Fractional Ownership – Answers To Frequently Asked Questions

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Fractional Ownership – Answers To Frequently Asked Questions

The phrase “fractional ownership” is typically used to describe shared ownership of a vacation or resort property by people in an arrangement which allocates usage rights based on time. In other words, only one owner will be allowed to use a particular home or apartment at a particular time. Fractional ownership arrangements can be applied to a single home or apartment (typically referred to as a “one-off fractional”) or to a multi-unit building or resort development. In multi-unit developments, each co-owner may have ownership rights to all the units, some of the units, or only one unit, and his/her usage rights, and cost obligations, may or may not correspond to his/her ownership rights. Groups can be assembled by a real estate development or hotel company, an individual builder, Realtor or seller, one or more of the prospective buyers/users, or groups of friends or family members.

The terms private residence club (or “PRC”), timeshare, shared ownership, vacation home partnership and fractional co-ownership are also used to describe these arrangements, and there are no consistent distinctions in the use of these descriptions. Since property usage is allocated based on time, this type of co-ownership falls within most legal definitions of a “timeshare”, which means it can be subject to restrictions and requirements applicable to the creation and sale of timeshare property. Nevertheless, there are significant practical distinctions between most arrangements commonly called fractionals and more traditional timeshares, and these are discussed more fully below. Fractional ownership arrangements should not be confused with “destination clubs” (in which participants purchase a temporary right to use without ownership), or a “condohotel” or “condotel” (in which each participant has whole ownership of a particular hotel room or suite).

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