WHAT TO BUY: Purchasing a share or portion of a property What started with aircraft and yachts spread to
FRACTIONAL F
ractional ownership works by allowing buyers to own a fraction of a property, rather than owning it in its entirety.
holiday homes about twenty years ago and has been a big success in North America, with its highly developed leisure industry. It’s also enjoyed some success within Europe in areas which can offer year-round occupancy, such as golf resorts in the Algarve, popular city-break destinations and Tuscan estates. A fractional purchase can offer an attractive
alternative to buyers who are looking for a low entry point, and the benefi ts of holiday ownership without having to pay for “full” ownership and 52-weeks maintenance.
Buying a fraction of a property – typically between
a quarter (for 13 weeks’ usage) and a twelfth (one month) – means that the initial outlay is a lot less, enabling you to buy fractions in different types of property, in different locations. It’s a formalised form of co-ownership that will not produce the personal usage issues which buying with friends or family can bring. But, equally, you will have no control over the décor/upkeep of the property which won’t suit everyone. Also, be aware that a fraction, say a quarter, will not cost exactly a quarter of the market value of a property because administrative costs of running a fractional ownership scheme – an essential service – pushes up the price of each slice of the pie. Such costs will also mean high monthly service
charges, so make sure you factor these into your budget. Sceptics of fractional often either confuse it with timeshare and the reputation this gained in the late 1980s, however fractional is NOT timeshare – or a destination club – because you are buying a share of the equity in a property, not only the right to use the property for x-number of weeks a year. You can sell on your fraction, but do check out the exit strategy. Are there any contractual restrictions on how and when you can sell? Another thing key to a successful scheme is in the track record of the developer and management company, and whether the latter can maintain occupancy levels to keep the scheme buoyant fi nancially. To buy safely, use a lawyer who has expertise in fractional ownership.
AIPP CONSUMER GUIDE 15
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