On 16 September 2011, the Belgian Official Gazette published the Act of 28 August 2011 on the protection of consumers in respect of agreements relating to timeshare, long-term holiday products, resale and exchange.
This Act of 28 August 2011, which entered into force on 26 September 2011, repeals the former Act of 11 April 1999 on agreements relating to the purchase of the right to use immovable properties on a timeshare basis.
In this newsletter, Stibbe provides you with a brief overview of the most fundamental changes laid down by the Act of 28 August 2011.
1. The new Act on agreements relating to timeshare
The Act of 28 August 2011 on the protection of consumers in respect of agreements relating to timeshare, long-term holiday products, resale and exchange1 (hereinafter the “New Act”) is the result of the Belgian legislature’s implementation of directive 2008/122/EC (hereinafter the “Directive”).
The Directive is a maximum harmonization directive. This means that Member States are obliged to implement the Directive’s provisions in national law in a way that accurately reflects and neither exceeds nor falls below the requirements in relation to the areas covered by the Directive.
In light of the many inevitable changes the Directive entails, the New Act replaces the entire former Act of 11 April 1999 on agreements relating to the purchase of the right to use immovable properties on a timeshare basis2 (hereinafter the “Former Act”).
After more than ten years, the New Act therefore expands the purpose and the scope initially anticipated by the Former Act, actualizes certain elements, and offers a set of clear, modern and simplified rules.
2. Background and ratio legis
After the adoption of the Former Act, new products and contracts, which were not covered by any legislation, have been developed. These new products include those which can be called "timeshare-like products" (such as timeshare in canal boats, cruise-ships and caravans, or contracts for less than 3 years) as well as the so-called "holiday discount clubs". Resale and exchange of timeshare schemes were not covered either by the Former Act.
Some of the new products and some transactions related to timeshare, particularly resale, caused high levels of detriment to consumers since they were not covered by the Former Act. Such detriment was evidenced by a significant number of complaints and unfair competition towards honest traders.
The New Act will thus try to enhance consumer protection by extending the scope of the current rules to also include the new products which have emerged in the market, such as holiday clubs. Resale and exchange will be covered as well.
The New Act should ensure that consumers are equally well-protected and will create a level playing field in the market for timeshare and other holiday-related products.
3. Overview of the most important provisions and novelties
The Former Act referred to a “contract relating directly or indirectly to the purchase of the right to use one or more immovable properties on a timeshare basis”, yet the New Act applies to “an agreement relating to timeshare”. Consequently, the two Acts define contract differently. The Former Act defines this as “any contract or group of contracts concluded for [more than one year] under which, directly or indirectly, on an exclusive basis or not, a real property right or any other right relating to the use of one or more immovable properties is established, or is the subject of a transfer or an undertaking to transfer for a specified or specifiable period of the year of at least two days”. The New Act states that it is “a contract or group of contracts of a duration of more than one year under which a consumer, for consideration, acquires the right to use one or more overnight accommodation(s) for more than one period of occupation”.
In light of this expanded scope, the New Act includes several new definitions (i.e., “long-term holiday product contract”, “resale contract”, “ancillary agreement”, etc.). Besides the scope of the New Act, the most significant change with regard to the definitions lies in the different actors to whom both Acts apply.
The Former Act referred to “Vendor” and “Purchaser”, whereas the New Act refers to “Traders” and “Consumers”.
It is thus clear that the New Act covers a broader playing field and emphasizes the protection of the “Consumer”, who is the person “using” the property/product in question as opposed to the “Purchaser”, who is the person “acquiring” a certain right on the property/product in question.
3.2 Advertising and pre-contractual information
Although the Former Act already included several stringent oblig
ations with regard to advertisements and pre-contractual formalities, the New Act takes it one step further and attempts to harmonize the required information.
For example, the New Act foresees that “where a timeshare, long-term holiday product, resale or exchange contract is to be offered to a consumer in person at a promotion or sales event, the trader must clearly indicate the commercial purpose and the nature of the event in the invitation. The pre-contractual information is to be available to the consumer at any time during the event”. In addition, a timeshare or a long-term holiday product may not be marketed or sold as an investment.
In order to ensure that proper communication of the pre-contractual information is harmoniously implemented in all Member States, the New Act now stipulates that standard agreements, a copy of which is annexed to the Act, must be added to the initial offer to the consumer by the trader. This requirement thus replaces the Former Act’s mandatory remittance of a prospectus.
Moreover, the contents of the standard agreements must be respected when drafting the final agreement. These standard agreements contain the mandatory provisions which the Former Act already enumerated (i.e., identity of the parties, information on the acquired rights, information on the real property, etc.).
Finally, the pre-contractual information as well as the final written agreement must be drawn up in the language or one of the languages of the Member State where the consumer is resident or of which she or he is a national, at the choice of the consumer, provided it is an official language of the European Union.
3.3 Right of withdrawal
The consumer is given a period of fourteen calendar days to withdraw from any timeshare, long-term holiday product, resale or exchange contract, without giving any reason, owing any cost, or paying any indemnity. Under Belgian law, it should be noted that the consumer now has slightly less protection since the former withdrawal period was fifteen working days.
The withdrawal period will be calculated: (a) from the day of the conclusion of the contract or any binding preliminary contract; or (b) from the day when the consumer receives the contract or any binding preliminary contract if it is later than the date referred to in point (a).
Whereas the Former Act required the final agreement to contain information on the period or the periods of the year wherein the right of withdrawal could be exercised, the mortgage situation of the real property as well as a statement that the acquisition of the real property would not entail any additional cost other than those mentioned in the agreement, the New Act stipulates that a separate standard withdrawal form must be provided to the consumer prior to the signing of the agreement.
This separate standard withdrawal form must be provided to the consumer in writing, on paper or on another durable medium, and meets the abovementioned language requirements.
In the event such separate standard withdrawal form is not provided to the consumer, the withdrawal period will be one year and fourteen calendar days. If such form has been filled in by the trader and provided to the consumer in writing, on paper or on another durable medium (meeting the abovementioned language requirements), within one year from the day referred to above in the second paragraph of this section 3.3, a withdrawal period of fourteen calendar days will start as from the day the consumer receives that form.
Similarly, where the information referred to in the standard agreements as well as the applicable standard information form has not been provided to the consumer in writing, on paper or on another durable medium (meeting the abovementioned language requirements), the withdrawal period will be three months and fourteen calendar days. If the information referred to in the standard agreements as well as the applicable standard information form has been provided by the trader to the consumer in writing, on paper or on another durable medium (meeting the abovementioned language requirements), within three months from the day referred to above in the second paragraph of this section 3.3, a withdrawal period of fourteen calendar days will start as from the day the consumer receives that form.
In relation to timeshare, long-term holiday products, and exchange contracts, the trader is prohibited from requesting - either on his/her own behalf or for that of any third party - any advance payment, provision of guarantees, reservation of money on accounts, explicit acknowledgement of debt, or any other consideration to the consumer before the end of the withdrawal period. As to the resale agreements, these prohibitions apply in any way possible to the period prior to either the actual sale or the end of the agreement.
In relation to the agreements regarding long-term holiday products, payments will be made according to a staggered payment schedule. Any payment of the price specified in the contract made not in accordance with this payment schedule is prohibited. The payments, including any membership fee, are divided into yearly installments, each of which is an equal value. The trader will send a written request for payment, on paper or on another durable medium, at least fourteen calendar days in advance of each due date. From the second installment payment onwards and without prejudice to the provisions of law which regulate the termination of the agreement, the consumer may terminate the contract without incurring any penalty by giving notice to the trader within fourteen calendar days from the date of receiving the request for payment of each installment.
The New Act forbids the following types of provisions and deems them null and void by operation of law:
Any provision pursuant to which a consumer waives his/her rights conferred on him/her by this Act, when the applicable law is that of a Member State;
Any provision pursuant to which a consumer is deprived of the protection granted by this Act, when the applicable law is that of a third party country, if:
The warning procedure described in Article 22 of the New Act (i.e., a public officer can be appointed by the Minister of Economic Affairs to address a warning to the offender of any of the Act’s provisions) adds a publicity element to the concept of warning mentioned in the Former Act. This Article states that the obligation of the offender to stop committing the breach can be publicly announced.
- for the agreement related to real property under this Act, the real property is located on the territory of a Member State;
- for the other agreements under this Act, which are not directly related to real property, the trader pursues commercial or professional activities in a Member State or, by any means, directs such activities to a Member State and the contract falls within the scope of such activities.
Finally, when compared with the Former Act, the New Act foresees higher fines in the event of a breach of a contractual obligation (€250 to €20,000 instead of € 150 to € 10,000).
Based on an analysis of both Acts, it is obvious to conclude that the New Act covers a broader playing field, inspired by the economic reality and evolutions. Whereas the Former Act applied to agreements relating to the purchase of the right to use immovable properties on a timeshare basis and determined the relationship between a vendor and a purchaser, the New Act applies to agreements relating to timeshare (including those related to movable properties), long-term holiday products, resale and exchange, and determines the relationship between a trader and consumer.
Where the Former Act was entered into force subsequent to the implementation of a minimum harmonization directive, the New Act is the result of an attempt to maximally harmonize the regulations applicable in the Member States. The obligations mentioned in the New Act should therefore reflect what will be available throughout the entire European Union. The use of the standard agreements is the best example hereof.
Finally, additional obligations and formalities render the New Act more strict and complex which is most likely to protect consumers (for example, by way of requiring that a withdrawal form be used, and imposing higher fines, etc.) from traders with bad intentions.
- On the same day, the Belgian Official Gazette published the ancillary Act of 13 August 2011 on the action in cessation of a breach on the Act of 28 August 2011 regarding the agreements relating to the purchase of the right to use immovable properties on a timeshare basis.
- In order to reflect the expanded scope of the new Act of 28 August 2011, the ancillary Act of 13 August 2011 (which also entered into force on 26 September 2011) amends the former Act of 11 April 1999 with regard to its content relating to the action in cessation of a breach of an agreement relating to the purchase of the right to use immovable properties on a timeshare basis.
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