Fractional Ownership Management

The Need for Fractional Ownership Management

If you own a leisure asset (real estate, boat, car) outright you are solely responsible for the maintenance and upkeep of the property, you have only yourself to blame if it is not in a reasonable condition when you want to use it.  Not so with fractional ownership!  People will not (and should not) put up with fixing things caused by the fractional owner who used it last.  There is a need for cleaning and maintenance to be arranged and for the rules in the fractional ownership contract to be enforced.  The question is, who should do this and what are the consequences of it not being done well?

Owner-Managed Fractional Schemes

This is the most cost-effective method, where either the fractional ownership management is delegated to one of the fraction owners, or a committee formed from the fraction owners.  Although cost-effective there are many potential problems.  The person responsible for managing things such as changeover arrangements and time allocation may have to mediate between different fraction owners.  Where there is a serious disagreement this could be a very unpleasant experience.  There is also the possibility of having to enforce unpopular rules, such as stopping fraction owners from using the asset if they have consistently broken the rules or not paid maintenance fees.  There is also the possibility of there being a conflict of interest if the dispute involves the person(s) who have been given the authority to manage the fractional ownership scheme.  Overall, although cost-effective this is an option that has lots of potential difficulties that should be carefully considered.  You would not want the burden of administration and mediation to prevent you enjoying using the asset!

Resort Fractional Ownership Management

In the instance of private residence clubs, destination clubs, or other forms of club ownership the management of the fractional asset will come as part of the overall package.  In this case you will need to make sure that you have confidence in the ability of the organization and the management team to control both the regular maintenance required and any disputes that may arise.  How old is the resort/club in question?  Has it or its assets been well maintained to date?  Try to speak to some of the existing members to get a feel for how happy the are with the way that the resort is managed.

Third-Party Fractional Ownership Management Companies

If your fractional ownership scheme was put together by an agent/company for a single asset they may offer a management service of there own.  The same points apply as to resort fractional management.  Do your research and find out what their track-record is.  Also, importantly find out what the arrangements are for terminating the management contract if you are unhappy with the service.

Conclusion

Do not forget to check out the quality of the fractional ownership management that is going to be in control of your asset.  The best contract in the world is devalued if its terms are not implemented properly by a competent management team.