This simplified guide looks at timesharing and the Shariah considerations of the different forms of timesharing.
- What is time-sharing?
Timeshare allows a person to buy the use of a holiday home for the same week or weeks every year. This concept is a fraction of the price of owning it all year-round. It also takes away the costs and worries of year-round maintenance. In effect, you are buying holiday time. You can buy timeshare and use it yourself, rent your timeshare out, give it away, sell or bequeath it as you wish. Timeshare has many different variations with the same basic concept. Other names include vacation ownership, holiday ownership, and club time.
In essence, a timeshare is a property with a divided form of ownership or use rights.
From a Shariah perspective, timesharing is known as Muhaya’ah[i]. The AAOIFI Shariah Standards state in regard to timesharing:
An Ijarah contract may be signed with several lessees being entitled to the same specified usufruct of a particular asset and duration of rent, without specifying a particular period of time for a particular person. In this case, each lessee may benefit from the property during the time assigned to him in accordance with specified rules. This case is one form of Muhaya`ah (time-sharing) in benefiting from the usufruct.
Thus, the concept of timesharing is recognised in Shariah.
- Types of timeshares
There are three types of timesharing arrangements:
a. Fee Simple
b. Leasehold
c. Right-to-Use (RTU)
Fee Simple
A fee simple timeshare requires you to buy a deeded interest in real estate. The land court and other authorities record the deed, and you’ll receive a title in perpetuity.
Many timeshares, especially in the US, are owned as fee simple real estate. Fee simple ownership is deeded timeshare ownership, and is typically structured very much like the way most people own their personal residences. Often, similar to the way people own condominium properties, a fee simple deed includes a date, on which the individual timeshare owners, stop being individual owners and become tenants in common. When that date is reached, the tenants vote on whether or not to continue the structure of individual ownership. For example, they may decide by majority vote, to sell the timeshare resort as a total property, in which case, each timeshare owner will receive his or her appropriate percentage of the total sale.
Essentially, Fee Simple is just another way of saying that a timeshare property is “deeded.” A deed is a legal document which provides the title to a timeshare property and grants official ownership rights. Fee Simple is generally regarded as the preferred type of vacation ownership.
Fee Simple is essentially the opposite of Right To Use ownership, wherein owners are granted rights to a piece of property for a certain number of years, but the property is actually owned by a set of trustees. Rather, with Fee Simple or Deeded property, ownership continues forever and the ownership of the property can even be willed or passed along to heirs. Owners of Fee Simple timeshares can sell, rent or gift their property or usage rights at any time.
From a Shariah perspective, a fee simple gives a valid form of Milkiyyah (ownership), giving the owner rights of disposal (Tasarruf) and a set of rights as a result of this ownership interest.
- Leasehold
A leasehold is a little like a fee simple. You’ll have basic ownership rights, obligations, interests, and security. Yet, you will not hold a title in perpetuity, so the deed will expire after a specified date. This is one of the key differences between fee-simple and leasehold. It is also a non-deeded timeshare arrangement. You may receive first right to renew ownership before the property’s expiry date. Ownership of the physical property is held by the developer or management company. A leased ownership also typically places more restrictions on property transfers than a deeded ownership interest does. This means as an owner, you might be restricted from selling or otherwise transferring your timeshare to another. Due to these factors, a leased ownership interest can often be purchased at lower cost than a similar deeded timeshare.
From a Shariah perspective, this is a form of Ijarah. Such a structure is also Shariah compliant, however, the terms and conditions of any such leasehold must be reviewed to ensure no non-compliant terms are embedded in the leasehold.
Some Shariah considerations in a leasehold arrangement is the liability of maintenance fees, insurance and tax. All major structural maintenance should be borne by the owner of the freehold.
- Right to Use
The right-to-use (RTU) grants you a right to use a unit or unit size every year.
Yet, unlike with a leasehold or fee simple, you will have no ownership interest in the property. The right-to-use will also often expire after 20 to 30 years, depending on the agreement. Once the agreement expires, the property will be returned to either an owner or developer.
From a Shariah perspective, this is an acquisition of a Haqq (right). An RTU is a type of al-Huquq al-‘Urfiyyah (customary rights). Rights that are not primarily granted by Shariah but are based on custom and practice, are regarded as al-Huquq al-‘Urfiyyah (customary rights). These are determined by the practice and understanding of people. The ruling of all such rights are based on customary practice (‘Urf). Rights that have a customary economic value and are sought by people, are Māl, based on the customary practice. Many such rights today are documented, registered, and legally recognised as assets. As a result, they are easily tradable.
However, in an RTU, making the bearer of the rights responsible for expenses and costs related to structural maintenance is objectionable in Shariah.
- The different ways timeshares are used
Timeshares can be used in the following ways:
a. Fixed week – This is the simplest type. It gives you rights to a specific week of the year, for specific room size, more likely than not at a specific resort that you return to year after year (defined as your home resort)
b. Floating week – Also referred to as flex week. Buying a floating week gives you rights to one week during the year to be used at your home resort. However, this needs reservation.
c. Points – In a points-based system, each week of timeshare ownership is allocated a specific number of points, based on such criteria as the size of the condo, rating of the resort, and the like. Although there are exceptions, the majority of points-based timeshares have their deeds held in trust by the developer, not the owner. The greatest advantage to points is that the owner is not locked into a full week; more often than not, two- and three-day stays are permissible.
From a Shariah perspective, a fixed week is the simplest and reflects a classical Ijarah agreement in a leasehold where the leaseholder gets a predetermined week to benefit from their acquisition. Whilst in a fee-simple, a fixed week is a form of Muhaya’ah and division of use in one’s co-owned property. Points are recognised globally and part of several schemes. Points are a type of Māl as they are sought by people, have an economic value, and are subject to exchange. Hence, a points-based system is also acceptable in principle.
Conclusion
The concept of timeshares is a recognised concept in Shariah. The modern applications of timeshares can be adopted, however, a timeshare must be structured in accordance with Shariah principles.
[i] ثُمَّ الْمُهَايَأَةُ قَدْ تَكُونُ بِالْمَكَانِ وَقَدْ تَكُونُ بِالزَّمَانِ (المبسوط للسرخسي)
(وَأَمَّا) النَّوْعُ الثَّانِي وَهُوَ الْمُهَايَئَاتُ بِالزَّمَانِ فَهُوَ أَنْ يَتَهَايَآ فِي بَيْتٍ صَغِيرٍ عَلَى أَنْ يَسْكُنَهُ هَذَا يَوْمًا، وَهَذَا يَوْمًا، أَوْ فِي عَبْدٍ وَاحِدٍ عَلَى أَنْ يَخْدُمَ هَذَا يَوْمًا وَهَذَا يَوْمًا، وَهَذَا جَائِزٌ؛ لِقَوْلِهِ تَبَارَكَ وَتَعَالَى {قَالَ هَذِهِ نَاقَةٌ لَهَا شِرْبٌ وَلَكُمْ شِرْبُ يَوْمٍ مَعْلُومٍ} [الشعراء: 155] أَخْبَرَ سُبْحَانَهُ وَتَعَالَى عَنْ نَبِيِّهِ سَيِّدِنَا صَالِحٍ – عَلَيْهِ الصَّلَاةُ وَالسَّلَامُ – الْمُهَايَئَاتُ فِي الشِّرْبِ، وَلَمْ يُنْكِرْهُ سُبْحَانَهُ وَتَعَالَى، وَالْحَكِيمُ إذَا حَكَى عَنْ مُنْكَرٍ غَيَّرَهُ، فَدَلَّ عَلَى جَوَازِ الْمُهَايَئَاتِ بِالزَّمَانِ بِظَاهِرِ النَّصِّ، وَثَبَتَ جَوَازُ النَّوْعِ الْآخَرِ مِنْ طَرِيقِ الدَّلَالَةِ؛ لِأَنَّهَا أَشْبَهُ بِالْمُقَاسَمَةِ مِنْ النَّوْعِ الْأَوَّلِ؛ وَلِأَنَّ جَوَازَ الْمُهَايَئَاتِ بِالزَّمَانِ لِمَكَانِ حَاجَاتِ النَّاسِ، وَحَاجَتُهُمْ إلَى الْمُهَايَئَاتِ بِالْمَكَانِ أَشَدُّ؛ لِأَنَّ الْأَعْيَانَ كُلَّهَا فِي احْتِمَالِ الْمُهَايَئَاتِ بِالزَّمَانِ شَرْعٌ، سَوَاءٌ مِنْ الْأَعْيَانِ مَا لَا يَحْتَمِلُ الْمُهَايَئَاتِ بِالْمَكَانِ كَالْعَبْدِ وَالْبَيْتِ الصَّغِيرِ وَنَحْوِهِمَا، فَلَمَّا جَازَتْ تِلْكَ فَلَأَنْ تَجُوزَ هَذِهِ أَوْلَى، وَاَللَّهُ – تَعَالَى – أَعْلَمُ. (بدائع الصنائع في ترتيب الشرائع)
(وَأَمَّا) الْمُهَايَئَاتُ بِالزَّمَانِ فَلِكُلِّ وَاحِدٍ مِنْهُمَا أَنْ يُسْكِنَ أَوْ يَسْتَخْدِمَ؛ لِمَا ذَكَرْنَا، لَكِنْ لَا بُدَّ مِنْ ذِكْرِ الْوَقْتِ مِنْ الْيَوْمِ وَالشَّهْرِ وَنَحْوِ ذَلِكَ، بِخِلَافِ الْمُهَايَأَةِ بِالْمَكَانِ أَنَّ لِكُلِّ وَاحِدٍ مِنْهُمَا وِلَايَةَ السُّكْنَى وَالِاسْتِغْلَالِ مُطْلَقًا؛ لِأَنَّ الْحَاجَةَ إلَى ذِكْرِ الْوَقْتِ لِتَصِيرَ الْمَنَافِعُ مَعْلُومَةً، وَالْمُهَايَئَاتُ بِالْمَكَانِ قِسْمَةُ مَنَافِعَ مَقْدِرَةٍ مَجْمُوعَةٍ بِالْمَكَانِ، وَمَكَانُ الْمَنْفَعَةِ مَعْلُومٌ، فَصَارَتْ الْمَنَافِعُ مَعْلُومَةً بِالْعِلْمِ بِمَكَانِهَا، فَجَازَتْ الْمُهَايَأَةُ. (بدائع الصنائع في ترتيب الشرائع )