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Litigation Exposure

Marriott was always hailed to be one of the good guys in the world of timeshare mis-selling however, they have recently suffered a fall from grace after admitting that it has mis-sold timeshare contracts to consumers in Spain.

They have stated “A series of Spanish court rulings over the past several years invalidating timeshare contracts have increased our exposure to litigation and such litigation may materially adversely affect our business and financial condition”

They further explain “These rulings have invalidated timeshare contracts entered into after January 1999 related to certain resorts in Spain if the timeshare structure of those resorts did not meet requirements prescribed by Spanish timeshare laws enacted in 1998, even if the structure was lawful prior to 1998 and adapted to the 1998 laws pursuant to mechanisms specified in the 1998 laws”.

The rulings have led to an increase in legal action by timeshare owners (clients) who are now seeking to invalidate timeshare contracts in Spain, including a number of such actions filed by owners at two of our resorts in Spain that have been decided in favour of Timeshare consumer-owners.

Marriott explains “should additional owners at our resorts in Spain file similar similar claims, this could result in the invalidation of consumer timeshare contracts entered into after January 1999. This will cause Marriott to incur losses and other litigation costs, including judgment or settlement payments thus materially affect the results of operation of its Europe operations, as well as its business and financial condition”.

In TESS’s experience, Marriott has an honourable approach and is paying out compensation claimed which assists the process, lower the costs and returned damages to consumers – in a reasonable timeframe.

In other parts of the operations, Litigation expenses in Marriot also recorded in other trading markets and they will record pre-tax litigation expenses of $16.3 million on its Statements of Income for the second quarter and first half of 2018. These costs relate to: –

  • agreements in principle to settle two actions in our North America, consisting of an accrual of $10.6 million in connection with the Petrick and an accrual of $4.6 million in connection with an action brought by owners of fractional interests at The Ritz-Carlton Club, Lake Tahoe, and
  • certain actions in our Europe segment brought by owners of timeshare interests at two of our resorts in Spain, in connection with which the balance of the accrual will be recorded. In addition to various terms and conditions, the settlements in principle contemplate our repurchase of fractional interests owned by the plaintiffs in the Petrick and Lake Tahoe actions.

Posted on: 11th June 2019