What is Fractional Ownership?
This is a simple way to ‘own’ an Italian property for a fraction of the cost. Fractional or Collective Ownership, allows a number of likeminded buyers to collectively own a luxury property, which is professionally managed and maintained by locally based staff.
As a lifestyle choice, fractional ownership makes sense. The majority of individuals struggle to take more than 4 weeks vacation each year. This can mean that a holiday homeowner can only use their vacation property for up a small part of the year - but endure the financial costs of the whole year. Fractional owners don’t have these financial burdens - they simply share the maintenance and running costs with fellow owners.
As with buying anything, care should be taken that you fully understand what you are buying and the terms of your purchase.
Choosing Your Property
Think about your budget – decide at the outset about how much you can afford and how you will fund your purchase. If you require a mortgage or finance to purchase what options are there?
Do you want to buy one share in your fractional ownership property or multiple shares, perhaps with a view to rent unused weeks.
Where do you want to live in Italy? Which regions attract you? For example Tuscany, Campania or Puglia? Italy has a great variety of landscapes: lakes, coastline, mountains and plain so there is a wide choice. Please see our Discover Italy pages for information on Italian regions.
Realpoint work exclusively with the Pinelli Estate to provide you with a selection of fractional ownership properties in italy. We are continually seeking out new properties and locations. If you have friends who wish to invest with you, tell us your requirements and we will make sure you are updated when we secure a new property under the Pinelli fractional purchase programme.
Are you thinking or renting out the property? Sea view villas and farmhouses with pools all offer attractive rental income and your property can pay for itself over time.
Another aspect to be considered is accessibility and facilities. Is the area that you have chosen well served by airports, for example.
Plan your timings. When can you view properties? We'll arrange your viewing trip and assist you on your way to your shared ownership.
An Example of Fractional Ownership in Action
Let's take il Rifugio property on the Pinelli Estate, sold exclusively through Realpoint, as an example of how collective ownership works. There may be minor differences from one fractional property to another, but in general this is the process to be followed and the things that you need to know about your purchase.
- Owners purchase one or multiple shares in a UK Limited Company, which owns the property.
- We can recommend the services of a UK or USA lawyers who has experience of fractional ownership, but of course you are free to choose your own.
- At Rifugio a share entitles an owner to 5 weeks residency at il Rifugio each year, for other properties this may be 4 weeks.. Shares held by each owner can be sold or passed on to family members.
- There is a maximum number of owners of the UK based non-trading Limited Company. If, at any time, an owner wishes to sell, gift or transfer their share, it is a straightforward process which can also be executed simply, legally and globally. It does not involve the complexity or cost of transferring property under the Italian legal and tax system. In simple terms, the owners own the company - the company owns the property.
Which weeks can I have and how are these allocated?
- Firstly, it is important to clarify that there are 2 weeks assigned to maintenance - to carry out any essential works, decoration and annual refurbishment. The remaining weeks are equally shared between the owners. Effectively, this translates to a full 4 or 5 weeks use of the property - which depends on the actual property.
- A rotating priority system ensures that each owner has annual access to the popular high season months. It is simple, fair and provides flexibility for each owner. Using the on-line system, owners will take turns based on their current priority to reserve 2 consecutive weeks period. Once each owners has made their selection, the priority is reversed and the owners select their second block of 2-week periods.
(NOTE: This model is slightly different for Il Rifugio which has 2 weeks, followed by 3 x 1 week periods).
- The priority is simply established on an owner’s initial purchase timing. Each year owners move up the priority list. So, for example if you are third to choose the peak period weeks in year one, you will be second the next year, and so on.
- Weeks may be exchanged with co-owners, used by friends and family or rented to a third party, but to ensure proper and fair co-ordination the management company should always be notified of any such changes at least 2 weeks in advance.
So how does this work in reality?
- Each year in November, the management company organises an on-line AGM meeting of all owners where each one chooses their weeks for the following year.
The Property Management and Annual Service Charge
- During the first year of ownership (and until all shares are sold), the management company will be The Pinelli Estate Limited. However, at the first AGM (after all shares are sold) and subsequent AGMs of the limited company the owners have the absolute right to appoint a new management company should they so wish.
Running Costs - the Management Charge explained
- An annual service charge is payable to ensure that the property is always maintained to its luxurious standard both inside and outside. The owner of each share pays their share of this cost. This cost is calculated on the total running costs and is divided equally.
What is covered by the Management Charge?
All housekeeping including bed linen and fresh towels- Essential foodstuffs on arrival
- Maintenance and refurbishment
- Company legal/accounting
- Building and contents insurance
- A fund for replacements and future decoration
- Utilities - gas, water, electricity and internet (but not landline or mobile)
- Pool cleaning and maintenance
- Local property taxes
- Administration All expenses are charged on an actual cost basis and are available for review by owners. Any differences from expenditure will be either charged or refunded after the accounts are finalised each year.
What’s the difference between Fractional Ownership and Timeshare?
- The main difference between Fractional Ownership and a timeshare is in the way actual equity is distributed. In this arrangement, as the actual purchaser, you own a share of equity (10%) in the company that owns the property asset. If the property goes up in value, the owner’s share also becomes more valuable.
- Timeshare, ownership is not distributed. The owner purchases only weeks of enjoyment in a property, and these weeks do not rise and fall in value with the value of the property. The title is still owned by the principal owner.
Any other major benefits?
Fractional Ownership allows an individual to have a share of a valuable asset without putting up the cash to purchase the whole asset outright. This is very similar to owning stock in a corporation. In fact, Fractional Ownership can apply to assets other than real estate.
In the case of real estate, the onership model allows multiple buyers to own part of a company that owns the property title. If the property declines in value, the owner can sell the asset and potentially write off the capital loss. Similarly, If the value increases, the owner can sell the share and receive capital gains.