Purchases of vacation property are often made while people are in a wistful state of mind, as they dream about future family gatherings and where they would like to spend their retirements. As circumstances change, they find that they need to dispose of vacation properties, which is difficult for several reasons:
- The property is distant
- FSBO just doesn’t work
- Lenders aren’t interested
- Realtors are interested only in lakefront and lakeview single-family homes
- The owner doesn’t understand the nature of what is owned
Vacation property terminology
UDI, or undivided interest property, usually pertains to campground resorts or occasionally non-condominium timeshare property, with maintenance fees.
interval, means timeshare, in which occupancy rights entitle the owner to stay in a specified class of lodging (3BR, 2BR) during a season (peak or off-peak, designated by a color such as red or yellow) for a use period (week, split week, alternate year). Intervals may be deeded interests in real estate or a right-to-use, which is denominated in points. Intervals are sometimes structured as condominiums and increasingly as vacation clubs, with no deeded interest conveyed by the developer. Maintenance fees are assessed by owners’ associations, which are usually operated by a subsidiary of the developer, as a profit center.
exchange rights allow an owner to stay at a resort other than the resort described in the owner’s deed or membership. Interval resorts are associated with Interval International or RCI, which allow occupancy rights to be used at other resorts in the exchange network. Annual exchange club memberships fees must be paid.
a fractional is simply an interval ownership product with occupancy rights that are typically 4 to 13 weeks.
whole-ownership condominium units are units in which the owner has exclusive ownership of a unit (which may be a lot, a dock slip, an apartment, or a house) and a tenancy-in-common interest in common elements, such as roads and recreation facilities. Maintenance fees are assessed by the owners’ association. In Missouri, condominiums are subject to the Missouri Uniform Condominium Act. Many types of timeshares and vacation clubs are not condominiums and are regulated in Missouri only as to marketing.
Conveying a vacation property
A selling point of vacation properties is that they can be freely conveyed, to a living trust, to a child, to devisees, or to anybody who wants them. The reality is that except for UDIs and whole-ownership condominium units, the conveyance is subject to an application process with the resort management company, requiring payment of a fee.
A buyer of an interval on the resale market takes the chance that the interval may be burdened by unpaid maintenance fees, mandatory exchange club fees, and complex restrictions about making reservations.
If a client seeks legal advice about conveying an interval, the lawyer should check first with the resort management company. If the interval is deeded, a deed can be prepared and recorded easily enough (except for the crazy legal description). If it is not a deeded interest, you will have to work with the resort management’s procedures.
Resorts are plagued by owners simply no longer paying maintenance fees. In addition, timeshare resellers advertise that they will accept an interval as a trade-in or will list it for resale for a fee. The timeshare resellers are simply trying to sell the owner another vacation product at another resort, giving “trade-in” value for the buyer’s existing interval. Some companies posing as timeshare resale companies are actually using the timeshare resale spiel to find people to buy travel club memberships. The reseller simply takes the money and may not complete the transfer process with the resort, so the owner is still on the hook for the maintenance fees, despite the quitclaim deed to the resale company.
Resolving consumer issues
A 5-day cancellation period for timeshare and campground purchases, and some other remedies for fraudulent sales techniques, are provided by Chapter 407 of the Missouri Revised Statutes. Missouri also requires companies selling travel club memberships to post a substantial bond with the Missouri Attorney General.
Most states have consumer protection statutes and regulations regarding vacation properties sold in those states and marketed in other states.
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You have well explained the concept of vacation property terminology. Thanks for sharing and keep up the good work.