Deeded Vs. Non-Deeded Timeshares: What's The Difference?

If you've had your eye on a certain destination and are thinking how nice it would be to visit regularly, you might have considered getting a timeshare. This vacation property offers frequent travelers peace of mind and the convenience of knowing that they have a place to stay waiting for them when they visit.

But, just like with any other property purchase, you'll need to do your due diligence and research what you're getting yourself into. For instance, Bankrate recommends carefully considering how often you're going to use the space and if buying a timeshare makes sense to you financially.

You should also take into account the type of timeshare, as it can affect your ownership status and how you can use the vacation property. There are basically two types of timeshares: deeded timeshares and non-deeded timeshares. One type makes you a co-owner of a timeshare while with the other, you're only buying a right to use the property. So, before signing any agreement or contract, make sure you know the difference between a deeded and non-deeded timeshare.

A deeded timeshare grants exclusive use of a vacation property for a minimum of one week per year in a "fixed or floating week" arrangement. This Loyola Consumer Law Review journal article explains these concepts well.

According to the article, a fixed week is a rigid setup where your use of the timeshare is limited to the same period of at least seven days annually. For example, if your contract is for November 23 to 30, then you can only schedule your vacation on those dates as other people own the other dates, so you can't book them. This arrangement is good for those who travel to the same destination at the same time every year and don't want to compete for dates with other timeshare owners. Meanwhile, a floating week is more flexible, allowing more leeway on the dates you can book. Limited by availability, you can organize your vacation within a particular period or season. However, during high or popular seasons, when other owners are competing for the same dates, you might have a hard time booking your stay.

Because you have a deed, you co-own the property forever (per Investopedia) until you decide to transfer ownership via a sale or hand it down to your heirs as inheritance, according to the Loyola Consumer Law Review. (You can also rent it.) Ownership also affords you certain legal rights and remedies unavailable to you otherwise.

In contrast to deeded timeshares, non-deeded timeshares don't grant you ownership. Instead, you'll only receive a right to use the vacation property via a lease or license, according to the Loyola Consumer Law Review. Basically, the owner is only giving you a privilege to use their property exclusively for a specific period of time, and once the agreement ends, so does your privilege. The typical terms of non-deeded timeshares can span 20 years or more, according to Quicken Loans, for at least a week annually.

A lease contract is more favorable as you gain possessory interest, according to the Loyola Consumer Law Review, which means you have some rights over the property along with legal remedies. The Legal Information Institute (LII), a project of the Cornell Law School, defines possessory interest as the right to occupy or possess a property, adding that "a possessory is often taxable."

In contrast, a timeshare under a licensing agreement only grants you the privilege of occupying the property with the owner's oral or written permission, per the Loyola Consumer Law Review. Basically, it's a license to use the vacation property that might otherwise be considered trespassing. The article adds that since there's no transfer of ownership or possessory interest involved, you run the risk of the owner exercising their right to revoke the license without any legal remedies at your disposal.