Fractional Ownership can be defined as the collective ownership of an asset, usually one with a high monetary value.

Usage of the asset is shared amongst the owners by means of an ownership usage roster. The running costs are also shared amongst the owners.

Fractional ownership has become popular as more people are looking to purchase holiday homes. Prime properties are                

becoming more expensive and therefore people have started to use fractional ownership as a way of purchasing these properties. It is obviously more affordable to purchase such a property with a group of people rather than on one’s own .

What do you buy?

You buy shares in a private company that owns the property. You are then issued with a share certificate as proof of purchase. Usually there is a maximum of 13 shares that are issued and a maximum of 13 shareholders.

Fractional ownership allows you access to the property at certain times of the year. You are also entitled to rent your time allocation out to make money.

Legally fractional ownership is no different to other forms of shared ownership, such as time-share. With most time-share you pay to use the property over a specific time during the year but you do not own the property. Time-share is normally cheaper than fractional ownership. One of the possible drawbacks of fractional ownership is that your running costs that you have to bear as an owner may be significantly higher than if you owned time share. This is due to the fact that there will obviously be fewer owners in a fractional ownership scheme than in a time share scheme.

A point to note: is that should you sell your fractional ownership share, you will be liable for capital gains tax.

Fractional Ownership Companies normally manage the property on behalf of all shareholders. Management services include inspection of the inventory list after each shareholder’s visit, domestic services, maintenance, accounting and auditing, attendance of the Estate Annual General Meetings on behalf of the shareholders, and updating shareholders on general aspects of the property.

How can you finance your purchase of fractional ownership?

One way is to pay cash by taking out further finance on your primary residence or any other property that you may own. Certain commercial banks will allow you to finance 60% of the purchase price over ten years as a mortgage loan.

Fractional title is a very in-depth form of ownership and it is important to do your research before committing yourself. Go through the contract, house rules, and so on very carefully.

We advise that you seek advice from an attorney or a company who specialises in Fractional Ownership.