Deeded or Right to Use Timeshares
Deeded and right to use timeshares contracts are very different, and it is important to choose the right one. Deeded contracts generally mean that a timeshare is divided into weekly increments. Each increment is typically sold off as a fractional ownership. This means that these timeshares are real property. Since under this type of contract, the timeshare is your property, you can leave it in your will, rent your week, or give your week away. Since this type of ownership is real property ownership, you can enjoy real peace of mind and security, knowing that your week will always be available. In many cases, these types of timeshares can be treated like any other asset or property. This can affect your equity as well as your taxes. Like any property purchase, a timeshare under this sort of contract will be privy to local property laws, so it is imperative that you research these before you buy anything.
With deeded contracts, leasehold deeds are quite common in timeshare purchases. These deeds allow ownership for a specific period of time. After this time, the ownership reverts to the Freeholder. Sometimes, leasehold deeds are offered in perpetuity. These generally do not convey ownership of the land. Instead, they convey ownership of the ‘unit.’
Right to use contracts are very different from deeded timeshare contracts. When you sign a right to use contract, you are effectively agreeing that you have the right to use your part of the property in the ways stated in the contract. However, at some point when the contract ends all the rights will revert to the owner of the property. In this type of contract, you do not effectively gain an asset and do not become an owner – you just agree that you have the right to use the property for the stated number of years. In countries, such as Mexico, where property ownership among foreigners is restricted, right to use contracts are very common. These contracts are also very common among larger resorts such as Disney Vacation Club. If you are considering a right to use contract, check to see how your use will work. If your use is on a ‘club membership’ or reservation system, be aware that you might not always get the locations or times you want. Also, check to see what happens to your timeshare if the controlling company sells the property. Your right to use may be lost if the controlling company and the property owners are not the same entity.
No one can tell you which type of timeshare contract is right for you. If you are seeking a vacation spot in another country, you may only have the option of right to use. If you have a choice, know that deeded contracts offer you more security and control but may cost you more in taxes. Right to use contracts offer you much flexibility – especially if you opt for a contract with a large resort company – but you may have less control over where and when you travel. Always read your contracts carefully and work with your attorney to ensure that you are getting your money’s worth.
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