In the U.S. there are 1,580 resorts and 204,100 units in those resorts as of 2019. Most of us are aware of the term “timeshare”, but fractional ownership is less familiar. While both can be considered a form of shared ownership, there are significant differences, so let’s compare them.
Timeshares
A timeshare gives owners the right to use part of a property during specifically designated times. The buyers might purchase one or more weeks and all buyers have the same rights but the title remains with the property owner. Essentially, a timeshare owner owns the right to use something but doesn’t have a deed, which is why timeshare cancellation often becomes something considered by owners.
Fractional Ownership
Fractional ownership is a purchase made by several buyers, maybe 6 – 12 that gives each buyer an equal part of the title. Each buyer has access to the property for some time but benefits from not buying the entire property or paying all of the maintenance and taxes. The period for use by each owner could be up to 5 – 6 weeks, depending on the number of owners.
Equity Value
The biggest difference between a timeshare and fractional ownership is that a fractional owner has equity in a valuable asset. If the asset value appreciates, so does the equity of each owner. Should the owners wish to sell the property, a capital gain would result.
A timeshare is ownership of a right to use the property but not ownership of it. If the resort value increases, the value of the timeshare does not. Were the resort to change hands, no value would be realized by a timeshare owner. Timeshare cancellation is simply eliminating a contract of no tangible value.
Control
With a timeshare, management and decisions reside with the project owner or operator. Timeshare owners have no say in maintenance fees, management fees, or even if the pool gets repaired. A fractional owner, sharing ownership of the property, also shares control. That owner has a say in what happens. A fractional owner will never have to contemplate something like a timeshare cancellation.
Timeshare owners are often considered guests when visiting the resort. Fractional owners visit their properties as an owner of a valuable asset. It’s always better to be the owner than the guest.
