Need to know
- Holiday timeshare schemes can burden the whole family for 99 years
- Our Classic Holidays case study had never seen anything that said they couldn’t leave – until they tried to
- They reached out to four major industry regulators, but none would step in
John and Linda Booth – both 69 and living off their super – have two main household expenses these days.
The first is private health insurance; the second is a holiday timeshare scheme managed by one of Australia's biggest timeshare operators, Classic Holidays.
They could get out of the health insurance if they wanted to, although that mightn't be a good idea at their age. But they recently discovered that they – and their children – are stuck with the timeshare for a very long time. At least that's what Classic Holidays told them earlier this year.
"There's no end to the scheme as far as I understand it," John tells CHOICE. "And when we die, it immediately transfers to the executors of our estate."
John and Linda's three children want no part of it.
(We've established that the Booth family is stuck in the timeshare until 2076, but we'll get to that below.)
There's no end to the scheme as far as I understand it. And when we die, it immediately transfers to the executors of our estate
John Booth, timeshare owner
The timeshare currently costs the Booths about $2,200 a year, and John estimates the costs have been going up about nine percent every year.
They bought the timeshare in a single property, Queensland's Cedar Lake Country Resort, in August 2006. The Booths didn't sign a contract at the time, but they did fill out an application form and were supposed to have received by-laws and constitution documents that laid out the terms and conditions.
In 2010 Classic Holidays entered a management agreement with Cedar Lake.
John and Linda Booth had no idea their timeshare scheme offered no escape.
No way out
When the Booths contacted Classic Holidays in January 2019 and said they wanted to get out of the scheme, they were taken aback by the response:
"We wish to advise that Classic Holidays and the Resort do not provide a relinquishment option should a member or their family no longer wish to retain their ownership".
It was the first the Booths had heard of not being able to exit the timeshare scheme they'd entered 13 years earlier, entitling them to three weeks a year in a two-bedroom apartment. They had bought the timeshare from a previous owner.
Classic Holidays referred them to the Cedar Lake by-laws and constitutions document, the first time they'd seen either as far as the Booths were concerned.
The by-laws say nothing about not being able to leave the scheme
We've reviewed both documents. The by-laws are relatively clear about things like who gets to use the pool and booking time frames, but say nothing about not being able to leave the scheme.
The constitution is 35 pages of dense legalese. Section 7.6 paragraph 1 says "a member shall not be entitled to resign or retire from membership of the Club while he remains registered".
As for the length of their timeshare arrangement, the Cedar Lake constitution says the objective of the "company" is to lease a parcel of land for 99 years from Coastal Mountain Corporation starting in March 1977. It doesn't specifically say anything about the length of the Booth's timeshare deal.
"We don't believe we were ever supplied these documents, when we first signed up for the scheme or at any point after until we asked to get out of the scheme," John says.
"We were aware that we would have to pay a maintenance fee but knew nothing about not being able to get out of the timeshare once we were in."
"At no stage of the purchase did we get advised by the seller or did the solicitor highlight the details we now know from various people," John says. "The only document we had in our files from the beginning was the title showing the previous and current owners. I have not seen anything that says you can't get out of the scheme."
Unmoved by this argument, Classic Holidays told the Booths they might be able to qualify for a hardship waiver, but warns "this is quite a lengthy process and you will be required to complete forms and supply supporting documentation. The only other alternative is to gift or sell your timeshare ownership".
As we've pointed out in earlier timeshare investigations, trying to sell a timeshare ownership is a very tall order. And, given the ongoing fees and restrictive conditions, a timeshare would probably not make a welcome gift.
A deal gone bad
Though they recently lost their part pension after the government raised the assets threshold, John says he and his wife are not necessarily in financial hardship, he just wants to get out of the scheme because it's bad value for money and they don't want to burden their children with it.
"It's gotten to the stage where I can go to booking.com and get an accommodation for half the price I would pay through the timeshare scheme," John says.
He acknowledges that the scheme delivered good value for money for a number of years, and they took holidays around the world. But those days are over.
"It's no longer an affordable holiday, the way it was promoted in the early years," John says. "The costs outweigh the return."
The Booths say they once took holidays around the world on their timeshare scheme, but it's no longer an affordable holiday: "The costs outweigh the return".
Belated disclosure
In May 2019, the Booths received a Classic Holidays newsletter that cautioned members not to believe third parties when they promised timeshare owners there was a way to exit their schemes.
Aside from the vague wording in the Cedar Lake constitution that Classic Holidays sent them earlier in the year, they say it's the only documentation they've seen that seems to indicate, by inference in this case, that customers are locked in.
The Booths filed a complaint with the Australian Securities and Investments Commission (ASIC), which regulates the timeshare industry as a managed investment scheme, but the regulator advised that the Booths should resolve the matter with Classic Holidays or, failing that, through the Australian Financial Complaints Authority (AFCA).
I can go to booking.com and get an accommodation for half the price I would pay through the timeshare scheme
John Booth, timeshare owner
They tried both, but AFCA sent them a response saying the agency "cannot consider a complaint against Cedar Lake Country Resort Limited as it is not an AFCA member. Cedar Lake is a member-run timesharing scheme, and was granted an ASIC exemption in 2001. This means it does not require a responsible entity, and is not required to be an AFCA member. Classic Leisure has a management agreement for Cedar Lake."
The Booths also filed complaints with the Commonwealth Ombudsman and the Queensland Office of Fair Trading (OFT).
Both said the matter was not in their jurisdiction. The Ombudsman directed them to AFCA.
As we discovered during this investigation, Cedar Lake is not an AFCA member, but Classic Holiday Club (the timeshare scheme) is.
We asked AFCA if this makes a difference and were told by senior communications adviser Matt Jones, "after investigation we have not been able to establish a legal relationship between Classic Clubs Limited and Classic Leisure that would allow us to consider complaints about products or services provided by Classic Leisure [which trades as Classic Holidays] – given that we can only review cases involving our members."
However, Classic Holidays, Classic Clubs Limited and Classic Leisure are all included in the Classic Holiday Club product disclosure statement. And the PDS says members should complain to AFCA if they're not happy with the outcome of their complaint to Classic Holidays.
(By the way, if you're confused about the relationships, or lack of them, between these various companies and schemes, you're not alone – we had trouble unpicking them too. So it's no wonder John and Linda Booth have struggled to make sense of where they stand, legally and financially.)
ASIC told us 'we suggest that Mr and Mrs Booth seek their own legal advice about their situation'
We followed up with OFT, which said it couldn't intervene in the Booth case because the couple signed on to the scheme in 2006.
"This is prior to the commencement of the Australian Consumer Law and the introduction of unfair contract terms it brought," a spokesperson told us.
"Additionally, under the ACL, and under the legislation in force prior to the ACL's commencement, there is a three-year time limit on proceedings under the Act. Accordingly in cases such as those you have outlined, the OFT would recommend the consumer seek legal advice as to the options and avenues available."
When we followed up with ASIC, the regulator told us "we suggest that Mr and Mrs Booth seek their own legal advice about their situation".
Classic Holidays responds
Classic Holidays CEO Ramy Filo takes exception to the Booth's version of events.
"The timeshare is not run by Classic Holidays but by the board of the Cedar Lakes Country Resort," Filo tells us. "What we wrote to the Booths is what the board and the constitution required us to do."
Filo says the Booths should take their grievance to Cedar Lake, not Classic Holidays.
But John Booth says he contacted Cedar Lake and received an email referring him to the response he had received from Classic Holidays.
"Even when you contact Cedar Lake, Classic Holidays reply, so how can they say they have nothing to do with Cedar Lake?" John says.
You can't just magically get rid of a title. They may not have understood what they bought, but they were bound by the constitution and the by-laws
Ramy Filo, Classic Holidays CEO
When we made Classic Holidays aware of this and asked how the Booths could contact the Cedar Lake board, Classic Holidays COO Carole Smith didn't provide contact information but said "correspondence including hardship requests are tabled at each board meeting. Members can also attend the AGM held at the Resort each May."
Filo likens being in a timeshare scheme to owning a home.
According to Filo, the Booths "own land and title at the resort. You can't just magically get rid of a title. They may not have understood what they bought, but they were bound by the constitution and the by-laws. They own shares in a company and title to the land."
As for whether they saw these documents in 2006, Filo says "when you buy privately in a secondary sale, ASIC says you don't have to give any disclosure".
(We confirmed this with ASIC, which told us "there is no requirement under the Corporations Act for a PDS [product disclosure statement] to be provided where the transfer occurs between parties where there is no involvement of the issuer of the product, such as in a private sale".)
Filo also makes the case the Booths and their children have a good deal going. "They're paying $807 a week for a two-bedroom apartment, and they can swap these weeks around the world."
But the deal comes with many conditions, such as having to make bookings for school holidays, Easter weekend and the Christmas period at least two years in advance.
And if you cancel a booking anytime sooner than 60 days before the date, you lose your Classic Holiday points.
The legal parameters of the Booth's obligation to the scheme appear to be unclear.
They can rent it out, they can exchange it or they can gift it
Ramy Filo, Classic Holidays CEO
Though Filo says the Booths "own land and title at the [Cedar Lake] resort" and that they "own a share in a company and title to the land", Classic Holidays COO Carole Smith uses the word "lease" in the same interview and acknowledges that a 99-year lease is a long time to be committed to a property.
"You won't find that on the market today unless it's a private seller," Smith says. "That was the older style of timeshare."
How three weeks a year in a range of holiday timeshare properties constitutes land and title remains unclear.
Smith also confirms that the family is stuck with the scheme until 2076, or 99 years from when it was established by the member the Booths bought it from.
"The member owns the title to the land which will transfer to the executors of their estate upon their deaths, same as any other real estate ownership," Smith says.
Filo says the average duration of Classic Holidays timeshare ownership is currently 15 years.
What are the options for the Booths? "They can rent it out, they can exchange it or they can gift it," Filo says.
What they can't do is simply exit the timeshare scheme.
Passing on the bad deal
This Booth case follows a case we investigated earlier this year, in which an 87-year-old woman named Anne Begbie was unable to get out of a 99-year Classic Holidays contract (ending in 2084) at Pacific Palms Resort on the NSW mid-north coast despite the best efforts of her daughter, Lindy Mason.
A Classic Holidays sales consultant told Mason "the liability of the annual fees will pass on to the beneficiaries of the estate. If annual fees are not paid, then first they add interest and then if they remain unpaid, [Classic Holidays] will get debt collectors."
In other words, the fees for the timeshare, about $824 annually plus maintenance costs of $1900 every five years, would pass on to Begbie's children for the next 65 years.
Eventually Classic Holidays agreed to replace the 99-year contract with a new six-year deal, costing $12,500 for the life of the contract.
Anne took the deal believing it was the only way she could end the contract and prevent the fees from continuing.
CHOICE lodged a complaint with ASIC about the matter on the grounds that the advice Begbie and her daughter received was misleading and deceptive, and we've urged the regulator to take action against Classic Holidays.
Industry body looking after its own?
In John Booth's view, the Australian Timeshare and Holiday Ownership Council (ATHOC), the industry body for timeshare operators, does little to protect timeshare members. Booth's emails to ATHOC went unanswered, he says.
It's worth noting that Ramy Filo is also the president of ATHOC, which has a one-page code of ethics that says timeshare operators must "act honestly, fairly, courteously and with integrity in all dealings with the public and with other members".
We're not asking for any compensation or payback. All we want to do is get out of the scheme.
John Booth, timeshare owner
But when the code says timeshare operators must not "exert under [sic] influence, pressure or persuasion on potential purchasers of timeshare products", it's not the potential purchasers that ATHOC is worried about, but rather the possibility that pressure sales tactics might be "to the detriment of the public perception of the Industry".
In 2017, timeshare operators held about 180,000 sales presentations, according to ATHOC. It says somewhere around 178,000 people owned a timeshare in Australia at the time, and around one million Australians were directly or indirectly involved in a timeshare.
ATHOC received 1431 complaints in 2017, 56% of which were related to sales.
John and Linda Booth want to change the game for all timeshare customers stuck in a bad deal.
"We're not asking for any compensation or payback," John says. "All we want to do is get out of the scheme and get the financial obligations out of our estate."
Stock images: Getty, unless otherwise stated.
