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So in these cash-strapped times, when most of us are especially wary about investing all our savings in one place, surely fractional ownership is a great solution?


FRACTIONAL QUESTIONS YOU MUST ASK...


What do I get for my money and what is the ownership structure behind the property? Does my purchase


represent good value for money compared with buying and owning outright? What are the costs


of running the shared ownership programme and what control do I have over how the property is managed? How can I choose


my weeks of usage each year? Do peak holiday periods rotate, can I buy extra weeks or swap them? Do I trust the


company promoting and managing the project and what protection is in place if they fall on hard times or the number of owners drops?


Initially fractional ownership referred to schemes where the buyer owned a share of the property title but alternative ownership models have developed with owners able to buy equity in a company structure that owns the title to the property or properties.


In timeshare schemes – so popular then so exploited in Spain during the 1980s - you don’t own a share of the underlying asset, you only buy time periods of usage, say two weeks a year for twenty-fi ve years.


The EU recognises fractional ownership, vacation ownership, shared ownership, points clubs, destination clubs, private residence club, seasonal ownership and indeed timeshare under its Timeshare Directive 2011 even though there are different ownership structures that give you access to your property.


Although fractional schemes do differ, you generally own a share of the property’s freehold. Essentially you pay for a share – such as a tenth - and the cost will be the proportionate share of the property’s value, such as £50k of a £500k villa, roughly (there is always a cost from the developer for the marketing and management of the project to ensure it is well-run).


Big name companies with mature developments in established resorts rarely fail with members’ rights protected by a deed. If fractional schemes do fail however it’s because of poor management


and their inability to drive sales to reach the required occupancy levels. A need for high levels means that fractional schemes tend to be found in areas with good year-round appeal: tourist hotspots such as Tuscany, city-break destinations, golfi ng regions such as the Algarve – or the USA where the fractional home market is most highly evolved. Obviously someone’s got to pay for a more complex form of ownership so investigate what this premium really equates to, and whether it is cost-effective. As always, consider your exit strategy; how easy is it to sell on your fraction, are there any contractual restrictions on how and when you can sell? It’s still early days for many European fractional schemes so happy-ever-after stories about buyers selling on their fractions are hard to locate. Yet this in itself is perhaps evidence that people haven’t been in a rush to sell yet. Being able to spend time in a million pound villa in Tuscany you don’t have to worry about maintaining or renting out when you’re not there, fi ts with many people’s dream of ‘owning’ a foreign property. It can be a hands-off way of accessing a higher value property or home in a premium location without the associated cost and hassle.


So do your own research, try to speak to other


owners and put yourself in a position where you can make an informed choice.


AIPP CONSUMER GUIDE 27


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