Inside Timeshare receives many emails asking the question “is my contract illegal and do I have a claim?” Usually, this has come about because they have been cold called by one of the many claims companies and so-called law firms which have proliferated over the past couple of years. Many have been told that they do have a claim when in fact they don’t, they either purchased before the change in the timeshare laws or they do have a legal contract. Today Inside Timeshare explains simply what constitutes a claim and what does not.
We start with when the timeshare laws came into force, the law was passed in December 1998 and came into effect on 5 January 1999. Before this date the contract duration was not an issue, perpetuity contracts were legal, after this date contracts for timeshare had to be of a duration of between 3 years minimum and 50 years maximum.
Many timeshare operators thought they could get around this using a “Deed of Adaptation” which they had to file with the Land Registry. Filing this deed of adaptation ensured that any sales made prior to 5 January 1999 were not impacted by the new laws. It only applies to sales made after that date. What the operators believed was that as the resorts were in existence before that date then they could carry on as before. They believed it only applied to new resorts or rather that is what their lawyers probably told them. Anfi tried to use this argument before the Supreme Court ruled that any contract signed after this date was subject to the law.
Another factor to be considered is the taking of deposits within the 14 days cooling-off period, which was forbidden by the new law 42/98, this also included the taking of any payment by a third party such as a trust. Some sales decks tried to get around this yet again by not showing a deposit on the paperwork but issuing an invoice for “accommodation”, usually when the purchaser was persuaded to move straight into the resort to secure the sale. The courts regard this as a payment to a third party.
In the beginning, timeshares were sold as fixed weeks and fixed apartments, you were guaranteed your week in the apartment assigned to your purchase. The resort could not “rent” it out, (unless banked) it was yours. They could also only sell 51 weeks in each apartment and each sale had to be registered with the land registry. The law recognised that these fixed weeks were a tangible and contained substance, you actually owned something.
We then saw the emergence of the points and floating weeks systems where you did not purchase a specific week in a specific apartment but became a member of a club. You owned nothing but membership with a right to use subject to availability. This is rather like joining a gym or a golf club, you pay your annual fees but you are not guaranteed the time when you want to use the facilities, it is subject to availability.
The Supreme Court ruled that the timeshare law 42/98 covered this system as it lacks anything tangible or anything of any substance, it was just a promise. They, therefore, ruled that these contracts infringed the law and the contracts are illegal. (This has also included Fractional and Company Participations)
With the points and floating week systems, the problem is a simple one, there are more members than weeks available, hence the most common complaint of all “nothing available for the dates you want”.
So to recap the basic criteria for a claim is:
- The purchase must have been made in Spain after 5 January 1999;
- The contract is over the permitted 50-year duration, i.e no end date is known as perpetuity;
- Contains floating weeks or points systems which also includes fractional and “investments” (this includes the participation scheme);
- Any payments made within the 14 days cooling-off period, this is extended to 90 if other infractions such as any of the above are present.
So if your contract does not contain any of the above then the chances are you will not have a claim.
It is also a fact that the contract must still be active and that all maintenance fees are paid to date. If the contract is cancelled then no claim can be made through the courts, they will not accept the case, this is a ploy that is being used by many of the dubious companies that have emerged. It is also a fact that any arrears in maintenance fees will have a very negative effect on any claim, the timeshare company will appeal to the court that there is no case as the owner/member is now in breach of contract.
It is also important to know that until the case is actually and formally accepted by the court then maintenance fees should be kept up to date. Again Inside Timeshare has received many emails where clients have been told to stop paying as soon as they sign up for a claim, this has then resulted in the timeshare company winning the case on the ground of breach of contract by the member.
What would be the claim?
- Double the deposits paid within the 14 days cooling-off period, the balance only if paid after, this is the minimum claim amount. If paid within the cooling-off period then double that as well. (All double if 90 days invoked), this is the maximum claim amount.
- Added to the claim will also be the return of legal fees (this is at the judge’s discretion), but also legal interest is paid from the time the case is presented to the court.
- Maintenance fees may be added to the claim, but again it is the judge’s discretion if the judge awards there return.
- Declare the contracts null and void.
So that is a simplified version of the law and what you would be claiming, each case is done on an individual basis and has to be presented to the court as such. There are no “class or group actions”.
It should also be pointed out that this only applies to timeshare purchased in Spain or its territories, other countries have their own laws and at present, we do not know of any cases in other timeshare hotspots such as Portugal or Greece. We do know however that there is a case being brought by Canarian Legal Alliance against a timeshare operator in Malta using a local law firm. More news on this as we get it.
If you think you have a contract which infringes the law and may be illegal, then please use our contact page and Inside Timeshare will get back to you. Know your real position and options before you sign with any firm that calls and makes the offer of a claim, doing your homework will save you money in the end.