“If it walks like a duck, swims like a duck
and quacks like a duck, it must be a duck.”

If only it were as simple to distinguish fractionals from timeshares as it is to distinguish a duck from other avians.  Regrettably, it is not.

In search of new ideas for this post, I opened my March Google Analytics reports hoping to learn what site visitors viewed most often.  The results astonished and dismayed me.

Once again, the most popular topic was the one that has consistently been the favorite over time:   “Fractional vs. Timeshare.”

Surprisingly, this subject was not among those addressed in my newest posts in prime locations front and center on Home complete with “gotcha” headlines and eye-catching thumbnails.  Instead, it appeared way off to the left, included in a list of a dozen categories.  In fact, I hadn’t written about fractional vs. timeshare in more than two months!

Since a hefty percentage of my site visitors are new and hail from countries where fractional development is just beginning, I realize this still remains a hot topic in many places in the world.  But, having already posted several times on this subject, I thought.  “What more can I possibly say?”

Literally at a loss for words, I found new inspiration in two recent articles about Fractional Summit Europe 2012 written by George Sell, editor of Fractional Trade. 

• Sell noted that there is “continuing customer confusion over the difference between fractional and timeshare.  Les and Mary Hyde, buyers at the Regency Country Club in Tenerife, own a six-week interval, which many in the sector would describe as a fraction, but they referred to it as a timeshare, even though they acknowledge this had negative connotations among their family and friends.”
• In another report on the Summit, Sell observed that conference delegates included “several timeshare developers who are moving into fractionals in a big way.”

Then, I had an “aha” moment.

Perhaps the question of differences between fractional and timeshare continues to be so confusing for so many is because people are asking the wrong question.  Instead of focusing on differences, perhaps a more productive line of inquiry might be: 

What are the similarities between fractional ownership and timeshare?

Now that’s much easier to answer, isn’t it?  Both property types are characterized by:

• Multiple co-users of a property
• Usage based on amount of time allotted
• Reservation systems
• Vacation exchange programs
• Property management (either on site or from an off-site company)
• Numerous and varied on-site amenities and vacation services
• Rental programs (except for a few private residence club-type properties)
• Resale programs (a relatively new development for timeshare properties)

And I don’t believe it too much of a stretch to add two more items to this list.  Developers of both property arrangements aim to:

• Encourage people to vacation as a regular part of a healthful lifestyle
• Make vacations more affordable to the more people

Along this line of reasoning, having noted these similarities, the only remaining difference would be price.  Prospective owners could just choose the property arrangement best suiting their vacation lifestyle and financial capabilities.

And yet…And yet…I remained unsatisfied.  I felt I was missing something.

So, I turned to Andy Sirkin, Esq., an attorney’s attorney specializing in fractional ownership.  Sirkin explains in depth—and in plain English—some of the legal fine points of the issue on his excellent, authoritative website, www.SirkinFractionalLawyers.com.   

In quoting the following excerpts, I have highlighted the most essential parts of the text, bolded important words and added some paragraphing:

“What Is Fractional Ownership?”

“Fractional ownership” istypically used to describe shared ownership of a vacation or resort property by people in an arrangement which allocates usage rights based on time.  

“…This type of co-ownership falls within most legal definitions of a ‘timeshare,’ which means it can be subject to restrictions and requirements applicable to the creation and sale of timeshare property.”

“How Does Fractional Ownership Differ from Time Shares?”

“From a strictly legal standpoint, most definitions of the term ‘timeshare’ encompass any arrangement under which a group of people share use of a property based on time, regardless of whether they own the property…

“There are significant differences between most of the arrangements historically referred to as timeshares and most fractional ownership arrangements.”

“Contrary to popular belief, the difference between a fractional and a timeshare is not whether title to property is conveyed to the purchasers…Many ‘timeshare properties’ involve direct, titled ownership, and many ‘fractional properties’ do not. 

“This misconception about the difference between a fractional and a timeshare often leads to two significant problems:”

(i)            “An assumption that timeshare restrictions and regulations do not apply to fractional projects, and

(ii)          Failure to evaluate the important elements of an offering to make sure that it really is better than the old-fashioned timeshares with bad reputations.”

“The meaningful differences between most old-fashioned timeshares and most modern fractional ownership arrangements are:

(i)            The extent to which each participant’s rights and responsibilities are limited to a particular home or group of homes, and

(ii)          The extent of each participant’s ownership and control…

These issues must be examined based on the documents governing the shared property, not based on what the arrangement is called and whether or not ownership is deeded.”

Sirkin then poses some excellent questions prospective buyers need to ask in order to determine whether a property will be suitable to their vacation and financial requirements.  The questions are highly recommended reading and may be found at: http://www.sirkinfractionallawyers.com/short_format/fractionals_versus_timeshar.html

So what insights may be gleaned from the foregoing discussion of the similarities and differences between fractional and timeshare?

1. Distinguishing between a fractional and a timeshare is more far more complex than identifying a duck.

2. Confusion persists among members of the public—and even among new entrants into the industry as to the differences between fractional and timeshare.

3. The expansion of timeshare developers into fractional further blurs the distinction.  Many timeshare developers are upselling their clients to fractional, and many modern mixed use developments offer both property arrangements.

4, Fractional and timeshare properties exhibit basic financial and operational differences.  A property’s “label” does not necessarily tell the entire story.

For example, as Sirkin states on his website, “deeded ownership does not necessarily give a co-owner any particular level of control over how the home he/she owns will be cared for and managed, what ownership costs will be in the future or whether there are any meaningful prospects of making money based on increasing property value.”

5. Fractional and timeshare properties that make accurate representations to prospective owners in the sales office and make full and necessary disclosures in the offering documents of the buyers’ expected benefits as well as their expected financial responsibilities will enjoy the most opportunity for long-term market success.

What topics on this website would you like more information on?  What new topics would you like to see treated?  Drop us a line.  We aim to please our readers.

David M. Disick, Esq. helps developers secure financing. A former Wall Street attorney, he developed the world’s first Private Residence Club.  Disick is author of Fractional Vacation Homes:  Marketing and Sales in Challenging Times. Contact him now.

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