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Time-sharing in the Bahamas

The time-share holidaymakers – who account for a good percentage of repeat visitors to the Bahamas – and the provisions for them are very important to the success of tourism in the Islands.  This is why the government insist on such stringent regulations to protect their interest, says Carl Lashley and Terence Gape, partners in the law firm of Dupuch & Turnquest & Co.

Time-sharing has been in The Bahamas since the late 1970s and there are now more than 30 time-share/vacation club projects throughout the Islands, but notably in Nassau (New Providence) and Freeport (Grand Bahama).

Having survived early pitfalls that were brought about by weak management and lack of controls, the time-share/vacation club industry is now fully respected in North America.  Big names to follow the trend in recent years include Marriott, Westin and Hyatt Hotel groups.  All promote the sale of what is, essentially, a right to pre-paid annual holiday accommodation for ten to 25 years or more.

As far back as 14 years ago, in an effort to regulate the industry, The Bahamas passed the Time-Share Act 1984, which required the registration and licensing of all time-share projects and generally sought to protect and safeguard the rights of time share purchasers.  The Act required a Developing Owner’s License and a Marketing Agent’s License.

For protection during construction of the project, there is the division of the placement of an Escrow Fund by the Developing Owner into which the gross proceeds of all sales shall be paid but from which payments can be made to the Developer and to the Marketing Agent, up to fixed percentages.

There is also provision for a Sinking Fund of five percent of the gross sales price of a time-share interest.  This fund is to be used for repairs and refurbishment of the time-share facility, but will be paid over to the Developing Owner, five years after the project is completed. A Trust Fund was also established for use by purchasers to finish a project, if the Developing Owner has abandoned it.

The Act was drafted at a time when the time-share interest being sold was very often a Fee Simple interest or, at least, a leasehold interest in a particular unit for a particular one week or two week period:  Fixed Time, Fixed Space or Fixed Destination.  It therefore required the vesting of a time-share interest by deed, which must then have been fully recorded in the Register of Records.  The Act is particularly ‘dated’ by its specific exclusion of hotels, which could be licensed as time-share projects and thus could not enjoy the duty free benefits of the Hotel Encouragement Act.

The Act further requires a Public Offering Statement to be published and there is a rescission period of 15 days provided to the purchaser of time-share interests.

Ironically, by the mid late 1980’s the proposition for which the Time-Share Act had been legislated, had largely disappeared from the time-share market, as time-sharing became more dedicated towards its purchasers who wanted a hotel-resort experience and the vacation club concept took hold.  In a vacation club, the purchasers acquired a membership , not an interest in property, and the concept of Floating Time, Floating Space and Floating Destination became the industry’s sales leader.

Vacation club concept

The vacation club concept was thus in direct conflict with the Act, especially its prohibition against hotels.  Accordingly, over most time-share/vacation club facilities in The Bahamas have operated outside of the provisions of the Act.

This has also meant that there has been some conflict between the Government regulatory agencies and the Vacation Club Project.  This is not as bad as it may sound because most operators are reputable and, industry standards are mostly sustained to the North American standard and by membership of most projects in the large exchange service companies.

The Government has wished for several years to pass legislation to remove, forever, any doubts of whether the Stature applies to the Vacation Club membership and for the sale of any and all recurring occupancy rights sold in the Bahamas.