Chapter 20 TIME SHARES

JurisdictionNorth Carolina

20 TIME SHARES

§ 20.01. In General

Boiled down, a time share is a right to occupy a piece of property (usually a condominium) for a specific period of time. Sometimes time shares are referred to as "vacation ownership" because the interest is owned by people who use them for recreational purposes. Although seemingly simple, the concept has raised a number of complicated legal issues in the United States because the idea does not necessarily fit neatly into traditional real property ownership schemes. Time shares started in the 1960s in Europe and made their way to the United States in the late 1960s and early 1970s. Time shares are popular primarily in resort areas. Time shares started to meaningfully proliferate in the 1980s in the United States. As time shares became more commonplace, a number of organizations started to develop model uniform laws designed to be used in states to regulate them. Today, there are a number of model statutes, including the Model Time Sharing Ownership Act, the Model Time Share Sales Act and the Uniform Real Estate Time Share Act, adopted by the NCCUSL.

Because of a number of consumer protection concerns, the legislature in North Carolina eventually passed a statute governing the sales of time shares.1 In 1983, North Carolina adopted the North Carolina Time Share Act, N.C.G.S. § 93A-39 ("the Time Share Act"), in order to provide a legal framework for time shares. The Time Share Act gave the North Carolina Real Estate Commission ("the Commission") the power to adopt rules and regulations and to prescribe forms and procedures for submitting information to the Commission required under the Time Share Act.2 The Commission has taken full advantage of its rule making powers and adopted a number of rules relating to the registration of time shares, the duties of brokers and the record keeping requirements of time share developers.3 Today, time share statutes and regulations in North Carolina and elsewhere are an important part of protecting consumers from sometimes unscrupulous developers. A cornerstone of most consumer protection statues, including North Carolina's Time Share Act, is the requirement that sellers and developers of time shares be licensed by the Commission. Statutes requiring all sellers of time share units to be licensed and regulated by a real estate commission have been found constitutional when challenged.4

In addition to the Time Share Act, condominium time shares created after 1986 are subject to the Condominium Act.5 For time shares created before 1986, the Unit Ownership Act may apply.6 Since most time shares are in condominiums, time shares in North Carolina are even more regulated and controlled than are planned communities and ordinary condominiums.7 There is good reason for this, since the ownership interest one acquires in a time share is far more amorphous than an interest in a lot in a planned community or even a condominium in a garden-variety condominium project. Since what one acquires in a time share is not obviously a "brick and mortar" interest in land, there is more room for confused investors and an attendant need for more regulation. While time shares are still very much a viable real estate interest, they have waned in popularity in the past two decades in the State of North Carolina. Those that do exist in North Carolina operate much like hotels in resort areas.8

§ 20.02. Applicability of Time Share Act

The applicability of the Time Share Act depends on whether the interest in question meets the definition of a "time share" under the Time Share Act. Likewise, jurisdiction of the Commission over someone selling time shares depends on whether the person is a salesperson or developer under the Time Share Act.9 The Time Share Act prohibits any person from engaging in the business of a time share salesperson without first obtaining a real estate broker license.10 Further, the Time Share Act makes it unlawful for a time share developer to sell or offer to sell a time share located in North Carolina without first obtaining a certificate of registration for the time share project.11 Thus, a developer or person selling on behalf of a developer who sells a time share in North Carolina is subject to the jurisdiction of the Commission and must comply with both the Time Share Act and rules promulgated by the Commission.

Most fundamental to determining whether the Time Share Act applies or the Commission has jurisdiction over the subject matter is whether the interest being sold is, in fact, a "time share." North Carolina has a broad definition of a time share that encompasses both forms of ownership.12 As for the deeded form of ownership, a "time share" is defined under the Time Share Act as "a right to occupy a unit or any of several units during five or more separated time periods over a period of at least five years, including renewal options, whether or not coupled with a freehold estate or an estate for years in a time share project or a specified portion of a time share project."13 Therefore, a right to occupy a specific condominium unit or a right to occupy a unit in a number of different locations owned by a resort company for a week for five years would constitute a time share under the Time Share Act. Conversely, a right to occupy a condominium for less than five time periods, or even a right to occupy for five or more time periods but for less than a five-year period, may not be a "time share" under the Time Share Act. Neither the rules nor the statute defines what a "time period" is. There are no cases in North Carolina that define what a "time period" is either, but it has commonly been understood to mean one 24-hour day.

With respect to "non-ownership" forms of time shares, a "time share" under the Time Share Act would also include a vacation license, prepaid hotel reservation, club membership, limited partnership, vacation bond, or a plan or system where the right to use a time share unit or units for periods of time is awarded or apportioned on the basis of points, vouchers, split, divided, or floating use, even if on a competitive basis with other purchasers.14 This considerably broadens the scope of the Time Share Act and applies it to a number of different arrangements whereby the "owner" would not necessarily have a "deed" for a specific time period for a specific building or set of buildings. Moreover, it lessens the importance of how long the "owner" has a right to use or occupy a space since this part of the definition does not limit the interest to a specific time period or number of years.

§ 20.03. Types of Ownership and Incidents of Ownership

The "ownership" form of time share is exchanged much like a deed to a condominium unit. In an ownership form of time share, the owner receives a possessory ownership interest in the land and improvements.15 Although the "non-ownership" form of a time share may not be handled the same way as a more traditional ownership form, it is still considered a "time share" and is still deemed interest in real estate.16 "Non-ownership" forms of time shares in North Carolina include vacation licenses, prepaid hotel reservations, club memberships, limited partnerships and vacation bonds.17 Some of these types of time shares have been characterized as follows:18

Vacation License. The owner or developer of the property gives the purchaser the right to use a given unit during a fixed annual time period for a certain number of years.19 The time share license was originally established to circumvent estate real estate and broker licensing laws; however, since the Time Share Act includes licenses as interests in real property and a "time share," this would not work in North Carolina.20

Club Membership. This is similar to the vacation lease, except that the ownership of the property is owned by a nonprofit corporation that leases or licenses the units either as an entire unit or as a single time share from the developer and holds them for the use of members of the club.

Limited Partnership. In this form, the developer forms a limited partnership of people wanting an interest in the property prior to its construction or conversion. The developer forms a corporation that acts as the general partner for the limited partnership and is in charge of all construction and management of the limited partnership, as well as the sale of interests in the partnership.

In any form of time share, a time share developer has to record or cause to be recorded a time share instrument conveying an interest in a time share (a) not less than six days nor more than 45 days following the execution of the contract of sale by the purchaser, or (b) not later than 180 days following the execution of the contract of sale by the purchaser.21 Both types of ownership contemplate the occupancy of a "unit," presumably a condominium unit; however, units in the context of the Time Share Act can also include non-condominium type settings as well. The non-ownership form specifically uses the phrase "time share unit or unit."22 A "time share unit" and "unit" both mean "the real property or real property improvement in a project which is divided into time shares and designated for separate occupancy and use."23 The language appears to specifically contemplate a condominium unit; however, in other states where the statute is less than clear, some courts have concluded that things such as campsites can even be considered within the jurisdiction of a state's respective time share statute.24 The Commission has approved of time shares in North Carolina that were not in traditional condominium settings.25

Under the Time Share Act, a time share that in whole or in part burdens or pertains to real property is deemed to be an interest in real estate.26 The Time Share Act does this by, in part, incorporating the Connor Act to time shares, thus allowing conveyances to be recorded like any other interest in real estate.27 In this regard, the Time Share Act is...

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