Underwriting Manual: Timesharing Ownership

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Standard Exceptions


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State Supplements

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Underwriting Manual Subtopic

In General

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Timesharing ownership sometimes referred to as intevnal ownership is defined as the exclusive right of occupancy of a described parcel of real estate for a recurring period of time. Timesharing ownership is a vacation or resort concept. The exclusive right of occupancy may exist by virtue of an outright purchase of the fee simple title, a lease, or some other lesser interest, such as "right-to-use," and is sometimes called a "vacation license" or a "club membership."

Timesharing ownership is closely associated to the concept of the condominium regime and results in the mergence of a new property concept: the time-sharing estate vacation condominium. However, the timesharing ownership concept is equally applicable to other non-condominium properties.

Time-share projects may take several legal formats and affect the participants in different manners, with or without a condominium arrangement as an overlay. Fully research state law in regard to the legal creation and existence of any time-share estate.

For more information about timeshares, please click here to contact Stewart Vacation Ownership.

Underwriting Manual Subtopic

Time-Share Structures

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The Fee Simple Time-Share

In connection with a condominium regime, two approaches have developed in creating fee simple ownership of real property on a time-share basis. The Uniform Condominium Act as approved in 1977 at the National Conference of Commissioners on Uniform State Laws defined these two types of estates:

  • Interval estate: The combination of (i) an estate for years and a vested remainder in the unit. Title to a unit rotates among the time-share owners, vesting in each of them in turn for periods established by a fixed recorded schedule. The series recurrregularly until the term expires. After the term expires, each owner has a vested undivided fee simple interest in that unit. The magnitude of that interest is established by the declaration or by the deed creating the interval estate. [Section 4-103]

    Time-span: The combination of an undivided interest and exclusive right of occupancy. Title is to a present estate in fee simple in a unit. The magnitude of that interest is established by the declaration or by the deed conveying the time-span estate. Title is also coupled with the exclusive right to possess and occupy of that unit during regularly recurring periods designated by the deed or by a recorded document referred to in the deed. [Section 4-103]

    In both the interval estate and the time span estate, a purchaser is also a tenant in common with all other purchasers of the common areas of the complex.

    The time span estate makes all unit owners tenants in common in fee simple absolute, with each tenant in common having title to the undivided interest specified in his deed. The undivided right to possession and use of the whole property in its entirety is the one unity among tenants in common. To maintain the viability of time sharing ownership, the time span method require all co-tenant-purchasers to enter a separate agreement delineating each unit owner's specific period of occupancy. Each co-tenant also waives his right to seek partition. The time span estate is freely alienable, either inter vivos by deed or by testamentary transfer.

    The interval estate technique is conceptually more difficult than the time span method. Purchasers do not take title to each condominium unit as tenants in common. The purchaser receives two separate and distinct vested interests in the unit. First, the interval estate owner acquires a defeasible fee in the form of an estate for years for the time period in each year during which he is entitled to occupancy. This defeasible fee will continue to vest in the owner for a period of years equal to the expected useful life of the building as a resort complex. For example, an interval estate owner may purchase a defeasible fee for the first two weeks in July for the next forty years. The owner's fee, being defeasible, is subject to a shifting executory interest which passes the fee to the next owner when the next time period begins, the third week of July.

    The second interest acquired by the owner of an interval estate is a vested remainder as a tenant in common with other interval estate owners of the unit, upon the termination of the defeasible fee interest. This collective remainder interest was added to the defeasible fee arrangements in an attempt to eliminate any possible violation of the rule against perpetuities. At the remote date when the interval estate owners become tenants in common, they may repeat the cycle for another period of years. The interval estate differs from the time span estate in that the right of occupancy and title of ownership coincide; the interval owner is the sole owner of the unit during his period of occupancy. Also, the right of occupancy arises by reason of the ownership interest, and not by reason of some contract or lease as under the time span estate.

    The fee simple time share can be insured.

Leasehold Time-Share Interest

The leasehold time-share interest is created under a lease affecting a described parcel of real estate for a specific recurring period of time. The lessor retains the reversion in fee simple.

The leasehold time share can be insured.

Cooperative Time-Share Interest

The time-share cooperative concept involves a cooperative corporation which owns or leases the real estate. The time-share owner buys shares of stock in the corporation; the number of shares varies according to the size of the unit, the length of the annual use period, or some other yardstick. Individual use periods are set forth in the proprietary lease.

The coorperative time share cannot be insured.

Hybrid Time-Share Estate

In a hybrid time-share estate the owner has an interest in a specific unit of real estate but does not have the right to occupy that unit, or any other unit, for a designated recurring period of time. The owner, instead, must reserve his time and space each year from the association or management entity.

The hybrid time share cannot be insured.

Right-to-Use Time-Share Contracts

The right-to-use time-share contract is also referred to as a vacation license, vacation lease, or club membership.

In this type of arrangement, contractual rights, rather than conveyance of an interest in real property are involved. The most popular type of non-ownership time-share is the vacation license. This form of time-sharing is widely used for vacation resort properties. The license grants the buyer the right to use a particular unit for a specified number of years. The vacation lease resembles the vacation license, but allows the buyer to sublet or transfer his rights. The lease may also designate a particular unit that will be available to the participant. The club membership time-share involves the purchase of a membership which enables the buyer to stay at the project for a specified period of time each year. The club, in turn, owns or leases a building or resort property for the benefit of its members.

This type of timesharing arrangement cannot be insured.

Underwriting Manual Subtopic

Legal Descriptions Of Timesharing Interests

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Consider these points in connection with any legal description of a timesharing interest:

  • Use the proper legal descriptions when describing a condominium property, a leasehold estate, a cooperative apartment, or a non-condominium property.

  • The legal description contained in the deed or lease must designate the specific time-share period of occupancy.

  • The declaration must refer to the time-share periods of occupancy as "unit weeks."

  • In any time-span estate, the deed to each time-share buyer should convey an undivided ________ percent in fee simple of the parcel, together with the rights to the exclusive occupancy of the parcel for Unit Week No. ______ as defined in the declaration.

  • In any interval estate, the deed to each time-share buyer should convey an estate for years terminating ______ in Unit Week No. ________ as _________ percent of the parcel.

  • In any leasehold time-share estate, the lease to each time-share buyer should lease Unit Week No. ____ as defined in the declaration for a term ending ___________ in the parcel.

  • The unit week in the interval and leasehold conveyances should be further described as a separate estate from the other unit weeks in the same parcel, and it should be stated that each such estate is succeeded by the next in unending succession until the fixed termination date.

  • The legal descriptions to be used in the title policies should follow the description contained in the deeds or leases.

Underwriting Manual Subtopic

Federal And State Legislations Applicable To Timesharing Ownership

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Federal Securities Regulations

Securities regulations apply when the venture is structured as an "investment contract."

Federal Trade Commission

FTC rules apply when sales of land interests are in interstate commerce.

The Holder in Due Course Trade Regulations Rule

This rule has been applied to right-to-use time-sharing property. The rule has not yet been applied to fee time-sharing property.

The Cooling-Off Period for Door-to-Door Sales Regulations

Interstate Land Sales Act

The Act requires land developers to make full disclosure in connection with the sale or lease of certain undeveloped, subdivided land.

Federal Mail Fraud Statute


State legislation covering timesharing offerings and ownerships may be found in a number of areas including:

  • Time-share state statutes
  • Subdivision laws
  • Condominium laws
  • Consumer protection laws
  • Blue sky laws

Note: In varying degrees, state statutes have been patterned after two model time-sharing acts, the Model Real Estate Time-Share Act (MRETSA), developed by the National Conference of Commissioners on Uniform State Laws, and the RTC/NARELLO Model Act, drafted jointly by the Real Estate Timesharing Council of the American Land Development Association (RTC) and the National Association of Real Estate License Law Officials (NARELLO). Both model acts are designed to provide uniform timesharing legislation.

The Company's underwriting personnel must approve prior to issuing any policy on a time-share interest.