**/HITE** General

**Zoufl Bullding**  **1254a 70711**  **il 874-1387**  **5121475~268**

**St.. sun0**  **1400 .?5201**  **U**

4 A,twte

202 i-x. 77002 88

**WY. Suite** **312 TX78401**  **138**

**mth. Suite** **B n:**  **78501 n7** 
flua. Sutte 400 **nb. TX.** **78205 I91**  

# The Attorney ,General ofTexas

December 10, 1981

Honorable Ray Farabee, Chairman StateAffairs Committeeof the .Texas Senate StateArchives Building,Room 411 Austin. Texas 78711 Opinion No. NW407
Re: Characterization of “right-to-use” timesharing plans in resort communities
Dear Senator Farabee:
You advise us thata conceptknown as “timesharing”has been used in connectionwith resortproperties. You askus 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

‘timesharelicense,’offers the consumera certain eeaaon (high, swing, or low) during which he may reserve his intervalweek orweeks. The purchaser is not tied to any definite week prior to reservation, and will probably have a different unit of a particular type each **year.** IJotitle to property is conveyed and no investment represented. The purchaser is prepaying for the right ‘touse an accomodation. The reservation is handled like a hotel reservation in that no 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 be available for thepurchaserduring his reserved 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 thepostedprices. The objective of ‘timesharing’ has been to

_ provide the consumerwith the exclusive right to

p. 1387HonorableRay 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 indicatesthat theremay be various other types of timesharingplans; however, since these are not "right-to-use"plans, we will not consider them. No statement in the definitionwas made as to the duration of the "right-to-use".but itwill 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 structuredoes not,apply to this particular type of timesharingprogram 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"siVeright tooccupy a particular structure. The **COnSUmer ’** **S** right under such a timesharing program is a con,tractualright 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 followingquestions:

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" timesharingplan 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" timesharingplanshave specificprovisions in the contract stating that no interest in real property of any nature is being conveyed by the owner .tothe 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 interestin real property. If there is no specific provision in the timesharing contract regardingwhether an interest in property is conveyedby the contract, the courtswould look to the facts of each case to determine whether or not-the consumer had entered into a contract topurchase a license or a lease. The first and perhaps most important test to determine-

. .. *

RonorableRay 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 leaseor a tenancy is that theremust “be a definite, certain place demised or rented.” Tips v. United States, 70 F.2d 525, 527 (5th Cir. 1934). The factspresented in your request show that the consumer does not have the exclusive possessionof thepremises forwhich 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 determinewhich **room** or unit is tobe used by the consumer. The consumercannot expect any definite, certain space tobe allotted tohim. 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 contractbetween the owner and thepurchaser and not a landlord-tenant relationship. We note that the comptroller has considered such resortproperty as a hotel subject to hotel occupancy taxunderarticle 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 askedwhether 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 Codeprovidzthat:

(b) ‘Services’ means work, labor, **or** services of any kind when purchased primarily for personal, family or household use and not for commercialbusiness use.... V.T.C.S.art. 5069-6.01(b).
As described inyour request, a consumerpurchases extensivework and labor in addition to the license touse the owner’sproperty. 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 consumerpurchases 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).theTexas Supreme **Court** ruled that seeking to require the use **of** money, and, implicitly, the offering of moneyforuse, was not a “service”under **the** Texas Deceptive Trade Practices **Act.** The court emphasized that ,servicesincludes an activity on behalf of one party by another. Although the ,definitionof “services”under theDeceptive 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. 1389EonorableRay Farabee - Page 4 04w-4Q)

Consumer Credit Code: a "service" requires some formof 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 ConsumerCredit Code. Nonetheless, the right purchased under a "right-to-use" timesharingplan is a combinationof a serviceand anon-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'spurchase. 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 shouldbe characterizedas a "service"under theConsumerCreditCode.

**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 trulyyours.

MARK WdITE AttorneyGeneral of Texas
JORN **W.** FAINTER, JR. FirstAssistantAttorney General
RICRARD E. GRAY III ExecutiveAssistantAttorney General Preparedby Richard Symonds AssistantAttorney General
APPROVED: OPINION COEQIITTEE
SusanL. Garrison, Chairman Jon Bible Rick Gilpin JimHoellinger Richard Symonds

0. 1390