested interest in continuing to run the project and get paid for doing so, has no incentive to push for a sale and dissolution.

This would provide an exit strategy for everyone. Disney does this by selling a RTU, but then Disney gets the reversion right. The reversion right would be cheap at the outset (the original buyers would pay only its discounted value as of their purchase) and it keeps the owners, not the developer, in charge.

JMHO

Great points but the reality is you have to live with what the documents for your specific resort say. They are extremely difficult to alter after sales have started as they are the basis for the purchase rights.

In the case of one resort I know well the documents state that the term is perpetual. And to end it takes a super majority vote (at least 51% approval of 66.6% of all owners) to dissolve it. Getting a return vote from anything close to 50% - forget 66.6% of all owners - is nearly an impossible task for any timeshare. (Look back at the tough time Summer Bay LV had getting approval for a free upgrade for their badly deteriorated resort last year) So barring natural disaster or a financial meltdown disbanding that project will be extremely hard to do. Buildings can and do last hundreds of years so it is possible to keep a resort going indefinitely. If that's the best choice could be questioned but breaking the cycle may also be nearly impossible to accomplish. I doubt I'll be around to worry about it when the time comes.

 

[bilfbr245]

Dissolution has been rare to date but timesharing is still a relatively recent phenonmenon and has not fully played out. How timeshare owners fare on dissolution would seem to depend on the value of the underlying assets. I have seen examples where a relatively small number of units sit on ocean front land worth millions, and a little quick math suggests that those owners will not fare badly. I do think the impetus for dissolution will come from operating committees faced with stretched cashflow, as opposed to an effort to extract this value. And obviously many timeshare are not sitting on valuable land and will not be worth much when outdated and worn out. While I agree that one should buy a timeshare to use it and not for investment, I don't think that it hurts to also be knowledgeable about the underlying value of the assets that one is buying into.

 

[beejaybee]

Old in the Old World

The Osborne Club in Torquay England is in a 100++ year old building and is beautifully maintained. I suspect that many English and other European resorts are in this category and that is definitely part of their charm!

A well-located, well constructed US resort should maintain its value provided it is maintained and updated.

 

[jschmidt]

How about somebody creating a timeshare deal that allows the buyer to buy in for a given time period of his choice with the option to renew at the end of that time. I think a minimum buy in period of five years would be reasonable to see if it will work for the buyer. The renewal periods could be in some increment like 5 or 10 years. This type of deal would tend to keep management honest to entice buyers to renew. People could also bail out as age catches up with them.

Just some food for thought!

 

[Talent312]

How about somebody creating a timeshare deal that allows the buyer to buy in for a given time period of his choice with the option to renew at the end of that time. I think a minimum buy in period of five years would be reasonable to see if it will work for the buyer. The renewal periods could be in some increment like 5 or 10 years. This type of deal would tend to keep management honest to entice buyers to renew. People could also bail out as age catches up with them.

Hey, I've long advocated that idea for marriages. What if your M-License expired every 5 -10 years, and unless both parties opted to renew, a Trustee would distirbute the property and kids. Then, either could bail if the other proved to be too "high maintenance."

 

[Jya-Ning]

Did not realize someone willing to pay developer price every 5 or 10 years.

Jya-Ning

 

[Potential Buyer Scott]

I would think that upon dissolution there would be a big issue about how much money goes to each type of holder. Do platinum and bronze holders each get an equal share or do platinum holders get more money, and if so, how much more? I would think this would be a very big problem.

PBS

 

[jschmidt]

I would think that upon dissolution there would be a big issue about how much money goes to each type of holder. Do platinum and bronze holders each get an equal share or do platinum holders get more money, and if so, how much more? I would think this would be a very big problem.

PBS

The Royal Resorts in Mexico has something called “Residual Rights”. The contract states that when the property is sold, after the 30 year Right-to-Use contract expires, the owner will get his initial investment back and the developer will get a like amount. Any profits beyond that will be divided equally between owner and developer.

The 30 year life span came from the Mexican government who leases the land. The government changed the 30 year to 50 years about 8 or 9 years ago. I think 50 years is to long a period. Add 30 years or 50 years to your age and see which fits you best. That’s why I’ve been buying Royal Resort resales with 6 to 10 years left. I get the residual rights back at the end of the project and if I feel like it, I will reinvest.

 

[vacationtime1]

I would think that upon dissolution there would be a big issue about how much money goes to each type of holder. Do platinum and bronze holders each get an equal share or do platinum holders get more money, and if so, how much more? I would think this would be a very big problem.

Good point. The entire issue of a future dissolution date of and distribution of the sale proceeds would have to be in the initial development documentation. The documentation is already lengthy and dense. The allocation of sale proceeds between categories of owners (plat, gold, etc.) would be just one additional item. The important thing is that the allocation (whatever it may be) is determined in advance -- not that even a knowledgeable TS buyer reads or understands all of the documentation anyway.

 

[ctyatty]

The Royal Resorts in Mexico has something called “Residual Rights”. The contract states that when the property is sold, after the 30 year Right-to-Use contract expires, the owner will get his initial investment back . . . . . that' why I’ve been buying Royal Resort resales with 6 to 10 years left. I get the residual rights back at the end of the project and if I feel like it, I will reinvest.

Do you get what the original owner paid or what you paid resale?

Sounds interesting, any other resorts set to implode in the not too distant future?

 

[jschmidt]

Do you get what the original owner paid or what you paid resale?

You get what the original owner paid. I just bought one resale for $4K and will get $6.9K back in 2013. I will have used it 6 times before the 30 year right-to-use expires.

 

[Jennie]

I know someone who owned a week at VCI a/k/a Club Internacional de Cancun (the first built of the Royal Resorts). He bought it through a resale company in the mid 1990's for $1800., and rented it out for about $400. profit each year (over and above the annual maintenance fees).

When the RTU expired in July 2007, he was supposed to receive $28,000. --the price paid by the original owner. The resort was supposed to be sold but the value was considered to be too low for the owners and the developers to receive the amounts due. So they decided to begin a new 30 year RTU plan. A large number of the owners decided to repurchase, using the residual money value as a down payment.

The owners who did not want to "re-up" will be receiving the monies due in 5 equal payments over a 2 1/2 year period (in August and February, beginning August 2007 and ending in in August 2009).

The later Royal Resorts have a similar "residual value" refund program but the owners will receive a set percentage of the value of the entire resort, rather than the price that they, or a previous owner, paid initially.

 

[dioxide45]

Many deeded resorts in the US do have a sunset clause in the deed. So at a certain time in the future there is a provision to disolve the association. So just because you have a deed, doesn't mean it is forever.

 

[reddiablosv]

In 50 years, I will be 95!

Who cares?? In reality things happen a lot quicker than a 50 year time horizon. Already timeshares have been converted to whole ownership and been sold to developers for other uses. Walton Hall in GB is a good example, I could have made a profit if I had bought resale. I have heard of others. Several posts have suggested that ocean front resorts will be on very valuable real estate. Maybe? But, Al Gore will tell you they will be under water in 50 years! I suggest that a five year time horizon is about right for TSs. If you can't justify your pruchase in 5 years then forget it!

 

[ladycody]

I guess, growing up in NE...where there are tons of old, well-maintained, still-in-use, buildings...both public buildings and homes...it had just never even crossed my mind that my timeshare may not last and be usable by my children or grandchildren.

 

[richardm]

Residuals on Mexican properties....

Has any member here actually ever received a residual payment?

I've heard some pretty scary stories on these.. That the residual is only offered as a "credit" to a membership extension or a new phase purchase- and that promised payments if you don't take that option are never received...

Jennie- can you contact your friend and find out if he in fact rec'd his money.. I'm really interested in seeing what happens with the Royals. They have such a great reputation...

I know a Canadian, and also a resident of the great state of Alaska, that have an awful lot invested in this brand!

 

[richardm]

The 30 year life span came from the Mexican government who leases the land. The government changed the 30 year to 50 years about 8 or 9 years ago. I think 50 years is to long a period. Add 30 years or 50 years to your age and see which fits you best. That’s why I’ve been buying Royal Resort resales with 6 to 10 years left. I get the residual rights back at the end of the project and if I feel like it, I will reinvest.

Just a clarification on this issue.. Mexican law does not allow non-citizens to own specific types of land without a trust plan that is normally through a Mexican bank.. This is the reason Mexican timeshares are all RTU..


Foreign Ownership of Property in Mexico

The Mexican Constitution regulates the ownership of land and declares that ...within a zone of 100 kilometers from the border or 50 kilometers from the coast, a foreigner cannot acquire the direct ownership of the land. These areas are known as Restricted or Prohibited Zones. However, the latest Mexican Foreign Investment Law, which was ratified on December 28, 1993, allows a foreigner or foreign corporation to obtain the rights of ownership through a fiduciary trust known as Fidelicomiso, the equivalent of a US beneficiary trust.

 

[Dave*H]

Many deeded resorts in the US do have a sunset clause in the deed. So at a certain time in the future there is a provision to disolve the association. So just because you have a deed, doesn't mean it is forever.

You may want to check exactly what dissolution paragraphs say. One resort I own at provides for a vote to extend the timeshare. If the vote doesn't pass, all the deed holders for a given unit become tenants in common. It doesn't address how management of the resort will be handled after that. Seems like the situation could become very messy.

 

[bizaro86]

Tenants in common with 50 other people you don't know seems like a pretty horrible idea to me. I wonder who thought that one up. Maybe they're planning to use it as a stick to get owners to extend the timeshare...
Michael