An introduction to fractional ownership
I know what you’re thinking. When most people first hear of the idea of fractional ownership, they immediately think of timeshares and figuratively “run for the hills.” Although timeshares have some similar characteristics, fractionals are a different topic completely.
How is fractional ownership different from timeshares?
With a timeshare, you typically get access to the property, or “right to use” one to two weeks per year. Nowadays, a timeshare owner typically earns “points” that can be used to reserve space at a vacation property. The downside being, you can’t be guaranteed of getting the exact week you may want, and you are not sure what specific location within the property you will be staying at.
With fractional ownership, you have a deeded interest or ownership of a specific property — such as condominiums, townhouses or single family homes. As a “fee simple” property, the owner has unfettered personal use of the property. This means the owner’s family and friends can use the property and the owner can even rent the property out during unused weeks. This also means that the property is heritable — allowing the deed to pass on to family members through a will.
Where did fractional ownership come from?
Fractional ownership actually has its roots right here on Hilton Head Island. The first successful fractional ownership property to be marketed and sold in the United States was Brigantine Quarters, a one-fourth deeded ownership property located in Shipyard.
The concept was not derived from “bundling” timeshare weeks together, but from trying to fix the faults of partnerships. When visitors came to Hilton Head in the late ‘70s and early ‘80s, they had two options when they decided to buy a vacation property — a timeshare or an outright vacation property (ex: condominium, townhouse, home).
If they did not want a timeshare, and couldn’t afford a vacation property outright, what was the alternative? Many would go back home, convince a small group of family and/or friends to join them in buying a vacation home in a partnership. In other words, they would be sharing the use of one property by a small group of owners. Let’s go have fun!
Well, this is where the problems began. Who gets to use it when? Who’s managing the expenses? Arguments between partners? When happens if there is a sudden loss of a job or divorce? Or if a partner wants out? The primary downfall of partnerships is that all owners are on one deed. When this type of ownership goes south, more often than not, the entire property goes back on the market to sell.
A local real estate executive and developer, having a “light bulb moment” could see the possibilities. He came up with a workable solution. By combining timeshare concepts with partnership concepts, he created a new and innovative real estate hybrid product called “fractional ownership.”
How does fractional ownership work?
In essence, fractional ownership is like a partnership. However, rather than all owners being on one deed, each owner has their own deeded interest. In the case of Brigantine Quarters, each owner has a quarter interest with their own deeds. This allows ease of transferability down the road if an owner decides to sell, and it does not interfere with the property use or property interest of the other owners.
A master deed to the property covers all the rules and regulations. Each owner has a set calendar of which weeks they are scheduled to use the property each year. These weeks are adjusted each year, allowing owners different weeks of use and solving the argument, “Why do you get the 4th of July every year!?”
Similar to timeshares, there are annual maintenance fees that cover all real time and future costs. There are reserves for replacing fixtures, furnishings, and appliances. Maintenance of interiors and exteriors are all covered. In essence, the property is considered “lock & leave” because everything is taken care of for the owners.
Ocean Palms At Port Royal Resort, resort-style villas sold through Hilton Head Properties Realty & Rentals, offers a one-fifth deeded ownership with 10 weeks of use each year on a simple rotation. Each owner has use of their villa in two-week intervals five times per year. The property is managed by the Westin Hilton Head Island Oceanfront Resort & Spa that gives owners the use of valuable hotel amenities during their stays. There also is a great golf and tennis package included in the ownership.
The question is not “Why?” but “Why Not!”
When you go to a restaurant and decide you want that wonderful cheesecake for dessert, are you served the entire cake? Of course not! All you want is a “slice.”
This same idea can be applied to fractional vacation home ownership. You are not planning on spending 52 weeks a year at your vacation home, so why not purchase a “slice” and be able to get a taste of all four seasons? Light bulb!
Interested in learning more about Ocean Palms?
Stop by a model villa during our daily open house from 11 a.m. to 5 p.m. I’m happy to answer any questions you have. You also can try out Ocean Palms for yourself by booking a weekend getaway with our Stay and Play packages. Need immediate assistance? Fill out this form below and I’ll get back to you as soon as possible.