Holiday clubs: The new timeshare con

Published by Laura Howard on 04 March 2011.
Last updated on 05 June 2013

Desert island

Lounging on the beach during a backpacking holiday in Mexico, a Moneywise employee and her partner were bombarded relentlessly by salespeople offering free breakfasts at a nearby five-star hotel.

"We knew there was a catch, but we fancied a good feed, so we went along," she says. "We had to put up with a heavy sales pitch for a holiday club, promising two weeks of discounted hotel accommodation a year for life - if we parted with £6,000. But there was so much small print and no guarantee of the hotel you wanted. We didn't hang around."

Holiday clubs are a reinvention of the dodgy schemes that have long blighted the timeshare industry, particularly in the 1980s.

Typically, you get a phone call at home, or are approached while on holiday and handed a scratch card. You're told you have won a 'free' holiday, or can join an exclusive club offering discounts on flights and accommodation.

All you need to do is attend a presentation to collect your prize and learn more about a new venture - the 'holiday club'.

But what you've been promised is often very different from the contract you sign. The bogus club may involve extra fees, while the holiday may not be available when or where you want it.

The Office of Fair Trading (OFT) has found that holiday-club scams cost the UK public an estimated £1.17 billion each year - a whopping loss of £3,030 per victim.

New regulations

While timeshares are increasingly subject to regulation, holiday clubs have remained something of a free-for-all. However, from 23 February this year, all holiday clubs within the European Union have to adhere to The European Timeshare, Long-term Holiday Products, Resale and Exchange Contracts Directive 2008.

This regulation, for the first time, encompasses both timeshares and holiday clubs, replacing myriad complex regimes.

So what new protection does it offer? Most significant is the 14-day cooling-off period for both schemes that you'll be entitled to after signing. During this time, it will be illegal for the company to ask you for any money, such as a deposit or administration fee.

"This is the main benefit of the regulations," says Keith Baker, property lawyer and vice chairman of the International Committee of National Association of Estate Agents.

"When the cooling-off period (initially 10 days) was brought in for timeshares, by far the majority of consumers opted not to go ahead with the purchase."

The regulations also state that the seller can't take payments more often than once a year, the contract can be terminated when any payment becomes due, and it must be written in language the buyer understands.

This is a start, but the new regulations don't go anywhere near far enough. For a start, a scheme must fall into the definition set down by the European Commission before the rules apply. For example, the holiday property must be within the European Union and contracts must run for more than a year.

Existing timeshare owners wanting to sell may also be targeted by holiday-club fraudsters. According to the Timeshare Consumers Association (TCA), the number of people trying to sell their timeshare exceeds the number wanting to buy by 500 to one. This has led to a host of fresh scams.

Baker says: "Timeshare holders are often approached by companies or individuals who claim to have a buyer they'll introduce you to - for a fee. Then the buyer turns out to be non-existent and you're sold something else like a holiday-club membership in disguise."

To avoid being scammed twice, if you want to sell your timeshare, your first port of call should be an accredited resale broker. (You can find a list of these on the TCA's website at timeshare.org.uk.)

The good news...

The good news for timeshare owners is that the new regulations extend to the resale market of any "long-term holiday product". The trader must provide all pre-contractual information, a 14-day cooling-off period, and can't accept any payment until the sale of the timeshare is completed or the contract terminated.

Unfortunately, holiday clubs are not covered by the new regulations.

If a sale is impossible, you can simply attempt to hand back ownership to the resort. But not only will you not get a penny, but you're likely to be charged too. "Companies charge around £3,000 to take back a contract," says Harry Taylor, chief executive at The Timeshare Association (TATOC). 

Companies are more likely to take back schemes from older owners (aged over 75 or 80) simply because, to put it bluntly, the contracts will have less time to run.

If you can no longer afford your holiday club contract but can't sell, give away or buy your way out of it, first ask the management company for an affordable payment plan.

If this fails, the only solution is to walk away and stop paying the annual fees. The consequences of this, however, will depend not only on the company, but on the committee comprising the group of people who own the other contracts.

Taylor says: "It's often the committee that puts pressure on the company to take owners to court if they pull out."

TATOC is lobbying to change this attitude by introducing a number of 'fair reasons' to exit a deal - for example, a doctor has advised you not to travel or you've exhausted all options of trying to pass your share on.

Many owners have successfully defended claims on the grounds of "misrepresentation at the point of sale" or the fact that the contract was out of jurisdiction. If you lose your case, however, you may receive a County Court Judgment, which will affect your credit rating.

You may also get a European Order for Payment, which is issued in one country against a defendant living in another. To find out more, contact the TCA.

While not all holiday-club schemes are scams, pretty much all of them are rip-offs: the best solution is to stay well clear.

Useful contacts

For free impartial information and advice on timeshares and holiday clubs contact:

• Timeshare Consumers Association (TCA): timeshare.org.uk (0190 9 59 1100)

• Timeshare Association (TATOC): tatoc.co.uk (0845 230 2430)

• Consumer Direct advice service: consumerdirect.gov.uk (0845 404 0506).

(The first two organisations are not official regulatory bodies).

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