Firstly the taking of deposits within the 14 day cooling off period has been declared illegal, it has also been clarified that this includes those taken by a third party. Many companies used this method to get round the EU Directives which stated that no deposit was to be taken, many had the deposit paid to a trust company, thereby being able to state that they did not take deposits.
Why were deposits taken within this period outlawed?
Many of us are familiar with paying deposits, there are many instances where this is done. For instance, when booking a table in a restaurant for a large party a deposit is usually required. This tends to be non-refundable if you don´t turn up or cancel with reasonable notice. Most of us would accept this as we have initiated the contract with the restaurant.
Another example is booking a holiday with the local high street travel agent, we pay them a deposit as a sign that we will fulfil our commitment to complete the booking. If we cancel then the deposit is again non-refundable.
So why is the taking of a deposit for timeshare or related products illegal?
The answer is very simple, in the above examples we the consumer have initiated the contract by approaching the company concerned. With timeshare you the consumer has usually been invited or even coerced, possibly by OPC´s with scratch cards into attending the sales presentation. You are then subjected to a lengthy and intense presentation, with the emphasis on signing up “today”.
The cooling off period was designed for you to then take away the contract and reflect on what you have purchased, then having the option to cancel within 14 days. Unfortunately, we are so familiar with losing the deposit like with the above examples, many do not cancel for fear of losing possibly a couple of thousand pounds. How many would have canceled had they not paid this money?
The Supreme Court and now many of the lower courts are ordering double the amount to be refunded. In some circumstances where certain documents or information has not been provided, this has been extended to 90 days with the courts again refunding double the amount.
The perpetuity contract was also declared illegal, the maximum time allowed for a contract in Spain is 50 years. The courts deemed that perpetuity was inherently unfair as it then past a debt (maintenance fees), on the children of the purchaser. As the children did not enter into the contract this debt could not be passed on. Well who would want to saddle their children with this?
Most people who first purchased timeshare did so on the basis of the fixed week. This was where you were given an apartment number and a specific week, also being registered with the appropriate authority. After all at that time you were buying a share in the property. You would then use this same week each year, if at your own resort you would also use the same apartment, this was the guarantee that you would get your holiday. Obviously you could use one of the exchange systems to go to another destination.
These fixed weeks were split into usually 3 seasons, high, medium and low. The high season was obviously the most popular as it tended to coincide with the major school holidays and the best weather i.e. summer. The low season weeks were the hardest for the resorts to sell, so they began the floating week system. With this you could choose any time of the year, but it was subject to availability, so there was no actual guarantee of being able to book when you wanted. It also allowed the resort to sell more than the 51 weeks in each apartment as these weeks tended not to be linked to a specific apartment number.
The points system is very much like the floating weeks, allowing for flexibility throughout the year. Again it allowed the resorts to sell more than the 51 weeks in each apartment, obviously the number of points needed to book depended on the season with high costing more. Again it is subject to availability, with many people unable to get their desired week or resort due to more owners than apartments available especially during high season weeks.
The Supreme Court decided that this was ultimately unfair on the consumer, as they were not getting what they thought they had paid for. Also with these systems, as there is no apartment allocated, the ownership reverts from you to the resort, thereby giving them free reign. This has been seen over the years with various companies converting fixed week owners to points. Once this happens you the owners effectively do not have a say in the running of your resort or how much the management fees should increase.
The EU Timeshare Directives and member states laws were put into place to protect the consumer, as well as ensuring everyone was singing from the same hymn sheet. The trade bodies such as the RDO should have ensured it´s member abided by them, unfortunately as we have seen this was not done. This has ultimately lead to the situation we have today of millions of euros being awarded to consumers by the courts.
Spain is at the forefront of this consumer protection, having put these laws into place in 1998, they became active in January 1999, (Ley 42/1998). It is not surprising Spain is the first in this field, after all it was getting a very bad reputation because of some of the antics by some companies in the past. Going on holiday to Spain became synonymous with being “kidnapped” from the street and then sold a timeshare at one of the infamous presentations. How things are changing!
If you require any information on this article or even want to know where you stand with regards to your contract, Inside Timeshare will be pleased to help, if we do not know the answer we will find out for you.