What makes the right to occupy a property for a period of time a time share?
QUESTION: I am a broker in a resort market. I have been working with a couple who really want a vacation home here but can’t quite afford to buy a place on their own. They have come up with the idea of getting an option on a place they have their eyes on, and then offering undivided interests in the property to three others. Each of the four owners (including my clients) would have the right to occupy the property for a period of 13 weeks each year under the terms of an agreement that would be prepared by an attorney. They would like me to list the property if we can get the place they are interested in under option.
I talked this idea over with my BIC. She thinks it might qualify as a time share. I thought that a time share was where you have the right to occupy the property for a period of time but you don’t have an ownership interest in the property itself, and my clients’ idea would involve all four owners having a deeded interest in the property. What do you think?
ANSWER: We think your BIC is probably right. Under the North Carolina Time Share Act, a “time share” may or may not include an interest in the property itself. The reason your clients’ idea is likely covered under the Time Share Act is because it involves marketing and selling interests in the property to the public. Contrast their idea with an arrangement where your clients and three other couples together decide to buy that same vacation property your clients have their eyes on. The purchase would be for their own use and enjoyment under the terms of an agreement that would, among other things, permit each owner to occupy the property for a period of 13 weeks each year. That arrangement is very similar to your clients’ idea and actually fits the definition of a “time share” in the Act, but it would not require registration as a time share, nor would the owners be considered time share developers, because they would not be marketing and selling their interests in the property to others.
Any person who offers to sell a time share in North Carolina that requires registration must have a real estate broker’s license. Although no special license for time share agents is required, it is important for an agent who handles a time share to be familiar with the laws governing time shares. Among other things, (i) time share projects must be registered with the Real Estate Commission; (ii) time share developers must provide prospective purchasers, before contract, a public offering statement containing specified information about the project, and are subject to a fine of up to $3,000 if they fail to do so; and (iii) a time share purchaser may cancel a purchase within five days of signing a contract.
We think you should advise your clients to seek legal advice from an experienced real estate attorney to discuss their idea and guide them on the best way to structure it. If they proceed with their idea, you may have a role in helping them market the project, but if neither you nor anybody in your firm has experience with selling time shares, serious consideration should be given to referring them to a firm that has such experience.
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