Timeshares leave investors out of pocket
The sales pitch is simple: for a couple of thousand dollars, you can become a part-owner of a holiday house for a set period of time.
It might be a condominium on the beach or an apartment in the city. Sound too good to be true?
Research from Choice suggests it probably is.
Technically, a timeshare is considered a type of managed fund, so the scheme operator must hold an Australian Financial Services (AFS) licence, register the scheme with the regulator ASIC and give you a product disclosure statement (PDS).
But Tom Godfrey, Choice's head of media, says that timeshare advisers are exempt from some parts of the law, such as the rules around conflicted remuneration.
"This is one area of the law where financial advisers have preserved the cowboy tactics of the past - high-pressure sales techniques, high commissions and shocking consumer outcomes," says Godfrey.
"The fact is these are often complex contracts which leave buyers to pay hefty annual fees and hidden levies for years which operators can increase or add to unilaterally during the life of the contract."
Points-based timeshare schemes require you to buy points or credits that you can redeem at a number of resorts or holiday properties in various locations. The number of days you can redeem each year will depend on how many points you have, the time of the year you use them and various other factors.
Godfrey says it's concerning that timeshare operators determine the value of the points and can change that value at any time.
"It's hard to see why anyone would want to invest in these schemes when you consider the points you are purchasing can halve in value and you can face legal threats if you try to exit the schemes," he says.
"In reality, you'd be far better off avoiding timeshare schemes and paying directly for a holiday when you need to take a break."
To avoid becoming a victim to a dodgy timeshare, make sure you read the PDS and find out how you can cancel the membership if you ever need to.
Don't fall for the sales pressure - always do your research and before you invest find out how long the cooling-off period is.
If you're unhappy with the timeshare operator or how things pan out, you can lodge a complaint with the Financial Ombudsman or the Credit and Investments Ombudsman.