Fractional Ownership Advice
Fractional ownership is not a new concept, originally the term referred to a part ownership whereby people acquired a part stake in an expensive asset so as to enjoy it with other likeminded people. Likewise, individuals acquire shares in companies which can be classed as fractional ownership of said company.
One of the main motivators for a fractional purchase is the ability to share the costs of maintaining the asset with other fractional owners.
Every fractional ownership (an endeavour or fixture) requires some sort of management agreement/contract so as to equally divide the costs and maintenance fees between the fractional owners for the preservation of the acquisition.
These agreements apply constitutional rules and/or bylaws so that the asset can be managed in events of maintenance, exits, disputes and the like.
Each owner is guaranteed a prescribed amount of access to the asset, which typically can be used in the time allotted and which is directly relative to the fractional ownership acquired.
Fractional Ownership is a Timeshare product.
In essence there is little difference between timeshare and fractional other than a fractional purchase is usually of a longer usage period each year, although owning a fractional may include owning a share in the legal title whereas timeshare does not. Both are within the same laws and guidelines in Europe.
It appears there is an absence of an approved definition of fractional ownership. It also appears that timeshare companies use the term as a re-badging or re-branding of what is in fact a timeshare product.
Timeshare products have suffered over the years and the mere name sends shivers down some spines, so re-branding is a way for developers to sell without the blight associated with the word “timeshare”.
In short, it’s a cloak and a cloak only because if re-branding has taken place on a product yet the product is still made by the same people, with the same concepts (in mind), then essentially the “fractional ownership” product will not add comfort to the consumer.
A number of timeshare developers promote fractional products with claims of high resale values. This is purposeful so as to (yet again) lure Consumers to the belief that if and when they choose to dispose of the fractional ownership, the sale price is higher.
So it’s not any different, it’s the same tactic of selling high, knowing that the product will never achieve the levels of expectation that the consumer is lead to believe by the salesman.
The upshot of timeshare products is that you are acquiring a right to holiday somewhere. It could be classed as an investment into a controlled and guaranteed holiday destination but can never be classed as an investment in respect to financial terms.
Fractional ownerships are packaged to consumers in a number of flavours, some of which may or may not provide legal interest in the bricks and mortar of the accommodation. “Destination Clubs” or “Group Ownership” are some examples.
Again Fractional Ownership is regulated by the Timeshare Regulations 2010.
Consider the English way of thinking. A builder buys a parcel of land and builds a house, then offers his construction for sale to the public. His wants and needs are to realise the highest values for the house so that his own life is enriched with profit from the fruits of his labours.
Dependant on the marketing of the property, some Estate Agents will dress up the property in glowing terms and will achieve a higher sale price than others. In essence that is what the builder is paying for, the expert services of the Estate Agent.
Now assume that two people want to buy the property but each person only wants the property (in respect to occupation) for six months, it is a cost benefit for the two of them to fractionally own the deeded property together and share the bills.
If the builder was content with selling the property in two fractions he might receive a higher price as the buyers might share the benefits of their own cost saving.
This situation is very unlikely to occur in residential property but in the case of holidays this could work and work well.
Where the problem lies is that there are enrichments and expectations proffered in the sales puffs and false representations are given and lorded onto the consumers at the point of sale. Generally these aspirations, expectations and representations are well engrained in the consumers mind and then quietly and secretly withdrawn in hidden clauses in the long winded contract of sale. A duping has taken place. In short it’s a legal deception. Which many fall into time and time again.
Even the savviest find themselves victim to the sales puffs.
As is often the case, the consumer is caught off guard and given little time to give the contract just consideration. They are bombarded with pictures of happy people holidaying in the sun, sit through speeches and testimonials that sing the praises of the concept and the company so are on cloud 9 (cuckoo land) by the time they are given the contract. In short this is what the cooling off period affords a consumer, “time to cool off” and reflect (with the advice of others) the implication of the contract they are about to enter.
In respect to buying a home, a yard, hotel, or plot of land you would be foolish not to engage a Solicitor or Conveyancer to assist you. Indeed a vast amount of properties are acquired and transferred by the legal profession in the UK, yet in respect to fractional ownership transfers we don’t, when of course we should.
TCA advice:
It is ESSENTIAL that prospective purchasers of a fractional ownership take professional advice, covering both the legal and taxation issues. This should be done before concluding an agreement/contract. The potential loss, (if the sales promises fail), could be financially (and emotionally) very serious.
In the event that a Consumer is faced with an offer from a timeshare company to exchange their timeshare for another product which is dressed in a fractional ownership scheme, the consumer should be very aware that this is very risky and could potentially commit the consumer to years and years of further expense.
If you decide to purchase a fractional ownership, it would be very prudent (and could be your saving grace) to do so by the use of a UK issued CREDIT card. In the event a consumer is able to discharge the payment for the fractional ownership in full. The Consumer should consider paying, in part, on his credit card so as to enjoy the protection that card offers in the future – as it gives the Consumer protection under the Consumer Credit Act 1974.
If you think it sounds “too good to be true”, then STOP! It might be. Slow down and take some time over your decision. Regardless of what they might say, timeshare products will still be there – many, many of them. So shop around, do a bit of research and find the best fit for you, become the hunter not the prey.
For more information regarding this article or assistance in any other timeshare related issues please contact the TCA on 01908 881058 or email: info@TimeshareConsumerAssociation.org.uk