A Portion of the Pie - Article about Fractional and Quarter Ownership of Real Estate

Fractional ownership entitles buyers to a portion of the development with equity that can be resold. Quarter ownership offers buyers access for at least 12 weeks a year – more than enough for a vacation getaway. This article comes from the Westcoast Homes & Design magazine from November 2006 and is written by Leslie Peterson.

Almost a decade ago, a ski-resort developer in the French Alps persuaded some of his guests that, rather than rent, they ought to buy a portion of the hotel he was development. This innovate marketing concept has grown exponentially to encompass a whole range of fractional ownership arrangements, up to 1/52nd and beyond.

The terms timesharing and fractional ownership often are treated as one and the same. Not so, according to those who market and sell these resort properties. They are friendly cousins, perhaps, but with marked differences in actual ownership, though both arrangements attract buyers looking for vacation getaways.

Similarities? “Why pay 100 per cent of the cost for something you can’t possibly use 100 per cent of the time?” asks Vince Taylor of Pilot House Real Estate. Both timesharing and fractional ownership are set up to offer buyers a slice of paradse without paying for the whole pie. But there the commonality ends, Taylor says.

“Unlike timeshares, which confer right of use but not fee simple title to the land,” he notes, “fractional ownership is considered genuine real estate and entitles buyers to a portion of the development with equity that can be resold. So the fractional share of the cottage or ski chalet can be mortgaged, bequeathed in a will, listed and sold like any other home, without involving the other owners.”

Quarter ownership, the most exclusive form of fractional ownership, came on to the local real-estate scene in late 1999 Whistler’s Montebello II, where more than $25 million of quarter shares sold in the initial sales launch. The biggest surprise at the time was that only about 20 per cent of quarter-ownership buyers were concerned about affordability, Taylor says. “Most quarter ownership buyers continue to be primarily interested in luxury and availability of the finest real estate offerings in the world. Combine that with the fact that each owner has access to at least 12 weeks each year – since few people have more than 12 weeks’ holidays, the time is more than enough.”

Aside from the financial advantages, quarter-ownership also offers purchasers the freedom on the “lock and leave” lifestyle. Just walk in the door, pick up skis or a tennis racket, then head for the hills, the court or the beach. No repairs, no cleaning and upkeep, simply the opportunity to take full advantage of leisure time.

According to Taylor, there are no hidden costs or surprises of quarter ownership. “For each property,” he explains, “there is an ownership corporation (which helps set the usage rotations, and looks after all indoor finishings) and a typical strata corporation with duly elected officers. As always, all costs/budgets, changes must be approved by the owners – just like any other type of real estate. The only difference is that all the aggregate costs are then divided equally between the owners of each home.”

Recently, concerns have been raised in connection with taxation of these properties. Yet according to John Peebles, manager, valuation, and policy standards with BC Assessment, it is important to understand “that the use of the property is the key to determining the classification, rather than the form of ownership.” To be classed as commercial, any type of real estate must pass strict tests. For example, if a complex is smaller than 20 units, it remains in the Class 1 residential category, he says, pointing out there has been no change in legislation, merely closer scrutiny. “Every strata corporation is a bit different as to how it is structured, so potential buyers should read the fine print in the prospectus to see what the limitations are for personal use.”

With more than a 15 year history in North America, this radical shift in our approach to vacation time represents secure, traditional real-estate purchase with a healthy resale market, Taylor says. “living in the finest homes for a fraction of the total cost, never having to worry about maintenance, cleaning or repairs, and always having a stable real-estate investment makes quarter ownership the most popular choice for families, professional investors who are not afraid of the brave new real estate world.”