by Jennie Thompson

This question is actually a rhetorical one. Or is it? How do we decide whether we trust anyone? Is it by personal appearance, or by reputation or because you saw the name in a magazine? What are trustees and how do they fit in with the timeshare industry?

Over the next few issues of Sharetime we will examine these questions and hopefully make it all a little clearer.

A trust is in essence a relationship. The trustee’s actions are not only controlled by Trust Law but by precedents and also the trust deed. In the world outside of timeshare a trust is often used as either an inheritance vehicle to protect your assets and ensure that your children inherit or as a protection against taxes.

In this case you are the “settlor”, you settle your assets into the trust which is controlled and governed by the trustee. The goods that you have “settled” are not the trustee’s, they are held for your beneficiaries, whether that be the Dogs home or your children.

So the trustee looks after the trust assets but he must at all times consider what is in the best interests of the beneficiaries and the trust as a whole. This applies to timeshare as well as a private trust.

Trustees have a duty not to allow their personal self interest at any time to conflict with their fiduciary duties.

The trustees at a timeshare resort can be considered the faceless ones. They are not seen on the resort and yet they seem to have power. Maybe you see them at the AGM, maybe not.

At the recent TATOC conference I asked delegates if they had a trustee at their resort, did they know who they were?  Had they met them?  After each question the number of positive answers reduced.

Many times the trustee ends up being the most responsible party in a resort. Responsible for everything that has gone wrong. Is that really fair? Especially when you have read what their responsibilities really are and how onerous they are.

Trustees entered timeshare through a variety of reasons. The initial problems were highlighted in an early OFT report. Consumers were paying money and not receiving the goods i.e. the resort was never built and the developer had disappeared with the money.

Combined with this was an even worse situation in which the timesharers, after a few years, suddenly found that their apartments had been mortgaged by the developer who had defaulted - and suddenly they could no longer have their holidays. Thus the requirement for a timeshare trustee was born.

The following extract from an Office of Fair Trading Report is appropriate to quote:

“Legislation should require that payments made to purchase timeshare should be suitably safeguarded. This could take the form, for example, of insurance or bonding to indemnify the purchaser in the event of the contract not being completed, of payments made into an account maintained by an independent stakeholder of suitable standing and repute. This person might be for example, a trustee, a bank or other appropriate corporate body, a solicitor or professional accountant. The payments should not be passed to the developer until completion of the contract for the timeshare or until the timeshare unit is ready for occupation, whichever is the later. Failure by the developer to comply with these requirements should be a criminal offence.”

“Where title to timeshare accommodation does not already reside with the owners, that the title should be free of all undisclosed or future encumbrances and held by an independent person of suitable standing and repute on behalf of the owners. Failure, by the developer, to comply should be a criminal offence.”

So we are introduced to the main areas that involve the trustee - protection of land, buildings - and the money. This protection is provided with the one intention of ensuring that the consumer gets what he paid for.

This report was written many years ago when timeshare was first known. Since that time of course we have EU directives and more legislation. Perhaps surprisingly, the present laws do not ask for the land and buildings to be secured in this way.

The Directive introduces the cooling off period and cancellation notice and so the protection of funds is also deemed to have been dealt with adequately.

However, there are other parties involved with timeshare resorts who also require a trustee to be there. The exchange companies want to know that there is a credible trustee and its list of requirements is very strict: they need to be protected against any claims from members that the resort is”not there”.

The finance companies want trustees to act as stakeholders and to ensure that the product for which they are lending money is viable and that they will be protected against any consumer credit claims.

The marketers prefer to have a trustee as it makes their job easier and last, but by no means least, the consumers want to know that there is an independent third party protecting them.

The presence of a trustee gives all these parties, protection, credibility and integrity - powerful words and also a powerful responsibility.

Case of Cowan v Scargill (1985) it was stated that a trustee owes “undivided loyalty to the beneficiaries”. Who are these beneficiaries?

Well initially at a resort they are – YOU.