Flexible Legal Structures

Wherever your shared ownership development is located, choosing the correct legal structure at the outset is fundamental to your long term success. The structure needs to be robust, flexible and efficient, making the resort easier to run and more profitable.

Whether it is a simple fixed week based timeshare model, a quarter-share of a fractional property or a more complex Private Residence Club, the quality of the structure should be at the forefront of any strategic and financial planning. Here are some key points to consider in formulating the most successful structure:

  • Is it simple to administer, allowing you to focus on sales and marketing?
  • Can you work across a variety of different jurisdictions enabling both horizontal and vertical growth?
  • Can it adapt to a variety of different product offerings i.e. fixed week/fixed apartment, fixed week/floating apartment, split weeks, points, fractions, PRCs etc?
  • Will sales closure costs be minimized, making it easier for your purchaser to say ‘yes’?
  • Does it provide proper consumer protection without hindering the successful growth and management of the business?
  • Can quality standards of the property be maintained more easily over the long term?

That’s where FNTC comes in to the picture..

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With over 30 years experience of designing individual legal structures for more than 300 resort developments worldwide, FNTC clients can draw on an unparalleled knowledge base, providing multiple benefits, including:

  • Proven system which can be implemented internationally, simply and cost effectively
  • Lending credibility to the sales process by affording high levels of consumer protection
  • Easier and simpler for managing an exit strategy when selling all or part of your business
  • Recognised by leading industry service providers, including exchange companies and banks
  • Sales closure process is simple and cost effective
  • Easy process for issuing owner/member certificates, processing upgrades and re-sales
  • Faster repossession procedure for delinquent maintenance fees
  • More cost effective and helps to recycle inventory more efficiently
  • Quality standards of the property more easily maintained over time
  • Ensures agreements are in place at the offset before funds are distributed, avoiding subsequent disagreements and disputes

It is often complicated and expensive to divide a property into fractions and local legislation may not provide for this. FNTC can provide different structures so that the process of developing a fractional proposition can be:

  • Easier to administer in the long term
  • Cheaper to run
  • When an owner wishes to sell his fraction, there are minimal costs and taxes involved.

With our wealth of experience in the international fractional market, we can help you decide your best option. Everything we do is customised for you. From escrow, stakeholder and trustee services, to financial services and systems integration, FNTC can provide tailor-made solutions to help you to achieve your business goals.

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With the FNTC fractional product, a property is normally divided into fractions ranging from two weeks to thirteen weeks (quarter-shares). Owners of larger fractions usually have the benefit of occupying part of their fraction as fixed weeks each year, with the remainder subject to a rotating period of annual use. Fractional structures can exist in perpetuity or for a shorter term, for example 15, 20 or 50 years. This will depend on the commercial objectives of the developer.

Normally the legal title to the property to be fractioned is granted to a company, which is owned and controlled by FNTC as trustee for the benefit of the fractional owners. Owners derive their fractional title through the trustee, subject to a set of rules and a deed of trust. This offers the same level of protection and security to each owner as an individual registered leasehold title.

The country where the property is situated will determine the legal title being granted to the company. In the UK, this would be either a freehold or long leasehold title, if the fraction was being bought in perpetuity, or a shorter leasehold title, if the fraction is to exist for a shorter period, for example 10 or 20 years. In the case of fixed term fractions, a mechanism can be put in place whereby the trustee, on termination of the fixed usage rights, sells the property and distributes any net proceeds of sale to all the fractional owners registered at termination.

The short term fractional structure

One of the newest products now available is the fraction with a ‘limited life’ span (e.g.10 years) (known as the “Short Term Fractional). Here, at the end of the usage term, the property asset is sold on the open market as a ‘whole’ freehold property. The net proceeds generated by the sale are split between the fractional owners. This concept has two major attractions for the buyer:

  • There’ll be a decade of vacation use, saving money on future holidays
  • Money invested in a property could potentially show a return when the project terminates

The typical length of fraction is one to two weeks and the property will probably be in a Mediterranean beach resort, where the cost of real estate is relatively low.