Timesharing and fractional ownership in Brazil

  • Larissa Silva Gomes - 30 June, 2015 - Articles

Although these institutes are not very diffused in Brazil, timesharing and fractional ownership are institutes that date back to the 1960s. In a post-war scenario and before an economic crisis, timesharing appears in Europe as a means for a shared use of holiday homes (vacation home sharing). Later, in 1974, timesharing develops in the United States through the company Caribbean International Corporation offering “licenses of use” of 25 years (vacation license) in rooms of its resorts.

A few years later, Richard Santuilli launches the concept of fractional ownership by NetJets that created the possibility of individuals or legal persons to acquire shares or fractions of private aircrafts.

The difference between these two institutes is in the nature of both, because while fractional ownership regards a right in rem, timesharing concerns a contractual right. In the first case, the person owns the property, i.e. he holds its title and all rights of ownership, and may sell the property at any time or profit from its eventual appreciation.

In practical terms, members using the fractional ownership system have a fraction, ie shares of an entity that owns the property. The partners then divide the costs and expenses concerned to the property according to their use and may even stipulate a monthly fee to cover fixed costs.

In contrast, in the timesharing institute buyers are owners of “time units” and are entitled to the use of the property by a pre-set amount of time.

The timesharing system is commonly used in the tourism industry through timesharing contracts or a contract of adhesion to a vacation club or holiday program. In this case the contractor is the consumer of a service that, in practice, makes the payment of a monthly fee to enjoy accommodation in hotels, resorts, holiday homes etc.

Currently, the use of the institutes at hand is verified in several areas, among which we highlight: (i) luxury cars; (ii) private aircrafts; (iii) private boats, ships and yachts, and; (iv) beach houses / vacation and resorts.

However, one of the great dilemmas faced to disseminate the institutes under discussion in Brazil is the lack of specific regulations. The regulatory framework of timeshares in Brazil took place only on 12 August 1997 with the enactment of Normative Resolution No. 378 by which the Ministry of Tourism has implemented the timesharing system in tourism accommodation facilities. Subsequently, the Federal Decree No. 7,381, of December 2010, which regulates the National Tourism Policy (Act 11,771 / 2008), gave a definition to the timesharing system, in its Article 28. Please see our free translation below:

Art. 28. Accommodation by timesharing system is defined as the relationship in which the hotel service provider grants a third party the right to use housing units for certain periods of occupation, comprised within a time interval contractually fixed.

Thus, we find that the institute of timesharing is gaining strength and conquering the hotel market in Brazil. However, fractional ownership, whether concerning airplanes, helicopters, yachts or cars, is still little explored in Brazil. We can name a few reasons behind this fact, as the divergence in the nature of the two systems between property rights and obligations, as well as the absence of specific regulation as stated above.

We conclude that there is still much to adapt in the Brazilian legislation regarding both institutes, but we note that this is already gradually occurring, for example, the regulation of timesharing by the aforementioned Article 28 of the Federal Decree No. 7,381. The Brazilian market is growing with activities of companies in the business, such as Prime Fraction Club, RCI-Resorts and Búzios International Apart Hotel, which makes the mutation of legislation to accommodate the systems inevitable.

We understand that these are very interesting institutes since they provide a feasible cost to the enjoyment of property with very high values and luxuries that were only available to few, as well as fulfilling the social function of property as acclaimed by our Constitution.

Larissa Silva Gomes, Lawyer at Chenut Oliveira Santiago.




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