Why Timeshares Shouldn’t Be Taxed Like Condominiums

As we’ve mentioned time and again on our blog, a timeshare interest bought in a “points-based” or “right to use” model does not actually convey tangible real estate ownership to the owner. As a result, the vast majority of these points-based timeshare interests – even with the presence of a paper deed – do not convey any of the attendant investment benefits of real estate ownership, like inherited or resale value.

For these reasons and more, American Property Tax Counsel member Pamela B. Hunsaker recently wrote that timeshares should not be assessed or taxed like tangible real estate. More specifically, Ms. Hunsaker argues that timeshare developments “shouldn’t be taxed like condominiums” in this interesting post for National Real Estate Investor online.

Though timeshares and condos are often perceived to be similar – if not identical – in the eyes of tax assessors, Ms. Hunsaker argues that “looks can be deceiving,” and that there are “fundamental differences between timeshares and condominiums” which “can lead to significantly divergent value calculations.”

As an example, Ms. Hunsaker points to one “timeshare project” in her home base of Utah. Here’s what she had to say (emphasis added):

“In 2015, an assessor increased the assessment for a timeshare project at a Utah ski resort by 10 percent from the previous year. The property owner appealed the assessment and provided evidence of the project’s fair market value. The assessor challenged that evidence, however, based in part on an increase in sale prices for condominiums during previous years.

Under Utah law, the value of a wholly-owned condominium does not provide a meaningful comparison to the value of a timeshare project for several reasons. First, such a comparison assumes that units within a timeshare project could be resold as wholly-owned condominiums. This is impossible, given the legal structure of timeshare properties. Once a timeshare project is put into place, it cannot be altered. Unlike condominiums, individual units can never be sold.

Although the Utah assessor identified a 30 percent increase in per-unit condominium sale prices near the project, there was not a similar 30 percent increase in timeshare sales. The only consistent figure shared by timeshares and condominiums each year is the number of units subject to foreclosure.“

Ms. Hunsaker goes on to note a number of other factors that differentiate condominiums from timeshares, including the various maintenance and assessment fees unique to timeshares, as well as the fact that timeshares are often reported as personal property, separate from real property assessment.

Ultimately, “timeshare units are simply incomparable to wholly-owned condominiums,” she concludes. “If those timeshare assessments are comparable to assessed values of condominiums, then the assessor likely neglected to account for the unique characteristics and expenses associated with timeshares.”

For real estate, timeshare, and tax wonks, Ms. Hunsaker’s full piece is well worth a read, whatever your personal feelings on the vacation ownership industry.

Led by Attorney Michael D. Finn with 50 years of experience, the Finn Law Group is a consumer protection firm specializing in timeshare law. Our lawyers understand vacation ownership as well as the many pitfalls of the secondary market of timeshare resales. If you feel you have been victimized by a timeshare company, contact our offices for a free consultation. Know your rights as a consumer and don’t hesitate to drop us a line with any questions or concerns.