When a consumer purchases timeshare, they purchase ‘occupancy rights’ in respect of certain holiday accommodation belonging to the developer. The nature of the ‘occupancy rights’ is defined in the timeshare contract.
The most common structure for Timeshare in the UK, and used in other parts of Europe, is the ‘Club-Trust’ structure. The other common timeshare structure, known as ‘escritura’, (meaning “deed”) is sometimes used in Spain and Portugal whereby the consumer is given an ‘escritura’ (or title deed) as proof that he/she is the owner of a particular week or weeks in a specific property. This can be registered at the local Land Registry and is similar to house buying in the UK as it guarantees your ownership rights.
THE CLUB-TRUST STRUCTURE
The role of Trustee is primarily to protect the ‘occupancy rights’ which have been purchased by owners/members for the life of a project. This is achieved by ring-fencing those ‘occupancy rights’ as shown in figure (i) below.
- The Developer owns the holiday accommodation (the physical bricks, mortar and land).
- The Developer appoints a Trustee and enters into Deed of Trust. The developer transfers the ‘occupancy rights’ to the Trustee.
- The Trustee forms an Owning Company.
- The Developer appoints a Marketing Company to sell the ‘occupancy rights’ to purchasers.
- The Marketing Company sells ‘occupancy rights’ to purchasers.
- The Trustee issues Ownership/Membership Certificates to purchasers on instruction from the developer.
- Owners/Members have ‘occupancy rights’ in respect of the Holiday Accommodation.
- The Owning Company holds and controls the ‘occupancy rights’.
THE CLUB-TRUST SYSTEM
In the Club-Trust system, the ‘occupancy rights’ in the holiday accommodation are vested in a company controlled by the Trustee (the ‘Owning Company’). This company does not trade, thus negating any risk of financial failure affecting consumers’ holiday ownership. If the developer of the resort or club gets into financial difficulties, the holiday accommodation remains protected from its creditors.
The Trustee is the legal owner of the title to the holiday accommodation. The developer is the beneficial owner, who is entitled to sell the benefit of the ‘occupancy rights’ to the consumer. The Trustee is independent. In most Trust structures, the Trustee also acts as Escrow Agent during the purchasing process and collects monies from purchasers which are protected by the Trustee until such time as it is satisfied that there are sufficient weeks/points in the system which are secured and ready for immediate use and that all other criteria as laid out in the Deed of Trust have been fulfilled. At this point, the Trustee is able to provide owners/members with their Ownership/Membership Certificate – which confirms the ‘occupancy rights’ in the timeshare contract. Only at this stage, is money released to the parties entitled (usually the developer of the resort/club, the marketer and any exchange organisation involved).
The ‘occupancy rights’ in the holiday accommodation are vested in the Owning Company controlled by the Trustee. Usually, this company is a non-trading company, thus minimising any risk of financial failure affecting owners’/members’ holiday ownership.
The Trustee receives and records confirmation that the developer has good title to the property and that he has obtained all relevant planning permissions and building licences. The Trustee also receives and records that there are no mortgages or other encumbrances on the property, which might prejudice the consumers’ ‘occupancy rights’. In the event that the holiday accommodation is encumbered in any way, additional measures will be put in place by the Trustee to ensure the protection of the ‘occupancy rights’ of the members/owners.
The Trust system protects the consumers’ ‘occupancy rights’ from any demise of the developer, once the trust arrangements have been fully completed The Trustee takes control of the ‘occupancy rights’ of the holiday ownership property throughout the period of the project, thus preventing the developer from selling or mortgaging those rights or doing anything else which might adversely affect the consumer’s enjoyment of his holiday ownership/club membership.
- The Trustee administers the process involved in selling, transferring or upgrading holiday ownership/club membership to a third party.
- A reputable Trustee can help a resort develop relationships with other organisations such as timeshare exchange companies.
- The Trustee is not responsible for the day-to-day running or management of a resort unless it impacts directly on their Trust responsibility.
- How can a Trustee help owners/members (or owners’ committees) once the purchasing process is completed?
- The Trustee ensures that the legal structure of the Resort/Club is maintained and the ‘occupancy rights’ of the owners and members are fully protected for the duration of the “life” of the Club, or Resort, which in some case can be in perpetuity!
- The Trustee can assist with the issuance of new Ownership/Membership Certificates, including in the event of a transfer of ownership, a death, a divorce, etc.
- The Trustee can intervene in the event of a dispute with the management company, subject to the terms of the Deed of Trust.
- The Trustee can have the power to appoint a new management company if necessary, subject to the terms of the Deed of Trust.
- The Trustee facilitates the transition if a developer sells and another takes over.
- The Trustee can step in if the developer gets into financial difficulties and the resort is in danger, subject to the terms of the Deed of Trust.
- The Trustee can assist if there is a dispute with a developer or with the management company about the ‘occupancy rights’.
- The Trustee can provide additional support at owners’ managed Resorts.
A Trustee cannot help when;
- There are individual complaints/disputes between owners/members and the Resort unless it relates to the owners’ ‘occupancy rights’.
- When a consumer can no longer afford their timeshare. For example death, bereavement, through illness, through drastic change of circumstances, etc.
- Issues surrounding the setting & collection of management fees.
- Issues surrounding the daily management of the resort/club such as Reception opening times, garden maintenance, etc.
- Issues surrounding bookings of weeks directly with the Resort or with the Exchange Organisations.