                      The Attorney        ,General     of Texas
                                   December 10, 1981

/HITE
 General


ZouflBullding
                  Honorable Ray Farabee, Chairman        Opinion No. NW407
1254a             State Affairs Committee of the
   70711            .Texas Senate                        Re:      Characterization   of
il                State Archives Building, Room 411      “right-to-use”     timesharing
874-1387          Austin. Texas                          plans in resort communities
                                  78711
 5121475~268

                  Dear Senator Farabee:
 St.. sun0 1400
.?5201                 You advise us that a concept known as “timesharing” has been used
U
                  in connection with resort properties. You ask us several questions in
                  connection with the   timesharing plan knowu as the “right-to-use”
                  timeshare. In your letter, you define a “right-to-use”    timeshare as
                  follows:

                                 ‘Right-to-use’ -timeshare, also known a8
4 A, twte202               ‘timeshare license,’ offers the consumer a certain
i-x.77002                  eeaaon (high, swing, or low) during which he may
88                         reserve his interval week or weeks. The purchaser
                           is not tied to any definite week prior to
                           reservation, and will probably have a different
WY. Suite 312
TX78401
                           unit of a particular type each year.   IJo title to
138                        property    is   conveyed   and     no  investment
                           represented. The purchaser is prepaying for the
                           right ‘to use an accomodation. The reservation is
mth. Suite B
                           handled like a hotel reservation in that no
n: 78501
n7                         particular room or unit is dedicated to the
                           purchaser until he checks in.      The reservation
                           clerk makes Sure that a certain type of unit will
flua.
    Sutte
        400                be available for the purchaser during his reserved
nb. TX. 78205
I91
                           week.    When the purchaser checka In. he is
                           assigned to a condominium unit.        The resort
                           supplies maid service, heat, aft. water, linens,
                           and conducts the usual check-in and check-out
                           procedures. Gueeta have the right to use all of
                           the available resort amenities, ouch .a8 pool,
                           tennis courts. golf course, marina. stables, etc.,
                           at the posted prices.

                                The objective of ‘timesharing’ has been to
                  _        provide the consumer with the exclusive right to




                                             p. 1387
Honorable Ray Farabee - Page 2   (MW-407)




          use and ~occupy a structure during a   pariiCUlar
          time of year.

You have not attached any particular timesharing contract to your
request for our interpretation. Your request indicates that there may
be various other types of timesharing plans; however, since these are
not "right-to-use" plans, we will not consider them. No statement in
the definition was made as to the duration of the "right-to-use". but
it will be assumed that it is of limited duration and therefore can
not constitute some form of life estate. Your statement as to the
objective of a timesharing program as providing a consumer with the
exclusive right to use and occupy a structure does not,apply to this
particular type of timesharing program as you have defined it. Since
no consumer can claim an exclusive right to use any particular piece
of property, condominium or apartment, the consumer cannot be said to
have eXcl"siVe right to occupy a particular structure. The COnSUmer’S
right under such a timesharing program is a con,tractual right for a
license to enter into the real property owned by the resort company.
The resort makes   the decision as to which unit the consumer can
occupy.

     You ask the following questions:

               1. Is a right-tolrse timeshare an interest
          in real property?

               2. Is a right-to-use timeshare a 'SerViCa'
          as used in the Consumer Credit Code?

     Since, by definition, a "right-to-use" timesharing plan does not
convey title to property. a consumer would not obtain an undivided
interest in the property subject to the "right-tO-"Se" plan. The
question remains. therefore, whether the consumer has purchased a
license to use the property or a lease in the property. Whether or
not two parties intend to enter into a lease agreement or some other
agreement is determined by the contract between them.        Byrd v.
Fellding, 238 S.W.Zd 614, 616 (Tex. Civ. App. - Amarillo 1951, no
writ). Many "right-to-use" timesharing plans have specific provisions
in the contract stating that no interest in real property of any
nature is being conveyed by the owner .to the contracting consumer.
This, in and of itself, could be dispositive of the Issue as to
whether or not a particular right-to-use timesharing contract conveys
an interest in real property.

     If there is no specific provision in the timesharing contract
regarding whether an interest in property is conveyed by the contract,
the courts would look to the facts of each case to determine whether
or not-the consumer had entered into a contract to purchase a license
or a lease. The first and perhaps most important test to determine
-
    .   . .   *
              Ronorable Ray Farabee - Page 3   (Mw-408)’




              whether or not the contract is for a lease of real property is the
              extent to which the consumer obtains exclusive possession of the
              property. Brown v. Johnson, 12 S.W.2d 543. 545 (Tex. 1929). The
              second test to determine the existence of a lease or a tenancy is that
              there must “be a definite, certain place demised or rented.” Tips v.
              United States, 70 F.2d 525, 527 (5th Cir. 1934). The facts presented
              in your request show that the consumer does not have the exclusive
              possession of the premises for which he contracted. The owner remains
              in possession and control of the property, provides all the cleaning
              services for the property. and has the right to determine which room
              or unit is to be used by the consumer. The consumer cannot expect any
              definite, certain space to be allotted to him. Under a similar set of
              facts in the Byrd v. Feilding case, the court held that the owner
              retained sufficient control over the premises so that a license was
              created in the contract between the owner and the purchaser and not a
              landlord-tenant relationship.    We note that the comptroller has
              considered such resort property as a hotel subject to hotel occupancy
              tax under article 23.02, Taxation-General. Cur con+sion    is that the
              “right-to-use” timesharing plan does not create an interest in real
              property.

                   You have also asked whether or not a right to use timeshare is a
              “service” as used in the Texas Consumer Credit Code. See V.T.C.S.
              arts. 5069-6.01, et. seq. The Consumer Credit Code providzthat:

                             (b)    ‘Services’ means work,     labor, or
                        services of any kind when purchased primarily for
                        personal, family or household use and not for
                        commercial business use....

              V.T.C.S. art. 5069-6.01(b).

                   As described in your request, a consumer purchases extensive work
              and labor in addition to the license to use the owner’s property. The
              owner provides work and labor to clean and maintain the condominium
              and to maintain and operate the various recreational facilities that
              are made available to the consumer under the program. In addition,
              the consumer purchases the managerial work necessary to organize the
              timesharing schedules.    Under the plan, therefore, the cons-r
              purchases both the license to enter the property and the labor
              required to maintain and manage its facilities.         Regarding the
              license, in Riverside National Bank v. Lewis, 603 S.W.2d 169. 175
              (Text 1980). the Texas Supreme Court ruled that seeking to require the
              use of money, and, implicitly, the offering of money for use, was not
              a “service” under the Texas Deceptive Trade Practices Act.   The court
              emphasized that ,services includes an activity on behalf of one party
              by another. Although the ,definitionof “services” under the Deceptive
              Trade Practices Act is broader than under the Consumer Credit Code,
              the central focus of the court’s definition would still apply to the




                                               p. 1389
Eonorable Ray Farabee - Page 4     04w-4Q)




Consumer Credit Code: a "service" requires some form of activity On
the part of the party providing the services. Therefore, the eale of
a mere "license" to use land would not be a "service" under the
Consumer Credit Code.

     Nonetheless,   the  right purchased under a        "right-to-use"
timesharing plan is a combinationof a service and a non-service. The
purchase of the mere:~license would be worth very little if the
services were not aleo included in the purchase.        In fact, the
services are    an   integral part    of   the consuttter's purchase.
Consequently, it is almost impossible to distinguish, in practical
terms, the service from the non-service.       A court would in all
probability find that the entire "right-to-use" timesharing plan
should be characterized as a "service" under the Consumer Credit Code.

                              SUMMARY


                A "right-to-use" timeshare is not an interest
           in real property, but it is a service~within the
           Texas Consumer Credit Code.

                                           Very truly yours.



                                           MARK      WdITE
                                           Attorney General of Texas

JORN W. FAINTER, JR.
First Assistant Attorney General

RICRARD E. GRAY III
Executive Assistant Attorney General

Prepared by Richard Symonds
Assistant Attorney General

APPROVED:
OPINION COEQIITTEE

Susan L. Garrison, Chairman
Jon Bible
Rick Gilpin
Jim Hoellinger
Richard Symonds




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