In an era where travel and leisure have become an integral part of our lives, timeshare agreements have gained popularity as a unique way to enjoy vacation destinations. However, with great opportunities come great responsibilities. Understanding the intricacies of timeshare agreements is essential to make the most of your investment and avoid potential pitfalls. In this article, we shall explore the ins and outs of timeshare agreements, as well as the applicable law in Cyprus Jurisdiction.
What is a timeshare agreement?
Timeshare agreements are legal arrangements involving vacation real estate property, such as a condominium, resort, apartment and/or campground which allow multiple individuals known as timeshare owners to jointly own the property. The idea behind timeshares is to provide a cost-effective way for people to enjoy high-end vacations without the burden of full ownership.
In essence, it is a legally binding contract between an individual who wishes to purchase the exclusive right of usage and/or occupation of a vacation property, for a week or a number of weeks, and the owner of the said vacation property who is known as the timeshare developer or resort owner. It is worth noting that for an agreement to be considered a timeshare agreement needs to be valid for more than 1 (one) calendar year.
Types of Timeshare Agreement: Fixed or Floating
A. Fixed Timeshare Agreement:
Most timeshare owners favour this type of timeshare agreement which is designed for those seeking to contractually possess the right to use or occupy their chosen vacation property for a specific days or weeks annually. In other words, the timeshare owner is only entitled to utilise the chosen property on the specified dates of the month explicitly outlined in the agreement each year until the expiration of their fixed timeshare agreement.
B. Floating Timeshare Agreement:
The second type, also known as the floating timeshare agreement, grants the timeshare owner contractual ownership of the right to use or occupy at the vacation property for a certain number of days or weeks throughout the year. However, in a floating timeshare agreement, the specific dates of the month purchased by the timeshare owner are not explicitly mentioned. Instead, the timeshare owner generally acquires the privilege of using the property for a specific number of days or weeks, with the flexibility to select the period he wishes to use the property. Nevertheless, it is important to note that his request will be “subject to availability” of the property.
Exchange system
Both types of timeshare agreements may grant the right to timeshare owners, either concurrently with the execution of the timeshare agreement or at any later date, to participate in an exchange system. Under this system, every timeshare owner has the option of requesting to the timeshare developer or resort owner to exchange either their designated dates or vacation property with those of another timeshare owner who is also a member of the exchange system. It should be noted though, that the exchange system usually operates on a “points” system, where in essence, each timeshare owner is allocated a certain number of points upon entering into a timeshare agreement. The points allocated to each timeshare owner are determined by factors such as the resort location, the size of the vacation property, and the designated dates of usage etc. A timeshare owner with a certain amount of points can only “exchange” rights with another timeshare owner who possesses an equivalent number of points as them.
The timeshare developer or resort owner has the option to utilise the “points” system to facilitate timeshare exchanges within their resort (internal exchange) or with any other resorts they collaborate with in other areas (external exchange).
Applicable EU Directive and Cyprus Law regarding timeshares
The timeshare agreements are regulated by the European Union by virtue of the Directive 2008/122/EC of the European Parliament and of the Council issued on 14 January 2009 in relation to the protection of consumers in respect of certain aspects of timeshare, long-term holiday product, resale and exchange contracts.
In Cyprus, the Law of N.34(I)/2011 on Timeshare, Long Term Holiday Product, Resale and Exchange Contracts (the “Law”) which implements the Directive 2008/122/EC is applicable.
It is important to note that Article 8 of the Law highlights that prior to the execution of the timeshare agreement, the timeshare developer/seller shall explicitly draw the attention of the timeshare owner to:
- the right of withdrawal, and the length of the withdrawal period, and
- the ban on advance payments during the withdrawal period.
Such rights of the timeshare owner shall be included as appendices to the timeshare agreement but shall be signed separately from the agreement by the timeshare owner.
Benefits of timeshare contracts
A timeshare vacation property provides certainty, comfort and predictability regarding the services and benefits received. Most timeshare resorts are professionally managed and include many facilities which are regularly maintained, making them a far more comfortable stay than a hotel room. With that being said, timeshare agreements are beneficial for people who enjoy revisiting the same destination for a period of time, as they avoid the hassle of booking different accommodations or destinations each year.
Further, a timeshare owner can rent its vacation property for his designated period of time through well-established websites which offer a variety of timeshare properties available for rent. Apart from renting a property, timeshare owners have the option to sell their ownership rights derived from the timeshare agreement if they wish to do so.
Some of the rights for timeshare owners deriving from the Law include the right to withdraw from a timeshare agreement without being obliged to provide any reason for their withdrawal, considering that such withdrawal occurs within the Law determined “Grace Period” of fourteen calendar days from the date of entering in the agreement, or from the date that the timeshare owner receives the executed agreement, whichever is applicable. Furthermore, timeshare owners by virtue of Article 13 of the Law do not have to make any payments, either as a deposit, as a security or as an acknowledgment of debt, nor can the timeshare developer request any amount from the timeshare owners for the property during the Grace Period. This provision allows flexibility for the timeshare owners in case of change of heart.
Drawbacks of timeshares
Timeshare agreements undoubtedly lack flexibility. Timeshare owners, especially under a fixed timeshare type of agreement, are contractually obliged to use the property only on the designated dates as stipulated in their agreement, and they lack the ability to choose their preferred dates each year.
Although under the floating timeshare type of agreement the timeshare owners do not have designated dates, they still have designated number of days or weeks by virtue of their agreement. Therefore, the lack of flexibility here does not lie in the ability to change the designated dates, but rather with the likeliness of whether the property is available during the timeshare owner’s preferred dates to use the property. As a result, the timeshare owners’ ability to utilise their purchased number of days during their preferred period is subject to the property’s availability each time.
In addition, due to the nature of these agreements, reselling the rights deriving from the timeshare agreements can be challenging, as any prospective purchasers shall also wish and desire to purchase the designated dates or designated number of days or weeks that have already been purchased by the timeshare owner who sells. Another important consideration is that timeshare owners are obligated to pay maintenance fees for the upkeep of the property on a monthly and/or yearly basis, depending on the timeshare resort, and such financial obligation persists until the expiration of their agreement. In other words, timeshare owners cannot simply walk away from their responsibilities deriving from their agreement, even if they encounter financial difficulties.
Is it the right option for you?
As with any agreement, a timeshare agreement has its benefits and its drawbacks.
Each individual should assess whether for their current personal situation, the benefits of entering into a timeshare agreement outweigh the disadvantages. For example, one shall take into consideration whether they prefer a predicted and organised vacation at a resort with access to numerous amenities, for the specific time period they desire for the whole validity of their timeshare agreement, or whether they prefer to explore a different destination each year.
Without a doubt, timeshare agreements can be a fantastic way to enjoy quality vacations, but it’s crucial to approach them with a clear understanding of the terms and conditions.
by: Stefani Michael