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February 4, 2006
Time-shares: Don't buy under pressure |
Since the Consumer Protection Act 2002 came into force on July 30, 2005,
an Ontario consumer can cancel an agreement to purchase a time-share
property, for any reason, within 10 days after receiving a written copy
of the agreement.
This protection does not, however, extend to Ontario residents who
purchase time-shares outside of the province or outside the country.
As a real estate lawyer, I have had a number of clients over the years
who retained me with respect to time-share agreements they were sorry
they'd signed. I was not alone in receiving this kind of complaint. Last
year, the Ministry of Government Services received 829 complaints from
Ontarians about time-share contracts.
I never quite understood the intense salesmanship that prompts otherwise
astute consumers to sign long-term contracts for vacation destinations,
so I decided to conduct a personal investigation into time-share
marketing.
Last month, my wife Dorothy and I spent a week at an all-inclusive
five-star resort in the Los Cabos region in Mexico. The Royal Solaris
group is a growing Mexican-owned chain of hotels that offers visitors
the opportunity to buy into its exclusive club membership.
My experience on numerous Mexican and Caribbean vacations in the past
has been that tourists are frequently bombarded with offers of various
types of freebies in exchange for listening to the sales pitch. I had
always resisted the temptation.
On our visit in January, however, we accepted and enjoyed a free car
rental for two days, and then showed up for a promised 90-minute
presentation. Based on conversations with friends and clients, I believe
that our time-share sales pitch was very similar to theirs in structure,
presentation and pressure, except that the promised 90 minutes stretched
to three hours and 15 minutes — admittedly with our co-operation.
Our first contact was with Sofia, who took us to view the members-only
beachfront rooms and explained some time-share terminology and benefits.
She said we would soon be offered one of the few remaining founder
memberships.
After about 45 minutes, Rodrigo took over and explained how the special
membership cost was a mere $51,550 (all figures U.S.), including no
annual fee for the 30-year duration of the program.
That figure rapidly dropped to $49,750, then only $19,995 with a number
of free weeks and other frills thrown in. Fortunately, however, we were
eligible for a special discount, lowering the price to $16,995 for four
weeks each year over the 30-year-period.
Rodrigo mentioned, too, that in order to use our annual high-season week
at each Solaris resort, we would have to pay $92 per person per day for
the all-inclusive food provided by the hotel — about $1,300 for our
seven-day stay.
It didn't take long to figure out that if we bought and used the
time-share membership, it would cost more in one week just for food than
we paid for the entire trip, including food, airfare and transfers.
At this point, the sales pressure was stepped up. Written notes of
prices and extras were flying across the table, and I was tempted to buy
just to stop the sales pitch. "Señor," Rodrigo pleaded, "come on!"
Wanting to see what would happen, I continued to express resistance and
watched the price drop to $15,900, then $13,900, $10,900 and finally
$9,800, with extra bonus weeks flying in and out of the deal.
Rodrigo eventually gave up and his manager came over with a
questionnaire on Rodrigo's performance. It turned out that the answers
were irrelevant, as it was just another sales pitch, with even more
freebies and VIP weeks thrown in. I knew the manager was important
because he wore a Rolex watch and used a Montblanc pen.
By the time the price dropped to $8,900, even I was confused as to what
was and was not on the table, despite the copious notes I was taking.
Eduardo then took over — also sporting a Rolex and, now, two Montblancs.
His function was to introduce Jorge, the developer's personal
representative, who had a gold Rolex and two gold Montblancs. Jorge was
really smooth, and introduced a shortened three- to five-year plan for a
mere $4,995. With 15 free weeks and a few cruises thrown in, I was made
to feel that they were giving it all away.
After almost an hour with Jorge, I was totally worn out and finally said
what I should have said two hours earlier: "No thanks."
What I did get for free was a fascinating example of high-pressure
salesmanship, and the psychology of selling.
I later discovered that the time-shares I was being offered were
available on Internet resale sites at less than half of the developer's
prices.
Here's what I learned from my experience:
● Never show interest.
It only encourages them. At the same time, asking questions is the only
way to get a thorough explanation of what is actually for sale.
● A time-share is
worthless if you can't get there. Make sure your travel destination is
served by scheduled or charter airlines.
● If you're tempted to
buy, wait a bit. The price will drop. Or go for the resales.
● Calculate the extras
for food and airport transfers. Often, a travel agent can do better with
a package deal.
● Recognize that buying
a time-share involves a significant commitment of time and money to one
set of vacation parameters. If you don't use it, you lose it.
● Time-shares are not
liquid. The resale market is limited and the resale values are subject
to huge discounts.
● Annual fees are
payable whether you use the time-share or not. And they may increase
without limit.
● Contracts signed
outside of Ontario typically do not have a cooling-off period. Once the
ink is dry, it's binding.
● Have the contract
checked out by an independent lawyer in the country where the sale takes
place.
● It may be difficult or
impossible to exchange use of a time-share for another property
elsewhere.
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Bob Aaron is a Toronto real estate lawyer. He can be reached by email
at bob@aaron.ca, phone 416-364-9366 or
fax 416-364-3818. Visit the column archives at
http://www.aaron.ca. | |
