Changes Have Come...In Other Countries

While it may seem that things remain status quo here in the US when it comes to timeshare matters, it’s not the case elsewhere. 

Consider that in Spain perpetual timeshare contracts have been ruled illegal. To date, Spain has ruled in favor of the consumer in a whopping 129 Supreme Court victories. 

In Canada, a decision was reached in July of last year (funny how this story didn’t receive much coverage here) that will likely affect all timeshares and owners of timeshares with properties located in Canada. The Federal Court of Appeal set aside the Tax Court of Canada’s decision in the case of Club Intrawest v. Canada. In doing so, the Court of Appeal substituted its own decision to refer GST assessments back to Canada Revenue Agency for reassessment of GST just for services supplied in Canada in relation to vacation homes situated in Canada.  Federal Appeal Court Judges Nadon, Gauthier and Dawson agreed with the Tax Court’s finding that a principal-agent relationship does not exist between the club and its 22,000 members. 

This decision also confirms that members of Club Intrawest (now rebranded Embarc by Diamond Resorts International (DRI)) do not hold beneficial ownership in the real estate and equipment in vacation home resorts and do not control the Club. The Court found that members merely own a right of occupancy in exchange for their resort points. This contradicts sales presentations, financial and marketing materials by Intrawest Corporation (“Intrawest”) and now DRI, to the effect that members have beneficial ownership of vacation homes and control the Club through election of the Board of Directors, responsible for managing the Club’s operations.

The ruling will require the club to pay reassessed GST back-taxes for tax years 2002-2007. The GST/HST tax liability for tax years 2008-2016 is unknown at this time. All timeshare owners with vacation homes in Canada may be impacted by this decision and may also see themselves assessed for back taxes on the supply of services in Canada related to vacation homes situated in Canada.

Also in Canada, a remarkable piece of legislation passed last month known as Bill 178. This Bill was introduced in April of this year and passed in June of this year. 

Although this only covers the province of Quebec and most timeshares in Canada are located in other provinces, the bill is quite an eye opener. 

Here are some excerpts from the bill which are well worth your time: 

Bill 178 defines a timeshare contract as a service contract and not a purchase agreement involving a property transfer.

The Act proposed amendments to the Consumer Protection Act to introduce a protection regime governing contracts relating to timeshare accommodation rights.

• The Act introduces rules specific to the making of that type of contract and sets out the compulsory information such a contract must include. It grants consumers the right to resolve the contract without charge or penalty within 10 days of signing it and specifies the circumstances in which that right is extended to one year.

• The Act imposes on merchants who enter into a contract relating to timeshare accommodation rights the obligation to establish a payment schedule for each year covered by the contract…..Furthermore, the Act introduces a disclosure obligation related to promotion made by merchants engaged in the business of such contract, prohibits certain stipulations and provides that such contracts may not be automatically renewed.

Division V.3
Contract Relating to Timeshare accommodation rights

187.13 A contract relating to timeshare accommodation rights is deemed to be a service contract

187.14 A contract relating to timeshare accommodation rights must be evidenced in writing. In addition to the information that may be required by regulation, it must contain or state the following, presented in conformity with the model prescribed by regulation: 

• (h) the term and expiry date of the contract;

• (j) the fees to obtain an accommodation right, their amount on an annual basis if they are calculated on a basis other than annual, and the total of such amounts for the entire term of the contract.

• (t) a statement that the merchant may not collect payment from the consumer before beginning to perform his obligation;

• (u) the right granted to the consumer to resolve the contract at his sole discretion within 10 days after that on which each of the parties is in possession of a duplicate of the contract; and

• (v) the other circumstances in which the consumer may resolve or resiliate the contract, any applicable conditions and the time within which the merchant must refund the consumer.

187.15 Any stipulation that results in the automatic renewal of a contract relating to timeshare accommodation rights is prohibited.

187.16 The merchant may not make the entering into or the performance of a contract relating to timeshare accommodation rights dependent upon the entering into of a credit contract.

187.21 The contract may be resolved at the discretion of the consumer within 10 days following that on which each of the parties is in possession of a duplicate of the contract.

That period is, however, extended to one year from the date on which the contract is made in either of the following cases:

• the contract is inconsistent with any of the rules set out in section 25 to 28 for the making of contracts, or one of the particulars required under section 187.14 does not appear in the contract; or

• a Statement of consumer resolution and resiliation rights and a resolution and resiliation form that are in conformity with the model prescribed by regulation were not attached to the contract at the time the contract was made.

187.24 Any contract entered into by a consumer, even with a third-party merchant, on the making of or in relation to a contract relating to timeshare accommodation rights and that results from an offer, representation, or other action by the merchant who is party to the contract relating to timeshare accommodation rights forms a whole with the latter contract and is resolved or resiliated by operation of law at the time the contract relating to timeshare accommodation rights is resolved or resiliated.

In addition, the consumer may, with respect to a contract entered into with a third-party merchant and contemplated in the first paragraph, exercise directly against the merchant a recourse based on the non-performance of the contract or on the provision of this Act.

187.25 Within 15 days after resolution or resiliation, for the reason set out in section 187.26, of the contract relating to timeshare accommodation rights, the merchant must refund all sums paid by the consumer under the contract and under any other contract contemplated in section 187.24, including sums paid to a third-party merchant.

229.1 No person may, when making or promoting a contract relating to timeshare accommodation rights, make representations implying that the contract is an investment, unless the person gives the consumer a document showing the truthfulness of the representations.

A contract related to timeshare accommodation rights is considered a service contract. You may resiliate your contract for other reasons, and you have other rights and recourse.

How long before the US sees legislation such as these passed in Spain and Canada?  My guess is a long time the timeshare industry is deeply entrenched in. They’re fighting hard for things to remain status quo. 

Looking to change things?  Speak up.