Time(share) on their side

Timeshare is nice to have but the "in perpetuity" clause could end up being a noose in the long term, says Georgina Crouth.

Timeshare is nice to have but the "in perpetuity" clause could end up being a noose in the long term, says Georgina Crouth.

Published Oct 6, 2015

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Some holiday clubs are doing a roaring trade by locking customers into open-ended contracts, writes Georgina Crouth.

A 2011 study by Grant Thornton for the Vacation Ownership Association of Southern Africa (VOASA) indicates South Africa’s timeshare business is booming. At the time, there were more than 740 000 timeshare owners, which included “at least 400 480 members of clubs (using point systems) and 341 295 owners of vacation ownership products at resorts”.

A new study has been commissioned by the VOASA, and the results are expected to be released later this year. It is, however, a lucrative industry, which rakes in R3.5 billion annually.

And while the research is clearly dated, the figures aren’t likely to have dropped much because some of these contracts have been signed “in perpetuity”. Whether or not the timeshare or holiday club owners were informed of this little fact – or if they had taken time to read the small print during the energetic sales pitch – that essentially means you are forever under a contract which you can’t opt out of, for whatever reason. Imagine if you were unhappy with the service or your circumstances changed?

That hardly seems fair or ethical, does it?

A reader, who preferred to go by the pseudonym “Disgruntled”, wrote to me about this issue, saying: “I have been a member of Flexi Club for more than 10 years, and as far as the spectrum of resorts available, I generally don’t have any problems with their service, besides the fact it’s not always easy to get the accommodation that one wants, and early booking is called for.

“However, I do have a major problem with the approach that the membership is ‘in perpetuity’, meaning that one cannot opt out, and implying that your heirs inherit this obligation. My grounds for objecting are that this was never explained at the time of purchase of membership, or subsequently. Had it been, I would never have put a noose around my neck.

“It devolves into a kind of bondage that hardly belongs in this time and age, and may well be unconstitutional.

“I have now been approached by Flexi Club with an offer to reduce the duration of the ‘contract’ to seven years, but at very considerable additional cost, which I turned down flat. Other members have had similar offers, with similar reactions. It would seem as if this is fancy footwork to evade the ‘in perpetuity’ issue.”

The National Consumer Commission (NCC) feels that timeshare contracts that last “in perpetuity” are in breach of the Consumer Protection Act (CPA), and is preparing cases to take to the National Consumer Tribunal.

Trudie Broekmann, a commercial lawyer and expert in the CPA, has watched the case closely.

“The timeshare/holiday club industry is structured in a way which I believe is unconscionable or close to being unconscionable in the sense that the CPA uses the term, ie unethical and exploiting consumers’ inability to understand the legal nature of what they are signing up for. One can poke a lot of holes in the agreements and the quality of services rendered (or, as seems usually to be the case, not rendered) using the CPA,” she said.

“The CPA is not clear that a contract in perpetuity is necessarily in conflict with the act, but I believe such a contract is most likely unfair, unreasonable and unjust (all of which is prohibited in section 48). It would be wonderful for consumers if we had an authoritative finding to confirm this.”

Trevor Hattingh, spokesman for the NCC, said they have lodged two applications with the National Consumer Tribunal: “One against Club Leisure Group, and the other against Univision and its associated clubs.

“I can confirm that a hearing date has been set down for Univision and associated clubs, that being the first week of November 2015. The NCC is yet to receive a date for the Club Leisure matter.”

In a statement, VOASA chairman John Lee said they were “not in a position to comment until such time that the National Consumer Tribunal has made a decision on the merits of the NCC applications”. He did, however, point out that they have drafted an industry code in terms of section 82 of the Consumer Protection Act and legislation specifically applicable to timeshare and share-block schemes.

“This industry code makes provision for an ombud scheme to deal with timeshare members’ complaints. The draft was submitted to the NCC in October 2014 for consideration but has not elicited any response from the NCC as yet”.

Until then, timeshare owners locked into these “forever contracts” have little recourse. If you have timeshare and want to get rid of it, you can sell it, but as it stands, if you’ve signed an “in perpetuity” contract, you can’t opt out of it, unless you had a change of heart within five days of signing it.

Wise up. Here's how

Ask questions: A few years ago, holiday clubs were aggressively marketing themselves by inviting “winners” of competitions to presentations where it was clear the only prizes were the signatures on timeshare/ holiday club contracts.

These events were so hyped up that people eagerly signed up, without asking the right questions. Later, they’d realise that that luxury holiday in Italy would never be in reach, as much as a December break along the KwaZulu-Natal coast. By then, it’s too late.

It’s not all bad: Not everyone’s unhappy with their timeshare/holiday club arrangements. Some of my friends signed up many years ago and plan their local trips well in advance, which means they regularly take their children away on holiday.

Read between the lines: In terms of its contract cancellation policy, the Vacation Ownership Association of South Africa (VOASA) industry body stipulates: “In every shared vacation ownership purchase contract you will find a clause which is often referred to as the ‘revision’, ‘cool down’ or ‘cancellation’ period.

A period of time during which a consumer has the right to cancel a purchase contract and obtain a full refund of his/her deposit with no penalty. This is contained within the new National Credit Act and the Estate Agency Affairs Act, and is also stipulated in VOASA’s code of conduct.

“The revision or ‘cooling off’ period is five working days.”

It then outlines the process which should be followed, stating that “this is just another example of the strong consumer protections built into shared vacation ownership sales”

But of course, what is not said is that after that cooling-off period, it’s your baby.

* Georgina Crouth is a consumer watchdog with a serious bite. Write to her at [email protected] and follow her on Twitter @Consumerstar.

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