With every timeshare investment we encourage you to seek legal advice, ensure that you understand what you are investing in and more importantly, ensure that you understand your legal obligations.
The latter point is especially important when registering timeshare in Belize. This is because, if you do not follow the correct and legal process when registering, your rights may vanish if not done so.
In a case of Lincoln Cane Ventures LLC v British Caribbean Bank International Limited (held earlier this year),the Supreme Court highlighted the need to comply strictly with the law and essential legal requirements when investing in property or associated properties rights abroad.
The court found that many United states citizens who had purchased timeshare interests in a residential resort pursuant to membership agreements could not exercise their purported rights in priority of a bank’s mortgage interest on the property. This was primarily because they or the resort had not registered their timeshares or paid the required stamp duty on their membership agreements.
Facts
As tourism plays a significant part in the Belizean economy frequently visitors invest to Belizean acquire timeshares. The residential resort of Sueño Del Mar Limited is just one. The US citizens entered into membership agreements with Ambergris Caye for the purchase of timeshare interests. That said in not registering the timeshare they avoided paying the stamp duty fee. They claimed it minimises cost and as a result of that cost saving exercise it put those very timeshare at risk of being foul of the law.
In this example A separate company, Sueño Del Mar Holdings LLC, obtained loans totalling US$4 million, which were secured by various mortgages from British Caribbean Bank International Limited, for which Ambergris Caye (the seller) stood as guarantor. The bank was unaware.
“In July 2010 the bank demanded repayment from Sueño Del Mar Holdings and Ambergris Caye. Both companies defaulted on payments and the bank appointed a receiver of Ambergris Caye. Four months later, the receiver informed the claimants that the bank did not recognise their interests or rights as timeshare members. By March 2011 the Sueño Del Mar Ltd property was advertised for sale and the claimants were prevented from occupying the premises.”
The investors initiated proceedings against the bank and the receiver, seeking declarations that their membership agreements were legally binding and that they would be recognised in rem and enforced by the bank, receiver and any subsequent purchaser or owner of Sueño del Mar Ltd pursuant to the Timeshare Act 2007. In short the timeshare investors lost the lot.
As said the claimants did not obtain any property interest by way of the membership agreements, but rather a revocable licence to use and occupy the premises. The claimants did not pay a purchase price, but gave a 30-year unsecured, interest-free loan to the developer, which would be returned in full provided that membership continued and was in good standing.
It was held that:
“timeshare rights available under the act cannot be acquired by membership agreements alone. Failure to register such timeshare interests would deprive the claimants of any protection afforded to them under the act. The only way to achieve such rights was through the registration of Sueño del Mar Ltd as timeshare accommodations.
The act came into force in 2009, in order to:
“regulate the provision of timeshare accommodation in Belize; to provide for the registration of timeshare accommodation developers, to provide for the payment of licensing fees for timeshare accommodation; to provide for the payment of occupancy tax by the holders of timeshare rights; and to provide for matters connected or incidental thereto.“
The act not only regulates registration and payment of taxes, among other things, but also provides a guarantee to potential investors that the premises meets required legal standards. It allows third parties (eg, lending agencies and insurers) to determine the extent of the responsibilities that they undertake when engaging in business with a timeshare property.
Specifically, Section 5(1) of the act states:
“5. (1) No premises shall be leased, sold or used for the purposes of a timeshare accommodation unless such premises and the developer are registered under this Act and a licence is obtained by the developer from the Registrar in that behalf.
(2) An application for registration in respect of any premises used for the purposes of timeshare accommodation on a day this Act comes into operation shall be made within thirty days of that date.“
These sections mandate that any premises desirous of becoming a timeshare accommodation must be registered before they can attain such a status. Section 5(2) makes this a strict requirement, since a deadline was given for application for registration of premises which acted as timeshare accommodations before the enactment of the act.
The court stated:
“if subsection (2) is complied with and the application is approved, then those premises which formerly were only being used as timeshare accommodation would then achieve the status of a timeshare accommodation for the purposes of The Act.”
The act was passed to regulate and eliminate the dangers of agreements such as the membership agreements used at Sueno Del Mar, but in order to acquire that protection, it was compulsory that membership agreements be registered. Failure to comply with the act meant that the status of timeshare accommodation was never achieved and consequently the claimants were unable to assert any rights in priority to the bank’s mortgage interest.
The culpability lies not only with the claimants in signing suspect membership agreements, but also with Ambergris Caye:
“However, the onus to perform the contracts entered into with the Claimants remains with The Company. It is The Company which ought to have done all that was required, to ensure that it fulfilled its contractual obligations including, if necessary, full compliance with The Act once it was passed. It was always open to the Claimants to seek the court’s help in enforcing the proper performance of those agreements. They did nothing.“
Apart from failing to register the agreements for timeshare purposes, stamp duty was not paid on the membership agreements. The court held that the Stamp Duties Act required ad volarem stamp duty to be paid on the membership agreement, and not doing so “allowed the Company to keep private that which the law demanded to be public, to defraud the revenue and consequently to deny themselves even the rights they contracted for”.
For more information regarding this article or assistance in any other timeshare related issues please contact the TCA on 01908 881058 or email: info@TimeshareConsumerAssociation.org.uk