To provide direction and information on the valuation of timeshare properties.
Section 19(1) of the Assessment Act provides the authority for the valuation of timeshare properties at their current value.
Ontario Regulation 282/98 Section 3(1) 1.vi. includes timeshare properties in the residential property class.
A timeshare is a form of property ownership in which individuals purchase limited ownership interests in, or rights to use and occupy accommodation at a resort, condominium, apartment or other facility for specific time periods. Most timeshares are resort or vacation properties.
There are two types of timeshare agreements:
- Deeded agreements which allow the purchaser/owner the right to use the timeshare unit in perpetuity; or
- Right-to-Use agreements where the ownership remains with the developer and the purchaser is given the right-to-use the specific resort accommodation for a certain number of years.
In setting up a timeshare, a developer divides occupancy of each of the units into time-based intervals. The developer may sell the intervals so that each purchaser of an interval receives the right-to-use a specific unit for a specific time period. Normally the intervals are one week in duration, however some timeshare developments use other interval fractions such as one quarter (10-12 weeks), or one tenth (5 weeks).
There are several options for timeshare usage including:
- fixed week, the unit is used for a specific week of the year;
- floating week, the unit can be reserved for any week during a certain season;
- fractional ownership, the ownership is sold in multiple week packages;
- vacation clubs, the members purchase points that give them the opportunity to use a variety of timeshare options at various resort locations; and
- points system, the participants purchase points, which they use as currency to acquire accommodation.
In addition to the purchase price, the purchaser of a deeded or right-to-use interval pays an annual fee for property upkeep and management. If the resort is affiliated with an exchange organization, the purchaser may become a member for the purpose of trading their week with other members throughout the world.
The Valuation Process
The sales comparison approach to value is the primary method of valuation used in establishing current value assessment for timeshare properties. This approach estimates the value of a timeshare project based on the sales of the timeshare interests.
In order of preference, the following sales sources are used:
- resales, within the timeshare development;
- developer sales, within the timeshare development;
- sales from a comparable timeshare development; or
- sales from a comparable condominium development.
In order to compile a sales inventory for each development, MPAC sends a sales and data collection questionnaire to each developer requesting specific details about the timeshare project, (i.e., description of the unit, size, amenities, accommodation limit, on-site facilities) and pertinent sales information to determine the validity of each sales transaction i.e. arms-length sale.
MPAC staff review the completed sales questionnaires and based on the following criteria, adjust the selling price.
- Developer sales include the extensive sales and marketing program that must be discounted.
- Both developer sales and resales include an amount for chattels. The units are normally sold as fully furnished. The standard deduction for chattels is 10% of the discounted sale price.
MPAC utilizes these adjusted sales prices as benchmarks to arrive at an estimated value for all of the unsold units within the timeshare complex. Where necessary, further adjustments are made to allow for differences between the sold and unsold units, i.e. unit size, accommodation limit, number of bathrooms, view, location within the complex.
In developments where insufficient sales information exists, sales from a comparable condominium complex or a comparable timeshare project can be used to develop current value. Further adjustments may be necessary to reflect differences in amenities, location and any other factors specific to the valuation of the complex.
Note: This procedure has been developed to provide the public with a general understanding of the valuation process for timeshare properties. The applicable law prevails to the extent there is any conflict between the procedure and the relevant law.