The convenience of co-ownership
Are you keen to enjoy the benefits of your own holiday home but you don’t want to feel tied to one destination? Benefits such as relaxed holidays in a beautiful destination you come to know and love, somewhere to invite friends down to, but all with capital growth too.
On the other hand, maybe you can’t justify the price and ongoing costs of a second residence when you’re unlikely to visit more than a week or two each year.
Suppose you could share the costs and usage of a luxury overseas property, or even a collection of them, with a small group of like-minded people?
For many luxury homebuyers, this model of owning abroad is the most enjoyable and sensible option, and thanks to a variety of innovative and well-managed co-ownership schemes, its widely available. Moreover, they operate in some of the world’s most desirable destinations.
Co-ownership – also referred to as fractional ownership or shared equity ownership – describes a scheme that enables a designated number of co-owners to share all the benefits and costs associated with owning one or more overseas properties.
The immediate appeal, compared to conventional home ownership, is the reassurance that you’re not paying for something you’re unlikely to use for much of the year. After all, how many second homes sit empty for much of the time but still attract ongoing running costs?
With co-ownership, each owner gets to use the property, or properties, on a fair basis according to how large their share is. Usually there is a system that rotates the most popular weeks of the year, such as in high season or school holidays, with the flexibility to swap weeks.
Another huge advantage is that most schemes are completely hands-off for their owners. The usual administrative and legal processes that come with a property transaction are all taken care of by the scheme’s administrator. The costs are built into the one-off purchase price of each share. The same goes for furnishings and any renovation costs.
Most schemes include the management and maintenance of their properties on behalf of the owners. You just turn up for your holiday and everything is ready for you! Sparkling pool, maintenance all looked after, maybe a bottle in the fridge waiting for you.
Because co-ownership properties are typically premium residences located in desirable locations and furnished professionally, the management – and often concierge – service is of an equally high standard.
Naturally, there will be a fee for management included in your annual running costs, but again this will be shared accordingly.
Looking at the financial side, fundamental to any co-ownership scheme is that owners, sometimes called ‘members’, own a share in each of the property’s freehold (typically through a secure company structure). If an owner decides to exit the scheme and sell on their share, they will benefit from any capital appreciation in the value of the property or properties. A useful alternative to selling a share is passing it on to a family member.
Just the one…
Fractional ownership usually describes the simplest form of co-ownership when one property is divided between co-owners. Ten owners is typical per property, meaning each has a 1/10th share (usually through a company that owns the freehold), equating typically to five weeks’ usage per year.
One twelfth and 1/15th shares are not uncommon either. Of course you get less use of the property, but the costs are less too.
Often fractional properties will be on a complex, such as in Portugal’s Algarve. They may be part of a small development of renovated properties, all of which might have access to communal gardens and facilities. It may be that owners’ usage time can be used in neighbouring properties looked after by the same management firm.
Italy is a popular choice for renovated boutique fractional developments. A typically high-end example is Borgo di Vagli, a restored 14th century hamlet in rural Tuscany. Character apartments are available in 1/10th, 1/15th and 1/20th shares.
At the most luxurious end of the market, fractional specialist Appassionata offers beautifully furnished villas in rustic locations in the undiscovered Le Marche region. Offering 1/10th shares, this year they launched their fifth fractional property, the four-bedroom three-bathroom Villa Veneto. It is set in a charming historic village, with views of the sea and countryside. There are seven shares remaining there. Previous projects have included fractional properties within a wine and olive oil producing estate.
The more the merrier!
Co-ownership caters equally well for anyone who wants five-star accommodation across a selection of destinations, often contrasting but no less desirable.
The sharing principle is the same as with a single fractional home, although your connection with the properties and co-owners will be less intimate, given the upscaling. A scheme that includes multiple properties requires more co-owners to meet financial requirements too.
The obvious benefit compared to a single property or single destination scheme is having the ability to spread your allocated usage/weeks between different types of destination, for example beach, ski resort, city apartment… and different types of luxury properties, depending on your preferences.
Some of the larger co-ownership schemes – sometimes called clubs – offer owners different levels of membership. A more expensive membership will usually give you priority over certain booking windows and usage levels. Whether you prefer to travel at off-peak times, to use your weeks’ entitlements for just two weeks a year or want to max out your weeks and have maximum flexibility, there will be a solution.
A popular perk is that properties may be shared with family and friends, just as you would offer them the keys to a conventionally owned holiday home. An exciting new player in the market is August Collection, whose first scheme is its Signature Collection. Once complete, this will include carefully chosen and beautifully renovated homes in the French Riviera, French Alps (Chamonix), Tuscany, the Cotswolds and Mallorca. Only 21 shares are available within the whole scheme, allowing each owner an average 12 weeks’ usage a year, spread across the five luxury properties.
To date, the first homes in the Collection are ready for occupancy, namely those in the French Alps and the Riviera. As things are going, 2021 is gearing up to be an exciting year for August Collection.