I have been reading a lot about Fractional Ownership recently and have been asked a lot about it over the last couple of years. “Fractional will save the industry” and “Fractional – the new way to buy” are typical of the sort of phrases that I hear and read about. Somehow this mystical ‘new’ product is being hailed as the new way of buying international property and which will help not only those agents and developers struggling to sell but also those buyers who can’t afford to buy a whole property.
What constantly amazes me about Fractional Ownership is the lack of knowledge about the product. For a start Fractional Ownership is not new. Those of us who have been dealing with international property for some time will have come across Fractional Ownership from time to time over the years (although admittedly not in the volumes that appear now). Back then we called it Co-ownership rather than Fractional Ownership but make no mistake, it is basically the same thing. All that has changed is what we call it.
Fractional Ownership is nothing magical – it is just a way in which something is owned by several different people. You have a Fraction of the Ownership – hence the name. At a basic level, if I get together with a couple of friends and buy a property then that is Fractional Ownership. At the other extreme you can own part of a property along with lots of other people, whom you have never met before, and that is Fractional Ownership as well. There are various different ways of structuring Fractional Ownership, ranging from simply having the property registered in the individual owners names, to more corporate structures.
The other thing that amazes me is the lack of understanding among some of those involved with Fractional Ownership as to what Timeshare is. People selling Fractional Ownership take great pains to disassociate themselves from Timeshare because it had a bad reputation.
In reality Timeshare can be a good product – the problem with it is the way that it is sold, the price and the increasing maintenance fees. I have long said that Timeshare is actually a type of Fractional Ownership, but Fractional Ownership is not necessarily Timeshare. One is a sub-set of the other, if you like. Timeshare has a strict definition in accordance to the various directives and laws. Some Fractional Ownership schemes that I have seen actually come within the definition of Timeshare (although people don’t like it when I point that out to them!), but not necessarily.
Ah, I hear them say, but Fractional Ownership means that you get legal title to your property whereas Timeshare is only a right to use! No, not necessarily, although ordinarily this is the case. I have dealt with Timeshares where the client had his right in the property registered at the land registry. I have also dealt with Fractional Ownership where from a strictly legal point of view you are just buying a right to use the property. Both of these examples are exactly the reverse of what is expected.
I mentioned Timeshare earlier. It is impossible to talk about Fractional Ownership without doing so. The reason why those people selling Fractional Ownership do so much to try and distance themselves from Timeshare is the bad reputation of that product.
What worries me is that the lack of knowledge about both Fractional Ownership and Timeshare could mean that people involved with Fractional Ownership might make some of the mistakes that Timeshare made over the years. I really hope that I am wrong.
