The Difference Between Timeshare and Fractional Ownership

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The Difference Between Timeshare and Fractional Ownership.

When it comes to fractional ownership, many people just assume that this comes under the timeshare umbrella. Both are used to refer to shared ownership agreements and, in some cases, they do share similar characteristics. However, there are also significant variations and, to put it bluntly, timeshare and fractional ownerships are incredibly different. 

Read on to find out the difference between timeshare and fractional ownership agreements so that if you or someone that you know that has been a victim of either, can seek help for their unfortunate situation.

Timeshare Ownerships

A timeshare gives multiple buyers the ability to buy the rights to a holiday home for a specified period; in most case, this is a one to two week period each year. If a family are wanting their own holiday home but cannot afford maintenance on such a property, a timeshare allows a compromise. The family would have use of a property in their desired location, they would always be able to book their preferred dates and, more importantly, they would only contribute a proportion towards the up-keep costs. 

Within a timeshare agreement, the property remains with the owner of the property as the buyer has only reserved the right to use the holiday home. And, with the traditional process, this is a fixed week at the same property each year. Another way timeshares are managed is through a points system. A points system is a different structure that allows buyers to accumulate points to use on a variety of resorts around the world. In a few instances, these points may be allowed to roll-over into the following year. 

On top of the one-time purchase payment, owners will pay their maintenance fees. This payment could be monthly, quarterly or annually. The overall bill is divided between all of the buyers and covers the property’s upkeep, management, taxes and insurance costs.

Unfortunately, timeshare comes with many cautions and warning signs; many scam companies are operating through misleading trading practices and fraudulent activity. It is always good to be vigilant when the misrepresentations of timeshare ownerships come into play. 

Fractional Ownerships

In comparison, fractional ownerships enable several owners to each hold a part of the title on the property. The title is divided up into multiple parts, ensuring each owner is apart of the deed. This division lets the buyers have their portion within a really valuable asset without having to fork out for the entire property in full.

Fractional ownership is becoming more and more common these days, especially in property crowdfunding. Property crowdfunding is an upcoming industry that allows several people to each own a proportion of the property that’ll earn them a return in balance to their stake. With any investment, there is always the element of risk. With property crowdfunding, it is just as easy to lose money as it is to make it.

Within fractional ownership, you are also responsible for paying the maintenance fees, including taxes, insurance etc. But, the amount that you pay is directly proportional to your stake in the fractional property. If you’re considering a fractional ownership contract, it is always advised to check that the details of the seller are registered with The Fractional and Shared Ownership Trade Association (FSOTA). With shared ownership, it is always best to double-check.

The main difference between timeshare and fractional ownership is in a timeshare contract; as a buyer, you would not own any rights to the deeds, whereas, within fractional ownership, you would be entitled to a fractional share. However, there are other ways to distinguish between these two variations of shared ownership.

The Number of Owners and The Amount of Usage

Another distinction is the number of owners per property. As fractional ownership involves the division of the property’s deeds between a number of owners, it is uncommon for the total number of buyers to exceed 15 to 20. Although, it has been known for there to be as few as 4. Timeshares, on the other hand, have no limit, so there can easily be as many as 50 owners per property. 

Your usage of such a property, therefore, will vary in each ownership. Despite both forms of ownership entitling the purchaser to the right of usage, in timeshares, the duration is much shorter. This can be as little as one week, on some occasions, possibly two. With fractional ownerships typically involving far fewer owners, this entitles these owners to several more weeks of usage during a year — with a range from as little as 3 weeks to 13 weeks per annum. 

Option of Resale

It is well-known that timeshare properties are challenging to sell on. A timeshare property typically loses value from its original price as soon as they go back on the market, making timeshare resale undesirable. Fractional property is, on the whole, much easier as these properties are much more attractive. Marketed as ‘real estate,’ these properties can also be resold through a traditional estate agent. 

When it comes to selling on a property in fractional ownership, each purchaser owns a fractional share of the equity. This means that every owner will be able to take advantage of the increase in value over the years, financially benefiting everyone. In a timeshare, ownership is not divided between buyers and, instead, the equity remains with the original owner — who sold the timeshares in the first instance. 

Do you understand the difference between timeshare and fractional ownership? The reality of being in these two variations of shared ownerships are very noticeable. If this is a type of ownership you are considering, you must be able to distinguish between both a timeshare and fractional agreement. At Athena Law, we are specialist timeshare solicitors and can offer you the most cost-efficient and valuable advice about your timeshare contract so that you are not susceptible to scams or a no-exit agreement. Give us a call today on 0161 839 8847 or visit our website for more information.