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| | The Legal Needs Network is not currently active and cannot accept new posts | | [Article] Timeshare or Timescare? | Views: 1133 | | Mar 01, 2008 6:11 am | | [Article] Timeshare or Timescare? | # | 
Vijay Nair | | Gone are those days when vacationing in style was an idea that confined itself to the western part of the world. In this era of globalization, Indians, once too conservative in terms of shelling out money, have caught on to the concept of holidaying in not only club resorts and condominiums but also houseboats, yachts, cruises, jet planes and the like. Toys of the filthy rich can now be seen in the hands of the ordinary salaried people. Things, which were only a distant dream for most of us, have now seen the light of the day. Although most of it may sound too luxurious for our pockets, there is now a way out. One can now share the cost of dabbling in such riches with other vacationers. Timesharing, though not a new concept, has now gained immense popularity among that breed of population, which still believes in saving rather than spending it all. It presents an ideal picture where both economy and luxury can co-exist.
What is a timeshare?
Simply put, a timeshare is a jointly owned property, usually an apartment in a resort or a condominium that is jointly owned by people who use it at different times. In other words, timeshare is the right to spend a specified period of time (say, a week or more) in a vacation/holiday property. For instance, if a person purchases a timeshare for one week at a resort in Goa, he will have the right to spend one week there each year. In such a case, there may be up to 52 timeshare owners in the same resort each year.
Every apartment may be fully furnished with well-equipped kitchens. The vacationers could even choose from a wide range of attractions such as golfing, snorkeling, scuba diving, skiing, para gliding, etc. and take home a memorable experience. The fleeting thoughts of monotony that may occur to a prospective timeshare purchaser are also done away with by giving the timeshare owners the option of holidaying at different places each year through the exchange facility extended by most of the timeshare companies.
As a business model, timeshare allows the resort developer to share the operational and maintenance costs with the timeshare owners. Not only does it allow the developer to ease the burden of cost, but it also helps him increase the occupancy rate even during the off-season. A unique feature of the timeshare industry is that it is less susceptible to factors such as epidemic breakouts, terror strikes, war, oil price rises, exchange rate fluctuations, etc. which would normally affect the traditional hotel industry adversely. Thus, a developer running his resort on a timeshare basis would be able to achieve a year-round occupancy as opposed to a traditional hotelier who experiences seasonal fluctuations and unstable occupancy.
For the timeshare owners, it provides a holiday package complete with indoor and outdoor activities by making a one-time payment plus annual maintenance charges. This means that vacation owners get to enjoy their holidays at a top-notch resort without having to bear the daily room charges or per head costs. Since the cost of the upkeep of the resort is distributed among a number of timeshare owners, they enjoy the pleasures of vacationing at a resort of high quality at a fairly affordable price.
Timeshare system in India and beyond
Timeshare is one of the most evolved and profitable sectors in the hospitality and leisure industry. Introduced in India barely 15 years ago, the timeshare industry is growing manifold with big brands such as Resort Condominiums International (RCI), Ramada Hotels & Resorts, Club Mahindra, Hyatt Vacation Club, etc. entering the business. Much of it still remains untapped and developers keep coming up with new, innovative and attractive deals.
Globally, timeshare has been in existence for about 40 years and today, as reported by Interval International, which is one of the two major timeshare exchange companies, it is a US$11.8 billion industry with 5,400 resorts in nearly 100 countries. Although still at a nascent stage in India, the timeshare industry is poised to witness a major surge in sales with increasing disposable incomes, a booming economy and a consequential change in consumer tastes as the primary factors of growth in the leisure segment.
The tourism industry in India is one of the greatest generators of net foreign exchange earnings and employment. The industry, according to the Department of Tourism, currently employs 42 million people and contributes 5.4% and 5.5% to the countrys total GDP and employment respectively. Already the country with the largest number of billionaires in Asia, India is expected to be the third fastest growing country in the world in the leisure and hospitality industry over the next ten years, according to the World Travel and Tourism Council (WTTC). With nearly 20% increase in the number of Indians living in India having financial assets worth more than US$ 1 million, Indian tourism is all set to get a major boost in the coming years. In fact, the Indian tourism industry is expected to grow at a rate of 20-25% per annum till 2017.
Vacationers are spoilt for choice having a wide variety of timeshare schemes to choose from. Broadly speaking, there are six forms of timeshare:
ÃÆÃÃ ''''''''''''''''''''''''''''''''Fixed Week'''''''''''''''''''''''''''''''' This is the most common form of timeshare whereby a timeshare consumer can use one week for the same time every year.
ÃÆÃÃ ''''''''''''''''''''''''''''''''Floating Week'''''''''''''''''''''''''''''''' This type of timeshare allows a timeshare consumer to use one week anytime during the year, subject to availability.
ÃÆÃÃ ''''''''''''''''''''''''''''''''Split week'''''''''''''''''''''''''''''''' This is yet another type whereby the consumer has a right to use his timeshare for less than a week.
ÃÆÃÃ ''''''''''''''''''''''''''''''''Fractional'''''''''''''''''''''''''''''''' This timeshare scheme allows a consumer to use his timeshare for over a week.
ÃÆÃÃ ''''''''''''''''''''''''''''''''Biennial'''''''''''''''''''''''''''''''' By availing himself of this facility, the consumer enjoys his timeshare every other year.
ÃÆÃÃ ''''''''''''''''''''''''''''''''Exchange Timeshare'''''''''''''''''''''''''''''''' This facility allows a consumer to exchange his timeshare with one at a different location as per his choice and convenience.
The flipside
While an increase in the average real disposable incomes of the Indians translates into a rise in the consumption graph of luxuries, a similar trend in the number of law suits against resort developers shows the darker side of the story.
In the recent past, a plethora of cases with respect to timeshare has been brought before various courts. The most common complaint of the consumers has been that they could not schedule their holidays as per their convenience on grounds of non-availability of rooms and, as such, would be sent off to locations that would not meet the standards of the facility as promised. A number of times, consumers found themselves stuck with their timeshares not being able to sell them off despite being told that they had an option to do so. More often than not, the resort owners take advantage of the lacunae in the Indian legal system that lacks a specific legislation with respect to protection of the interests of consumers who purchase and use timeshares. On the one hand, resort owners generally choose to take advantage of the loopholes in our legal system, while on the other hand, the consumers of timeshares, due to lack of a specific legislation, opt out of taking any legal action.
For a long time, the National Consumer Disputes Redressal Commission regarded the purchase of vacation property on a timeshare basis as relating to right/title in immovable property and, hence, not falling under the ambit of the Consumer Protection Act, much to the chagrin of the consumer body. The consumers were left to fend for themselves by filing civil cases against the resort developers, who, by the time the petition would be presented, would have declared themselves insolvent, getting away scot-free.
Several cases with regard to timeshare have come up before various consumer forums. Some of the landmark cases, which highlight the key issues associated with timeshare, were decided by the National Commission and are worth mentioning here:
In a batch of appeals/revisions before the National Consumer Disputes Redressal Commission, viz., T.V. Sunderason and Anr. v. Sterling Holiday Resorts (India) Ltd. AND Sterling Holiday Resorts (India) Ltd. v. Smt. Sunila Malik w/o Shri Vinod Malik AND B.K. Jha and Anr. v. Managing Director, Five Star Holidays (Pvt.) Ltd. and Anr. AND Toshali Resorts International and S. Amarlal v. Rattan Lal Banerjee AND Dr. B.K. Rohtagi v. Five Star Holidays Pvt. Ltd. and Ors., III (2003)CPJ154(NC), the key question that arose was whether deficiency in service alleged by a time-share consumer against a resort operator would fall within the ambit of the Consumer Protection Act, 1986 (CPA).
The Commission interpreted and analyzed the above-mentioned aspect in the light of judgments passed by various commissions and the Supreme Court of India. The Commission overruled two of its earlier judgments i.e., Dalmia Resorts International (P) Ltd. v. Ranjana Gupta, I(1997) CPJ 63 (NC) and Punjab Tourism Development Corporation Ltd. v. Kirit P. Doshi, (1997) 5 CTJ (CP), whereby the Commission had held that the purchase of timeshare in immovable property was not a consumer dispute.
The Commission conceded that it had taken an erroneous view in the Punjab Tourism Development Corporations case that a member gets interest in the immovable property, which is the building of the resort. The Commission was now of the view that the ownership of property vests with the promoter and the member had only purchased his right of stay and had to pay for separate services. Therefore, where the member was denied his right of stay/services, it amounted to deficiency of service on the part of the owner running the resort.
The Commission further referred to the decision of the Apex Court in the case of Lucknow Development Authority v. M.K.Gupta (1994) 1 SCC 243. The Apex Court in this case has held that:
If the service is defective or it is not what was represented then it would be unfair trade practice as defined in the Consumer Protection Act. Further, any defect in the construction activity would be denial of comfort and service to the consumer. When possession of the property is not delivered within the stipulated period the delay so caused is denial of service.
It was thus held that such disputes or claims are not in respect of immovable property but deficiency in rendering of service of a particular standard, quality or grade. The Commission held that there could be deficiency in service in respect of immovable property sold by the owner to the complainant and the complaint would lie under the Act.
Thus, the Commission, in all the appeals as well as the revisions before it in this present case, held that the Consumer Protection Act would cover deficiency of service alleged by a timeshare consumer.
The paradigm shift from a complete denial of protection to consumers to recognition of consumer interests and protection thereof was much needed in the interest of not only the consumers but also the economy as a whole. The judgment that a deficiency of service to consumers by resort owners would fall within the ambit of the CPA serves to instill greater confidence in the consumers thereby giving an impetus to the timeshare industry. However, the timeshare industry still remains unregulated to a large extent. A legislation that pertains specifically to the unique issues relating to timeshare is conspicuous by its absence.
Within the present framework of laws in India, a timeshare consumer, aggrieved by the quality of service provided to him by the resort developer, may move the court for fraud under section 17 r/w 19 of the Indian Contract Act, 1872, misrepresentation under section 18 r/w 19 of the Indian Contract Act, 1872 or unfair trade practices under the Monopolies and Restrictive Trade Practices Act, 1969 (MRTP) or claim damages. The aggrieved consumer may also file a suit against the resort developer for breach of contract under the provisions of the Indian Contract Act, 1872 or claim redressal under the CPA.
However, the current scenario leaves a lot to wish for. Going the normal route for seeking redressal is not only time-consuming and expensive but also harrowing for the aggrieved consumer who would be agonizing over having purchased a timeshare in the first place. A specific legislation needs to be put in place, which seeks to remove the inadequacies of the timeshare model keeping in mind the protection of the interests of not only the consumers but also the interests of the resort developers. There is a dire need for a legislation that ensures fair and ethical business practices in the industry and also improves the credibility of the providers of timeshare services in the minds of the consumers.
Need for streamlining the timeshare system
Although a fantastic business idea, timeshare carries quite a murky image among the consumers. With no set rules and regulations in place, unconscionable businessmen found it easy to lure gullible consumers into purchasing timeshares by making a heavy payment upfront. When they would be all set to enjoy their vacation in style, the timeshare purchasers would be told that the vacation property is full or that their timeshare unit cannot be exchanged for some reason or, worse still, the quality of the resort would not match the promises that were originally made to them. By the time the vacation property owners would realize the trappings of timeshare and want to get out of the same, the timeshare vendors would have them entangled in the complex terms of the sale contracts.
In India, timeshare was highly disorganized until All India Resort Development Association (AIRDA) was brought into existence in the year 1998. AIRDA is a national autonomous body of resort developers, formed to safeguard the interests of the consumers, increase consumer awareness, reduce the incidence of grievances among the consumer body and make self-regulation among the member resort developers the norm. AIRDA has been set up on the lines of the American Resort Development Association (ARDA) to streamline the timeshare segment and infuse confidence in the minds of consumers to promote growth and development of the timeshare industry. To achieve this objective, AIRDA has formulated a code of ethics, which is required to be followed by the members so that the business of timeshare may flourish in an atmosphere free from unfair trade practices, with a view to protect the interests of not only the consumers but also the members.
With the establishment of the AIRDA, timeshare business in India has been systematized to some extent though with the absence of a specific legislation, the vacation ownership segment remains largely unregulated. The need for a specific legislation for the protection of consumers of timeshare has been recognized globally. In Australia, timeshare schemes are considered to be financial products and must comply with duties of governance imposed under Corporations Act 2001. In the European Union, Council Directive of 94/47EC of 26 October 1994 makes written disclosure and written contract in the sale of timeshares mandatory. The Directive has been implemented by various European Union member states, for instance, by the United Kingdom through the Timeshare Regulations 1992, as amended by the Timeshare Regulations 1997. In the United States of America, sale of timeshares within the U.S. is governed by both federal and state law and may be subject to disclosure requirements in certain circumstances.
The way ahead
With the rest of the world slowly waking up to the need for a separate legislation for timeshares, it is high time that a similar intent is materialized in India as well. Currently, the sole organization acting as the regulator of practices in the timeshare industry is the AIRDA. However, this model must now take the form of a comprehensive framework of rules and regulations that have the backing of law. This will not only regulate and standardize the timeshare business and ensure ethical trade practices to have a firm place in the industry but also achieve a reduction of grievances and protection of the interests of all the parties involved. Bringing the defaulter to book will also redress any grievance suffered by a consumer of the timeshare product. Streamlining the timeshare industry would repair the image of timeshare as a product in the minds of the consumers thereby giving a much-needed fillip to the industry.
The new legislation for timeshares should be along the lines of those in other countries with special emphasis on disclosures, provision of certain minimum information to prospective purchasers and compliance with fair and ethical business practices.
Unless the legislators recognize the importance of the tourism sector in terms of its contribution to the Indian economy and formulate a special law for timeshare, a large number of people will continue to be subjected to distress and agony. With a thriving economy and expectations of a further boost to the same, the timing could not be better to take steps in the direction of streamlining the timeshare industry and reap the benefits thereof.
(P Sandhya is an advocate with APJ-SLG Law Offices in New Delhi. Namrata Unnikrishnan is an advocate in New Delhi.)
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