Summary of the Spanish Timeshare Law 42/1998

 

On the right to enjoy successive possession of immovable property for touristic purposes, and taxation rules – Key Provisions

The Law applies to all contracts (regardless where they are executed) concerning the use of properties in Spain (including the Canary Islands and the Balearic Islands) during a defined or definable period of the year.

The Law creates a new legal scheme for timesharing: the rotational enjoyment rights scheme. All timeshare schemes established after the law came into force concerning the use of properties in Spain must be constituted as a rotational enjoyment rights scheme. Such schemes may be established for between 3 and 50 years duration and based either on limited rights adin rem or personal rights (in the form of seasonal lease contracts with all or part of the rentals paid in advance). Timeshare owners will not be entitled to any compensation on expiry of the rights purchased.

  • Disclosure Information must be provided prior to any timeshare sale to any person requesting information. The document must mention a number of points which are listed under Article 8.2 of the Law.
  • Purchase contracts must contain all the information under Article 9 of the Law.
  • Contract and information documents must be expressed in the language of the Member State of the EU where the purchaser resides. They must also be expressed in Spanish or any other official language in Spanish.
  • The cooling-off period during which the purchaser can cancel the agreement is 10 days. This can extend up to 3 months if the contract does not contain the prescribed information.
  • Any advance payments by the purchaser to the vendor before expiry of the cooling-off period are prohibited. However, the parties can make contractual arrangements to guarantee payment of the deferred price provided that the vendor does not receive any payments (directly or indirectly) in the event of withdrawal by the purchaser. The purchaser has the right at any time to demand the return of an amount equal to twice any advance payment made to the vendor in contravention of the Law and can then choose either to cancel (within three months) or to affirm the purchase contract.
  • Timeshare credit agreements are cancelled automatically when the purchase agreement is cancelled. No provision may be made in loan agreements for any sanction or penalty on the purchaser in the event of withdrawal.
  • Tax provisions are included in the Law addressing Wealth Tax, Transfer Tax, Stamp Duty and VAT. Wealth Tax applies based on purchase price, VAT applies at a reduced rate of 7% except in the Canary Islands where a reduced IGIC rate applies, and transfer tax/stamp duty applies to transfers between private individuals (not subject to VAT) at a rate of 4%.
  • The registered owner (developer) of a pre-existing scheme must execute a regulatory deed of adaptation within two years and record it in the Property Register.
  • Execution of the deed of adaptation of pre-existing schemes under the Spanish "multi-ownership" escritura system shall be effected by the President of the Owners' Committee.
  • In the deed of adaptation the scheme may be converted to a "rotational enjoyment right scheme" or may continue to exist under the same pre-existing legal structure.
  • It is forbidden to convey rotational enjoyment rights using the term "multipropiedad". In addition to the above, new schemes shall have to observe the following:

    • Resorts must have at least 10 units
    • Schemes may be set up as a right ad rem or a personal right scheme
    • Mixed use timeshare/other form of tourism activity is permitted
    • Annual period of occupation must always be no less than 7 consecutive days.
    • Duration of schemes must be from 3 to 50 years
    • Upon expiry of the term, timeshare owners are not entitled to any compensation
    • Schemes must be established by the registered owner of the resort and all applicable licenses must be in place
    • A contract must have been signed with a management company unless the developer has decided to take direct responsibility for the management services himself.
    • Delinquent owners. A rotational enjoyment right may be repossessed if the owner fails to pay maintenance fees for at least one year following 30 days after formal demand. In such a case a timeshare owner would be entitled to an amount equivalent to the remainder of the value of the interest purchased. This entitlement may be waived in the sales contract.
    • Bank guarantees or insurance policies guaranteeing the return of all sums paid are compulsory where sales are being made at resorts under construction.
    • Detailed information complying with the requirements of Article 5 must be included in the regulatory deed which will govern the scheme.
    • Insurance against liability arising from damages caused by the developer or by his employees is required.
    • Insurance covering occupants’ liability, fire and general damage is also mandatory.