Harry Taylor from TATOC, the U.K. and Europe’s leading timeshare consumer association, considers timeshare exit strategies and suggests that a change in terminology might be needed.
“The term timeshare exit is giving out the wrong signals to resorts, owners and the media. It is time to find different terminology which reflects what really needs to happen.”
So says Harry Taylor, executive chairman and CEO of TATOC, the U.K. and Europe’s leading consumer association, which represents timeshare owners and over 90 member resorts.
And Taylor is correct in focusing the association’s efforts on this important issue. TATOC’s flagship service, the TATOC Consumer Helpline, has reported a large increase in the number of contacts from owners looking to relinquish their timeshare.
Mark Caldicott, the Helpline’s manager explains: “For a variety of reasons, timeshare owners no longer wish to, or are able to, continue with their ownership.
“In many cases, family and friends have no interest in taking the timeshare over and people often find it difficult to sell their weeks and points on the re-sale market. They can’t even give it away sometimes.
“For the first six months of 2015, the Helpline received 213 consumer enquiries about timeshare exit or relinquishment. This is an increase from 141 contacts for the same period in 2014 and just 56 in 2013.”
While not huge in number, the figures show an increasing trend among owners, many of whom bought their timeshare in the 1980s and 1990’s when timeshare was sold in perpetuity – a real selling point at the time.
Although interest in exit routes and perpetuity contracts by government and the media has only recently come to fore, the issue of timeshare relinquishment is not new and has been on the industry’s radar for some time.
In 2011, TATOC’s Taylor chaired a working party of industry leaders (the Panel of Experts) who considered the challenges of perpetuity contracts, an ageing ownership base and a decline in sales and marketing at many of Europe’s legacy resorts.
The Panel suggested a series of options that could be taken by resorts of all ages including:
• The development of shorter-term products aimed at younger owners;
• The creation of new clubs where the club takes the liability of the timeshare week, the owner pays an annual membership fee but may leave at any time;
• In-house re-sales where owners’ weeks are added to the developer’s unsold stock; and
• The relinquishment of membership certificates when certain conditions are met such as age (70+), ill health and financial hardship.
The Panel was not just a talking shop and action has been taken.
The industry’s trade body, the Resort Development Organisation (RDO), for example, has recently updated its code of conduct to provide more options to owners who wish to relinquish their timeshare.
The RDO’s new requirements for its member resorts go over and above those covered by law. In addition to it now being mandatory for members to have an overall exit programme in place, specific new elements have been adopted including:
• In the event of the death of a joint owner, the surviving owner can surrender their timeshare if they wish while the beneficiaries of a will are not obliged to take on the timeshare if they do not wish to do so;
• A timeshare owner who has been declared bankrupt may hand back the timeshare without charge; and
• If a sole owner or either of the joint owners is suffering from a long-term illness that prevents them from travelling to their resort for the foreseeable future, the timeshare interest may be surrendered.
In all other cases, an owner may surrender their timeshare interest at any time, subject to the agreement of the RDO member. In such cases any surrender fee shall not exceed a sum equivalent to three years’ current maintenance fees.
Some have asked why TATOC hasn’t updated its own code of conduct and made it a requirement for its 90-plus member resorts to implement an exit programme for their owners?
“Well it comes down to the realities of managing a mature resort, many of which are run by a committee of owners, and the perception of the term exit policy.
“For many, exit means exodus and they are unwilling to take the risk that a large percentage of their ownership base may leave, resulting in the failure and collapse of the resort, to the detriment of those who wish to continue,” explained Taylor.
This was a topic covered by TATOC board member Geoff Chapman at the first one-day joint TATOC and the Resort Development Organisation seminar focusing on perpetuity and exits, held in March 2014.
A world-first, over 110 delegates representing the industry and including owners who were part of their resort’s committee, came together to discuss the diverse challenges created by perpetuity or long-term contracts.
Chapman explained: “Finding a solution that is suitable for everyone is like a double-sided coin. We cannot isolate each part involved in the solution, but treat each part as a whole. Any strategy must be carefully managed with a clear policy, criteria and conditions.”
He added that the simplest solution to exit is entry, “but we know that it is not just that simple.”
For this reason TATOC does not make it a requirement for member resorts to implement an exit strategy for their owners.
The association realises that owners who leave must be replaced to ensure the on-going survival of the resort. Yet, many of the member resorts no longer have an active sales and marketing team and still sell traditional fixed or floating weeks.
Without first implementing changes to the products sold and establishing an onsite sales presence, something many resorts are resistant to, it would be wrong for the association to enforce exit strategies on our members.
Rather, TATOC would prefer to work with them to develop new products, introduce modern sales and marketing techniques and look at alternative ways to handle owners who no longer wish to continue with their timeshare, for whatever reason.
TATOC has been working to persuade its members to comply with the following criteria:
• If either one or two names are on the certificate and the partner dies, the certificate can be surrendered as long as the management fees are up-to-date;
• Bankruptcy (will be a consideration, but it is not a right);
• Ill-health, if the owner cannot travel (will be a consideration, but it is not a right);
• If the owner cannot obtain travel insurance (will be a consideration, but it is not a right); and
• If the owners are over the age of 75
And this policy is proving successful with two-thirds of TATOC’s resort membership now offering an exit route for their owners.
“For this reason, I think we should change the term from exit strategy, which implies mass exodus, to controlled or managed departure where the resorts consider each request on a case-by-case basis against a set of fair guidelines. This is what we offer at my own resort, Lakeview Country Club Timeshare, and the results have been interesting.”
Like many U.K. resorts, Lakeview Country Club Timeshare sold timeshare on a fixed week, in-perpetuity basis and did not allow owners to relinquish their ownership.
However in 2013, discussions on how to tackle concern among owners about this policy, led the committee, headed by Taylor, to change the resort’s constitution – with overwhelming support from owners.
“Perpetuity remains in the constitution with an addition that the Lakeview View committee will discuss each request to leave on a case-by-case basis. This allows the committee to manage the departure of owners, ensuring the long-term future of the resort. What we found is that of the owners who had stated they wished to relinquish, only a handful did so. There was no mass exodus – owners had peace of mind, knowing they could leave if they wished to.”
Recent interest in the issue of perpetuity contracts by the media and U.K. and European governments, has meant that resorts in the future might be legally required to allow owners to leave – without any consideration to those left behind.
TATOC has been actively involved in the work undertaken by U.K. governments and the upcoming review of the European Directive.
“The first report from the Competition and Markets Authority (CMA), on the disposal of timeshare and long-term holiday products was not acceptable. TATOC responded and a second report was issued, but it is TATOC’s opinion that the CMA needs to do more investigation to understand the implications to consumers and industry,” added Taylor.
However, it is agreed that action needs to be taken.
The association is particularly concerned that for owners looking to terminate their contracts on an individual basis, the market is ridden with scammers who target the most vulnerable and desperate.
“We have also seen an increase in the numbers of owners who have been contacted by bogus legal firms and timeshare take-over schemes and have put together some recommendations for owners looking to relinquish,” explains Mark Caldicott, from the TATOC Consumer Helpline.
“My best recommendation for owners is to first check the latest version of the club constitution regarding relinquishment. There may be criteria your developer or committee has already put in place to allow you to walk away from your ownership.”
If there are no options in place, owners should consider the following:
• If you have an owners’ committee make contact with them and explain your situation asking for any assistance they can give you;
• Check if your resort or club offers a buyout scheme as many committees and developers have recently implemented schemes which allow the owner to buy their way out of the membership early;
• Negotiation is always better then confrontation so discuss your situation thoroughly with your resort and try to seek a negotiated settlement to terminate your timeshare agreement. Ask if there is any possibility to pay one or two years’ fees in advance before terminating your agreement to give them an opportunity to re-sell your timeshare.
“It’s time to change our mind-set as an industry and self regulation is the way forward,” says Taylor. “Controlled and managed departure is the best option for our mature, legacy resorts combined with new marketing techniques, different product options and an understanding that sales must become part of their daily operation.”
If TATOC is an association that you would like to be part of then join us and support our work. We’d love to have you – either as an individual member, through your resort owners’ committee/HOA or as an affiliated company. Check out the TATOC website for further information.
Telephone: +44 (0) 161 237 3518