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Part 2: Dream holiday or nightmare! An overview of the property time-sharing control act and the vacation ownership/time-share industry

In 2018 the National Consumer Commission (NCC) investigated the vacation ownership and time-share industry after various consumer complaints were submitted to the Consumer Protection Tribunal. [1]

The majority of the complaints received and raised during the enquiry related to the inability to cancel these so-called “life-long” contracts with clubs, the forfeiture of points on cancellation or transfer/reselling of the interest, unavailability of accommodation, misrepresentation of what is actually being sold during the sales presentations, and escalating membership fees which were advertised as non-escalating fees to potential buyers.

In terms of the report, it scrutinised marketing practices of luring customers with purported freebies e.g. free flights, holiday vouchers, high-pressure selling, hoodwinking, and the practice of asking customers to bring their credit cards to presentations.

The Commission recommended that consumers who entered into contracts as a sequel to the abovementioned unfair marketing practices should have the option of having their contracts cancelled if the consumer alleges this wrongdoing.

Credit-related complaints e.g. over-indebtedness and reckless lending, should be referred to the National Credit Regulator (NRC).

Besides the NCC’s recommendations, the consumer might have other mechanisms of recourse.

If an agreement was concluded before the Consumer Protection Act (CPA) came into effect, the CPA will not apply in its entirety but in terms of section 41 of the Act, which states that a supplier may not mislead the consumer in any way, and if the consumer can prove they were misled into signing, the contract is void.

The CPA makes reference to cancellation fees that may be charged, but they should be reasonable in relation to the contract. The CPA is silent on what a reasonable fee must be. The CPA does, however, protect the consumer in Section 68, which states that a supplier cannot victimise a consumer by charging a penalty fee that is so exorbitant and results in the consumer not being able to exercise their right to cancel.

In terms of the common law, if the consumer can prove that the contract was inter alia concluded under misrepresentation or fraud, the consumer can have a claim for contractual damages. Misrepresentation, in material terms of the contract, could include the payment price, non-escalation of fees, and what is being sold to the customer.

There is no obligation placed on time-share companies to re-sell contracts and no guarantee that a consumer will get the value of the investment already made back,  by selling their property time-share rights.

In lieu of the abovementioned factors and recommendations made by the National Consumer Commission report of 2018 and various statutes regulating the time-share industry, the possibility of exiting your time-share contract has become a reality.

The Commission’s recommendations have not yet been incorporated into the Property Time-Share Act but it does carry weight when consumer contracts are cancelled.

In conclusion, consumers are no longer held to life-long contracts, should not be burdened with excessive annual fees, and be frustrated by the inability to book accommodation. The consumer must ultimately decide whether they can continue to afford the annual maintenance fees and must weigh the financial implications thereof against the use and enjoyment of the rights to a holiday destination.

Written by HESRI ELOFF

This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

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