Court rules against Caravanserai timeshare owners: “Alegria does not have to respect contracts”POSTED: 11/30/14 11:43 PM
St. Maarten – The Court in First Instance ruled yesterday that the new owner of the Caravanserai Beach Resort – Alegria Real Estate – does not have to respect the rights of timeshare owners. Alegria bought the resort at auction in August and informed all timeshare owners in a letter dated September 30 that their contracts had been canceled.
The timeshare owners united in an association and initiated a lawsuit against Alegria in which they demand that the company withdraws the September 30-letter and that it respects their rights.
The association, represented in court by attorney Monique Hofman, based its claim against Alegria on the notion that their timeshare contracts have to be considered as lease-agreements.
Scotia Bank auctioned the long lease rights Kildare Properties held on the Caravanserai Resort in August and sold them to Rafik R. (Ray) Sidhom, the director of EVO-payments, a credit card processing company. Sidhom sold the rights immediately to Alegria Real Estate NV.
The association argued that Alegria is bound by the lease-agreements and cannot terminate or void them. Alegria cannot invoke lease-stipulations that are included in the mortgage deeds.
The timeshare owners furthermore called on an article in the civil code that states that in case of the transfer of an immovable asset, the rights and obligations of the lease-agreements also transfer to the new owner.
The court establishes in its ruling that the timeshare owners entered into a contract with Endless Vacations NV, a legal entity doing business as Caravanserai Beach Resort Beacon Hill. The bank auctioned Kildare Properties’ long lease rights, because this company defaulted on the bank loans.
The notarial deed dated august 13, 2014 shows that Sidhom bought “the immovable property” for $14 million and that the representative of Alegria made the bid on behalf of Sidhom.
The court ruled that not Alegria, but Sidhom bought the property and that it is not possible to grant the association of timeshare owners their demand, “because the timeshare contracts have been signed with Endless Vacation NV.”
Because of this, the article from the civil code the timeshare owners association invoked, does not apply, the court ruled. “Endless Vacation NV did not transfer the long lease rights and these rights have not been auctioned for its account. It has not been stated and it has not appeared that Alegria assumed these contracts with the cooperation of the members of the association from Endless Vacation NV.”
On this basis, the court concluded, the claim cannot be granted. “For now it must be assumed that Alegria is not bound by the timeshare contracts with the members of the association. According to the tentative judgment of the court, Alegria does not have to respect these timeshare contracts.”
A very sad day in the history of St. Maarten, and a devastating blow to its tourism product, is the way Jeff Berger, publisher of the electronic newsletter St. Maarten Weekly News reacted to the verdict. “Thanks to the failure of the island to enact meaningful timeshare owner consumer protection, thousands of timeshare owners have lost millions of dollars of their hard earned money which they chose to invest here, intending to come to SXM year after year. There is little doubt that shockwaves from this will affect the values of other timeshares across SXM.”
Tens of thousands of timeshare owners have already sold or walked away from their units, Berger added. “Now, with no reason to trust that their contractual rights will be protected, owners at timeshares across the island are likely to leave in droves unless the island’s new government steps up to the plate and hits a home run with legislation that is real and that has sharp teeth.”
The next question: what about those Caravanserai timeshare owners? Berger stated. “Is the island and / or SMTA going to step forward to help them? That should be the #1 tourism-related mission of the new government. The island’s timeshare sector is now on life support and needs all the help it can get.”