Want to own a home worth millions but only pay a five-figure sum for it? Fractional ownership is a safe, straightforward way to buy luxury at a low price. Fleur Kinson tells you how it works.
These days, we’re all looking for ways to save money. But of course we still want the finer things in life if we can get them. For many of us, a luxurious holiday home in Italy is unaffordable right now, albeit still greatly desired. But they do say that when there’s a will there’s a way, and ‘fractional ownership’ might just be that way. Fractional ownership was devised a few decades ago specifically to allow affordable access to high-end products (private jets, yachts, luxury homes abroad). It has been taking off in Italy over the last few years, and if you haven’t heard of this purchasing method before, it’s time you knew more about it.
Let’s be clear right away that fractional ownership is completely distinct from ‘timeshare’ – the latter a concept that few people seem to have very good things to say about. When you buy into a timeshare property, you merely own the right to spend a certain amount of time there every year for a predetermined number of years. (Hmmm. Why not just rent the same place each year?) With fractional ownership, on the other hand, you actually own a share of the property itself. Your name is on the deeds with the other co-owners. “And as the property appreciates in value, so does your share,” points out Dawn Cavanagh-Hobbs of the fractional-specialist agency Appassionata. “Your share may be sold, willed, transferred or placed in trust at any time.” So, it’s not like timeshare at all.
The only similarity between fractional ownership (often called ‘residence clubs’ in America) and timeshare is that you only have access to your property for a certain number of weeks each year. With fractional ownership, that is commonly about four to six weeks, spread across different seasons of the year. Coincidentally (or perhaps not), four to six weeks is the average amount of time that a conventional buyer actually spends at his or her fully-owned holiday home in Italy. As John Dillon of RealPoint Italy puts it, “With fractional ownership you buy into a property on a shared basis, but still have the same amount of usage that you would have if you owned the whole property.” The great boon of fractional ownership is that you are never really paying for the time that you’re not at your property. Plus, crucially, when you are there you get to enjoy the full run of a far larger and more luxurious home than you could probably ever afford outright.
But why do it? Why not just spend that money renting different lovely properties in different parts of Italy whenever you want a holiday? Well, first of all there’s the obvious answer that any rent is ‘dead money’ you’ll never see again, while a share of a fractionally-owned property remains a saleable asset. But there are other advantages to having a fixed Italian abode, too. It is actually your home; you know where everything is, how everything works. You can store some personal effects there permanently. Note also that many fractional-ownership properties come with weekly cleaning and the fresh stocking of fridges and cupboards for your arrival, among other perks.
Repeatedly visiting the same area rather than always holidaying in new ones has the advantage of making you part of the local community, especially in Italy. You will become familiar to shopkeepers and service-providers, you will form friendships and be included in social events. In essence, you will have a ‘life in Italy’ in addition to your normal one at home. This doesn’t really happen when you merely take a series of one- or two-week holidays in many different parts of the country. There’s also the huge bonus of getting to know an area intimately. You learn where the best restaurants are, the best places to visit. You don’t spend the first few days of your holiday getting your bearings and trying to find your way around. There’s always room for further exploration too, of course. Italy’s roads and transport infrastructure are very good, and just because your home is in, say, Tuscany, that doesn’t mean you can’t explore nearby Umbria and Lazio and Liguria. Note also that many fractional-ownership properties are connected to exchange networks that give you the option of sometimes swapping your weeks at the property with weeks in an equally luxurious property somewhere else in the world.
If your true Italian property dream is to lovingly restore an old tumbledown farmhouse according to your exact taste and specifications, then obviously fractional ownership isn’t for you. A fractionally-owned home is going to be bought perfectly ready to inhabit and full of lovely furniture. You won’t really be able to make any structural or design changes. If, however, you hate the thought of getting bogged down in building work, with all its mess and expense and waiting, but you still want a property with character and history, then fractional ownership remains a good option. Many restorers, as well as many owners of centuries-old properties bought ready-restored, underestimate how much general maintenance an old house in Italy requires. One of the many advantages of fractional-ownership schemes is that periods for maintenance and repairs are built into the annual calendar. You never have to worry about the maintenance side of things yourself, nor do you alone have to face a sudden massive bill to fix something as you could if you were the outright owner of an elderly home.
It’s worth spending a moment addressing the issue of exclusivity, of course. If you long to feel that a house is wholly yours and belongs only to you, then fractional ownership isn’t the route to go. Emotionally, you need to feel comfortable with the fact that other people have a share in your beloved home in Italy and that they’re going to be enjoying it when you’re not there. Of course, many full owners rent their Italian home to holidaymakers for many weeks of the year, so even they aren’t enjoying a total exclusivity on enjoyment of their property. While the vast majority of holiday rental clients in Italy are a discerning and highly considerate bunch, it isn’t inconceivable that co-owners are even more likely to treat all the fittings and furniture of a home carefully than here-today-gone-tomorrow rental clients. So your home might remain in even better condition inside than a fully-owned home rented to short-term clients. And as for security concerns, note that a fractionally-owned home doesn’t stand unoccupied for as long as a fully-owned one might.
So how exactly does it work? Typically, the legal framework is that the property’s 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 which carry your name and the names of all the other owners. Fractions usually range from one quarter to one twelfth, and give you the right to spend the corresponding fraction of the year at the property. A typical fraction of an Italian property might be one tenth, which entitles you to five weeks per year there. (Two weeks of the year on a property divided into one tenth shares would be devoted to maintenance work, with no owners visiting at that time.) Obviously, you can buy more than one share in the property if you want to enjoy even more time there.
But which weeks of the year is your share going to get you? The usual system is that a rotating calendar gives you a different selection of weeks each year, with every owner always allocated an equal number of peak-season and off-peak weeks. So let’s say you have five weeks a year; two of those will always be in the summer and three in other seasons. In practice, the system isn’t quite as rigid as it sounds. Usually all the owners in a fractional scheme can readily contact each other about the possibility of swapping weeks if they want to, and they work it all out between themselves. They often have a shared blog or website specifically for this purpose, or they might use a different contact system.
In general, having set periods allocated for visiting is the one thing that could deter some would-be buyers from fractional ownership. If you want total flexibility in when you can turn up at your house, if you hate planning ahead and like to take spontaneous, last-minute holidays, you may well find the system too restrictive. Families with school-age children who want always to obey the dictates of school holiday dates may struggle especially. But Jeff Johnstone, who runs the U.S.-based PrivateResidenceClubs.com, points out that it’s possible to find varying systems of week-allocation in different fractional ownership schemes and that you could secure the same weeks every year if you prefer. He says, “Families with a flexible holiday schedule are best suited to fractional ownership offering ‘floating time’, but families who need to schedule holiday with their school schedule might want to look for clubs offering ‘fixed weeks’.”
Fractional ownership has been steadily growing in Italy over the last decade or so, and there are reports that it remains one of the more flourishing sectors of the country’s property market for foreign buyers, especially since the international recession began back in 2008. At the moment, fractional-ownership properties tend to be clustered in Italy’s most expensive and prestigious areas – Tuscany, Umbria and Le Marche. Properties sold fractionally are invariably grand and gorgeous, with all sorts of luxury facilities. Bought outright, such a home might cost you a seven- or eight-figure sum. With fractional ownership, you get to enjoy ample time in a home like this, and actually own a part of it, for a tiny fraction of its full cost.
Leicestershire-based Debora and Chris Everard own a one-tenth share of a large, luxurious farmhouse in Le Marche. They have the run of the whole property for five weeks a year, and have no complaints about fractional ownership.
“We’d never heard of fractional ownership before we read an article in a lifestyle magazine,” Debora explains. “When we heard how it worked, we saw that it made a lot of sense. It was straightforward, there were no catches. It wasn’t like timeshare; you actually own your share. You get access to a beautiful property that you wouldn’t have been able to afford outright. Chris is a business consultant and he goes through contracts with a fine-toothed comb. He saw that this was a very safe and solid thing for us to get involved in.”
Why did the couple choose Italy? “Our son is a professional rugby player,” Debora says, “and in 2011 he was playing for the World Cup in Treviso in northern Italy. We were going to be out there for nearly four weeks watching him play and enjoying his time off with him. We decided that during a four-day break between games we would drive down to Le Marche to view a property being sold by Appassionata – and we bought a share of it. It sits on a hill twenty minutes from the sea, with fabulous views: the Sibillini Mountains on one side, the Adriatic on the other, and Le Marche’s exquisitely tended rural landscape in between – a tapestry of beautifully manicured ploughed and planted fields. Our estate has a vineyard, a lavender plantation and a truffle-tree grove. It’s so beautiful and tranquil. Every owner gets two peak-holiday-time weeks and three off-peak weeks, with the exact weeks changing each year. It suits us perfectly because we can be flexible, we’re not dependent on school holidays. But also, the other owners are willing to swap, so we work it out between us.”
Why not just rent different properties in different parts of Italy for five different weeks of the year? “There are several advantages,” Debora says. “Becoming familiar with one area is a big one. The people in the village know and remember us. We’ve also become friends with the lovely English family who run Appassionata. It’s great knowing our way around the area. Often at the start of a holiday in a new place you don’t know where anything is. There’s so much to see in our area, we couldn’t possibly exhaust it all. The transport links are good and we can go far afield. There are always personal objects at the house that we don’t have to pack. And when we arrive the fridge is stocked and the cupboards full of provisions. It’s wonderful.”
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.”