Timeshare Information

Before the real estate market fell into an abyss a few years ago, fractional ownership was described as timeshare on steroids.  Because of its narrow audience and high-ticket prices, fractional properties were among the first in resort real estate to take a tumble. It looks like they may be coming back.

Prevailing Optimism

Fractional ownership continues to be a vacation ownership option in the U.S., Europe, and Canada. It also is an option in Antigua, Mexico, and the Dominican Republic. Recently, fractional ownership came back into the picture in the Turks & Caicos with the passage of the Fractional Ownership Bill.  Rufus Ewing, Premier of Turks & Caicos called the bill, “a vision of his government to help empower the people, drive development and stimulate the economy. At a fraction of the cost our people can become property owners and have increased equity that would allow them to have access to financing that otherwise they perhaps would not have had."

News from the website Timeshare Broker Beat is also optimistic. A recent post says fractional property ownership is on the rise and lists the benefits of this type of ownership:

1. Owners have more time per year to vacation. Fractional vacation properties offer more weeks at a time.

2. Fractional properties tend to be high-end and have many amenities.

3. And perhaps the best benefit of all... savings. In fractional ownership, the cost of the property is shared by a number of people. In most cases, after paying the initial cost, fractional owners will only have to pay the annual maintenance fees.

A pioneer in the shared vacation industry is Carl Berry, CEO of Star Resort Group. Sales at the company's fractional ownership resort, Seahorse Beach Club on the Texas Gulf Coast, is up and going. According to Carl's September blog, "Seahorse is 'knocking down its first sales.' Seahorse's houses are available on either a whole-ownership, or a fractional-ownership model designed in the tradition of the fully deeded luxury Private Residence Clubs around the world. Members enjoy the benefits of vacation home ownership but with far fewer upfront and ongoing costs and virtually none of the headaches."

Defining Terms

Understanding and defining the various forms of fractional ownership can be confusing. Here are some brief explanations that might be helpful in wading through the different avenues of ownership:

Timeshare

Timeshare may be the most misunderstood term in the fractional vacation property lexicon. Under the common legal definition, timeshare describes any arrangement where usage of property is shared based on time, and there is no reliable distinction between properties marketed as timeshares, fractionals, or private residence clubs. Timeshares are deeded and many fractionals and private residence clubs are not.  Yet, others are.

Fractional Ownership, Co-Ownership and Shared Ownership

The terms fractional ownership, co-ownership, and shared ownership, can describe any arrangement where two or more people share ownership of something, regardless of whether they have a time-based usage arrangement. The term fractional ownership seems to be more commonly used in the U.S. for time-based sharing of vacation property. Co-ownership and shared ownership are more commonly used to describe these arrangements in other English-speaking countries.

Private Residence Club, Destination Club and Vacation Club

Generally, but not always, private residence clubs involve equity ownership (though not necessarily deeded ownership) of a specific property with 4-13 owners per home. These clubs are usually on the high-end of fractional ownership options. Destination clubs and vacation clubs commonly involve multiple homes in different locations. Owners are allowed to use any of the homes in the club. There are equity and non-equity variations.

Condominium Hotels, Condo Hotels and Condotels

The above terms usually describe a hotel that has been subdivided into condominiums where each owner owns all of a specific condominium. This set up has run into numerous legal sticking points.  One of the most recent was the Hard Rock Hotel in San Diego which had numerous unhappy owners, yet survived the law suit.  Management operates the hotel and shares the proceeds with the condominium owner. The owner can sometimes use the property free of charge, but sometimes there's a fee. When there is only one owner per condo, the arrangement is not fractional. The term fractional ownership is sometimes used when the hotel has not been subdivided, and the owners own a percentage of the whole development but do not actually own a condominium.

Taking the Plunge into Fractional Ownership

If you are buying or thinking of buying a fractional ownership, you might want to take a look at the Fractional Ownership Guide developed by the Sirkin Fractional Lawyers group. This guide covers the top 10 issues related to shared ownership. Many of those nagging legal questions are answered in this publication.