We’re all looking for ways to save money these days. For luxury at a low cost, have you considered fractional ownership or residence clubs? Fleur Kinson investigates new ways to own a home in the sun.
‘Timeshare.’ The word slightly chills the blood of the average Briton, invoking vague, ugly memories of dodgy dealings on the Spanish Costas in the 1980s, all over the press at the time. Salesmen were aggressive, money was lost, buildings were unbuilt; it was ghastly. So let me be absolutely clear from the outset: in this article I will not be trying to make you re-consider the timeshare concept. Whilst timeshares have radically smartened up their act, and what few property-timeshares there are available in Italy these days are infinitely more reputable and trustworthy than what went on in 80s’ Spain, that isn’t what we’ll be looking at here.
Instead, I am going to examine the rather more interesting prospects offered by fractional ownership, or residence clubs. Note that the two terms ‘fractional ownership’ and ‘residence clubs’ are more or less interchangeable, with Brits having a slight preference for the former and Americans having a greater fondness for the latter. Neither is the same thing as timeshare. With a timeshare, you own time at a property, a certain number of weeks per year for a predetermined number of years. In contrast, with fractional ownership and residence clubs, you own, in perpetuity, a share of the property itself. Your name is on the title deeds. You have an asset which can be sold whenever you want, and which can appreciate in value. You also generally get more time at the property than most timeshare schemes allow. Four to six weeks a year at fractionally-owned properties is common – which, coincidentally, is the average number of weeks per year spent at a conventional holiday property owned by full-buyers.
But why do it? Why not just buy an Italian home, wholly your own, in the normal way? The chief benefit of fractional ownership is that it enables you to spend far, far less on a holiday property, while allowing you to spend as much time there as you are likely to do with a fully-owned home. In essence, you’re not paying for a property during the time you’re not there. Fractional ownership can also allow you to enjoy a much larger and more sumptuous property than you might ever be able to buy outright. Ideally, you make further savings through lower running costs, because maintenance expenses are split between all the owners rather than covered by you alone. And security isn’t an issue, since there’s always someone there. There are sometimes perks thrown in, like membership of a local golf or yachting club. Perhaps most attractively, a certain degree of hotel-style service is common. Weekly cleaning is usually included, and there are some properties where daily cleaning and other labour-saving comforts are an option. At the very least, whenever you arrive the kitchen is full of fresh food and the whole place is spotless.
On the downside, you can’t make structural changes to a fractionally-owned property or overhaul the interior decoration whenever you wish. If your real dream is to lovingly re-build, restore and re-design an old Italian home, then fractional ownership isn’t for you. Having set-periods to visit won’t appeal to some. If you want total flexibility in when you can turn up, if you hate planning ahead and like to take last-minute holidays, you’ll find the system too restrictive. And of course, if you simply long to feel that a place is wholly yours, and belongs only to you, this isn’t the route to go. Emotionally, you need to feel fine that other people have a share in your beloved home abroad and that they’re enjoying it when you’re not there.
As already mentioned, one of the nice ideas behind fractional ownership is not paying for a property during the time you’re not there. But nor are you gaining rental income during that time, of course, or at least not usually. This isn’t necessarily a disadvantage. Most owners find that rental income on their holiday property allows them to cover upkeep and maintenance costs, but doesn’t usually amount to an actual substantial ‘income’ of any kind. (There are some exceptions for those who set out to make rental returns their prime business and own several properties in key places.) On a fractionally-owned property, the maintenance costs are low because shared, so the absence of rental income ought to represent, in theory, no great loss. Note that there is of course the possibility of renting out your property during your allocated weeks if you decide not to visit during that time, but you may find that trickier to market than a property that’s available for most of the year.
So what kind of outlay are we talking about here? What are some sample prices on fractionally-owned properties? You might pay €50,000 for a one-eighth share in a historic villa near Florence, allowing you six weeks per year at the property. €77,000 could get you a similar one-eighth share at a luxury hotel-style golf resort in Tuscany. €95,000, meanwhile, could buy one-tenth of a grand house and country estate in rural Le Marche. Because the size, style and service-level of fractionally-owned properties vary so much, it’s not very easy to make generalizations on price. But for buyers looking to spend between, say, €40,000 and €100,000, there are many options out there. Before we look more closely at the nuts and bolts of the fractional ownership system, let’s spend a moment putting the concept in context. Where has it come from? Where might it go?
Residence clubs have been fairly popular in America for about twenty years or so. The aspirational, can-do (or in this case, can-have) American spirit has applied the idea of fractional ownership to luxury properties, yachts, aircraft and classic cars – thus enabling buyers to have the fun of these things without their full-on expense. It is largely thanks to the Americans’ love of Italy – especially Tuscany – that fractionally-owned properties started to blossom in Europe’s boot-shaped peninsula. Jeff Johnstone of the U.S.-based PrivateResidenceClubs.com says that his website draws the most page-views for New York City first, Italy second and Colorado’s glamorous Aspen third.
It’s no surprise that the majority of Italy’s fractional-ownership properties are currently in Tuscany, as this is the region best-known to Americans. However, buyers of fractionally-owned properties in Italy these days are by no means limited to our friends across the Atlantic. The concept has caught on among many different nationalities. And Tuscany isn’t the only place where this type of buying is available. Umbria and Le Marche are notable additions, as indeed are other countries in Europe. Perhaps the chief shared quality of all these places is prestige, and a sense of luxury. Fractional ownership makes particular sense in localities which can otherwise be prohibitively expensive. Whether the area itself has such a reputation that its property is astronomically priced, or whether the property itself is on a grandly luxurious scale, or both, fractional ownership enables the more average buyer to secure themselves a part of it.
So how exactly does it work? What’s the legal set-up? Typically, the property-developer establishes the property as a company and the buyers buy shares in that company – or ‘fractions’ of it. As with all property, ownership is defined by the title deed, which in this case is divided into fractions. You can buy as many fractions as you wish. Your name is put on the deed when you buy, and you can later sell your fraction whenever you want. (Note that some developers specify a minimum ownership period.) If the property has increased in value during your ownership, then it’s fair to assume that your share in it has too, and can be sold for more than you paid for it.
OK, so it’s all legal and straightforward, but how does owning a fraction of a property translate into spending time there? How is the calendar fairly divided between the different owners? Eddy Crompton of RealPoint Italy says “Obviously there have to be rules for sharing access. This is invariably achieved using a rotating calendar so that everyone gets a fair share of both the peak seasons and off-peak seasons. Fractions can vary from ¼ to 1/52, but common models in Italy are 1/8 and 1/10. Any calendar has to allow a couple of weeks a year for maintenance.” So, typically you can expect to always get a couple of weeks at the property during the summer and three weeks there at other times of the year.
Michael Hobbs of Appassionata says “All our owners will have different requests regarding their preferred weeks. Some will want to avoid school holidays and some will request them. Our calendar allows everyone to experience all seasons. There is also the opportunity to exchange weeks with co-owners or rent weeks to a third party. We offer owners an external exchange programme too, allowing them to exchange their weeks with other luxury properties around the world, including in Antigua, Australia, Bali, South Africa, the U.S. and Thailand.” Many fractionally-owned properties include the option of exchanging weeks with other properties in this way.
Fractional ownership has been quietly and steadily growing in Italy over the last few years. There are some clear advantages to the concept, and it’s likely that we’ll see an increasing number of properties sold in this way in the near-future. Dawn Cavanagh-Hobbs of Appassionata has no doubts. “This is a great product,” she says. “In this day and age it is also a green product, encouraging people to share one home at different times, instead of ten people buying ten separate properties and leaving them sitting empty for about forty-seven weeks of the year!”
Englishman Peter Wakeham and his Swedish wife Anita live in Lugano in the Italian-speaking part of Switzerland. They have fractionally-owned an apartment in central London for several years, and decided in 2010 to buy a fraction of a country estate in Le Marche.
“It’s a four-bedroom villa with a couple of living rooms and a lot of land,” Peter says. “There’s a swimming pool and a tennis court. We have our own vineyard, and beyond it, a truffle field. It sits on a lovely country hill, and you can see for miles and miles to the sea. We own ten percent, so we get five weeks a year there. When we arrive, the house is clean and the fridge is stocked. But it’s not hotel-style living, it’s a home away from home – which is what we wanted.”
Why did they choose fractional ownership? “We’ve owned holiday properties before and knew what a hassle it can be, that however lovely the place is you never use it as much as you expect to. We had a chalet in the French Alps, and an apartment on the island of Menorca, but we just didn’t use them in the way we thought we would. In the end we realized it was crazy to tie up so much money in homes that require continual maintenance.
“I was already familiar with fractional ownership because of our London apartment. It worked well for us, living in Switzerland but wanting to come to the UK now and then. We subscribe to Italia magazine and it was here that we saw an ad for Appassionata and their fractional-ownership properties. When we went to see the villa, it was a thirty-second decision. Having owned lots of houses in the past, my wife instantly liked it and knew that it was right. We spent the rest of that visit to Le Marche checking out the sea, mountains, countryside and so on to make sure we understood the area. You can always change houses, but it’s very hard to change an area! You must be absolutely sure that the location is right for you.
“We have two summer weeks at the villa and three weeks spread throughout the rest of the year. It’s all rotated and you can swap dates with other owners if you want. But we’re also in a scheme which allows us to swap weeks with various properties round the world, and I’m sure that at some stage we’ll take advantage of that.
“Fractional ownership is all about how you want to spend your time. We get five weeks in Le Marche and five weeks in central London for barely the price of a small semi in Kent. We use both properties fully. For people with mobile lifestyles, it can work well.” |
