Written for The Scotsman Newspaper by Laura Henderson

Forgoing the what's-mine-is-mine constraints of traditional second-home ownership in favour of a "part share" is less of an anomaly these days with investors taking a more pragmatic approach to where, what and how they buy. Long associated with the ultimate in luxury acquisitions, such as private yachts and jet aircraft, fractional ownership is now the property league's latest signing, providing an effective middle-ground solution to the high cost of a second house purchase. Sales of time-share, fractional and destination club membership doubled worldwide in 2005 to more than $4 billion (£2.2bn) and it's easy to see why, given the annual maintenance costs of a traditional second home likely to be used for just a handful of weeks a year.

"The most significant benefit of shared ownership is being able to match your purchase with your expected use of a property," explains Melanie Down of the Vigia Group. "When combined with access to facilities of a self-contained resort, you have a very compelling reason for investing this way."

Fractional Ownership

For those with a mind to do their own thing and in less-crowded surrounds, fractional ownership may provide the solution. More akin to true second-home ownership, fractional residences confer a deeded interest in the property and an investment component where you benefit from long-term capital growth but, as the term implies, at a significantly reduced outlay. Property that would otherwise be sold outright can be purchased in multiples, with ownership configurations varying from 4-13 as opposed to 25-50 with timeshare. Property is of a high standard, often fully furnished with administration and maintenance provided by a management team and associated running costs shared equally between owners. "Fractional ownership is a hybrid of timeshare and full freehold ownership, and is more about investment in the property itself and real legal interest in the bricks and mortar, as opposed to the purchase of time," says Down.

Owners, in turn, have full rights of ownership, including selling to others, renting, buying additional fractional shares and upgrading to outright ownership, with a fraction becoming part of the owner's portfolio of heritable wealth. "Fractionals tend to be more amenity laden than timeshares," adds Down. "Owners can swap weeks between themselves or rent out their allocated period privately. Vacation exchange opportunities are also available, but this is regarded more as an add-on benefit and not the primary reason for the purchase."

Off-plan investors may also find fractional ownership a beneficial means of releasing invested equity sooner by selling fractional shares in their property, while at the same time retaining a fraction for their own use or for rental purposes. "Fractional ownership and timeshare can't really be compared," says Joanne Molloy of Sunset Estates. "Timeshare values have been historically poor because of the large number of re-sales on the market and the continuous stream of new developments being launched, so the secondary market has never really developed. Conversely, there are fewer fractionals on the market and those that are, are usually in desirable locations where traditionally residential property prices have been high. If your criteria is part investment, part pleasure - they're hard to beat."
Purchase Process

Prices vary based on the size, amenities and location of the individual property and start from as little as £20,000 plus annual fees to upwards of £300,000.

The purchase process can take the form of a limited company set up in which each owner owns a percentage of the shares in the company (more common with five+ owners). Alternately, a deed of co-ownership can be set up with individual names placed on the title deed.

An annex document outlines owners' rights to certain weeks a year based on high/low season distribution.

Maintenance fees vary per resort with a benchmark of between £900-£1500 per property per annum. A contribution to a "sinking fund" to cover incidental expenses is standard. This usually equates to 10 per cent of the annual maintenance fee.

Upkeep of the property is the responsibility of the resort's elected management company and is written into the deed of co-ownership.

Links to articles:

Fractional Ownership News and Articles

Fox Business News - (1/21/2008)
Fractional Property Ownership - Owning a small piece of big luxury

From CNN Money - (6/7/2007)
Deluxe vacations on the cheap. Private residence clubs, or fractional's, let owners share a second home with five-star service

ABC 30 News Article - (5/28/2007)
Think You Can't Afford Your Dream Vacation Home? Think Again

From ABC news Los Angeles - (5/17/2007)
Living the High Life With Shared Ownership

Hotels Magazine review of fractional vacation ownership - (15/03/2007)
Fractional Property Ownership. A Home Away From Home

Golfonline Magazine - (3/1/2004)
The Ultimate Time-share. High-end homes for the traveling golfer

Bankrate.com - (12/11/2003)
Fractional ownership: Get a piece of a vacation home