Perpetuity is Illegal in Spanish Timeshare
How does this new ruling sit with the UK Courts in particular section 75 of the Consumer Credit Act 1974?
The Facts
The Supreme Court in Spain has declared, in an unprecedented decision, that any contract signed in perpetuity should be considered null and void.
This Landmark case defines the contracts as those timeshare contracts which were signed after Law 42/98 came into existence (that was the 5th of January 1999).
So if your timeshare was entered into after the 5th of January 1999 and it contains a perpetuity clause this brief is very relevant to you.
The proceeding reported on involving “Anfi” which is a resort in Grand Canaria and in the Jurisdiction of Spain. This being the case the ruling will apply to all of Spain not just the island of Grand Canaria and/or the Anfi Resort.
As the ruling in Spain deems the term unlawful the contract can be terminated and the timeshare liability ended forthwith.
J Carrea and Miguel Rodriguez are two very respected Spanish Lawyer and have expressed the importance of this Supreme Court decision.
In Spain access to the Supreme Court is very limited.
It is explained that only very large money claim are settled by the Supreme Court.
The only other access to the Supreme Court is if an issue exists which is of such magnitude and affects many people and that it would be just to have it settled once and for all.
The claimant/petitioner needs to show that there is real legal interest, for instance, that there is a real need of a unified interpretation about a controversial legal point that has been decided in different ways. This is a good reason to have the matter settled in the Supreme Court.
In this issue it have been before the courts and the courts have expressed different judgments , that being the case there was a requirement to have the issue settled once and for all.
In such referrals the Supreme Court judgements interpret the law and how it has been applied by the other Courts. i.e (First Instance courts and Courts of Appeal, etc).
The Supreme Court has pointed the way, asserted its dominance and their ruling have to be followed by lower courts.
J Corria states “The paradox is that this time was Anfi who appealed the Supreme Court seeking for confirmation that what they were doing was correct. There had been two different decisions from the Court of Appeal in Las Palmas so Anfi considered that the Supreme Court should decide what interpretation was correct”.
Unfortunately for them (and for any other Club that has sold timeshare contracts for more the 50 years after 1999) the Supreme Court has ruled against them”.
In Conclusion
The Spanish introduced a Law identified as Law 42/98. That in short dealt with the Provisions.
The pre exiting contracts and the future contracts.
In respect to the pre existing contracts and before 1998 all perpetuity clauses were lawful however after the introduction of the law all future contracts and signed after the effective date (5th of January 1999) contracts periods contained in timeshare contracts had to be defined between 2 years and 50 years. If the contacts did not have an expiry date and remained in perpetuity then it is those contracts which are subject to this Supreme Court ruling. Now deemed unlawful.
In all matters of law there are two sections which courts have to settle Liability and Quantum (damages). This law and the explanation above settle Liability.
In respect to damages this again has been addressed, in that if the contract is voided and deemed unlawful the courts have adjudicated that the parties should be place into a position whereby they had never entered into the contract in the first place. This would involve the returning of all the money paid for the allege benefits of the contracts. Furthermore the offender would have to return all the monies paid by the consumers which supported the contract, i.e the maintenance fees and other operational expenses. Finally interest on all the sums claimed.
As the offeree of the contract was the offender they will be obliged to pay all the costs incurred in the action. These are called adverse costs orders.
Warning this is a Spanish Law not a European Regulation or a UK Law.
So a consumer should stop paying maintenance fees and the like and seek recovery of your money forthwith as if you have a continuance of paying you could be deemed as affirming consent to the breach.
This will facilitate an exit as well.
The proceeding in getting your money is a slow one, but nether-the-less worth it in the end.
As we have explained this is your money and no doubt you will have to pay costs upfront as its the legal profession who is assisting you not the timeshare industry. At present the Timeshare Industry are silent as to the ruling as this ruling will effect there members and you don’t shoot the enterprises which is funding you.
How much will it cost?
Again there are two routs fees based or damage based. The legal profession cannot have both. If you are asked to pay an upfront fees and the legal company want part of your damages as well, you are being subjected to an unfair conditions and you should not deal with the company or law practise. It’s called in short exploitation.
Did you pay for the timeshare contract by way of a linked finance agreement or credit card?
We now have advice on this subject and it comes from Athena Solicitors who have looked into matter and their initial considerations should be taken on board:
The following text is taken from the Connected Lender Liability Section 75 of The Consumer Credit Act 1974
A question also arises whether connected lenders liabilities would extend to a claim by the debtor in respect of a transaction made abroad with a foreign supplier and which may be subject to foreign law. Although the statutory wording seems wide enough to cover such a case, this would be tantamount to according the act extra territorial character. It is suggested that the implication of section 75 ought not to be given that affect in the absence of words making it clear that this was parliament intention, and because it imposes an artificial liability without fault upon the creditor which would not otherwise arise. This adverse affect is mitigated by the creditors right to join the supplier to proceedings to recover from him by virtue of the statutory discretionary benefits scheme, by these rights may not be capable of effective enforcement against the foreign supplier. In addition, the use of the terms misrepresentation and breach of contract may also be read as supporting the view that the only claims which parliament have in contemplation as giving rise to connected lender liability were those under the law of England and Wales and of the Scottish law.
If the transaction financed by the credit agreement is the purchase of an interest on jurisdiction and enforcement of judgement it has been argued that the effect of article 16 of the convention is that the convention country has exclusive jurisdiction over the claim. The argument has now been rejected on the grounds that the claim does not fall within article 16 because the subject matter of the proceedings under section 75 is the credit agreement not the property.
Since there must be a claim for misrepresentation or breach of contract, it would not seem that claims in tort other than misrepresentation give rise to connected lender liability, furthermore, if the supplier has effectively limited, exempted, compromised or been released from his liability to the debtor, the connected lenders liability will be affected to the same extent. The fact that the debtor has obtained judgement against the supplier would not prevent him from obtaining a judgement against a creditor (unless the judgement against the supplier has been satisfied) but the debtor would not be entitled to the costs of the second action unless he could show reasonable grounds for brining it.
The TCA suggest that consumers need to take stock and shoo-off the unqualified internet ambulance chasers that are (at present) getting giddy about the decision of the Supreme Court.
Before everyone goes off half cocked, it is worthwhile considering the decisions critically, and any potential bearing it has on any UK section 75 claims.
The Spanish decision is confined in ambit to the Spanish civil code and law 42/98. This being the case and if you believe that you have a claim against section 75 the road could have its dangers as you would have to apply breach of contract principles in the UK and try the case again. If you did action the case no doubt the Lenders (The banks) would run the following defences
- Limitation
- No breach of term. Clients got what they contracted for.
- Breaches waived and/or contracts affirmed due to length of time that passed since the breach (date of the purchase agreement)
- Even if illegal contract, it has been performed and as such you can merely cancel but no recovery. The rule in English law is that neither party can seek relief from a court in respect of an illegal contract. In other words clients cannot be sued for maintenance fees but could not pursue the money paid, where the contract has been performed. As such no claim under section 75.
- Mistake may be an argument, whereby a mistake was made as to law and the resort knew of the mistake and took advantage of it. Nice argument in theory but does not help a section 75 claim as of course does not amount to a breach of contract or misrepresentation to give rise to liability under the Act.
On the whole, we can see difficulties with section 75 claims and I would not recommend expending anytime on it. So we are left with the sensible rout in that these claims should be raised in SPAIN.
Who do you appoint to represent you?
Any Spanish Lawyer needs to be approved and a chain has to be formed so as to ensure that the cases are not only handled correctly but information is effectively passed down the chain. The money you pay has to be accounted for and held in trust accounts so that the forward fees can be met as if they are frittered always and subject to flimsy controls then again the consumers could be ripped off.
Another way is to get a sponsor who will fund your case. If that sponsor (Litigation Funder) were to invest in your case of course they would expect to take a share of the damages but the consumer would not pay anything and stand to gain a lot.
The second issue is risk
Clearly the section 75 rout could present difficulties but it’s not ruled out. That said if consumer does launch against the resorts and those resorts become insolvent due to the massive exposure, then the costs they have incurred could be wasted as if the resort go bust then the dreams of compensation could flounders and again the consumers are out of pocket.
It appears that the safest rout is the sponsor and let the legal industry take the risk if they win “you win” and if they lose then “you are no worse off”.
The TCA are exploring these avenues and will get back to you is good time.
In the meantime and if you are unsure the message is simple “DO NOTHING”
Consumers are not advised to engage with TATOC, KwikChex, The Timeshare Task Force or the RDO as they have a undeniable conflict of interest
For more information regarding this article or assistance in any other timeshare related issues please contact the TCA on 01908 881058 or email: info@TimeshareConsumerAssociation.org.uk