Despite revising its regulatory scheme as recently as 2005, the Alberta provincial government has determined that its rules have not kept pace with the changes in how vacation ownership products are structured, marketed and sold. To address this, it has adopted Alberta Regulation 105/2010, also known as the “Time Share and Points-Based Contracts and Business Regulation” (“New Regulation”), to replace the “Time Share Contracts Regulation” as of November 1, 2010.
As implied by its expanded title, the New Regulation broadens the scope of sales regulation in Alberta. The following details some of the more significant changes that apply to the sale in Alberta of vacation ownership products, whether or not the underlying property is located in Alberta.
Coverage of Points Programs. The New Regulation defines “points-based contracts” as an agreement in which a consumer acquires points, credits or similar equivalencies along with the right or option to exchange those points for a right to use, occupy or possess real or personal property as part of a time share plan, whether or not the consumer receives any other interest, right, privilege or benefit under that agreement. Further, the definitions of “time share business,” “time share interest,” “time share plan,” and “time share property” include the activities, rights and interests acquired pursuant to a points-based contract. As such, the New Regulation attempts to create a regime whereby deeded and non-deeded vacation ownership products are subject to substantially the same consumer protection provisions.
Licensure, Records & Security. Under the New Regulation, every person who offers time share interests (“supplier”) who is not otherwise an “industry member” under Alberta’s Real Estate Act must acquire, on an annual basis, a Right To Use, Personal Property Ownership or Real Property Ownership License. As a condition to receiving this license, a supplier is required to post the security mandated by the Director of Fair Trading through a surety bond or cash security agreement. The supplier must also maintain complete and accurate financial records and records of all sales contracts, assessments, marketing materials and refunds. The license applications and forms of security documents can be accessed at: http://www.servicealberta.gov.ab.ca/1709.cfm.
Guarantee of Use Rights. The New Regulation incorporates a set of “unfair practices,” which includes the offer or sale of a timeshare interest if the use rights under the applicable time share plan have been oversold. Moreover, the New Regulation requires that every time share property be subject to either a non-disturbance clause or a warranty regarding consumers’ use. A “non-disturbance clause” is defined by the New Regulation as an arrangement between a supplier and a creditor with a security interest in the time share property whereby each agrees that: (a) transferees of the time share property assume the obligations of the supplier; (b) the consumers’ time share interests take priority over the interests of the creditor; and (c) the creditor will not interfere with the consumers’ use and enjoyment of the time share property. In the absence of a non-disturbance clause, the supplier must warrant to consumers that: (x) the time share property is not subject to any leases, mortgages or other financial encumbrances; (y) the time share property will not in the future be made subject to a mortgage, pledge or third party interest (other than a time share interest); and (z) any encumbrance on the time share property will be discharged as soon as reasonably possible. The supplier’s failure to comply with the non-disturbance clause or warranty is an unfair practice.
Cancellation Rights. Consistent with the prior regulation, consumers have an irrevocable right to cancel a time share contract or points-based contract at any time until 10 days after receiving a copy of the contract. However, the New Regulation expands the circumstances by which this cancellation right may be extended to one year to include: (a) a supplier’s failure to hold a valid license or deliver an executed contract to the consumer; (b) the omission of information required to be included in the sales contract; and (c) the absence of a consumer’s signature.
The revised Schedule setting forth these expanded cancellation rights must be printed entirely in not less than 12-point bold type. The New Regulation allows consumers to exercise their cancellation rights via email.
Use of Trust. Section 9 of the New Regulation requires suppliers to deposit all funds received from a consumer in a trust account within two banking days of receipt. Those funds may not be released to the supplier until the later of the following: (a) expiration of the consumer’s 10-day cancellation right; (b) construction of the time share property is complete; or (c) the consumer may use or occupy the property.
Liability. In general, the failure to comply with any of these obligations on and after November 1 is an offense under the Fair Trading Act punishable by: (i) a fine not to exceed the greater of $100,000 or three times the amount obtained a result of the offense; and (ii) imprisonment for up to two years. The New Regulation explicitly provides that suppliers are responsible for the acts and omissions of their employees, agents and contractors.