If the holiday club rep drops by your sun-kissed resort, be on your guard

Esther Shaw on how to avoid the pitfalls and sales spiels if you're tempted by a timeshare-style offer

If, while relaxing in the sun at your resort this summer, you're approached by someone with a flashing smile offering you a "winning scratch card" or a free holiday, then be on your guard: you could be about to fall into the timeshare or holiday club trap.

A recent undercover study by consumer body Which? found that scratch card touts in popular Mediterranean resorts – particularly in southern Spain and the Canary Islands – were luring British tourists into sales presentations with the promise of "star prizes". But to get these prizes, "winners" were having to sit through up to five hours of sales patter.

"Everyone likes to win a prize, but you may have to attend a lengthy presentation with a barrage of confusing information, where you are pressured into parting with thousands of pounds for something you might not even want – without the chance to think it over," warns Lorna Cowan from Which?

And this practice doesn't just happen overseas. You could also be targeted in the UK via a letter or someone cold-calling you at home to say you've won a "free luxury holiday".

So how do these timeshare and holiday club schemes work?

With a legitimate timeshare firm, you buy the right to stay in an apartment or villa for a set period each year. You will usually pay an initial charge, which could be several thousand pounds, plus some form of continuing membership or maintenance fee, which may be between £300 and £400 a year. Ownership rights are confirmed by a real estate register trustee and can be passed on or sold. But timeshare is quite inflexible as your use is usually booked in fixed blocks.

Timeshare holidays have attracted a lot of bad publicity over the years due to the tales of investors who got their fingers burnt. However, legislation is now in place to provide some protection. Under the EU Timeshare Directive, consumers have the right, for example, to obtain information in a prospectus or brochure before signing a contract, and must be given a "cooling off" period of at least 10 days after signing.

Holiday clubs, though, are not covered by these rules. Marketing themselves as the "flexible alternative" to timeshare, they differ in offering the chance to buy discounted holidays from a particular company – with a password to a website, say – instead of a tangible "bricks and mortar" product with ownership rights.

With a holiday club, people are persuaded to pay a joining fee that could range between £5,000 and £15,000, with the promise of cheap deals on hotel rooms and flights in the future. Yet the deals may be no cheaper than those available online or on the high street, and at the moment consumers do not get the same legal cancellation rights or protection if things go wrong.

In June last year, the European Commission announced plans to bring the law governing holiday clubs into line with that for timeshares – a move that was welcomed by consumer groups. Citizens Advice said the proposals would "stamp out some of the very worst abuses" and "close many of the loopholes in the law which have allowed rogue practices to flourish".

The rules, though, are not expected to come into force before 2010, so in the meantime consumers must be on their guard.

"Many people are very happy with timeshares," says Susan Marks, consumer affairs officer at Citizens Advice. "But we've all heard lots of horror stories."

She urges consumers to be wary of any prize or holiday that has to be collected at a presentation. "Don't claim it unless you want to undergo several hours of high-pressure selling."

If you are approached while on holiday, don't get into a taxi or bus provided by a sales rep; companies often choose locations well away from your hotel and out of town, making it more difficult to leave.

"Ignore suggestions that the special offer may not be available later on," adds Ms Marks. "And never make a payment upfront to clinch the deal on a timeshare. If the sales rep asks you to do so, they are acting illegally."

Always request written information about costs, including maintenance fees , as well as details on the companies involved and their responsibilities.

Take these documents away and read them before signing up; written information in your own language is a legal right.

"If you change you mind, act quickly," says Ms Marks. "Check the small print for information about a cooling-off period. If it's a timeshare deal, you may have time to cancel, but you may not have long."

Sandy Grey of the Timeshare Consumers Association says one of the biggest problems is knowing which product you are being sold. "It is difficult to identify whether it is timeshare or a holiday club, as reps tend not to use the word 'timeshare'," he explains. "Timeshare can range from excellent to awful but holiday clubs are generally bad news as on many occasions delivery doesn't match up with the promises made."

He adds, though, that a lot of local authorities are clamping down on touts – in the streets of Tenerife and Malta, for example – so fewer people are being caught out.

"Some credit card companies are also getting better at offering customers protection," he continues. "In some cases, they are helping people to get their money back."

For those people who are set on buying timeshare, he adds, it is better to wait until you return home – and then pick up a "resale" timeshare for a much lower price.

However, remember that there are alternatives. "A more flexible, upmarket timeshare is emerging called fractional ownership," says Melanie Bien from the broker Savills Private Finance. "This enables you to buy a share of a property which you can use for a period each year. But unlike timeshare, you actually co-own the property."

And as your cash goes into the bricks and mortar, you will benefit from any capital gain when the property is sold – though, of course, you will need the co-owners' agreement.