Vacation Ownership Usage Allocation
The usage allocation for a vacation property decides who can use the property and when and is part of the Equity Share Agreement. There is no perfect usage allocation system. Whether a system will work well for a particular buyer will depend on the buyer’s family status, job, vacation patterns, mode of transportation to the property, and other factors. This page will help you understand the pros and cons of the most common usage allocation systems, and may help identify usage system.
Fractional Ownership Usage Systems To Avoid
“we’ll just work it out"
Aside from the inability to plan ahead, the main problem with this approach is that working it out may become more difficult over time, as the participant’s lives change, kids get older, people die or sell, and other events alter the original assumptions. The “we’ll just work it out” Out system does not work over the long run for anyone, but it is particularly problematic for those who are most likely to adopt it, namely groups consisting of long-time friends or family members. Even if you plan to handle things informally, create a usage allocation system to fall back on if you are unable to "just work it out".
“first-come-first-served”
Meaning one that allocates all usage rights based upon who signs up, calls, emails or logs on first. These systems become frustrating over time, as well as unfair to those who do not have the time, inclination or expertise needed to master the system. There is nothing wrong with fractional ownership reservation systems that offer some usage on a “first-come-first-served” basis, provided that the system operates as a supplement to another system that allocates some usage to each owner on a non-competitive basis.
“gambler’s”
Meaning one based entirely on chance (such as picking cards from a deck or drawing straws). The problem here is that the lucky owner who drew first choice the past three consecutive years has just as much chance of drawing first this year as the unlucky owner who has been last in each of these years. Each owner deserves the right to choose first just as often as each of the other owners, and a chance-based system almost guarantees that this will not occur.
Fixed Rotation Plans and Usage Reservation Systems
A “fixed rotation plan” ensures that, over a period of years, each owner will be entitled to use the property during each day of the year. For example, a simple fixed rotation plan for four fractional owners assigns each owner a two weeks period every eight weeks, and starts the rotation with a different owner each year, so that each owner will have rotated through every week over the course of eight years. More complex fixed rotation plans can vary the length of usage periods (so that, for example, owners use the property for some two-week periods and some one-week periods), or group certain premium periods or holidays together (so that, for example, each owner gets at least a certain number of highly-desirable weeks or days every year).
A “usage reservation system” allows owners to reserve usage based on availability and a system of rules. An example of a simple usage reservation system for four fractional owners would be where, during October of each year, each owner selects usage for the following year based on a rotating system of priority. The owner with first choice in a particular year might choose two weeks, followed by the owner with second choice, and so on. After each owner had selected two weeks, the process would begin again in reverse order. Finally, in a third round of selection, each owner would choose his/her fifth and sixth week.
In comparing fixed rotation plans to usage reservation systems, consider the following advantages and disadvantages:
Fixed Rotation Plans
• Allows vacations and events to be planned years in advance
• Very early advance knowledge facilitates exchanges with other owners before they have made plans
• Less expensive and simpler to operate than usage reservation systems (keeping owner dues lower)
Usage Reservation Systems (simple--with entire year reserved in advance)
• Provides flexibility for owners to adapt to tailor each year’s usage without relying on owner exchanges
• Less expensive and simpler to operate than complex usage reservation systems