FEBRUARY 2011 |
www.opp.org.uk WORDS | George Sell Fractious debate
A new EU Timeshare Directive comes into force at the end of this month, and its imminent arrival has caused a healthy debate in the fractional industry. Will it put some developers off investing? George Sell takes a look at what is involved and talks to a variety of industry opinion-formers on their outlook.
A
s the fractional ownership industry was winding down for the Christmas break,
a series of news stories appeared on the OPP website which ruffl ed a few fractional feathers and sparked some serious debate in the market. The articles spoke about the potential
effects of the new EU timeshare directive coming into force on the 23rd of this month, and debated the implications for developers. But, before we address the arguments
for and against, lets have a quick look to see what the directive actually entails. The new EU Timeshare Directive was primarily introduced to bring in added consumer protection to buyers of timeshare products – and the EU has classifi ed fractional ownership as timeshare for the purposes of this legislation. It aims to implement measures to protect buyers and help put an end to “pressure selling”. Its most signifi cant elements are:
• Pre-contractual information (or disclosure.) Traders must provide comprehensive pre-contractual information to enable consumers to make an informed choice prior to being bound by any contract. • A cooling-off period and right of withdrawal. The directive applies a universal 14 day cooling-off period, with a right of withdrawal during this period without cost to the consumer. It applies a ban on the taking of any money during this period, including a ban on taking deposits through third parties. • Short term holiday products. Current legislation defi nes timeshare as a holiday product formed by a “contract or group of contracts concluded for at least three years”. Some companies devised products and trial packages specifi cally so that they fell outside of this defi nition and therefore outside the legislation. Now the new Directive is
extending consumer protection to holiday products with “a duration of more than one year.” • Resales
Resale companies must provide comprehensive information about the service being offered and will not be able to charge advance payments until the actual sale has taken place or the contract has been terminated. A quick poll of fractional industry
fi gures reveals that far from believing the directive will sound the death knell for the sector, many think the directive is a positive development. Brad Lincoln, chief executive of Best
Group said: “We believe that the regulation of our industry will bring some consistency and quality in the market, which will help improve consumer confi dence. “Moreover, the current regulations
provide an opportunity for developers to structure products that will provide them with access to incredibly cheap fi nance. This is an exciting time for our industry.” Lisa Migani of First National Trustee Company said: “The Directive must and will be used as an opportunity which proves to the consumer that a fractional purchase is the safest way of buying a
cost effective second home.” Property lawyers are perhaps in the best
position to assess the likely effects of the new legislation, and those who deal with the fractional sector are largely positive. Stephen Bishop BLB solicitors thinks
that fears about the new rules putting off developers are exaggerated. “Yes, legal documents and structures will and are being developed to deal with this. With fractional still relatively new to the European consumer, clear and easily
“Yes, it will stop some schemes in their tracks but not serious and reputable projects”
understood structures are vital to gain a consumer’s confi dence and give a fractional offering credibility.” Eric Gummers of Howard Kennedy
responded to the initial OPP story quickly, saying: “Yes, it will have an effect, and it will stop some schemes in their tracks … but I don’t think that it will stop serious and reputable developers from investing in a proper fractional project. It will make things clearer in my view, and make the
George Sell is the editor of Fractional Trade. Visit:
www.fractionaltrade.com
fractional sector feel more consumer friendly. It will make schemes more uniform and bring in concepts such as standard disclosure. “Over the medium term it will be good
for the industry (and indeed the common misconception that existing legislation does not apply to fractions today). For serious developers, product disclosure, cooling off periods and requirements for protection in relation to off-plan developments are not an issue,” Gummers adds. Britain’s consumer minister Edward Davey said: “These products are often sold across borders, so it’s only right that we have protections in place for consumers that also cross borders. Knowing these regulations are in place will boost consumer confi dence and boost business for legitimate traders.” Tellingly, the Resort Development
Organisation (RDO), the trade body for the European timeshare industry – and the parent organisation to FSOTA, its fractional ownership equivalent, also welcomes the new regulations. “It’s a major milestone for the
industry,” it says, “because while the vast majority of timeshare owners say they are happy with their purchases, it is the unregulated “holiday clubs” and rogue resale companies that taint an otherwise solid and thriving global industry. “Vacation ownership is an ever-
growing, continually-evolving holiday product with Disney, Hilton, Marriott and Ritz-Carlton among the big names in this sector, renowned for the fl exibility, choice, quality, value for money and excellent amenities they offer,” says RDO. How smaller developers react to all
Lightning | on the horizon for the fractional sector - but it is not all bad news
this remains to be seen however. The debate goes on.
DEVELOPER DEVELOPER Fractional column | 41
Page 1 |
Page 2 |
Page 3 |
Page 4 |
Page 5 |
Page 6 |
Page 7 |
Page 8 |
Page 9 |
Page 10 |
Page 11 |
Page 12 |
Page 13 |
Page 14 |
Page 15 |
Page 16 |
Page 17 |
Page 18 |
Page 19 |
Page 20 |
Page 21 |
Page 22 |
Page 23 |
Page 24 |
Page 25 |
Page 26 |
Page 27 |
Page 28 |
Page 29 |
Page 30 |
Page 31 |
Page 32 |
Page 33 |
Page 34 |
Page 35 |
Page 36 |
Page 37 |
Page 38 |
Page 39 |
Page 40 |
Page 41 |
Page 42 |
Page 43 |
Page 44 |
Page 45 |
Page 46 |
Page 47 |
Page 48 |
Page 49 |
Page 50 |
Page 51 |
Page 52 |
Page 53 |
Page 54 |
Page 55 |
Page 56 |
Page 57 |
Page 58 |
Page 59 |
Page 60 |
Page 61 |
Page 62 |
Page 63 |
Page 64 |
Page 65 |
Page 66 |
Page 67 |
Page 68