Fractional
Ownership – A New Way To Own Property in
Costa Rica
By Les Nunez
Fractional Ownership has been around a long
time, especially in the USA where it is a
multi-billion dollar industry, but most
people in Costa Rica are just becoming
familiar with this approach to buying and
owning property.
It is a very simple and cost effective way
of owning a second home without all the
hassle and cost of running and maintaining
it.
Fractional Ownership is the new, exciting
and smart option for second home ownership.
It is the difference between whole
ownership, with its sole responsibility and
full exclusive use, and the commonly thought
of time-share, where most often, you
purchase “vacation time” in a resort,
(usually about two-weeks) not in the
real-estate itself.
And just as savvy investors continue to buy
stocks in the global market to balance and
strengthen their portfolios, Buyers can now
invest in properties that are a strong value
in the global real estate world. Buying a
fantastic, renovated, fully furnished beach
house with a swimming pool and steps to the
Beach is out of most people’s reach but
buying just a few weeks in that property
suddenly makes it much more accessible!
How does fractional ownership differ from
time shares?
Both the arrangements known historically as
timeshares, and the arrangements now
referred to as fractional ownership, fall
within the legal definition of a “timeshare”
in most U.S. States and Canada.
From a strictly legal standpoint, the term
“timeshare” refers to any arrangement under
which a group of people shares use of a
property based on time, regardless of
whether they own the property and regardless
of whether a management company or developer
is involved in organizing or operating the
property.
But from a practical standpoint, there are
significant differences between most of the
arrangements historically referred to as
“timeshares”, and most modern vacation
property fractional ownership arrangements.
Put simply, the meaningful difference is the
extent of ownership and control given the
users of the Property. Modern fractional
ownership almost always involves direct
ownership, meaning that each user has a
deeded interest, and this usually means
greater owner control.
Some often used phrases to describe
fractional ownership are ‘multiple parties
owning an asset’ or ‘shared ownership of an
asset in perpetuity’. This differs from
‘time share’ in that the asset is actually
owned by you, rather than having just a
right to use time in a development for a
limited period.
You have the right to sell or gift your
share in a fractional ownership development
and it could appreciate over time. You are
free to set a sales price based on market
conditions. The management and maintenance
are provided for you.
Not only is fractional ownership an idea
whose time has come; because of its economic
value, but also very importantly it is for
the EXPERIENCE it allows an owner to have by
living and connecting more deeply with the
lifestyle and culture of Costa Rica.
A Lifestyle Asset You Can Buy and Sell: With
a fractional vacation ownership property,
you own a share of the property, not just
usage rights of properties. And just as
savvy investors are buying stocks in the
global market to balance and strengthen
their portfolios, Buyers can now invest in
properties that are a strong value in the
global real estate world.
There are a number of ways of structuring a
fractional ownership development; one method
is to have a Costa Rica based company own
the property. There are 52 shares
corresponding to the number of weeks
available. Clients can buy as many shares as
they wish and time will then be allocated in
the property to correspond to the shares
purchased. In simple terms ‘the company owns
the property, the shareholders own the
company’.
By structuring it this way you are able to
avoid the normal legal and tax issues
associated with purchasing a property in
Costa Rica.
To ensure that all owners get equal access
and use of the properties throughout the
years of ownership there is a Rotating
Calendar (RC). This calendar will set your
fixed weeks and move your floating weeks
each year so that you will enjoy the seasons
or it will provide you with rental income
which gives you an ROI. This is the fairest
way of assigning weeks and the starting
point will be allocated on a first come
first served basis.
Two weeks of the year will be held in
ownership by the developing company for
maintenance purposes and where possible to
assist owners to swop weeks.
With fractional ownership you have the usage
rights for 30 days or more each year, pay
for only your share of the operating costs,
own the real estate and stand to gain from
the appreciation. You can sell, will, or
gift your share of the property when you
want. You are free to set a sales price
based on market conditions. The management
and maintenance are provided for you.
Fractional Real Estate Glossary
Many vacation fractional ownership
properties will offer a variety of usage
calendars and models. The Fixed usage is
defined as time that is purchased and
permanently assigned to you. Other terms you
will encounter Floating Weeks, Reservation
Agreement, Private Co-ownership, One off
Developer, Condo-Hotel,
Management/Maintenance Company, On site
Owners Storage Units, Departure Fees, Maids
Fees, Mixed-use development, Occupancy rate,
Space Available to name a few.
The properties are usually fully furnished
to a very high standard, as you would your
own home, they will not look like holiday
rentals. The aim is to attract an affluent
customer, people who are seeking a lifestyle
for a vacation home and with the fractional
means to make the purchase or aspirational
customers who want to share in something
they cannot buy outright. They can afford a
fractional but now really do have to
evaluate it financially. These are the ones
sitting on the sidelines today watching and
waiting for the economy to change.
Costa Rica along with this form of ownership
is set to explode, however not all
developers understand and can provide for
this niche market, but they are aware of the
need to appeal to customers. Our clients
come to us for the same reason, they need
more buyers. The old adage of ‘build it and
they will come’ does not happen in
fractional ownership, it revolves around a
more complex marketing environment. However,
from an Owners perspective, all you have to
do is:
Arrive, Indulge and Relax – Brilliant.
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Contributuion by Les Nunez- A Licensed Real
Estate Broker for the last 27 years, is a
legal resident of Costa Rica, and Consultant
for Fractional Ownership Projects. His
office is located in Playa Hermosa,
Guanacaste.
He can be reached via:
www.FenixRetreat.com or
www.FirstRealtyCRE.com
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