Fractional property is a concept which is rapidly gaining popularity, and is making inroads in markets across the world.
Article written by Venture2
But there is still a long way to go in terms of consumer and media awareness and understanding of the concept, mainly because there are several different versions of fractional ownership, all with different terminology.
The first and most common misconception about fractional ownership is that it is timeshare by another name. With timeshare you don’t own a tangible asset, but you are buying the right to use one or more holiday properties at certain times. With fractional ownership you are buying a percentage of actual bricks and mortar – whether this is a share of a deeded ownership or a property held in trust by a specialist trustee company. This fraction then entitles you to use the property for a certain number of weeks a year, and unlike timeshare, you can transfer or will ownership or sell your fraction on.
So here is a brief guide to explain the main forms of fractional ownership and how they work – the vast majority of fractional developments will fall in to one of the categories below:
- Basic fractional ownership
- Private residence club
- Destination clubs
- Exchange programmes
The basic form consists of buying a fraction of a freehold of a unit in a fixed location. Annual dues are payable towards maintenance and upkeep.
With higher prices, more amenities, bigger units and the very best locations, these are essentially the upmarket end of the fractional ownership market. In terms of ownership and legal structures, they are usually the same as basic fractionals (see above).
This sector has seen the most evolution in recent years and has been hardest hit by the recession. These offer membership of a club which entitled the user to a certain number of nights’ usage at a range of properties across the world, typically including the US, Europe and the Caribbean, but did not include any ownership of the actual properties.
The trend in recent years has been for equity-based destination clubs. These are essentially investment funds which acquire a portfolio of properties, which are jointly owned by the shareholders. Some funds have a finite lifespan and will sell the portfolio after a set period, distributing the proceeds between shareholders.
Members are entitled to a set number of nights’ usage across the portfolio. In terms of specification, amenities and pricing, destination clubs tend to be at the top end of the market, along with PRCs. As well as a membership fee, annual dues are payable.
There has also been a move towards destination club models which include rental programmes and more friendly usage calendars which offer members a much more flexible vacation experience.
Many fractionals and PRCs are affiliated to exchange programmes. These allow owners to swap some of their allotted time at their home resort for nights at other participating resorts around the world. The exchange programmes range in size from just a few resorts to several hundred.
Venture2 have a range of fractional ownership opportunities available. To find out more, click here to send them an enquiry.
The views and comments herein are those of the author and do not necessarily reflect the views or opinions of Rightmove Overseas, Rightmove Group Ltd or Rightmove Plc