Timeshare schemes
Key messages
- carefully consider what you are getting before you purchase an interest in a timeshare scheme; or
- there are a number of protections that may assist you if you think you have got a bad deal.
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!! IMPORTANT !!
If you have entered a Timeshare contract you will have a cooling off right which will give you a limited time to cancel. The time limit will usually be:
- if the operator is a member of the Australian Timeshare and Holiday Ownership Council (ATHOC) – 7 days; or
- otherwise – 14 days.
Don’t delay: it is much more difficult – and often impossible – to get out of the contract after the cooling off period has lapsed.
If you cancel the contract in time, the Timeshare company must bay back any money you have already paid.
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What are timeshares?
Timeshares are usually schemes which allow points or credits to be redeemed for holiday accommodation.
There are other versions of Timeshare that involve purchasing a share in property or the right to use property. This fact sheet is concerned with issues relating to the first kind of timeshare.
Key Consumer Issues with Timeshare:
Some consumers who have purchased timeshares report:
- the resale value is much less than the purchase price;
- high pressure selling techniques have been used;
- accommodation is difficult to book at suitable times;
- confusion about what they have signed up for due to the complexity of the product;
- ongoing fees are charged, whether the holiday credits are used or not.
A number of recent decisions have highlighted other problems experienced by some consumers, such as:
- the failure to make appropriate enquiries and give proper reasons for recommending the purchase of timeshare:
- misleading statements were made about the product timeshare product; and
- accommodation was infested with cockroaches and without ‘ocean views’
How are timeshares sold?
A Timeshare company may first approach you through telephone contact, a raffle or competition, or by approaching you personally at a holiday resort. The representative for the Timeshare company will then usually invite you to a seminar held by them with a reward offered for your attendance.
At the seminar, Timeshare sellers may use high-pressure selling techniques to get you to sign up to the scheme. For instance, they may tell you that the only opportunity you have to purchase a particular Timeshare deal is at the seminar itself.
Some consumers have said that they were made to feel ‘stupid’, guilty and uncomfortable if they did not want to enter into the scheme. The pressure of having to make the decision at the seminar, the number of sales staff – often one allocated per family – can be confronting for many consumers.
There have also been cases of sellers misleading consumers about the nature of Timeshares or the operation and consequences of the contract.
Paying for Timeshares:
There are often substantial ongoing fees
You will usually have to pay fees and charges associated with managing the scheme and maintaining the upkeep of the holiday accommodation. Normally you will have to pay these fees whether or not you use the Timeshare. These fees apply in additional to paying what is often a substantial sum (between $12,000 and $25,000) for the Timeshares credits themselves.
Loans to pay for Timeshare credits
Timeshares are not loan contracts. However, it is common for a loan contract (also known as a credit contract) to be entered into in order to pay for the Timeshare.
If you have entered into a credit contract in order to pay for the Timeshare, you are probably being charged interest under the credit contract as well as fees and charges relating to obtaining the credit.
What information must the Timeshare company provide?
A Timeshare company must provide you with certain documents at the point of sale. Their failure to do so may give you the right to cancel the Timeshare contract.
Below is a list of the main documents that you should be provided upon entering a timeshare scheme:
- Product Disclosure Statement (“PDS”). A PDS is a very important document that sets out some of the terms and conditions of the Timeshare contract and other important information about the product such as: its features, fees that apply, the benefits and risks of purchasing the product, any commissions that are payable. The PDS may look like a glossy advertising brochure for the Timeshare company, but it contains important terms and conditions relating to your entry into the Timeshare contract.
- A copy of the Timeshare contract
- A copy of the Timeshare application
- A copy of any related credit application together with a copy of the credit contract
- A Cooling Off Statement: which alerts you to your right to a cooling off period and must be set out on a separate document in a form approved by ASIC (see below).
- A Statement of Advice (“SOA”). A SOA should be provided if the sales staff have told you that they think the Timeshare is a good deal for you. They should not do this unless they have talked to you about your financial position and your goals and objectives. The SOA should explain why buying the Timeshare fits with your goals and objectives.
If the Timeshare company fails to provide you with one of these documents, or the documents provided are out of date, deficient or contain false or misleading information, you may have a right to withdraw from the Timeshare contract. You will need to exercise this right as soon as possible after discovering the problem, particularly as some time limits may apply. We recommend you seek legal advice.
Cancelling or getting out of the Contract
Where a cooling off period applies
If you have just signed up to a Timeshare contract, you may still be within the “cooling off” period – act immediately.
Timeshare schemes must provide you with a cooling off period within which you can provide written cancellation of the contract to the Timeshare company without incurring penalties. If you do this you will be entitled to a refund of all monies paid.
You have a right to a seven-day cooling off period after signing if the timeshare operator is a member of the Australian Timeshare and Holiday Ownership Council (ATHOC). If the timeshare operator is not a member of ATHOC you will have a 14-day cooling off period.
If you are unsure how many days you have to cool off, seek legal advice immediately.
Even if you are uncertain about wanting to get out of the contract during the cooling off period and/or you experience difficulties in contacting the Timeshare company to have any questions you have answered, we recommend that in the meantime you still exercise your cooling off rights.
When the cooling off period begins:
The cooling off period begins when all the required documents have been given to you AND you have acknowledged in writing that you have received these documents. This is usually at the time that you sign up for the Timeshare, such as a sales presentation or seminar.
If you have a credit contract as well
In general, if you are able to withdraw from a Timeshare contract, you are also entitled to terminate any credit contract that was linked to the Timeshare contract (generally this is where the credit contract was organised by the timeshare company rather than by you). The finance company may also be liable for any misrepresentations made by the seller in relation to the Timeshare contract and/or the credit contract.
Exercising your cooling off rights:
The Timeshare company may have given you a blank form for the purpose of ‘cooling off’ (canceling). If you have not been provided with a form, you can write to them and tell them you withdraw from the contract within the cooling off period. If you have entered into a credit contract to finance the Timeshare contract, you should seek legal advice as to whether you can cancel the credit contract as well.
Make sure to sign and date the letter and keep a copy for your records. You should sent it by Registered Mail or fax so that you can prove you sent it. Further, if time is tight, we recommend that you send the letter by fax and post (see further below for a sample letter).
Cancelling or withdrawing where a cooling off period does not apply
If you are outside the cooling off period and want to know whether you can cancel your contract, you can contact Consumer Action for advice.
Resolving a dispute with a Timeshare company:
If you can’t resolve a dispute directly with the Timeshare company, you can complain to the Financial Ombudsman Service (FOS) and the Credit and Investments Ombudsman
(COSL). Most Timeshare schemes are now with the Credit and Investments Ombudsman
FOS and COSL provide free assistance in resolving complaints with Timeshare companies.
For more information contact the Consumer Action Law Centre.
Further information
Consumer Action Law Centre
Telephone: (03) 9629 6300, or 1800 466 477 for country callers.
Free telephone and email information regarding credit and debt and consumer law matters
If you are deaf or have a hearing or speech impairment, you can call through the National Relay Service (NRS):
- TTY users can phone 133677 then ask for 1800 466 477
- Speak & Listen (speech-to-speech) users can phone 1300 555 727 then ask for 1800 466 477
- Internet relay users can connect to NRS on www.relayservice.com.au then ask for 1800 466 477
Financial Ombudsman Service
Tel: 1300 78 08 08
http://fos.org.au/centric/home_page.jsp
Credit and Investments Ombudsman
Tel: 1800 138 422
Moneyhelp
Telephone: 1800 007 007
www.moneyhelp.org.au
Warning: This fact sheet is intended as a guide to the law and should not be used as a substitute for legal advice. This information applies only in Victoria and reflects the law as at 31 December 2015.
