Timeshare overhaul prompts continuing concerns

MACDONALD Resorts, the timeshare arm of the Scottish hotels group, is facing a legal challenge in the UK and Spain over its reforms to ownership.

The MRL Action Group advised by Manchester-based Athena Law has taken the first formal stage of litigation with a 'letter before action'.

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Macdonald, which has over 20,000 owners at nine resorts three of them in Scotland, last summer took control of the entire estate, and offered owners the option to exit their contentious 'in perpetuity' contracts for a payment of four years' fees.

Owners who remained were switched to a points system which offered more flexibility, but they lost their ownership of specific apartments and weeks.

The offer came amid political scrutiny at Westminster and in Europe of the historic contracts which bind a typically ageing demographic of timeshare owners not only for life but in perpetuity.

The action group says: "Macdonald owners have been disgruntled for some time and are largely unhappy at the changes that are being forced upon them."

Owner and action group member John Howison from Edinburgh said: "The members of the committee are very unhappy that Macdonald Resorts have forced through changes that replace the fixed weeks arrangement with a points system, which isn't what we bought into in the first place.

"The problem with any timeshare points system is that they have a reputation of simply not working and this system will leave too few high season weeks for the owners that bought them.

"This will leave us the owners with nothing for our money, but Macdonalds with apartments they can take out of the clubs, and weeks that they can sell on. It's simply not fair."

The Herald in a series of reports last year revealed the creation of a "concerned owners" group and the protests of Scottish owners at what one called the "wholesale destruction" of the resorts.

At three resorts, including Lochanhully on Speyside, owners attempted to block the crucial votes on the changes, which Macdonald staged last August after giving relatively short notice to owners.

The owners group said at the time that by changing the constitution, Macdonald had "neatly avoided having to negotiate with individual owners, which this group has been advised by both Scottish and English lawyers is extremely challengeable at law".

The group said Macdonald had failed to highlight the alternative option of allowing the clubs to dissolve, with the assets sold off to the highest bidder and the net proceeds shared between Macdonald and owners, who would then be released from their contracts.

The approved change allows Macdonald to take 75 per cent of any exit fees paid to compensate it for 'loss of contractual rights', but the owners' group says it will be able to control the sites and profit from the most attractive units.

The MRL Action Group says since it was formed, the Spanish Supreme Court has deemed 'in-perpetuity' timeshare contracts to be unlawful.

"Athena Law has reviewed the position and has taken advice from Spanish lawyers. The conclusion is that many MRL Action Group members could use this decision to claim against MRL. As a result, the committee has agreed to support two legal actions - one in Spain and one in the UK."

The group says it is now sufficiently large to require external management and support and has appointed Litigation Management Ltd (LML).

The Spanish Supreme Court ruled in March against a timeshare operator which had argued that 'in perpetuity' contracts were lawful if they applied to buildings created before 1998, when the EU introduced three-year and 50-year limits on such contracts.

The Timeshare Consumers Association said points systems could be seen as an " internal and unregulated closed loop currency", and noted that one industry-wide system had been heavily criticised by the consumer authorities in South Africa. The TCA said: "We have been and remain inundated with disgruntled MRL consumers."

Macdonald however has said it has "every confidence in the legal robustness" of its constitutional changes.

A spokesman for Macdonald Resorts said: "In 2014 six of our resorts were provided with the opportunity to vote on ground-breaking proposals to exit in-perpetuity agreements.

"These proposals were overwhelmingly adopted and since last summer a number of members have exercised their right to leave. The vast majority have chosen to remain as members. Ongoing members are now benefitting from the greater flexibility as to how their week(s) are accessed with the new points system proving to be extremely popular.

"The members at our three remaining resorts who wished to consider their position before choosing to vote on change are now requesting that we offer the same opportunity at these clubs.

"Since introducing the changes media and industry comment has been very supportive of our initiative."