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- Timeshare -
Giving the Consumer a Fair Deal
Paul Edgar
Micallef
the eu timeshare directive
Timeshare has
now been operating in Malta since at least the
mid-eighties, contributing substantially to the tourism
industry. Yet notwithstanding it was only last December
that specific regulations on timeshare were published
apparently motivated more by the necessity of conforming
to the EU acquis than of ensuring that consumers are given
a fair deal. If anything from a consumer point of
view, the gradual adoption of the European Union acquis
has the benefit of paving the way for the enactment of
long needed rules to regulate timeshare in Malta.
The EU
directive on timeshare (94/47/EC) came into being on the
26th.October 1994 at time when most EU member
states had no specific legislation on timeshare. It is
important to emphasize that this is a minimum
directive, and that therefore EU member states may
vary from the Directive provided that any variations
from the Directive give consumers a higher level of
protection than the minimum established in the Directive.
Otherwise the Directive does not admit of any variations
from the norms established in the Directive. This point
regrettably is not always sufficiently understood. Many EU
consumer policy directives – and timeshare is the
classical example – are the end-result of long painstaking
negotiations aimed at reaching a compromise between the
various interest groups and at times even between member
states. Hence to take again the example of timeshare, at
one stage the EU Commission proposed that the cooling off
period during which the consumer can cancel a timeshare
contract should be of 14 days, whereas conversely in some
quarters there was outright resistance to any cooling off
period. Eventually after some hard bargaining a minimum
period of 10 days was agreed to.
In
substance the Directive deals with two aspects namely:
· that
of information whereby the buyer must both prior to and
during the contact be given certain details to enable him
to make an informed purchase; and
· the
right of the buyer to withdraw from contract during a ten
day cooling off period commencing from the signing of the
contract. In doing so the buyer need not give any reason
whatsoever.
It is
pertinent to note that in October 1999 the EU Commission
made a report on the implementation of Directive by member
states, submitting various proposals with view to
improving upon the present Directive. One thing which
clearly emerges from this Report is that the Directive
fails to address certain issues, identifying various
ingenious ways that have been devised to overcome the
norms established in the Directive. On the positive side
it would appear that the Directive prompted members states
to regulate this industry to the benefit of consumers and
honest timeshare operators alike.
the timeshare regulations – the salienet features
Last December Government
enacted the Timeshare Regulations abiding strictly with
the minimum requirements of the EU Directive with the
exception of the norm binding the timeshare seller to
reserve a minimum of seven consecutive days in each
calendar year for the upkeep of the timeshare property – a
measure incidentally inspired by Portuguese legislation.
The
Regulations apply to timeshare contracts concluded for a
minimum period of 3 years, whereby the consumer on payment
of a global price acquires a real property right or a
right relating to the use of one or more immovable
properties for a specified or specifiable period of year,
which period must not be less than one week.
An
important feature of the Regulations is the emphasis on
the Information that must be provided by the timeshare
seller to the consumer. Regulation 4.1. binds the
timeshare seller to provide any person asking about a
timeshare property with information which must include the
following:
Ø
a
general description of property
Ø information
stated in the First Schedule to the Regulations including:
· the
identity/domicile of parties in particular about the legal
status of seller at time of contract and identity of
actual owner,
· the
exact nature of right which is the subject matter of
contract,
· where
the property is determined, an accurate description and
its location,
· where
property is still under construction, the state of
completion and a reasonable estimate for its completion
including a guarantee with regard to its eventual
completion,
· the
services provided such as supply of water, refuse
collection, lighting to which buyer will have access,
· what
common facilities are available,
· the
price to be paid by buyer and an estimate of amount to be
paid with regard to the use of common facilities,
· whether
it is possible to join a scheme for the exchange or resale
of contractual rights purchased,
· details
about the right to cancel or withdraw and the person to
whom letter of cancellation is to be sent, and
· the
date and place of when and where each of the parties sign
the contract.
The
actual timeshare contract must be in writing and must
include all the terms stated in the First Schedule to the
Regulations including information about the right of the
buyer to cancel the contract and a clear indication of the
person to whom a letter of cancellation should be
addressed to. Furthermore regulation 7.4. expressly
requires that a timeshare contract must have a clause in
the form set out in the Second Schedule to the Regulations
whereby the buyer is informed of such a right. Equally
important the Regulations expressly provide that the buyer
may choose to have the contract written in a language he
understands.
Regrettably however recent amendments to these
regulations have strangely eliminated the
requirement (and the regulations as published last
December) that such a clause be in bold and prominent
print. This frankly is an invitation for the
unscrupulous to print such clauses in small print safely
tucked away in some obscure corner of the timeshare
agreement. In the same breath the competent authorities
also eliminated the requirement on the timeshare
salesperson to advise buyers of their right to cancel.
An
important norm introduced under these Regulations is the
right of the buyer to cancel the contract within 10 days
of both parties signing the contract. If the contract does
not provide any of the information required under the
First Schedule to the Regulations, then the buyer has up
to 3 months from the date of the signing of the contract
during which he may cancel the contract. If the
information is provided during the 3 months period, then
the 10 days cooling off period will start to commence from
when the information is provided. If the buyer cancels
notifying in writing by sending a registered letter and
the notification is sent before the expiry of the ten day
period, then there is a presumption at law that the buyer
cancelled within the ten day cooling off period. This
irrespective of whether the timeshare operator actually
received the notification within or after the lapse of the
10 days cooling off period.
The
buyer is not required to pay for any costs if he decides
to cancel the contract in accordance with his right to do
so under the Regulations and the timeshare seller or his
agent cannot accept any advance payment from the buyer
prior to the lapse of cooling off period. Furthermore the
buyer cannot renounce to any of the rights that he has
under the Regulations and any clause to this effect does
not bind the buyer.
An
important measure which again has regrettably been changed
as a result of the recent amendments to the Regulations
relates to the law applicable to the contract if the
immovable property is in Malta. The previous norm was
clear on this point - if the contract relates to property
which is situate in Malta and the contract was agreed to
in Malta then Maltese law applies and any clause to the
contrary is null and void. This norm has now been replaced
with a new norm which substantially provides that whatever
the law applicable to the contract – it may for example be
the law of the Bahamas – if the immovable property is
situate in Malta then the timeshare regulations shall
apply. This unfortunately still leaves the door open for
the inclusion of clauses stating that the agreement is
regulated by the laws of some remote minute island which
no one ever heard of. Regrettably there have been many
instances where clauses were inserted stating that the
timeshare contract is regulated by the laws of other
countries – notably minute Caribbean Islands. One
particular instance which comes to the mind was the case
involving an Irish couple who where party to a contract
which was regulated by (of all places!) the laws of the
British Virgin Islands and where the other contracting
party was a company registered in the Isle of Man. I
retain that in this context at still Government must be
firm and clear. Timeshare sellers must be dissuaded from
evading the applicability of Maltese law by the simple
ruse of inserting a clause where the buyer unwittingly
accepts that the contract be regulated by the laws of some
remote jurisdiction. The revised version though better
than nothing may still give rise to problems to the
detriment of consumers.
proposals for amendments and alternative means of redress
The
Timeshare regulations though a step in the right
direction, leave room for improvement. First and foremost
we should not simply content ourselves with the
implementation of the bare minimum required under the EU
timeshare directive. The guiding principle should be to
have the place measures that guarantee that consumers are
indeed given a fair deal. This should be the first
priority of the Maltese legislator. Doing so will ensure
that we have in place a timeshare industry which whilst
satisfying the demands of consumers whether Maltese or
foreign tourists, is able to cope successfully in an
increasingly growing competitive market. Lack of adequate
regulation can only in the long run be detrimental to the
timeshare industry itself.
Regrettably there are some in the timeshare industry who
as a matter of course resist any form of regulation. This
with all due respect, is a shortsighted attitude which is
counter-productive. Many of those involved in this
industry do give the consumer a fair deal. The problem is
that there are those few who time and again fail to give
consumers value for money with the end result that the
industry in general is given a bad name. We fail to
realize that tourists who have been on the receiving end
of a bad deal, will inevitably spread the word round with
dire long term results for tourism in Malta. Hence the
need for norms which provide consumers with effective
remedies.
The
Timeshare Regulations whilst addressing various matters,
fail to tackle certain problems which beset the
local industry. Hence the Regulations ignore what is
possibly the main cause of complaint among tourists – that
relating to the aggressive selling tactics used by certain
timeshare salespersons. The 10 days cooling off period
is too short a period considering that in most
instances tourists are here for a few days and may need
more time to seek proper advice. A 20 day cooling off
period would have been more realistic.
There is
moreover no protection for the consumer if the
timeshare operator goes bankrupt. One must remember
that timeshare rights are in many instances sold for
periods ranging from ten to thirty years with the consumer
paying in advance for such a right. What is the position
of the consumer if say after five years due to financial
difficulties of the operator, the property is no longer
available to the consumer – and here we must remember that
in most instance we are dealing with a consumer who
resides in another country. The Regulations fail to
address such a situation. Clearly a measure must be
introduced binding timeshare operators to give some form
of guarantee or insurance to protect consumers in such a
circumstance. Such a measure might be combined with the
introduction of some form of licensing for those who
operate in this industry thereby ensuring that certain
minimum standards of conduct are adhered to as a condition
to operate in the timeshare business.
Finally some thought should also be given to
self-regulation. Regrettably self-regulation in Malta has
rarely ever succeeded. Effective and serious
self-regulation would be beneficial to all concerned – the
consumer, the honest timeshare operator and Government.
The timeshare industry should in its own interest
seriously consider such an option. Most operators I am
sure are there to give a good product to their clients. It
is therefore in their own interest to ensure that their
clients have access to an effective and fair means of
resolving any problems that may arise.
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