Entrance to Alegría resort in Beacon Hill.
THE HAGUE--The High Court in The Hague handed down its ruling in the case of Alegría Real Estate BV against the Timeshare Owners at Caravanserai Association (TOCA) and others on Friday, September 25.
This case concerns claims of TOCA that Alegría must adhere to the timeshare agreements its members as tenants entered into with the lessor, the operator of the former Caravanserai Resort in Beacon Hill, which real estate was purchased by Alegría at public auction in 2014 from Bank of Nova Scotia.
In the High Court’s ruling, the prior judgment of the Court of Appeals of December 20, 2018, has been referred back to the Appeals Court for a new decision on this matter. TOCA has been ordered by the High Court to pay the expenses for the handling of the case, which were estimated at 2,882.34 euros.
Kildare Properties Limited acquired in 1996 a long lease on three lots in Beacon Hill on which Caravanserai Beach Resort was developed. In connection with the development and operation of the resort, two companies were established in 1996: Island Hotel Corporation NV, which would manage the hotel and other catering activities; and Endless Vacation NV, which according to its articles of association was charged with, among other things, advising and mediation in the rental and sale of timeshares.
Bank of Nova Scotia financed the project and Kildare, Island Hotel and Endless Vacation transferred all their income to the bank.
The resort sold more than 2,000 timeshares between 1996 and 2013. The bank claimed the credits in 2013, which led to the executorial sale of the leasehold and apartment rights.
Alegría purchased Caravanserai Resort for US $14 million in a public auction organised by Scotiabank on August 13, 2014. Alegría claimed it was not bound by any type of timeshare agreement.
The approximately 2,200 timeshare owners claiming timeshare rights at Caravanserai were informed by letter that their previous ownership rights had been nullified and that Alegría would offer hotel units against payment instead. As compensation, it offered a hotel room usage agreement that would allow usage of a room and facilities at the resort against an annual fee to cover part of the resort’s operational cost.
Alegría wants to redevelop the resort into a five-star hotel property and has also been entangled in many other legal procedures to force operators of bars and restaurants from its premises.
TOCA, represented in this case by attorney Bart van der Wiel, was established in October 2014. Representing 62 of its members who together claim to have lost some $1.5 million in advance rent payments, TOCA called on the court to grant its members access to their apartments. TOCA deemed the immediate annulment of clients’ timeshare agreements unjust, as these constituted a breach of contract.
The association is of the opinion that timeshare agreements are, in fact, rental agreements that, as such, should be legally protected.
In its judgment, the Supreme Court ruled that the rights and obligations of the former lessor in the lease agreements between Endless Vacation and the timeshare owners have not passed to Alegría under Article 7:226 of the Civil Code. “After all, it was the bank as creditor and not Endless Vacation as landlord who transferred the business rights on the rented property to Alegría,” the High Court stated.
The Supreme Court also found insufficient grounds to anticipate the workings of the draft Timeshare Ordinance. “Where the draft Timeshare Ordinance provides a rule that protects the timeshare taker, regardless of whether the selling or transferring party is the contracting party of the timeshare taker, this deviates strongly from the applicable law, while it is also unclear whether, and if so when, the Timeshare Ordinance will be established and come into effect,” the High Court stated.
Alegría was represented in this matter by attorneys Chris de Bres, Eric R. de Vries and Chris van Amersfoort of HBN Law and Tax, with assistance of attorney Hans van Wijk of Pels Rijcken at the Supreme Court.
In what HBN Law and Tax described as a “landmark case,” the Supreme Court “in essence ruled that the rights and obligations of the former lessor based on the timeshare agreements did not pass to Alegría on the basis of Article 7:226.2 of the Civil Code; that the draft St. Maarten Timeshare Ordinance does not apply to this case; and that Alegría is not obligated to comply with the former lessor’s obligations based on tort or good faith,” HBN Law stated.
“Alegría is extremely pleased with this result and expects that all efforts can now be directed to the further development of the Alegría-owned Morgan Resort with an opening day slated for March 1, 2021, a five-star development with a $100 million total investment and employment opportunities for 500 St. Maarten citizens,” HBN Law said.