Spanish law 42/98 had a massive impact on the timeshare industry in Spain and the islands. On 5th January 1999 this law was enacted which in a nutshell put into place a number of much tighter rules relating to the selling of timeshare and the associated contracts. Although a complex piece of legislation the main thrust boils down to the following:
- You paid any money before the end of the Cooling Off Period
- Your membership contract was for over 50 years
- You were sold floating time or points
Although on the surface these points may not seem too draconian and in reality they weren’t, however for reasons unclear a vast swathe of timeshare sellers, resorts or developers failed to change their business model and contracts to fall in line with this new legislation. It wasn’t till 2015 that a lawyer acting on behalf of a Norwegian client read and studied her purchase contract, which was completed after the 5th January 1999, only to discover the contract was in contravention of many of the protections enacted by law 42/98.
Armed with this information the lawyer presented the case to the Court of First Instance in Gran Canaria. The lawyers duly began litigation and won the case at the Court of First Instance in Maspalomas. The resort took this to appeal; they lost the case at the High Court in Las Palmas. Once again the resort contested the decision, taking it to the Supreme Court in Madrid. After much legal argument the Supreme Court unanimously found in favour of the claimant, the estimated award, €40,000. TCA reported on the case at the time, our report may be read here. From that case forward the Spanish judiciary have been more than willing to hear similar representations and in most cases deliver judgements in line with the case mentioned above.
Shockwaves
Although these court cases cannot be seen as precedents, the stage was certainly set for many thousands of timeshare owners to state their case and have their day in court. With case after case being won, this sent shockwaves through the timeshare industry. With the exception of a few small resorts and developers, the majority of the industry was, to coin a phrase, caught with its trousers down. The question the industry was asking was can this be correct? Unfortunately for them the answer was yes. Other questions raised were; can we get out of this mess, is it all true, surely help is on hand, no no and no were the answers.
Enter the Resort Development Organisation (RDO)
The RDO is the self appointed trade body for European timeshare. Although it has no regulatory powers it does have a code of conduct which it expects all members to adhere to. One of the clauses, 3.5 states:
To comply with all laws, which apply to Member’s, business in the jurisdiction in which the Member operates.
One is therefore to assume that this also includes Spain and more importantly law 42/98 and the subsequent laws that followed. With this in mind we find it rather perplexing that instead of embracing Spanish law and chastising those members that blatantly acted against said law, the RDO choose to not only question its validity but also to impart what can only be described as misinformation. Below we reproduce consumer advice content from the RDO, after you read this we will comment:
You should, however, be aware that there are a lot of exaggerated and misleading advertisements on the Internet, TV and in newspapers about the rulings. Not all cases are won by the claimant and even when they are, claimants may receive far less than they were promised by the lawyers. The reality is that law firms are not telling their clients that the legal process is lengthy and time consuming. Nor are they telling them about the amount they are likely to recover or their future financial liabilities when taking their developer to court. Amongst other things:
- Claimants will have to pay their own legal fees – often upfront. If the claimant loses the case, the legal fees paid by them are irrecoverable and the Claimant will generally be ordered to pay the Developer’s legal costs.
If successful, the lawyer will often want a share of any monies recovered which can be as much as 30% - Claimants will need to attend court hearings in Spain and will incur flight and accommodation costs
- Claimants’ costs may increase if proceedings are drawn out, decisions appealed etc
- If the Claimant wins, they may still be ordered to pay the developer a fair market price for the holidays they have taken in the resort over the years
Fact or fiction?
It might be quite true that not all cases are won, that said, a proficient honest firm of Spanish lawyers will never take on a case that they expect to lose, that makes no sense at all. In relation to the amount of the claim, the lawyer will always claim for the entire amount spent on the timeshare relating to the illegal contract and will also ask for legal interest. The awards are at judge’s discretion and in rare cases the total may not be awarded but believe us when we say those cases are few and far between.
How long?
In relation to the length of time court cases take, again our experience is that lawyers rather overstate the time as against promising a short timescale. In most cases 12 to 18 months would be a fair estimate, most lawyers would agree, however, for complex cases the timescale may well be extended.
Costs
Naturally claimants will have to pay legal costs and globally lawyers ask for costs to be paid in advance. Realistically you cannot expect a lawyer to work in the preparation of a case, attend court on possibly multiple occasions and deal with all other matters relating to the case without being placed in funds. The comment that costs escalate is also, for the most part, not correct. From our experience the fee paid initially is final and covers all eventualities.
Sharing costs
Many claims companies offer a co funding position which means that they will take a lesser fee in exchange for a percentage of the compensation. This we see as a good thing, because any company that invests their own money into a potentially failed project certainly won’t be in business for long. Claims companies, together with their lawyers, who are confident of success will positively be prepared to negotiate initial costs which can only be of benefit to the claimant.
Going to court
In relation to claimants having to attend court, this is factually incorrect. If a claimant wishes to attend court then there is no reason why they shouldn’t, however there is no legal requirement to do so. Once engaged, Spanish lawyers will arrange an appointment with a Notary Public as near as possible to the clients’ residence. A Spanish Power of Attorney is produced then signed, apostilled and notarised. This document gives authority to lawyer to represent and act on behalf of the client without the need for the client to be present, the cost of this is borne by the law firm. Only in very rare circumstances will a client need to attend court and in these cases the law firm normally covers the costs.
Annulment
The final bullet point cited by the RDO is more of a scare tactic than reality. If a court deems the timeshare contract in breach of law, the said contract is annulled. Annulment is subtly different to cancelation, the dictionary definition is; to make void or null; abolish; invalidate, the effect is that as the contract has been deemed illegal then the annulment effectively means that the contract should never have existed, it is for this reason that full compensation is normally awarded. As we stated above, there is an element of judge’s discretion but taking that the contract should never have existed any so called “benefits” equally should never have existed, that being the case a plea from the timeshare company will almost certainly fall on deaf ears.
Finally
It has to be remembered that the RDO exists for the benefit of its membership who, predominantly are organisations that have a vested interest in the furtherance of the timeshare industry. Timeshare claims are costing the industry literally millions of pounds, so if the RDO can persuade timeshare owners that claims are neither financially rewarding, complex or a waste of time then this ultimately is to the benefit of their members.
The big question you may be pondering is, on the assumption you might have an illegal contract, should you investigate and potentially engage in the claims process? The answer is you definitely should take expert legal advice. Specialist claims companies and their associated law firms will be able and happy to advise you quickly and accurately as to whether you should proceed or not, naturally they will also confirm the costs involved.
A word of warning, there are more rogue companies on the peripheral of timeshare than legitimate operators so much care in selection is needed. At TCA we are only too pleased to offer advice in order to steer you clear of the danger zones. We intend to follow this article with more information relating to claims which we will publish next so please revisit the site.
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