Untitled Texas Attorney General Opinion ( 1981 )

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
0. 1390