RDT Abogados continue to assist many clients in cancelling timeshare or holiday club contracts.
These contracts have gained a rather deservedly bad reputation for a number of reasons.
What is exactly a timeshare contract?
It is a contract by which the buyer acquires the right to enjoy a property for some time every year (usually one or two weeks) against a one-off price and payment of a portion of the maintenance costs of a tourist development.
Is it legal? If yes, why does it have such a poor reputation?
Yes, it is legal and thus regulated in Spain and also in the EU Directives.
The problem is that it has the potential to be used to commit abuses against buyers, and also fraud.
As its object is a non-tangible asset – some time in a summer resort in a foreign land -, it is fairly easy to use it to commit fraud.
To recap: the contract itself it´s absolutely legal; only when it´s used to commit fraud and scam it is illegal.
Are there similar schemes?
Yes, the holiday or discount clubs.
These are schemes by which the buyers or member do not buy a certain time in the resort, but rather they pay an annual fee and then they get discounts when booking holidays in the company´s clubs and resorts.
It is important to know exactly which sort of scheme you are entering into and to understand your rights and liabilities to avoid legal issues later on.
What rights do consumers currently have with regard to purchase timeshare contracts and what specifically can I do to avoid issues?
Companies offering timeshares must give the buyers the following protection and rights:
A right to a 14-day cooling-off period counted from the day the buyer signs the timeshare contract.
During the cooling off period, buyers have the right to cancel the contract without giving any reason and – importantly – at no cost.
Sellers are strictly prohibited from taking deposits from buyers during the cooling off period.
This is one of the more important points because some sellers try to get as much money in advance and try to draw attention away from the cooling-off period until it elapses and the contract is in place.
The buyers must not feel pressured into signing anything, much less to pay for something while they are considering the purchase.
Sellers have to provide purchasers with a brochure and as much information on the product / shares if / when requested.
The brochure must contain information about the timeshare property. The consumer can choose between the language of the country where the property is, or the country of which he is a national.
The costs of the transaction must be clear, not just the price paid for the share but also regular payments such as maintenance, administration or management fees, etc.
The buyer must have full knowledge of all the liabilities of his long term commitment.
The consumer can also choose in which language he/she would like the contract. Sellers must provide consumers with a contract in writing. It must also be clear in the contract which company is selling the shares and if there is a broker intervening in the transaction.
It is recommended that the buyers show their solicitors the contract before signing it.
All seems very simple, where is the catch normally?
The basic scam is as follows: A broker introduces themselves as part of a group to an interested buyer.
Sometimes they show the potential buyers the development. Then they tell the buyers that to purchase a time slot within the year they must sign the contract as soon as possible and pay a deposit, with the remainder of the balance due later.
Often they manage to obtain large amounts there and then from the client via a credit card.
However, the buyers do not notice that the contract is made in the name of the broker, which refers the transaction to another company, which in turn refers to another one, and so forth.
The ultimate “timeshare” company happens to be an off-shore company, impossible to trace, so the result is that it is impossible to get a refund for the deposit.
Another abusive situation is that in which, even if the transaction is genuine and the buyer is actually buying time in a real development, the company issuing the shares conceals numerous costs and monthly dues that the buyers must pay later, but of which they are not made fully aware at the time of signing.
Once a buyer has a genuine timeshare in place there are other abusive situations that can come to light, such as when wishing to sell the timeshare.
The purchase contracts must include a clause by which the share issuer will repurchase the shares from the original buyer in the event that they are no longer desired.
On many occasions the buyers find that they are stuck with the shares for life, as the company wouldn´t buy the shares back and they are impossible to sell on the open market.
It all looks very complex, should I stay away from these schemes?
Yet again: no. The schemes are perfectly genuine but it is necessary to be aware of abuses and possible scams.
I currently find myself in one of the situations you´ve described above: I ´ve owned shares for a while and now I want to sell them but the company won´t take them, what can I do?
You should consult a solicitor.
Most of the contracts agreed during the Spanish tourist boom in the 2000 were abusive as they regularly included very long terms (or virtually for life: impossible to cancel), or related to “floating weeks”( i.e. giving the buyer the right of a week during every calendar year but without declaring which one) often with hidden fees and charges.
In all these situations we have managed to achieve favourable outcomes for our clients, even cancellations when desired.
If you have any specific timeshare issues you wish to discuss with a legal professional please don´t hesitate to contact us today for a no-obligation consultation.