Welcome to this edition of Inside Timeshare, today we have a look at Marriott and the continued litigation they are facing over their sale of illegal contracts under Spanish Timeshare Law. These cases have appeared on our pages over the past couple of years with Marriott losing in every one of them. The latest being published on 16 March, this case was also one in which not only Marriott appealed to the High Court but also the lawyers on behalf of the clients.
Back in 2018, Marriott admitted they were losing in the Spanish Courts, this was made public in a report published by Market Exclusive, (see links below). As a public company, Marriott has a legal obligation to publish and inform their shareholders of information regarding the company, its profit and losses and any risks that they foresee in the future.
One of these risks is of course all the court cases which they are being subjected to in the Spanish Courts. Like all the other timeshare developers, Marriott continued to sell their timeshare product as they did before the new laws to protect consumers came into force in January 1999. A move that all the timeshare companies are now having to address in the courts.
In the latest report to shareholders, Marriott has once again addressed this point, under the heading of Risk Factors and the heading:
“Spanish court rulings invalidating timeshare contracts have increased our exposure to litigation and such litigation may materially adversely affect our business and financial condition.”
It goes on to say:
“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 the requirements prescribed by Spanish timeshare laws enacted in 1998”.
Although they acknowledge the fact, they still believe that the laws as being interpreted and ruled on by the Spanish Supreme Court are wrong. The next part of the above states:
“Even if the structure was lawful prior to 1998 and adapted to the 1998 laws pursuant to mechanisms specified in the 1998 laws”.
For those of you who are confused by this, it is actually very simple, when the new laws on the sale of timeshare and the protection of consumers came into force, it was for all timeshare contracts sold after 5 January 1999, not those sold before. There was what was known as a “deed of adaptation”, this basically meant that contracts sold before this date were lawful and legal. After all, you cannot legislate and prosecute for something which was done before a law came into force.
The problem with the “deed of adaptation” and Marriott was not the only developer to do this, they all believed that it also covered all timeshare contracts as the resorts were built and running before the law changed. This they believed would allow for the same contracts to be sold and since then they have been. Unfortunately for them, the tide has turned, as a result of cases being brought to court and especially those cases taken to the Supreme Court by Canarian Legal Alliance, that loophole has been closed.
Returning to the Marriott report which has also been submitted as required by law and published by the Securities Exchange Commission, It is clear that Marriott still disagrees with the law in Spain. They acknowledge that there has been a significant increase in the number of lawsuits being brought by members of these Spanish timeshares, they have also inferred that it may have a detrimental effect on their business:
“If additional owners at our resorts in Spain file similar lawsuits, this may result in the invalidation of those owners’ timeshare contracts entered into after January 1999; cause us to incur material litigation and other costs, including judgement or settling of payments; and materially adversely affect the results of operation of our Vacation Ownership segment, as well as our business and financial condition”.
In other words, they know it is going to cost them dearly and they must acknowledge this fact to the shareholders. After all, it is their “profit” that is at stake!
The report also goes to say that it is affecting other timeshare developers as well, pointing out that this may also lead to the reduction of the number of timeshare resorts located in Spain which also means less inventory for companies such as Interval International.
They finish this segment of the report with a very telling statement, publicly announcing that they and other developers disagree with the laws enacted in Spain. They go on to say:
“Participants in the vacation ownership industry disagree with these rulings and are seeking to introduce legislation that will implement a more balanced approach”.
A more balanced approach, hang on a minute, have they not had over 20 years to conform to the law, yet continued to act as before believing they were untouchable and above the law?
The one true point they did state after that sentence was:
“However, this new legislation may not be enacted”.
Now considering the history of timeshare sales in Spain, very few believe that the timeshare industry will have any sway on changing the legislation to be in their favour.
They conclude this segment of the report with:
“The timeshare laws, regulations and policies in Spain may continue to change or be subject to different interpretations in the future, including in ways that could negatively impact our business”.
Well, I very much doubt if the 130 rulings of the Supreme Court on timeshare, thereby setting the law in place are going to change in their favour. At least they have acknowledged the fact to their shareholders that it is likely to have a negative impact on their business in Spain.
It should also be pointed out that although Marriott has admitted losing in the Spanish Courts, they do appear to be denying the fact that they are losing in every single case, including appeals to the High Court.
The last case we highlighted was on 16 March, in this case, a German Client of Canarian Legal Alliance won his case in the Court of First Instance, this contract contained the “floating weeks” system. Marriott decided they would appeal the ruling from the Court of First Instance to challenge the illegality of floating weeks.
Canarian Legal Alliance immediately launched their own counter appeal, this was a result of the judge in the original trial not acknowledging the illegal taking of deposits within the statutory cooling-off period. Any amount taken within this period is to be paid back in double, the court, in this case, failed to do so.
These points have been consistently ruled upon by the Supreme Court making this system along with points illegal in timeshare contracts and the repayment in double of any illegally taken payment.
The High Court dismissed the appeal from Marriott and confirmed that floating weeks are illegal under Spanish Timeshare Law and in accordance with the rulings of the Supreme Court. The High Court did however find in favour of the Canarian Legal Alliance appeal and ordered the repayment of the deposit taken in double.
It is also very interesting that although Marriott lodged the appeal with the High Court, they did however voluntarily pay over 48,000€ into the court as ordered by the Court of First Instance. So we do have to ask the question: If they paid the court-ordered amount as instructed, why did they go through with the appeal, especially as all other appeals have been dismissed and the original sentences confirmed?
Your guess is as good as mine, we really do not have an answer to this.
If you would like further information on your timeshare contract and if it is illegal under Law 42/98, please use our contact page and Inside Timeshare will get back to you.
The original article from July 2018 and the Market Exclusive report
In the latest report, under Risk factors, you will find the report from Marriott to the SEC
Marriott Vacations Worldwide ( Ticker VAC ) 2020 Annual Report 10-K filing to the SEC
The full report from Marriott, the relevant section is on page 28.
Extract from page 28.