Thursday, December 22, 2005


The Versatile Timeshare

As a way to give consumers what they want, nothing beats a timeshare. Not only can the consumer buy a right to first-class residential accommodations, but also just about anything else he or she might want in a second home. Timeshare ownership provides the possibility of combining a great place to sleep away from home with interesting activities in a single product.

For example, it is possible to combine a residential timeshare with, among other things, golf course rights, adventure travel rights, yacht rights or spa rights.

One of the best means of creating such variety is to sell a membership product that includes both timeshare accommodations and activities. For example, suppose a developer desires to build a lodge adjacent to high-country acreage which can be used as a cross-country ski trail system in the winter, a dude ranch in the summer, and a fly fishing stream system during the spring, summer and fall.

The developer could license use of the lodge rooms and the acreage for a daily fee, or could sell a long-term right or perpetual right to use these facilities. Obviously, the sale of a long-term or perpetual right will yield significantly more present cash, which is often desirable.

Let’s assume that a developer elects to sell a 30-year right to use the lodge rooms and the adjoining acreage on a timeshare basis. The developer has several options. One way would be to place the property’s land into a 30-year trust with a non-profit corporation and the developer appointed as beneficiaries. This way, the beneficial interest of the developer would entitle that company to the return of the property’s title upon expiration of the trust. Further, the non-profit corporation, as a beneficiary of the trust, would hold the right to use and manage the lodge and acreage for the 30-year term of the trust.

The trust would serve as a method to protect the lodge’s title and acreage for the benefit of both developer and the non-profit corporation. The product the developer sells would be a membership in the non-profit corporation. The bylaws of this corporation would set forth the ways and means of sharing the use of the lodge and acreage during the 30-year term of the trust.

Alternatively, the developer might decide to sell a perpetual interest in the lodge and acreage. This could be structured in at least two ways. One way would be to deed an undivided interest in the lodge to the consumer, and to convey the adjoining acreage to the non-profit corporation. The consumer would receive a right to use the lodge on a timesharing basis as the holder of a deeded interest in the lodge, and would hold a right to use the acreage as a member of the non-profit corporation that holds title to the acreage.

Another way to structure a perpetual interest in the lodge and acreage would be to convey both the lodge and the acreage to the non-profit corporation. Under this method, the consumer would have a perpetual right to use both the lodge and the acreage by virtue of his membership in the non-profit corporation.

Regardless of the term of the use-right sold to the consumer, the timeshare plan for using the lodge might be a so-called “fractional” program, under which the consumer might receive a right to use a lodge unit for several weeks in each of the four seasons of the year. Use of the adjoining acreage could be limited to periods when the consumer is using the lodge, or alternatively, at any time on a “day-use” right basis.

With the foregoing methods of timeshare ownership, the consumer could wake up in his lodge room, use the trout streams whenever the mood strikes, try his hand at cross-country skiing when there is snow, and take a sunset trail ride with a wrangler. It is the combination of his timeshare lodging rights and activities which makes the concept of use-rights so appealing, as well as profitable for the developer with sufficient imagination and creative instincts to make it happen.

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