There are many various forms of holiday ownership products which in the mind of the public are best described as “timeshare sharing agreements”. European Regulations have been created over the last 25 years in an effort to protect consumers against the potential long-term effects of these products. In order to deal with the explosion of “timeshare and long term holiday” products regulations have introduced into law and are designed to catch not only the ‘traditional timeshare model but other related products such as ‘floating timeshare weeks’, ‘holiday clubs’, points membership clubs and dreaded leisure credit schemes.
Regulations specific to long term holiday products are very welcome as they established the need to provide more detailed information about the nature obligations and liabilities associated with long-term holiday clubs and a mandatory cooling-off period.
What these timeshare specific regulations fail to deal with are problems associated with the mis-selling of these products and potential long-term liabilities regarding maintenance fees.
Any advisor dealing with long term holiday products must be mindful of not only timeshare specific laws and regulations, but also of other statutes, laws and regulations that came into existence to protect the consumer and which may be of application to a timeshare’s product.
In spirit “timeshare” is a product that enables the buyer to acquire their holidays in advance, allegedly for a discount. Often during the sales pitch, consumers are informed that, in exchange for a lump sum of money, they will obtain holidays that are “inflation-proof”, in that in future years the holiday product will (even allowing for maintenance fees) be cheaper than traditional holidays available on the open market. Generally speaking, timeshares do fall into the following categories.
Fixed Weeks Timeshare
This is the conventional model. In reality, you buy a membership in a club and each member is entitled (in return for paying the annual maintenance fees) to occupy a defined week or weeks each year in a specific apartment at their chosen resort.
Floating Weeks Timeshare
‘Ownership’ of a non-specific week, in an indeterminate unit of lodging. The owner buys a week or weeks in a limited band (for example high season such as summer or low season such as winter) and they have to book their holiday within that band, in advance each year, subject to conditions. Like fixed weeks, you become a member of a club.
Holiday Clubs or Points Clubs
These are intended to be more adaptable than fixed or floating weeks. The owner purchases a membership in a club and each year purchases are required to buy a number of “points”. The points are then exchanged to acquire your holidays each year across a variety of resorts forming part of the club’s inventory. The quality of the apartment, the destination and the length of the holiday is determined by the number of points that you own.
There are a number of Laws and Regulations that are applicable to timeshare and long-term holiday products. A summary of the most relevant regulations is now set out below. Links to the relevant regulations are included.
The Timeshare Holiday Products, Resale and Exchange Contracts Regulations 2010.
In 1994, the EU introduced Directive 94/47/EC (1994 Directive) to protect consumer buyers of long term holiday products tried to harmonise the market for, holiday properties sold on a timeshare basis.
Since then, the market for timeshares has evolved and new holiday products similar to them have appeared on the market. The new products may not be covered by the 1994 Directive.
In addition, certain transactions related to timeshares, such as resale contracts and exchange contracts, are not covered by the 1994 Directive. The 2010 Directive is intended to modernise the regulatory regime for timeshares and address the deficiencies of the 1994 Directive. Member states were obliged to execute the 2010 Directive by 23 February 2011 and in the case of the UK, it was transposed into UK law through ‘The Timeshare Holiday Products, Resale and Exchange Contracts Regulations 2010‘ (“the Regulations”).
The key features of the Regulations are set out below. In particular it:
• Extends the regulation of timeshares to a wider range of long-term holiday products, as well as resale or exchange contracts for such products (timeshare contracts).
• Regulates advertising and the provision of pre-contractual information in relation to timeshare.
• Requires timeshare contracts to be in writing, on paper or on another durable medium, and to be drawn up in the language of the EU member state in which the consumer is resident or a national.
• Requires specified information to be included in a timeshare contract, including the identity, place of residence and signature of each of the parties and the date and place of the conclusion of the timeshare.
• Gives consumers a 14-day cooling-off period during which they may withdraw from the timeshare contract without giving any reason.
• Requires traders to give consumers a copy of the timeshare contract at the time of its conclusion.
• Requires member states to provide for appropriate penalties in the event of a trader’s failure to comply with the national provisions adopted pursuant to the 2008 Directive.
Unfair Terms in Consumer Contracts Regulations 1999
The Unfair Terms in Consumer Contracts Regulations 1999 implement Directive 93/12/EEC on unfair terms in consumer contracts (Unfair Terms Directive “UTCCRs”). When interpreting the UTCCRs, the courts will have regard to the Unfair Terms Directive and interpret the UTCCRs in the light of this.
The Unfair Terms Directive is a minimum harmonisation directive. This means the UK was free to implement stricter consumer protection rules than those set out in the Unfair Terms Directive. It also means that other member states may also have done so (and local legal advice must be obtained for any consumer contract with a cross border element).
• Apply to unfair terms in contracts between a consumer and a seller of goods or services.
• Apply to terms that are “not individually negotiated”.
• Require the seller to ensure that any written term is expressed in plain and intelligible language. Impose a test of fairness. However, the fairness test does not apply to certain terms.
• Include an indicative and non-exhaustive list of potentially unfair terms.
• Provide that if a term is unfair, then it is not binding on a consumer, although the remainder of the contract shall continue in force if it is capable of doing so. The offending unfair term cannot be rewritten by the court, for example, an unfair penalty term cannot be reduced by the court to make it fair.
Broadly speaking, a seller has to comply with the requirements of the UTCCRs as to form or style of drafting and also as to the substance of a term. The UTCCRs are of particular relevance to timeshare and long-term holiday products which contain what may be arguable as described as a concealed trap – i.e. the trap of maintenance fees in perpetuity.
The UTCCRs can be read here:
The application of the UTCCRs is complex and in the context of timeshares, TESS Law has identified a significant number of UK and ECJ judgments which better explain how the regulations apply to individual contracts and therefore, how they can apply to timeshare and long-term holiday products. These regulations are of particular use when considering how to terminate these contracts.
Consumer Protection from Unfair Trading Regulations 2008 (“the Regulations”)
These Regulations may be applicable to a timeshare and/or long-term holiday product. In particular, the Regulations prohibit the following unfair commercial practices.
• Materially distort the economic behaviour of the average consumer in relation to a product regulation 3 (3);
• False or misleading practice regulation 5 (2). It is a false or misleading practice to provide false information or deliver an overall impression that deceives or is likely to deceive, even if the information is factually correct about the nature of the product, the main characteristics of the product and the price. This false or deceptive information must also cause or be likely to cause the average consumer to make a transactional decision he would not have otherwise taken regulation 5 (4);
• To make a misleading omission – if taking into account the circumstances of the commercial practice and the medium used to communicate it you as a trader omit, hide, disguise or delay material information so as to cause the average consumer to make a transactional decision they would not otherwise have made;
• Commercial practices which are aggressive. This includes practices which are likely to significantly impair the average consumer’s freedom of choice or conduct and causes (or is likely to cause) the average consumer to take a transactional decision that they would not otherwise have taken. The regulations provide a non-exhaustive list of factors to be considered including:
• the timing, location, nature or persistence of the practice;
• the use of misinformation
• Schedule 1 of the regulations also contain a list of 31 commercial practices which are in all circumstances unfair and thus banned outright. Our Clients are not obliged in relation to these blacklisted practices to produce any evidence of their effect or likely effect on the average consumer. The blacklist includes falsely stating that a product will be available for a very limited time in order to obtain an immediate decision.
The sales practices used by some timeshare developers and resorts may be unfair trading practices. In particular, many of TESS clients complain that they were given false or misleading information as to the purported benefits of owning a timeshare or long-term holiday product, including its value and transferability on the open market. The concept of perpetuity was often badly explained and spun as an advantage i.e. being able to pass on to family members when in fact it was creating a potentially devastating long term liability.
As a result of the Consumer Protection (Amendment) Regulations 2014, consumers are entitled to a discount, depending on the seriousness of the unfair commercial practices, to a refund of anywhere between 25% and 100% of the purchase consideration. Further consumers are also entitled to damages to compensate them for any breach of the regulations.
The Misrepresentation Act 1967
A common complaint made by Athena’s clients is that they were misled during the sales process before they agreed to purchase their timeshare. Often the sales agent will say anything to close the deal, promising the following: –
• That the timeshare will increase in value
• That the timeshare is highly marketable and therefore can be easily re-sold
• That you can simply stop paying the maintenance fees and walk away
• That you are investing in your holidays and “beating inflation”.
In law, any of the statements set out above may be misrepresentations. In the UK the law of misrepresentation is codified in the Misrepresentation Act 1967 (“the Act”).
A misrepresentation is an untrue statement of fact or law made by Party A (or its agent) to Party B, which induces Party B to enter a contract with Party A thereby causing Party B loss. An action for misrepresentation can be brought in respect of misrepresentation of fact or law.
There are three types of misrepresentation:
Fraudulent misrepresentation: where a false representation has been made knowingly, or without belief in its truth, or recklessly as to its truth.
Negligent misrepresentation: a representation made carelessly and in breach of duty owed by Party A to Party B to take reasonable care that the representation is accurate. If no “special relationship” exists, there may be misrepresentation under section 2 (1) of the Act where a statement is made carelessly or without reasonable grounds for believing its truth.
Innocent misrepresentation: a representation that is neither fraudulent nor negligent.
The remedies for misrepresentation are rescission and/or damages. For fraudulent and negligent misrepresentation, the consumer can seek rescission and damages. Please note that the consumer may have to prove misrepresentation. TESS law can assist as it has many clients in a similar position, and therefore has similar fact evidence that can potentially be used to assist your case. A full copy of the Act can be read here:
There are approximately 300,000 timeshare owners in the UK. Over 62% of these timeshares relate to properties within the jurisdiction of Spain (including mainland Spain and the Canary Islands).
The Spanish Supreme Court has recently handed down significant judgements.
In the cases of Maria Rosa -v- Anfi Sales SL) and (Eusebio & Antonieta -v- Banco Guipuzcoano SA) the Court held that both agreements were void ab initio. In the Maria Rosa case, this was because the terms of her agreement were contrary to provisions under Spanish National Legislation Law 42/98 – specifically because the term of the agreement was not limited to a maximum duration of 50 years. In the Eusebio case, the agreement was held to be void because it failed to specify the particular property comprising the subject of the agreement (again contrary to Law 42/98).
These cases are of particular interest to timeshare owners. The Maria Rosa case confirms that timeshare contracts in perpetuity are unlawful under Spanish Law. The Eusabio case confirms that “floating” timeshares is void for uncertainty. The impact of these decisions is significant as it enables consumers to pursue the following claims: –
1. Termination of their timeshare
2. Recovery of the Purchase Price
3. Recovery of double of any money paid during the first 3 months of the date of the purchase contract.
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Posted on: 7th January 2020