How do timeshare contracts work

Time-share vacation

During your vacation you will be approached on the beach promenade and asked to take part in a short opinion poll. As a reward, you can reach into the lottery pot and - fantastic - you have won. For example, one week of free accommodation in Spain or even in the Caribbean. A prize handover party has already been organized for you and the other winners. There it is hardly about the vacation gained. Instead, you will be told a lot about a new holiday idea: time sharing. The alleged advantages of time sharing are highly praised, the financial advantages are touted, photos are shown and - if you are still not convinced - you are offered a price reduction of 20 percent and more. Condition: You have to sign the submitted time-sharing contract immediately.

Time sharing - what is it actually?

Time sharing sells the right to live in a fully equipped apartment in a holiday complex or hotel for a certain period of the year during the holiday. This vacation usage right is contractually transferred for a period of at least more than one year up to 99 years or for an unlimited period of time. At the start of the contract, the holidaymaker pays a one-off amount that, depending on the duration of the contract and depending on the season, can amount to between EUR 2,500 and EUR 25,000, but can sometimes be higher.

Worldwide vacation by swap?

The idea of ​​spending your vacation in the same place over and over again for years is not particularly tempting. That is why there are companies, for example Interval International or RCI, that specialize in brokering exchange opportunities for vacation usage rights or brokering for the purpose of buying or selling. Not infrequently, dubious sellers take advantage of this and claim that you can easily swap your right of residence with all other apartments at any time and thus spend holidays in the Caribbean, in the USA, in Mexico or in other dream vacation spots.

However, this argument often turns out to be an empty promise. Anyone who has the right to use a vacation home in Spain will hardly be able to swap with a luxury apartment in Florida. Rather, the objects must be of comparable quality and size so that the exchange works without any problems. It is also decisive how popular the holiday complexes are and whether you have acquired a right of use in the early, low or high season.

The general rule: The exchange is not free of charge, but involves costs. First of all, membership in the exchange organizations is usually not free. Exchange fees are also charged for each holiday week exchanged.

Time sharing - financially beneficial?

In our opinion, time sharing involves considerable financial risks and disadvantages. It can therefore not be seen as a cheap alternative to package tours or other forms of vacation. On the one hand, in our opinion, the prices charged per week purchased are too high in many cases. Even if the seller goes down by a few thousand euros and speaks of a "one-time offer", time sharing is still very expensive. In addition - unlike other types of vacation, such as a package tour - you have to pay the right of residence for years in advance. This purchase price, if it were invested cheaply, would generate interest income which you will now lose.

It is also instructive to take a closer look at the price per square meter of an apartment in a time-sharing facility. The district court of Duisburg (judgment of October 6, 1994, Az. 8 O 129/93) calculated a square meter price of around 10,000 euros (19,576.88 DM) for a time-sharing bungalow apartment on Gran Canaria. Comparable condominiums in Gran Canaria cost between 750 euros and 1,000 euros per square meter. Due to this exorbitant disparity, among other things, the contract was declared immoral and therefore null and void.

On the other hand, time sharing is also an expensive vacation alternative in the long term. In addition to the purchase price of several thousand euros, you also have to pay for travel and meals every year. According to the time-sharing industry, time-share holidaymakers also spend around 20 percent more on restaurants, excursions and shopping than hotel guests and other tourists. Furthermore, your wallet will be burdened with additional costs of approx. 80 euros to 220 euros or more per holiday week, which are to be used for the maintenance, repair and management of the system. You also have to pay these amounts if you want to go on vacation somewhere else. The ancillary costs cannot be calculated in the long term, but tend to increase from year to year. Older systems also require expensive renovations over time. The maintenance reserves are often insufficient for this. So you will be asked to check out again, without you being able to actually influence the property management.

Time sharing - a cheap investment?

In our opinion, the popular claim that time-sharing is a good investment is simply untrue. A resale of vacation usage rights is either not possible at all for standard systems or is only possible with considerable financial losses. Also, the cost of maintaining a vacation home can be significant. The objects get older over time, but must have a certain standard in order to remain in the catalog of exchange organizations. And for this, considerable additional investments are often required, which the individual buyers of the vacation usage rights have to raise.

Time sharing - a sure thing?

In addition to the seller, time-sharing contracts include a number of companies, clubs and trustees whose tasks and relationships with one another are difficult to understand, even for lawyers. There are also various models for purchasing time sharing. Almost all of them are characterized by the very complicated structure of the contracts. However, one thing is clear: with all contract models, the buyer is not protected against bankruptcy and the associated financial losses.

Even if contract texts and advertising give the impression that you are the owner of an apartment on a pro-rata basis, you will not become the owner - with a few exceptions - as a rule.

Time sharing and travel rights

If you book a package tour, German travel contract law is at your side in the event of travel defects. In the event of travel deficiencies (e.g. transport, accommodation), you have the option of reducing the travel price or, if certain legal requirements are met, canceling the trip or claiming compensation. Furthermore, you are largely protected from financial losses against damage due to insolvency or insolvency of the tour operator through an insolvency insurance policy that is mandatory for the tour operator or a promise to pay from a bank - you will receive a security certificate for this.

As a time-sharing customer, you are in a much worse legal position. Travel contract law does not apply to time sharing. Rather, your options are determined by complicated contractual structures, statutes or the like. Their rights are far behind those of the package traveler. According to certain contracts, for example, it should be possible to withdraw the time-sharing right without replacement from customers who have not paid the administration fee for a period of two years. And often it takes great effort to find out who to turn to in the event of construction defects or other difficulties on site.

How do you get out of the contract?

The provisions on part-time housing rights contracts in the German Civil Code (Sections 481 to 487 BGB) are intended to protect against the pitfalls of time sharing. They apply to part-time right-of-residence contracts, long-term vacation product contracts, and brokerage and exchange system contracts. Long-term holiday products are discounts or other benefits for accommodation that consumers are to receive against payment of a total price, for example so-called memberships in holiday clubs. Rights of use to movable accommodation for overnight stays, such as mobile homes or houseboats, are also included.

Entrepreneurs must consider the following important points when selling time-sharing rights:

  • Information requirements
    The seller must inform the customer in detail before concluding the contract: about himself, the type and content of the law, the property, the community and utility facilities and the costs. Every interested party must therefore be given a form with the required information in their language. The information must become part of the contract. Of course, the contract must also be drawn up in the buyer's national language.
  • Right of withdrawal
  • Time-sharing contracts with a term of more than one year can be revoked within 14 days of the delivery of the contract document without giving reasons. When calculating the duration of the contract, all possible options for extending the contract must be taken into account. The withdrawal period generally begins with the conclusion of a contract or with the conclusion of a preliminary contract. If the consumer does not receive the copy of the contract until after the contract has been concluded, the withdrawal period does not begin until the contract copy has been received. The right of withdrawal expires after three months and 14 days at the latest if the seller does not or does not fully comply with his information obligations. The customer must be informed about the right of revocation of two weeks in a further form with prescribed information, for example the start of the period and the address of the recipient of the revocation letter and the prohibition of advance payments. Without such proper instruction, a revocation is possible up to one year and 14 days after receipt of the contract document. In the event of a cancellation, consumers may not incur any costs. Contracts financed by the seller and contracts financed, for example, by a bank with which the seller works, can also be revoked.
  • Down payment prohibition
  • Providers are expressly prohibited from requesting or accepting a deposit before 14 days after delivery of the contract document.

The consumer protection regulations for contracts for part-time housing rights and long-term vacation products, for brokerage and exchange systems in no way guarantee that one is protected from the machinations of dubious sellers, and they do not make time-sharing a cost-effective vacation alternative.

  • Don't be lured into time-share sales events with promises of profit. Show the pushers the cold shoulder!
  • Do not sign anything under time pressure and do not allow yourself to be influenced by supposedly high discounts.
  • If you want to sign a contract abroad, agree in writing that German law applies to part-time housing rights and a German place of jurisdiction.
  • Do not make any down payments if you do get across to a seller! Should this happen anyway, block your check or immediately have your bank or credit card company not to debit the amount.
  • If the advertising trap snaps shut and you have signed a time-sharing contract, declare the cancellation of the contract as soon as possible (by registered letter with acknowledgment of receipt). Please refer to the German law on part-time rights of residence contracts.
  • Contact a lawyer or your local consumer advice center immediately. We would be happy to advise you whether and how you can withdraw from the contract.