The Legal Ins and Outs of Holiday Timeshare Schemes

After months of hard work and dealing with life’s frustrations, you finally decide to take some time out and plan a holiday. While considering your options, you remember that not too long ago, a person in a mall stopped you and asked if you would like to visit a beautiful destination like the one pictured in the brochure he handed you.  After a convincing discussion about membership fees and the accumulation of points, before you know it, you’ve signed up for a flexi-club or holiday timeshare scheme in South Africa.   And so, you decide to follow up with hopes of cashing in on your points and taking a trip to that stunning stretch of beach in that brochure, only to find out that you are unable to make a booking , despite consistently paying your fee. You consider cancelling your membership, but you are told that you signed a lifetime contract- what now?

At the very least, you can take comfort in knowing that you are not the only South African who has struggled with a dodgy contract in the timeshare industry. According to the Consumer Goods and Services Ombud (CGSO), in 2018, the CGSO “had 427 timeshare-related complaints”. LAW FOR ALL takes a closer look at how to handle cancelling these so-called lifetime contracts and how to spot a timeshare scam.

Let’s take a step back- what exactly is a points-based timeshare holiday?

As Getaway Magazine puts it: “With a points-based system you’d join a club […], pay an annual membership fee and buy points to swap for nights at resorts. This model gives you more flexibility over when and where to go, but if you don’t book in advance your first choice may not be available”.

This sounds fairly straightforward- what seems to be the problem with these holiday time share schemes?

While there certainly have been many consumers who have reaped the rewards of their timeshare membership, far too many people seem to be running into various problems when trying to book a holiday or cancel their memberships.  Cape Town-based commercial, corporate and consumer lawyer, Trudie Broekmann highlighted a few of consumers’ biggest concerns:

Members often struggle to make a booking

Over a period of 4 years, Broekmann says only one of her clients managed to successfully book one holiday, despite many attempts and having points worth approximately R150 000. Broekmann believes that this non-delivery of services is likely due to the fact that the providers do not have enough accommodation available and, thus, design their booking systems to discourage members from continually trying to make a booking.

The marketing is often misleading

Remember that image you saw in that brochure? Well visiting that spot might just be an empty promise. Consumers, through marketing activations etc, are told they can book accommodation at any time of the year at any resort, only to find out that is not the case once they have signed the contract and try to actually go through with planning their trip. The “verbal contracts” from sales people are simply a way to sweeten the deal.

Overly complicated contracts

With almost illegible fine print, complicate languages and sections that do not follow on from one another, many timeshare contracts seem to be designed to frustrate potential members and rush them into signing and “binding” them to unreasonable conditions.

“Lifetime” contracts

Many of the timeshare contracts are in “perpetuity”, which means the consumers is bound its terms and conditions until they pass away. Often, these contracts are automatically assigned to a member’s family. What’s more, members are told that it’s not possible to cancel their contracts.

Surely, it’s the consumer’s problem if they have signed and agreed to the terms and conditions of the contract?

“The problem with the complicated contracts and misleading marketing lies in the fact that it’s not in compliance with the law, particularly The Property Time-Sharing Control and The Consumer Protection Acts,” clarifies Adv. Jackie Nagtegaal, LAW FOR ALL’s Managing Director.  In terms of South African law, there is also no such thing as a lifetime contract. “ In our country, the maximum period for a fixed-term contract is 24 months. Additionally, before signing a contract, the supplier must inform you of the cancellation policy. Should you want to cancel a contract, you must give a business 20 business days’ notice and be prepared to pay a reasonable cancellation fee,” maintains Nagtegaal.

How do these timeshare companies in South Africa get away with this? Is the law clamping down on the industry?

After receiving numerous complaints, the National Consumer Commission (NCC), the primary regulator of consumer-business interaction in South Africa, launched an inquiry into the timeshare industry in 2018. The idea was to review and amend the regulatory framework in order to protect consumers from dodgy schemes. Unsurprisingly, most the consumer concerns were regarding points-based timeshare or vacation club companies that didn’t deliver on what was promised.   Some of the most disturbing complaints the inquiry panel heard included pensioners being taken advantage of and a woman who took her own life after she was drowning in debt and couldn’t get out of her “lifetime contract”.

One of the most impactful revisions that was recommended was the Purchase of Points and Membership Applications Agreement to defined as “ fixed term contracts, running for a fixed, shorter period, subject to renewal by agreement between the club / developer and the member”.  The NCC also maintained that is was a prime opportunity revise sections of The Property Time-Sharing Act, particularly that certain information must be disclosed- in writing- to the consumer before a contract is signed.

What legal options do consumers stuck in a lifetime timeshare contract have at the moment?

It’s best to approach the Consumer Goods and Services Ombud (CGSO), which is set up to uphold the Consumer Protection Act.  You can have a look at the complaints process, for more information. Of course, it’s always advisable to seek legal assistance as well, whether it’s to check the merits of your case and/or to represent you in court or mediation.

How to spot a timeshare scheme scam in South Africa

 Another big problem that seems to be prevalent in the travel industry is the rise of fraudulent timeshare companies.  As a result, the Vacation Ownership Association of Southern Africa (VOASA) highlighted some red flags that you should take notice of:

  • Unsolicited correspondence (calls and/or emails) gauging your interest in possibly selling your timeshare points or eliminating your membership maintenance fee
  • A deal or offer that sounds way too good to be true
  • An offer to transfer your paid-off timeshare ownership to another company
  • A call from someone claiming to be from VOASA trying to make a sale (VOASA does not offer sale or resale services)

For further information, visit www.voasa.co.za or call 021 975-9607

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