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The latest vogue in the Spanish property market and the words on most savvy real estate agents’ lips seem to be “fractional ownership.” For the uninitiated amongst you, fractional property ownership simply means the division of the title or deed of a property into portions or shares. 

Isn’t this timeshare?

This is not to be confused with … (dare I mention the dreaded “T“ word) … timeshare, where buyers purchase time in a particular holiday resort and are only buying the “use” of that property for a specific number of weeks. The important difference with fractional ownership is that the purchaser owns part of the property, which is reflected in the title deeds, as opposed to the units of “time” in a timeshare deal. So with fractional ownership you are free to sell or rent out the property whenever you like.

Fractional ownership is no earth-shatteringly innovative concept though – it has been popular in America for nearly 20 years and now it seems that Europe, and Spain in particular, are jumping on the bandwagon. There can be any number of owners in a fractional ownership deal - and the more owners there are, the lower the price you pay as your share will be smaller, but at the same time you will get a more restricted choice of when it is available for you to use. Generally speaking there are up to 4 owners but 8 is common also.

Major plus…

It’s apparent that the glory days when you could find a cheap property in Spain for next to nothing are over, so the major plus to fractional ownership is that it allows you to buy a share in a more luxurious property than you would otherwise be able to afford. It also appeals if you’re keen to have access to a second property but can only commit to using it for part of the year.

Downside is….

The glaringly obvious downside is that a property under fractional ownership is and only ever will be nothing more than a holiday home. You certainly won’t be able to pack up and move to your dream home on a permanent basis. Fractional ownership companies will handle all the necessary paperwork for their clients and normally there will be a fund in place to accomodate any repairs that need to be done. Saying that though it is definetly prudent to go through all the legal checks independently as if the entire property was being bought outright.

Mostly its only new-build properties that are being marketed and it begs the question of whether this is just a well formulated plan to offload apartments that the developers cannot sell otherwise. It’s certainly no solution to those who dream of renovating an old farmhouse into something with bags of character. In fact even a small renovation or improvement to a shared ownership property can be problematic when not all the owners agree to the works. From the developers’ point of view – they’re on to a good thing, put yourself in their shoes for a moment – they earn much larger commissions by splitting up the ownership, as much as 20% more in some cases. But at the end of the day you need to ask yourself whether you really care – are you buying with your heart or your wallet? It may well be worth paying a little more for something that would otherwise be financially out of reach.

Discuss on this on the Currency Exchange Forum