Memorandum by the Department of Trade and Industry
TIMESHARE REGULATIONS 1997 (S.I. 1997/1081)
1. By letter dated 25 June 1997 from the Commons Clerk of
the Committee, the Committee has requested a Memorandum on the
New Section 1B of the 1992 Act, inserted by
regulation 4, creates a new offence in relation to the advertisement
of timeshare rights. Section 1B(3)(b) makes it a defence for the
advertiser to show that "he did not know and had no reasonable
cause to suspect that he was advertising timeshare rights".
Explain, with an example, the circumstances in which this defence
could be asserted.
2. The Department considered that it would be unreasonable
to expect persons such as publishers or advertising agencies who
are the advertisers of the product of a timeshare operator to
take responsibility for compliance with the Timeshare Act 1992
as amended by the Timeshare Regulations 1997. For that reason
the Department provided for a "publisher's" defence
in cases of advertisements. This approach is consistent with the
approach taken in other areas concerned with the protection of
consumers such as pyramid selling schemes (section 121 of the
Fair Trading Act 1973) or package travel (regulation 25(5) of
the Package Travel, Package Holidays and Package Tours Regulations
1992). In both examples the infringements of advertising rules
are criminal offences. The Department had in mind the case of
a timeshare operator who would use an advertising agency or send
advertising material to a publisher. Some of the timeshare rights
are marketed as insurance policies, membership of clubs and in
many other ways that make it not always obvious that the product
advertised is a timeshare. It would be even more difficult to
detect the true nature of certain mailshots which look like a
prize draw in a competition. The advertiser or publisher would
not necessarily notice that the prize draw was no more than an
advertisement for timeshare.
In the Section 5A inserted in the Act by regulation
9(6), explain what is meant in subsection (4) by the expression
"binding preliminary agreement" and what the purpose
and effect of the subsection is.
3. Section 5A implements Article 5 of Directive 94/47/EC
of the European Parliament and the Council of 26 October 1994.
Article 5.1 refers to "both parties' signing the contract
or of both parties' signing a binding preliminary contract."
It has been the Department's intention to provide the timeshare
purchaser with the full protection envisaged under the Directive.
The Department took account of the fact that timeshare rights
can be sold in many different forms, for example membership rights,
property rights, tenancies, shareholdings, collective investments
and no doubt many more. Under English law there are two examples
of a preliminary binding contract the Department would mention:
(i) legally binding "Heads of Agreement" with
the details to be found in the main contract and
(ii) a legally binding agreement to enter at some later date
into an agreement for the purchase of a timeshare right. The Department,
in copying out the words from Article 5 of the Directive, further
took account of the possibility that the protection of the UK
legislation might be invoked in respect of property situated in
another Member State.
The consumer might as a result find himself able to invoke
UK legislation. He may have entered into a preliminary binding
agreement rather than the final purchase contract. It is the Department's
view that the cancellation rights provided under the Directive
should also apply to such preliminary contracts (as indeed envisaged
by the Directive) and that the consumer should not be deprived
of his rights under the Directive because the Regulations only
apply to the contract for the purchase of timeshare rights and
not also to the preliminary binding agreement.
20th June 1997