Timeshare schemes are a form of ownership or right to use a particular property or properties for holidays.
It’s important to understand how they work before you sign up. They are a long-term commitment and can be hard to sell.
How timeshares work
There are two types of timeshare schemes.
- Specific time-period schemes – you can use a specific property for a given time, such as one week a year.
- Points-based schemes – you buy points to redeem at different resorts or holiday accommodation properties, or for other travel services.
Timeshares vary in price depending on the:
- time or points purchased
- standard of accommodation
Timeshare use can cost more in peak periods, such as school holidays or around public holidays. You may be able to rent your timeshare property out if you don't plan to use it. You can also 'swap' or 'bank' your timeshares through a timeshare website.
Timeshares are a financial product
Timeshare schemes are a type of managed fund. This means that the scheme operator must:
- hold an Australian financial services (AFS) licence
- register the scheme with ASIC
- give you a product disclosure statement (PDS)
Before you buy into a timeshare, check the company has an AFS licence on ASIC Connect's Professional Registers. If they don't have one, don't deal with them.
What to watch out for with timeshares
Before you sign up to a timeshare membership, fully understand what you're getting.
Timeshare memberships are usually bought following a 2-3 hour sales seminar. They may offer a 'gift' to attend the seminar, and describe timeshares as 'free or cheap holidays'. After the pitch, high pressure sales techniques will be used to try and get you to sign up before you leave.
You don't have to sign up to a timeshare on the day. Take time to consider the costs, and weigh up if you will use the holiday property enough to justify what you pay.
If you buy a timeshare, you have the right to a 7 day cooling-off period. It's 14 days if the operator is not a member of the Australian Timeshare and Holiday Ownership Council (ATHOC). If you change your mind, tell them in writing before the end of the period.
Costs of timeshare schemes
The upfront cost to buy a timeshare can be high, in some cases over $20,000.
On top of this, you pay an annual maintenance fee for the property, even if you don't use it. You may also have to pay a membership fee each year.
The PDS outlines all the costs. Add these up for the whole contract term to find the total cost. Then compare these costs against other holiday options.
Borrowing money to buy a timeshare
Banks don't generally lend money to buy into timeshare schemes. Scheme operators may offer credit to help you buy a timeshare, but interest rates can be high.
Be sure to read and understand all the terms of the credit contract. Before you sign a credit contract check the:
- interest rate
- cost of repayments and
- cooling-off period
Check they're licensed to provide credit by searching ASIC Connect's Professional Registers.
Timeshares are long-term commitments and the contract can be over 60 years long.
They are often sold as investments you can pass on to your family. But consider if your family would want or could afford the ongoing costs of a timeshare.
Timeshare expectations may not be met
A 2019 ASIC report on timeshares showed many consumers felt that they were not getting the expected value from their membership. Consumers had experienced financial stress because of unexpected changes to timeshare membership fees, or in some cases, to their personal circumstances.
Getting out of a timeshare
The main way to get out of a timeshare is to sell it. To do this you'll have to make sure all fees are paid. However, timeshares can be very hard to sell. Most people make a loss when they sell them.
When you buy a timeshare you sign a contract to pay the costs. So you can't just stop paying for it. If you do, you may be in breach of contract and could face legal action.
If you are in financial hardship, ask your provider to let you out of the scheme. Each provider will assess the owner's situation and will require evidence of hardship. They are under no obligation to release you from the contract.
Problems with timeshares
Timeshare operators must be members of an external dispute resolution scheme.
If you have a dispute that involves a timeshare operator, contact the Australian Financial Complaints Authority (AFCA) to make a complaint and get free, independent dispute resolution.