Timeshare is legally regulated by the European Union Timeshare Directive. In 2011 the new Directive 2008/122/EC replaced the old Timeshare Directive 1994/47/EC. The new Directive deals not only with the protection of consumer rights regarding timeshare products but also with long-term holiday products, resale, and exchange.
The new Directive defines in article 2, 1 (a) the timeshare contract more generic as a contract of a duration of more than one year (previously 3 years): ‘Timeshare contract’ means a contract of a duration of more than one year under which a consumer, for consideration, acquires the right to use one or more overnight accommodation for more than one period of occupation”.
European Union Timeshare Directive
Under the new Directive, resorts must provide detailed information to consumers in sufficient time before signing the contract, including information regarding the purchase price, a description of the product and the exact period and length of usage that the consumer is entitled to under the contract. The using right can refer either to a specific accommodation or to an accommodation selected from a pool of accommodations within a resort. All this information should be provided in the consumer’s own language if they so choose.
The Directive also ensures that consumers may withdraw from a contract within a “cooling-off” period of 14 calendar days and that resorts can never ask them for any form of advance payments or deposits during that period. Before the conclusion of the contract, the trader is required to explicitly draw the consumer’s attention to the existence of the right of withdrawal, the length of the withdrawal period and the ban on advance payments during the withdrawal period.
Protection by the Directive now also covers some new products on the market and contracts which had been developed so as to avoid the application of the previous Timeshare Directive. For instance, the new Directive applies besides to timeshare contracts also to long-term holiday contracts of ‘holiday clubs’ where members get discounts for long-terme use and includes also the regulation of resale and exchange contracts.
Timeshare using rights can be optionally exchanged yearly on basis of a separate exchange contract. The exchange service must be described with its restrictions.
Member States are obliged to provide for appropriate penalties against resorts who fail to comply with these rules. Member State must also encourage the development of adequate and effective out-of-court complaints and redress procedures for the settlement of consumer disputes.
Spanish timeshare laws
The Spanish timeshare laws 42/1998 and 4/2012 are not limited to the strict transposition of the European Directives and provide a more complete regulation within the context of Spanish civil, private and commercial law. They define a maximum duration of 50 years for timeshare schemes (systems, regimes) starting with the registration of the scheme as a public deed, its inscription in the land register and completion of the building of the resort. Once the scheme has expired as a result of the term having elapsed, holders shall not be entitled to compensation of any kind.
The contracts based on this scheme must show the end date. They can be cancelled within 3 month after signing if they do not comply with the law, and after this period with pecuniary sanctions.
Subject of the law is the usage right of accomodations. The law 42/1998 defines: “The purpose of this law is to regulate the constitution, use, transfer and annulment of a timeshare right to real estate, which provides for its holder the entitlement to enjoy, on an exclusive basis and for a specific period of each year, accommodation that can be used independently …”. The current law 4/2012 defines: “The timeshare right of properties gives its holder the faculty to enjoy, exclusive for a specific period each year, consecutive or alternate, accommodation capable of independent use …”. This means only “fixed periodes (weeks)” are allowed which optionally can be exchanged within an exchange system based on a separate contract.
Article 30 of the law 4/2012 regulates the yearly allowed increase of maintenance fee according to the Consumer Price Index (CPI) published by the Spanish National Institute of Statistics, unless the timeshare owner and timeshare users have established another method to update the fee.
The timeshare scheme must provide for the establishment of a community of timeshare usage right owners (club) governed by statutes. Agreements intended to modify the existing scheme should be taken by majority of two thirds of the owners, other agreements require only a simple majority.
Transitional provisions of law 42/1998
With the law coming into force at 6th January 1999, any ‘created’ timeshare right [seems to mean not yet assigned rights] shall be subject to the provisions hereof. The ‘transfer’ [seems to mean allready assigned rights] of such timeshare rights shall be governed by pre-existing regulations, and on the expiry of the adaptation period, if adaptation did not take place, it shall be subject to this law. If adaptation takes place the transfer of timeshare rights shall follow the adaption to this law.
Pre-existing schemes of timeshare rights must be adapted to the provisions of this law within two years and register in the land registry, solely for purposes of publication, and with full respect for the rights acquired. If those schemes are allready registered they may be amended to adapt to this law. Of the contracts only those existing at the moment of adaptation need to be incorporated.
On the expiry of the two-year period the owners’ association (means all owners of timeshare usage rights) can vote with simple majority at a general meeting to adapt the pre-existing timeshare scheme to this law.
In the deed of adaptation, registered at the land registry soley for the purpose of publication, the sole owner of the timeshare property must describe the pre-existing scheme and declare that the rights to be assigned in future shall be identical to those already assigned. If the owner wishes to sell any periods not yet assigned as timeshare rights, he must also create a scheme for the available periods with the requirements laid down in this law. If the owner wishes to change the whole scheme and convert it into a timeshare scheme, as regulated by this law, he may do so if he complies with all the requirements laid down therein, but maintaining the duration of the pre-existing scheme, even if it was indefinite.
Without prejudice to the provisions of the preceding, all pre-existing schemes shall have a maximum duration of fifty years from the date this law came into force, unless the same shall be for a lesser duration, or unless the deed of adaptation contains an express declaration of continuity for an indefinite duration or a fixed period.
Transitional provisions of law 4/2012
The law applies to new contracts from 6th July 2012 when this law came into force. It applies only to pre-existing contracts if the contractual parties agree to adapt the pre-existing timeshare scheme to the law. The deed of adaptation must be registered at the land registry soley for the purpose of publication. All pre-existing timeshare schemes shall have a maximum duration of 50 years. Schemes created before the entry into force of the law 42/1998 at 6th January 1999, will be calculated since this date, unless they are of less duration, or that they had expressed declaration of continuity in a deed of adaptation for indefinite duration or for a certain period.
Supreme court rulings
With some recent verdicts starting in spring 2015 the Spanish Supreme Court has clarified the interpretation of the law 42/1998 regarding maximum contract duration of 50 years for contracts signed after 5th January 1999 when the law came into force. Futher more so called ‘floating weeks’ must have in the contract an assigned periode (week) and assigned accomodation (apartment number) to identify the subject of the timeshare contract.
Some think that the Supreme Court has misinterpreted the law and has made a wrong judgement. Other think that the Supreme Court is right interpreting the transitional provisions in the whole context.