Applying the cooling-off rule for a timeshare contract made while traveling Hawaii

The following shows a case where a person who entered into a timeshare purchase contract when joining an overseas local guided tour introducing resort hotels was able to use the cooling-off rule for the contract.

Details of the inquiry

I went to Hawaii using a travel package of round-trip flights and accommodation. When I looked for optional tours ¹ there, I found a discount group tour to enjoy resort areas with a condition to look resort hotels. When I joined the tour, I was taken to resort facilities including a golf course by bus and was explained by a local Japanese sales person on a resort club membership with ownership of real estate (hereinafter called "timeshare" ²) as follows.

• If you become one of the owners of this resort hotel, you can use a room of this hotel as yours one week once every other year.
• You can exchange the right to use the resort hotel with the right to use another resort hotel of the same corporate group.
• Even if you don't use the resort hotel, you can accumulate points and use them within the same corporate group or exchange them with flight tickets.

Since it sounded advantageous, I concluded a timeshare purchase contract with the dealer.

The amount of contract was about 30,000 US dollar (about 2,500,000 Japanese yen). I was guided to make a down payment about 380,000 yen through credit card and to pay the rest with a 10-year loan. I signed a contract as I was told. I just remember they told that it was possible to use the cooling-off rule within 7 days.

After returning to Japan and becoming cool-headed, I did not think I can travel abroad so often. I began to worry about payment including the annual administrative fee, mortgage rate, risk of exchange fluctuations, and so on.

Since the contract is written in English, I don't know where in the contract the cooling-off system is mentioned. Although I have a Japanese translation thereof, I don't understand details of the contract very well and feel uneasy. How can I use the cooling-off rule?

(woman in her 30s, salary earner)

1. ¹ Optional tour: Fee-based excursion for interested persons to join during free time of a package tour.
2. ² Timeshare: In the US, it refers to membership with ownership of a resort hotel and it is also called ownership. For example, if you own 1/52 of one room in a hotel under the system, you can use the room as an owner one week per one year. It is a contract of real estate and can be registered.

Summarized outcome

After receiving this inquiry, the local consumer center (hereinafter called "the center") and the inquirer confirmed the written contract to find description on the cooling-off rule. While the Japanese translation indicated that the cooling-off period was 7 days, it also stated that "In case of using the cooling-off period, you need to submit an English document with your signature" and "In case of discrepancy between the original and translated version, the original English version is to be considered relevant". No date was written on the Japanese document.

After reading a thick English contract, a sheet of paper on the cooling-off rule was found in the document. It stated that the contract can be cancelled within 7 days as well as the contract date and the final date of the cooling-off period. There was enough time for using the cooling-off rule. The center advised the inquirer to facsimile the notification of contract cancellation to the dealer and to send the original notification to the dealer via international mail.

At the same time, the center contacted the credit card company and mailed a written argument as well as a copy of the notification of contract cancellation to the credit card company.

At a later date, the center contacted the credit card company and the dealer in Hawaii, and confirmed that the request for using the cooling-off rule had been accepted and that the payment through credit card had been cancelled. Therefore, the center concluded the consultation.

Difficulties

A timeshare contract is a contract of ownership of real estate rather than a contract of right to use a resort hotel. Owning a timeshare requires payment of tax and administrative fee. If the contract is made based on installment payment in US dollar, it is difficult to set up a repayment plan in Japanese yen due to exchange fluctuations in the future.

A contract made in Hawaii is not subject to the Japan's laws, so application of the cooling-off system is not based on the Building Lots and Buildings Transaction Business Act and the Act on Specified Commercial Transactions. Therefore, the center looked into US legal background of timeshare and found out that the cooling-off rule can be used within a certain period. The cooling-off period in the US varies depending on states, from 3 days to 15 days. In Hawaii, it is 7 days.

If you make a contract on an earlier date during your travel period and you try to use the cooling-off rule after returning home, you might miss the cooling-off period. Moreover, the cooling-off period is calculated based on the time of the country where you made the contract (Time difference between Japan and Hawaii is 19 hours.). Attention needs to be paid to these points.

In this case, the dealer in Hawaii had a Japanese staff member and an international toll-free telephone number, which facilitated access from Japan. Usually, it is difficult for local consumer centers to redress international troubles because of international telephone charges and language barrier. Days and time for contact are limited due to the time difference.

If the cooling-off period passes, timeshare ownership is registered, which makes impossible for a consumer to negotiate cancellation with the dealer. As a result, the consumer has to sell the timeshare in the secondhand market.

Advice for Consumers

Traveling abroad makes people relaxed, and sometimes travelers happen to make a contract which they usually don't do. In case of making a timeshare contract, it is necessary to rationally consider if you can speak the local language with ease, if you often use the timeshare, if the contract is really necessary for you, and so on.

As with any other contracts, much care is needed not to enter into a contract without understanding details.

1. ^* This article includes information from a consumer administration department at a local government.