Proposed legislation follows Indies Suites controversy
Frequent Cayman Islands visitors who invest in time-share vacation homes will have their rights and their finances protected under proposed legislation regulating the industry.
The Law Reform Commission has drafted a time-share bill and consultation paper including new regulations to protect the rights of consumers, who typically purchase stakes of around two weeks per year in holiday homes or apartments.
Included in the proposed legislation, the first of its kind in the Cayman Islands, is a requirement for property owners who sell units as time-shares to carry insurance of $2 million or higher at the direction of the Hotel Licensing Board.
The legal changes have been nearly eight years in the making, following the controversy that surrounded the sale of the Indies Suites time-share resort, which suffered serious damage in Hurricane Ivan and could not be rebuilt because it was “severely underinsured.”
The developer sold the property, arguably under value, without the consent or knowledge of the time-share owners, according to a summary of the case included in a consultation paper on the new time-share bill.
The legal dispute that ensued was eventually settled out of court with the time-share owners accepting 20 cents on the dollar for their investment.
One time-share owner told the Cayman Compass at the time that he had signed a 99-year-lease on a property he had been able to use only three times.
The new legislation carries a penalty of a $50,000 fine or two years’ imprisonment for proprietors who fail to properly insure their resorts in accordance with the law.
It also effectively gives time-share owners a “registered interest” in the resort, meaning their investment would be protected and they would have to be consulted before the property was sold.
The Indies Suites time-share owners did not have such protection and were not classed as creditors and were therefore unable to successfully commission for the winding up of the company that owned the resort in order to recoup their investment.
Kurt Tibbetts, who was leader of the country at the time, responded to complaints from the Indies Suites club members by requesting new legislation be drafted.
The Law Reform Commission, which is seeking public input on its draft bill, says the legislation aims to deal with the most frequent concerns expressed by time-share members.
“Owners have complained of hearing about the sale of a resort in the press, poor maintenance of resort premises, bad record-keeping and the failure by a resort to notify owners of major developments in the resort,” the commission said in a statement.
Key requirements in the proposed legislation include:
- Minimum requirements for time-share contracts, including name and contact details for all interested parties and the conditions/dates which the consumer is legally entitled to occupy the property
- New requirement for time-share operators to be licensed and subject to inspections by the Hotel Licensing Board
- New “registration of consumers’ rights” giving time-share owners a legal stake in the resort, similar to the rights of shareholders in a business
- Management agent of time-share resort to be legally responsible for management and maintenance, including ensuring books and records are up to date and open for inspection
- Time-share resorts to be insured for a minimum of $2 million or greater, as determined by the Hotel Licensing Board
The public is invited to respond to the matters provided for in the bill and discussed in the paper and to indicate whether there are other areas that should be reformed in order to improve the regulation of time-shares.
The time-share bill and discussion paper are published at www.lawreformcommission.gov.ky. Submissions should be made no later than Nov. 30.