The cost of Costa Blanca

Don't think of timeshares as an investment, writes Iain Morse

"I have no complaint about the timeshare accommodation itself, just the way it was sold to us," says Monica. When she and her husband retired they decided they could afford two weeks a year in a development in Costa Blanca, Spain. The salesman convinced them that if they bought two weeks, they could sell off the surplus period easily. "They said for every week we bought we would get one free, and be able to sell it at a profit," adds Monica. She has been unable to sell the timeshare and they are paying annual charges of more than pounds 500 for their four weeks each year. Monica, who is in her 60s, has been forced to take a part-time job to meet the costs. "I would call it misrepresentation," she says.

Dreams of cheap holidays and lucrative investments motivate many buyers. Yet, while timeshares are big, big business, those who make the money are rarely the buyers themselves. Complaints about unscrupulous selling techniques are commonplace. It isn't all bad news, however. More than 950,000 people from the UK went on a timeshare holiday in 1996. This year the figure will top one million. Companies operating timeshare schemes include Bovis, Disney, Virgin and Airtours.

Demands for a clean-up have resulted in an EU Timeshare Directive, which took force in late April this year, creating six new criminal offences connected to mis-selling and related fraud. The main provisions of the Directive are meant to curb high-pressure selling techniques. These include a minimum 10-day cooling off period after signing any contract. Payment of any deposits are banned in Britain, but may still be made in some EC states to the developer or be held by a trustee. They may be repayable if cancellation rights are exercised. Full disclosure of a scheme's terms and conditions must be made before any sale.

But what do we get for our money when we buy a timeshare? To answer this look closely at any contract and related sales brochure. All offer the right to use holiday accommodation for a period each year over a fixed number of years. Some contracts offer a particular week or calendar period. Others award points which can be spent through the year, with summer the most expensive season.

With this right comes an obligation to maintain the accommodation. An annual management charge will be levied on owners sufficient for upkeep. Failure to pay can lead to temporary and then permanent loss of all rights without compensation. Beyond these common characteristics there is no single formula for timeshare schemes. If you sign abroad, the country you sign in may or may not have any relevant law. If the company selling the timeshare is not registered in that country, then after payment you may have no enforceable legal rights. Some EC members, like Britain and Portugal, lead the way in protecting the consumer, while others drag their feet.

In Britain, the Timeshare Council represents the industry and imposes stringent criteria on any company seeking to join. Their chief executive Neil Cooper emphasises, "we aim to protect consumers from bad practice, and to ensure that they receive satisfaction. Timeshare is not an investment, but can be a means to purchase good value holidays."

When buying a timeshare the contract should specify a constitution for what amounts to an owners' club. This will cover issues like rights of access, the powers of a member's club committee, and provide for the preparation of annual accounts. There should also be a management agreement, appointing a company to run and maintain the scheme. This should include a clear statement of management charges. You should demand this before buying. In cases where members feel they are being overcharged, committees have changed management companies, or have taken over management themselves. This may be more than the average timesharer is looking for, but provides an ultimate sanction for the dissatisfied.

What you don't buy with a timeshare is any freehold right to the accommodation or land on which it is built. Some timesharers last in perpetuity, while most have a fixed duration, not usually less than sixty years. During the timeshare, title of the land and property should be with a trustee company. This acts as a third party between the scheme developer and members.

The Timeshare Council emphasises the importance of a trustee company in protecting members' rights when buying abroad. For instance, the First National Trustee Company now provides this service round the world, and has expertise in setting up both scheme constitutions and management agreements. When buying a timeshare with FNTC involvement, it may hold the balance of a purchasers' money in a trustee account while contracts are completed.

Timeshares can be swapped and resold. Swapping is popular and agencies like Resort Condominiums International and Interval International provide computerised services matching up demand worldwide in return for an annual fee and further transaction charge.

Reselling and renting out are also possible, but caution is strongly advised by the Timeshare Council. Diana Hanks, their consumer services manager warns: "Resale values are not likely to exceed the purchase price. If renting to someone, taking a deposit and references are sensible precautions"

Contacts: Department of Trade and Industry, on 0171-510-0174, quoting reference URN/97/643, for a free copy of its Timeshare Guide; Timeshare Council - 0171-821 8845.