What is fractional or share ownership of property?

Fractional or share ownership is when an asset eg a holiday house is owned by two or more people. The owners form a co-operative which purchases a property with a co-ownership or company structure. The costs and use of the property are then equally shared.

How does this differ from time share?

With time share you buy a week of holiday time (every year or every two years) in a resort facility. This means you can share your asset with up to 103 other people. Co-operative fractional ownership schemes have anywhere between two and 20 shareholders. A proportion of the profits from time share go to the large corporations which run them. The profits from co-operative fractional ownership go to the shareholders themselves.

What is the difference between co-operative fractional ownership and ordinary fractional ownership?

Fractional ownership of property is not a new thing:  it is an idea which has been sold with enormous success by many big players, including Donald Trump. However, the major flaw has been that shareholders sometimes pay a premium price for their investment. It may a great lifestyle option but, after the salesmen and the corporations have taken their cut, it can make a dent in the quality of the financial investment. Club Propertyshare is a ``peoples co-operative": a DIY path to achieving a financially-sound property investment where every dollar is spent on your asset. You have to do a bit of work but the savings in commissions make this worthwhile.

What are the benefits of owning a fractional share property?

Many people love the idea of owning a holiday home: a financial asset that the whole family can enjoy for years to come. However, the reality is that holiday homes are expensive to maintain, plus they often sit vacant for much of the year because their owners simply cannot find the time to use them. Fractional ownership is the obvious answer but, up until now, it has been an area dominated by corporations and developers. With co-operative fractional ownership, shareholders buy an asset at its market value. The old adage, ``You make your money on a property when you buy it", applies equally to fractional ownership. By bypassing the developers,

shareholders acquire a financial investment which should move in value in line with market trends.

Co-operative fractional ownership offers a host of other positives:

• Meeting point: the Club Propertyshare website brings people with similar aspirations and aims together to achieve their dream.
• Choice: you and your fellow shareholders get to choose the property you want. You also get to choose the furnishings, the roster, maintenance plans, lifespan of the co-operative, exit strategy, on-going management etc
• Security:  a purchase is made only once there are enough shareholders in the group to make the scheme financially viable. This system negates the need for any ``risk premium" normally associated with corporate share schemes.

    Can I pull out of the scheme if I do not agree with other members of the co-operative on what we should buy?

The terms of agreement each co-operative formulates will determine what happens in this situation. When we structured our share property, the terms of agreement were formulated in such a way that a shareholder could pull out at this stage of the process without losing their deposit.   It is important to note, however, that each shareholder was locked into the purchase process once they had emailed through their approval for the property.

How many shareholders can be in a fractional property scheme?

It really is up to the members of each individual co-operative but we suggest no more than 20 shareholders: any more and the co-operative may become unwieldy to manage.  

Will I be able to on-sell my share should I need to?

Yes, you can even advertise it on the site. Depending on the type of terms of agreement you enter into, the existing shareholders may be given the first option to buy the share at its market value. If no-one wants to buy it, the share can then be placed on the open market. There will be some legal costs associated with transferring ownership of the share.

We suggest co-operatives also insert an exit clause in their terms of agreement: this means that, after a certain number of years, the shareholders can vote to sell the property and disperse the funds.

How can I be sure I will not be ripped off by an unscrupulous member of the co-operative?

Club Propertyshare advocates the use of trust accounts held in the name of a lawyer/solicitor personally known to you for the transfer of any funds. Never transfer money into an account that has not been verified by your own trusted lawyer/solicitor.

How can I be sure the roster will be fair to everyone?

You get to work with members of your co-operative to design the roster that best suits you. Many co-operatives will choose to work on a ``rotating" roster system. A ballot is staged for the first years time slots: after that, the roster ``rotates" so that over the subsequent years everyone gets a chance at the premium time slots. Swaps can also be made between shareholders.

Who manages the property and decides how much money each shareholder needs to put in each year for maintenance/repairs etc

This is determined by your terms of agreement, which you get a say in formulating. In our co-operative, each of the shareholders takes on the role of manager for the period of one year. On-going issues about maintenance and funds contributions are discussed at the co-operatives annual general meeting. Co-operative members can choose to employ an accountant to manage the companys books if they wish.

Will my share be a good investment?

Co-operative fractional ownership allows shareholders to acquire shares at market value: a crucial component of any good investment. However, in the end, the strength of the investment comes down to the property you and your fellow co-operative members choose to buy.     

This is the time to recognise that this particular co-operative is not for you. Try again with another set of prospective shareholders from the Club Propertyshare database.

How do I evaluate a price for my share should I want to sell it?   

Have the property valued and divide that sum by the number of shareholders in your co-operative. Add a fee for the projected cost of transferring the share to another party, and you have an approximate sale price.

What if several shareholders want out of the scheme?

Each co-operative has the opportunity to insert an exit clause in their terms of agreement. This means that, after a certain number of years, the shareholders can move, on a majority vote, to sell the property and disperse the funds.

What happens if there is a dispute between the shareholders?

Under the terms of the agreement, the shareholders agree to try and resolve the dispute using arbitration. Litigation is the last resort to resolving the issue.

Can I take out a mortgage to finance a share in a property?

You can borrow against an asset (eg your family home) to finance entry into

a share co-operative scheme. However, lenders have traditionally been wary of

offering mortgages on share properties because of the obvious difficulty in seizing

an asset, in the case of a loan default, owned by several parties.

What happens if a shareholder dies or becomes incapable of managing his/her affairs?

Each co-operative has the opportunity to insert a clause into the terms of agreement to allow for the executor or guardian of the shareholders estate to take charge of their payments and entitlements for a period of two years, by which time the share has to be on-sold.

Is a co-operative share scheme for everyone?   

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