What is factual ownership?
Its best explained as follows:-
Excluding some matters, if you own a house with another, and jointly you bought the house you are fractional owners, each owning half. If say the property was sold to you both for £300,000 and one paid £200,000 and the other £100,000, clearly one would own 2/3 and the other 1/3. The other aspect you have to consider is what are you buying when you acquire a property.
Equity and Tenancy
When buying a house, you obviously own the property. This is the equity and as owner you can let/rent the property to a tenant in exchange for a consideration. That consideration is generally called rent. In that event you still own the property, but have chosen to give up the right to occupy for a consideration. The term of the tenancy can vary dependant on what you have agreed with the tenant.
What happens to the value if I let out the property?
In some cases the property values can raise or fall dependent upon the terms of the tenancy. If you have a good tenant who pays a high rent, clearly the property can attract and investment reward, so the property value can rise. If on the other hand the property is let on a peppercorn payment the value would plummet, as the tenancy could occupy the property for 999 years and pay £2.00 per year.
The Owners
You could therefore own the equitable interest (the landlord) or the right to occupy (the tenant) or both.
In timeshare most timeshare owners acquire “a right to occupy”. The first timeshares to be rolled out in Europe where fixed weeks “rights to occupy”, the term was forever (in perpetuity). The developer keeps the ownership and controlled the rent and maintenance fees.
Timeshare Rent.
As the property is fractionally own by different parties the annual rent is generally split equally between the parties. The spit is pre determined and should be referred to in the sales contract. The amount of rent is pre determined and again should be in the contract. The rent is then paid to the landlord (developer) by some clause/ arrangement. The exact calculation of rent is therefore very important, as it could start out quite low and rapidly increase to very high levels.
You have a need to know-before you buy-if you own the equitable interest or are lease holder/ tenant/. If a tenant, you need to be fully aware of the forward liabilities and the end of term conditions. If you merely sign the contract believing the salesman or the contents of the sales documents, you could be locked in for a long and be paying a very expensive burden.
The Contracts
The fractional contracts you sign have been authored upon the instructions of the developer/landlord. They are not government documents, drafted and designed to be fair. They are in our opinion entirely designed so as to protect the seller not you the buyer. On many occasions the buyer does not know what they are buying into. Many are merely “rights to occupy” on very harsh terms.
Consumers have an express need to know if they own fixed property or merely a “right to occupy”. If the latter, consumers need to give particular consideration to the contractual terms.
Rights to Occupy
If you are acquiring a “right to occupy” the property you are timesharing the property with others. Its timeshare pure and simple! The word might not be prominent in the contracts or referred to but its timeshare. The word Timeshare is avoided as it’s a blighted word.
Timeshare Contracts have Indicators.
Is there a club? Who controls the club? How many directors does the developer control in comparison to the owners? Who controls the management company? Who are the trust company and do they have a relationship with the developer? Have you attended a presentation? Was that presentation uncomfortable.
Signing Contracts
Contracts are not always fair and reasonable. The timeshare industry has a appalling reputation. This reputation has resulted from some imparting on others very unfair terms and onerous condition on consumers.
DON’T BE FOOLED!
A contract is just that, a binding agreement on two parties
“IF ITS FAIR”.
If not fair, the unfair terms will be struck from the contract. Each and every consumer is entitled to be told the truth. If salesman tells untruths and those untruths caused you to enter into the contract, the entire contract is unfair and could be voidable.
Write down what you have been told. You can do this on the back of the contract and get the salesman to sign the sheet of papers as a record of what you were told. If they will not sign your account of the representations made, a problem exists and you should walk away.
DON’T BE LIED TO BY SALESMAN.
Fraction Ownership Advice
It’s simple; never sign on the day! Walk away and inspect the documents with a solicitor! Tell him (in your instruction) what to were told by the salesman! What you expect from the contract and proceed with extreme caution at all times.
Fractional Legal Structures
Many legal structures exist in these types of contracts. Some of those structures are very complex, involving many legal jurisdictions in tax havens. Consumers must ask themselves why is it so complex? Why so many companies in faraway lands? You don’t make such complex arrangements without a purpose and we believe that purpose do not benefit consumers.
Beware “fixed weeks” coupled with “rotating period” of annual use.
These have proven in the past to be very dodgy, Floating week system in Spain have been outlawed as they have “no objects”. In any event, who is organising those rotational weeks? Consumers should only trust in themselves not others! In many occasions you are letting another (possible non member) occupy your property and when you want to book your rotational week many weeks are unavailable.
Fractional Structures Term
This will depend on the commercial objectives of the developer of the project.
Note: it’s what the developer wants and if they have wrote the fractional ownership scheme, they will have included in the contract what they want. Again they have paid a lot of money to someone to ensure they get what they want. Equally they will ensure that those who authored the contracts will monitor and protect they interest. These are generally the trust companies.
Share the Annual costs of Maintenance
Consumers have a need to know who is maintaining the site. Can the maintenance company be dismissed by you? Is the maintenance company controlled or connected to the trust company/developer in any way? If so we advise you walk away!
Stand alone-v- Holiday Complex.
Steer clear of mixed use and holiday complexes as the control may be taken away from you or your fellow owners in preference to the entire hotel. In Spain is unlawful to sub describe/divide units
The Property
One such trust company explains;
“Normally the legal title to the whole property to be fractioned will be granted to a company, which can be owned and controlled by FNTC” The question is can you trust the trust company if they were employed by or connected to the person who sold it you?
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