Timeshare

What is timeshare?

Also known as "holiday ownership", a timeshare unit is part of a property, usually in a prime holiday location, which is owned by many people, each of whom has the right to use it for a short period (usually 1 or 2 weeks) each year.

With some timeshares, you buy the right to use the unit at the same time each year. Others have a "floating" arrangement, in which you can change your booking from one year to the next. Some resorts sell you the right to use the property for a set number of years; others grant you use in perpetuity.

We've received some glowing reports about timeshare from our members. Among the benefits they outlined:

• "5-star quality" accommodation
• resorts in prime locations
• fewer hassles organising holidays
• access to extra recreational facilities.

And the biggest advantage of all is that you can swap your booking for one in another resort, either in New Zealand or overseas.

To do this, you need to join an exchange company such as Interval International or RCI. It's easily done through your own timeshare company. Swaps are subject to availability, but with thousands of timeshare resorts around the world, you won't be short of options.

Things to consider

Timeshare is not cheap. The initial cost can be tens of thousands of dollars, although buying secondhand is a lot cheaper. Yearly maintenance fees usually amount to several hundred dollars. And there are also the travel costs to consider if you do a swap.

How does it compare with your normal holiday? Let's assume you buy a week's holiday in a timeshare for $10,000, and that the yearly fees amount to an additional $400. If the lease lasts for 50 years (although some last in perpetuity), you're effectively paying $200 per year in advance ($10,000 divided by 50 years) plus the $400 in ongoing fees for your week's holiday. If you'd kept that $10,000 in the bank and earned, say, 5 percent interest on it, you'd have $500 in hand to spend each year.

In this case, therefore, the total yearly cost would be $1100 for your week's holiday each year. That works out at $157 a night.

Money, of course, may not be the only consideration. One member told us the cost is worth it for the convenience of knowing they've got a holiday already booked every year. Another said it "beats having a bach that requires maintenance and worry".

But there can be a problem onselling your timeshare. We've heard from several members who've tried to do this, both privately through newspaper ads and with the help of the professionals. They say it's hard to find buyers and hard to get a decent price.

There are two lessons here. First, timeshare should not be treated as an investment. Second, if you want to buy timeshare, look out for a good second-hand deal. It's a buyer's market.

Our advice

• Do your research. Before you buy, ask for comprehensive details about the property, the financial implications, and the company selling it. If possible, speak to people who own timeshare at the resort.

• Check that the developer belongs to the New Zealand Holiday Ownership Council. Members are supposed to comply with codes of ethics and practice and the council says it will investigate complaints brought by customers.

• Don't be rushed. If you are thinking about buying a timeshare, take time over your decision. Take the paperwork away to consider for a few days.

• Seek legal advice. Get your lawyer to check the sale agreement before you sign.

• Ignore the prizes. Buy if you like the property, the price and the opportunities it offers. Don't be swayed by free or discount enticements.

• Know your rights. If you buy new, the developer must issue a registered prospectus and give you a plain English "investment statement" before you buy, which includes information about the promoter's costs and charges. Sellers of second-hand timeshares don't have to do this.

  If you buy from a member of the New Zealand Holiday Ownership Council, its code of practice means you should get a 5-day cooling-off period during which you can ask for your deposit back in full, whether the timeshare is new or second-hand.