Fractions are the latest concept in the fast-growing overseas property market. They offer syndicated ownership of luxury residences to retirees, investors or those who just want a place in the sun. Whereas they have been likened to the old timeshare scheme, this is a misconception, as there are several notable differences.

With a timeshare scheme the purchaser effectively buys an annual chunk of time in a holiday property.

Fractional ownership differs from the traditional timeshare concept in that the purchaser has direct ownership of a fraction of the underlying asset. This means that the owner has a recorded titled interest as well as the use of a holiday home.

Furthermore, whereas a timeshare can have as many as 52 owners (one for every week in the year) a fraction is usually offered to fewer individuals, typically between four and 12 people, allowing groups of friends to club together to make a purchase. Fractions are specifically designed for the purpose of shared ownership, where small groups of people share the underlying asset.

Well maintained
One of the key selling points of fractional ownership is the maintenance package provided by the operator. Brad Lincoln is the CEO of The Best Group, one of the first firms in the UK to offer the fraction proposition. “People who own holiday property often find they spend the first few days of their vacation doing the cleaning – which isn’t the reason you go on holiday! With fractions you can still have your own property and rest assured that all maintenance is taken care of on an on-going basis.”

And maintenance does not mean sending the cleaner round for an hour every week. The Best Group’s maintenance service even stretches as far as ensuring that all furniture in the property is replaced every seven years. “Our motto is all the clients have to do is pack,” says Lincoln.

One common problem that owners of timeshares find themselves facing is that, due to time or other commitments, they are unable to use their holiday property every year. With a fraction, the knowledge that you have a defined percentage investment in the property provides considerable comfort.

Fractions often focus at the luxury end of the holiday property market, and this is a segment that is often attractive to retirees. Common destinations include European golf resorts, the Caribbean, and more recently Panama has become popular because of its benign tax regime. A fractional ownership scheme often offers full medical care and facilities as part of the package, which is also a big incentive amongst the pensionable demographic.

Funding for some fractional property developments is becoming more readily available, “One quarter ownership of a luxury villa in Panama – away from Panama City, in the lush mountainous hinterland – costs approximately £25,000. The majority of our clients have the funds available to purchase the whole property personally, so there is little or no risk for the mortgage provider.”

Whereas fractional ownership has been a well-recognised industry in the US since the mid-90s, it is relatively unheard of the UK in terms of property.

Of course we are all familiar with shared ownership arrangements found within car clubs, golf courses and race horses, so why not property? Lincoln believes that is about to change. “There are some very large and reputable developers carefully looking at the fractional market place and in the next 12 months I expect there will be an awful lot of noise made about fractions,” says Lincoln.

And the Best Group is well-positioned to take advantage of new opportunities in the market. “We have more destinations and more properties than our competitors, and most importantly, we do more work in ensuring the underlying structures of the investment are sound and appropriate for our clients,” says Lincoln. As further testament to its expertise, the Best Group does not only sells fractions, but also provides expert advice to property developers interested in entering the fractions market.

Reputable advisors
In its advisory capacity, Best Group has advised IMG in structuring fractional properties associated with its golf course management business. As a further bolster to its credentials, the Best Group is also the only fractions specialist that AMEX has agreed to deal with outside the United States, and has recently signed an agreement with Aylesford International, one of the UK’s best-known prestige residential property agencies, to promote the Best Group’s properties.

For those still sceptical of the fractions industry, potential investors will be reassured to know that the UK fractions market seems keen from the outset to avoid making the same mistakes as its timeshare predecessors. The Fractions and Shared Ownership Trade Organisation has recently been established with the aim of ensuring operators work responsibly and correctly, making sure everything adds up.

Look to invest
For people considering making an investment in a fractional ownership scheme, Brad Lincoln offers some simple advice, “People should carefully look at their lifestyle and find a fraction that best fits their needs and requirements. Also, do a lot of research into the company you are dealing with.

Are they reputable?
Some firms have been set up very quickly to take advantage of the boom, but they may not be as technically well equipped or as competent as others. Finally, look at the service package, as these can vary a lot between companies, and you should make sure you are getting the best possible level of service and maintenance.”

Fractions are looking like the next big thing in the UK holiday market, and unlike timeshares, you can count on them.