First we begin by explaining what it is. The perpetuity clause or forever clause is an indefinite timeshare contract, meaning it has no end date. It was very popular in timeshare contracts in Europe and is still pretty much the standard way American timeshare contracts are written.
In America the concept of “forever” ownership is still sold as a positive benefit as the timeshare, paid for once, could be passed to your children’s children’s children and so on, unfortunately, with timeshare having little or no intrinsic value, all that is passed on is a liability not an asset.
In the case of an American purchase it was pretty much standard practice to add the potential beneficiaries to the purchase contract thus forcing an inheritance. Most people don’t realise they have inherited a timeshare as a timeshare owner can add anyone in their will or on the contract as a beneficiary. So what’s the problem?
UK Wills
In a normal will most husbands and wives leave everything to each other and upon second death the estate is normally left to their children in equal shares absolutely. On occasions specific gifts are noted such as mum leaving her jewellery to her daughter(s) or dad leaving his golf clubs to his son. Failing nominated gifts, everything else is distributed as per above, this could include a timeshare.
A legal stumbling point is that the law prohibits a “pick and choose” approach, you take all or nothing. This means you can’t take everything except the timeshare. Only if the timeshare is willed to a specific beneficiary can that person refuse to inherit, if so it passes to the remaining beneficiaries, if they refuse to take ownership then the timeshare remains an asset of the estate and it falls upon the executor to continue to pay annual maintenance fees and other costs associated until a disposal method can be found.
Maybe a sound idea would be for the parents to leave the ownership to a charity, unfortunately that will not work either. In our experience, no UK charity will accept a timeshare as a bequest because at the end of the day, as we stated above, all they are accepting is a liability, not an asset. That being the case, once again it’s the executor that has to sort out the mess.
European timeshare law
An unfortunate facet of current EU timeshare law is that it still allows for the issuing of timeshare contracts in perpetuity; however Spain has taken a different stance. Spain effectively outlawed timeshare contracts with terms of greater than 50 years with the enactment of Ley 42/98 on 5th January 1999 so any contract issued in perpetuity in Spain after that date is illegal.
Specialist Spanish law firms have been challenging these contracts and winning in the courts since the first test case in 2015. If your contract is in the EU, especially Spain it may be worth taking legal advice as not only will this solve the inheritance problem but also may compensate owners for the fact that their original contract was sold illegally.
American timeshare law
Unlike Europe there are no laws in place to govern the term of timeshare contracts and as such whether you purchased many years ago or today, the perpetuity clause is very much alive and well and a facet of most contracts. It’s possible to exit your ownership but this can be difficult and specialist assistance may be required.
It must also be remembered that if you are unfortunate enough to receive a timeshare as a bequest under no circumstances use it as this will make any exit much harder.
Our advice
Maintenance fees are the lifeblood of both resorts and developers so you can appreciate there is a general reluctance to let owners cancel their contracts. A perpetual contract is like a cash cow as it’s effectively immortal, given the opportunity, it will live forever.
As explained earlier. Often sold as a benefit, but in reality a potential rock around the neck. The law may well be on your side especially with Spanish contracts contracted after 5th January 1999.
Wherever you own if you have a perpetual contract this really needs to be sorted, rather than leaving the problem to your kith and kin. At TCA we can certainly advise you about this very penal clause and if required we can point you in the right direction if specialist help is required.
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