Should cooling-off periods be applied more widely?

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17 Apr 2011

Should cooling-off periods be applied more widely?

A couple of weeks ago in the OPP News, there was a call for the establishment of a European wide cooling-off period in the cases of sales of freehold, often second-homes abroad, in order to avoid some of the scams perpetrated on people looking to buy their “Place in the Sun” . So often you hear of UK citizens in particular, who have sold up everything to move to the Southern Mediterranean in order to retire, only to find that the development has been built illegally without the appropriate permissions, or the developer has defaulted and not finished the project for lack of funds or the property provided is not the one the purchaser thought he or she was buying. Lacking the necessary language skills, a stranger in a foreign place, these buyers are often left struggling to resolve their problems with no clear redress available to them. If you have a touch of insomnia, you can find many of these horror stories playing out on late night TV and a quick dip into them will quickly persuade you that this is a very real human problem.

It was pointed out after that article that some countries particularly France, do have such a cooling off period, but I believe this was the exception rather than the rule. It is strange that a transaction with a value of normally more than 50,000 euro, can take place with no more control than will be exercised by a local lawyer or notary, whereas a timeshare transaction with a value of perhaps 15% of that amount, will be governed – quite rightly we say, with legal controls over documentation, deposits, cooling –off periods etc before the transaction is concluded. Not only that, but in most cases where UK developers are concerned, a specialist timeshare trustee will be in place whose role it will be to protect the funds paid by the purchaser and to ensure they are not paid over to the developer until the unit or development is ready and all contract conditions are fulfilled – how many potential freehold owners would have benefitted from that protection? As yet, and not surprisingly, there have been no calls from developers or related trade associations for better controls – is this a case of double standards?

So now we come to the world of fractionals, where will they fall within this debate? I think RDO can help here, because with a number of its major developers selling fractionals to their existing timeshare owners, for the very simple reason that timeshare owners like the product they own, (over 87% of them according to the last survey), when they are offered a fractional product of a similarly high standard and in a location they like, then if the price is right they buy it in considerable volumes. RDO’s Secretariat has therefore taken a long hard look at the 2nd Timeshare Directive and concluded that in the main, it will apply to fractionals and therefore its sister organisation for fractionals – FSOTA, will along with RDO, be monitoring how the 27 member states intend to implement the directive and make it applicable to fractionals and where necessary, will help to educate the member states as to what a fractional actually is.

In pursuit of this, FSOTA will be issuing shortly a press release setting out how fractionals will be required to meet the new law and why in the main they will be classified as timeshare, so at least cooling-off periods and other controls will be extended to this product in 2011 even if freehold developers don’t at the moment seem over keen to see such protection extended to their purchasers!

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