1.- The second transitory provision of the former Spanish Act of 1998 on Timeshare or Rotational Enjoyment (Act 42/1998 of 15th December) established the obligation for all timeshare systems in existence prior to its coming into force to be adapted to its own provisions “insofar as such an adaptation is consistent with the legal nature of the rights previously created”.
The way in which the verb “to adapt” was used in this Act was, in my view, inevitably confusing as to the legal implications of such an obligation. If the first meaning of the verb to adapt in Spanish is to “accommodate, adjust to something else”, we have to conclude that any pre-existing system should by virtue of the said adaptation have accommodated its legal structure to the new right of “rotational enjoyment”.
However, such an adaptation, which in a literal sense involved changing the nature of the pre-existing right into the new right of “rotational enjoyment” created ex novo by the Act itself, was only one of the possibilities which the word adaptation includes, as it also included the possibility of:
–not changing anything with regard to the legal nature of the pre-existing right albeit an obligation existed to “make it public” by execution of a public deed which should explain the kind of right involved, the legal nature which the said right preserved and an express choice for its duration to continue to be the same for which it had been originally created or shorter. Such a deed of adaptation was then registered at the Land Registry, to which all interested parties have public access, thus providing the protection before third parties which such a registration involves according to Spanish Law; or
-adopting a mixed solution: to adapt some rights (generally those not yet marketed) to the new legal definition and simply make the pre-existing system public with regard to those already marketed.
The deadline for such an adaptation to be carried out was TWO YEARS from the coming into force of the Act. Nothing prevented the adaptation from being carried out after the said deadline, provided that evidence of its pre-existence was furnished by any means admitted in Law, albeit this involved the imposition of legal sanctions including the possibility of demanding adaptation through the Courts (final paragraph of 2nd Transitory Provision).
Experience regarding such a mandatory “adaptation” tells us that only in very few cases were pre-existing systems adapted and therefore changed from a legal point of view into the new rights of “rotational enjoyment”. The same experience leads us to conclude that the adaptation merely consisted of giving public status to the nature and rules of the pre-existing legal system by way of a public deed and that, in most cases, a decision was made to “expressly maintain” its original duration, whether it was over 50 years or indefinite in the case of a Club membership which had been established without any time limitation or it related to multi-ownership or to full ownership by shares of a unit which, by definition, is a perpetual right.
2.- The new Act 4/2012, whereby Directive 2008/122/EC was incorporated into Spanish Law, also has a transitory provision which contemplates numerous rules and different possibilities for adaptation, which in this sense entailed a continuation of the possibilities offered or, where applicable, demanded, by the former Act 42/1998.
But what Act 42/1997 contemplated as an obligation is only an option in the new Act 4/2012 and, while there were three adaptation rules in the former (adaptation as the transformation of a pre-existing right into a right of “rotational enjoyment” defined by Spanish Law, as the mere publication of the pre-existing right without altering its legal nature or as a combination of the two, i.e. with the transformation of the non-marketed rights and the mere publication of those already marketed), the regulations currently in force offer a wider range which, in summary and stressing the fact that this is the undersigned’s interpretation of the current regulations, is as follows:
The rights which existed prior to Act 42/1998 (and, therefore, the legal scheme by which they were created) and were by the transformation of their very nature adapted to the rights of rotational enjoyment (whether they were limited rights in rem or leasehold rights) may, if considered suitable, be adapted again to any of the modalities recognised by the new Act 4/2012.
- Similarly, the pre-existing rights which were merely made public can be so published again, if considered suitable (as this is not mandatory as aforesaid), in order to be adapted to any one of the said modalities.
- Special mention should be made to the possibility similarly to adapt to the new Act 4/2012 the contracts and legal systems which, although in existence before the 1998 Act, were never adapted to Act 42/1998, although a time limitation is established on the duration of these rights whereby their lifetime may not exceed that established as non-adaptation penalty in the former Act, i.e. their lifetime may not be in excess of fifty years from the date on which the said rule came into force (5th January 1999) even if they had been originally constituted for a longer period or their duration was indefinite.
It is interesting at this point to analyse what will happen after the elapse of the maximum 50-year period with the legal systems which existed before, and were never adapted to, Act 42/1998, even if only in respect of the two majority systems – i.e. the personal rights system subject to non-Spanish Law called Club/Trustee and the functional community of property system subject to Spanish Law called “multi-ownership”.
My view is that, in the first case, the Club (and, therefore, the system) must be dissolved or liquidated unless an extension thereof is agreed by its members, although this would not be binding on the dissenting members who may always choose to leave the Club, obviously also in this case with the possibility of the relevant civil sanctions being applied.
In the second case, the functional multi-ownership community would be terminated by operation of Law and it would become an ordinary community of property, which would entail the application of the regulation provided for by the Civil Code whereby the allocation of annual occupation periods inherent in each owner’s undivided share would disappear. It is questionable whether each member would be entitled to a preferential right of purchase in the event that any owner decided to transfer their share, or that each member would be entitled to apply for the division of the communal thing (if capable of being divided) or the sale thereof for the proceeds to be distributed in proportion to the share owned by each member, as this would be a functional community which is characterised by the purpose of the property. I understand that, on the basis of this interpretation, such rights of division (which on the other hand is physically impossible) or pre-emption would not apply, but this is open to debate.
From the foregoing and the literal wording of the Sole Transitory Provision of Act 4/2012 can be inferred that all systems in existence before the enactment of the new Act 4/2012 can be adapted to it, whether by its mere publication or by transforming its very legal nature “in any one of the forms” recognised by the said Act.
Therefore, in order to study the content of the adaptation to the new Act where the legal nature of the pre-existing right is transformed, the various forms of adaptation admitted by the said Act need to be specified.
The modalities expressly admitted in Title II of the Act are obviously two: the limited right in rem of rotational enjoyment defined by Spanish Law and the personal-leasehold right of rotational enjoyment.
But also, in my opinion, Section 23.8 recognises the validity of any other contractual modality of creation of personal rights or rights of an associative nature with the same objective scope, constituted under and on the terms provided for by the regulations of the EU and, particularly, in accordance with the Rome I Regulation, i.e. personal rights subject to non-Spanish Law.
This rule, therefore, would indicate that voluntary adaptation to Act 4/2012 of systems constituted before its coming into force (whether or not before the 1998 Act) may transform the pre-existing system in one of the following ways:
–Personal right in rem systems, whether or not subject to Spanish Law, in existence before the enactment of Act 42/1998, or personal right systems subject to non-Spanish Law constituted before or after the said Act under the 1980 Rome Convention (and, where applicable, the EU Regulation ROME I), can be transformed into legally-defined right of rotational enjoyment systems, of an in-rem or a leasehold nature, but may in no event become personal rights subject to Spanish Law (due to their lack of legal recognition) which, on the other hand, seems incomprehensible.
- Thus, the predominant pre-existing Club-Trustee system or any other system created under international rules may be transformed into a right of rotational enjoyment system as defined by Spanish Law, in the form of a limited right in rem or seasonal leasehold, or into any other kind of legal system subject to non-Spanish law if so allowed by the latter.
- It is more questionable to determine whether the system that was usual in Spain before the 1998 Act (i.e. multi-ownership or functional community), in existence before Act 42/1998, can be adapted following the same transformation as aforesaid, that is, even becoming a personal right subject to non-Spanish law. I understand that it cannot as, owing to its in-rem nature, the Spanish rule applies (lex rei sitae – law of the place where the property is situated) and neither 1980’s Rome Convention nor the Rome I Regulation are applicable.
–The right in rem of rotational enjoyment defined by Spanish Law, whether created as a new right following the coming into force of Act 42/1998 or by modification of existing rights in accordance with the latter, may also be transformed into the personal-leasehold right of rotational enjoyment defined by Law, and vice versa.
But such legally-defined rights of rotational enjoyment, where they are of a personal nature, may also be changed into any “personal” right subject to non-Spanish law. The most controversial issue will be the position of those who dissent from such an agreement or fail to attend: The rules and regulations of the modified system will apply in any event.
I am aware that my interpretation of the latter possibility, which I believe the legal regulation allows, may not be shared, but I must stress that its literal wording does allow it as there is no express or tacit prohibition to do so and, more importantly, there does not seem to be any valid reason to prohibit it.
–There is one final possibility, i.e. adapting the “marketed” rights only to the extent that they are made public or not to making them public at all while the legal nature of the “non-marketed” rights is transformed in the manner allowed by the former Act 42/1998. The latter Act having been repealed, there is no specific legal coverage to do this, but I consider that it is not in contravention of any law either.
All of the above, as has been pointed out, is without prejudice to the mandatory observance of the legal regulations applicable to each system and of its own rules in passing the transformation resolutions and without prejudice to the limits set by the respect of the rights acquired by each holder of a specific right.
Francsco J. Lizarza (All credit given to Mr Lizarza)
13th of May 2013
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