Understanding what a Timeshare is!

The period of holday letting grants a right to occupy a property and that grant need not be continuous. Thus, an agreement granting the right of occupation of premises for three successive Bank Holidays was held to be an agreement for a single letting, although the periods of occupation by the tenant were discontinuous.

Likewise, a lease is not invalid merely because it prohibits the tenant from being in personal occupation of (say) holiday appartment at (say) week-ends or 7 14 or 21 day intervals . On principle, therefore, a time-sharing agreement granting a right to occupy a holiday property in England or Wales for one specific week in each year for a specific number of continuous years will constitute a lease if on its true construction that is the inference which ought to be drawn.
 Many such agreements are expressed at least for 80 years, and in such a case whilst the lease may be said to continue for 80 years, the interest created by it does not, because it is discontinuous.

 What is granted is the right to occupy for 80 holiday periods. Section 149(3) of the Law of Property Act 1925 provides that with certain exceptions not relevant for present purposes a term, at a rent or granted in consideration of a fine, limited to take effect more than 21 years from the date of the instrument creating it is void. It would seem that in the case of an 80-year agreement the right to a holiday week is void in each year after the 21st year.

Smallwood v. Sheppards [1895] 2 Q.B. 627, per Wright, J.

Cottage Holiday Associates v. Customs and Excise Commissioners [1983] 2 W.L.R. 861. There the question was whether the lease was zero-rated for VAT purposes as being for a period excluding 21 years. The agreement with the holiday maker was expressed to be a lease and the lessor covenanted to keep the property in full repair throughout the 80 years’ duration of the agreement. Woolf J. held that the agreement, though a lease, was not for a period exceeding 21 years, but for 80 separate and discontinuous periods.

The reason for the choice of 80 years is no doubt because that is the maximum perpetuity period under the Perpetuities and Accumulations Act 1964. However, if each holiday period were vested in possession of the date of the lease (i.e. if the interest created were truly for more than 21 years) the rule against perpetuities would be inappropriate and a period greater than 80 years would be valid.

Cottage Holiday Association v. Customs and Excise Commissioners, ante, at 866, per Woolf J.

Woolf J. ibid, referred to s.149(3) of the Act of 1925 but found it unnecessary to decide whether the subsection applied. The subsection could not be avoided unless each holiday period were regarded as vested in possession at the date of the lease, but the consequence of drawing thatinference would be that the interest created would be for more than 21 years, a consequence which would contradict the decision of Woolf J.