Real Estate Attorneys

Fractional/ Timeshare Development

Fractional (a/k/a timeshare) real estate is an undivided fractional (1/4, 1/8, 1/12…) interest in a piece of real estate coupled with a use plan that provides the agreement and roadmap for how and when an owner can utilize his/her interest. Both fractional and timeshares are governed by Florida Statutes Chapter 721 entitled The Florida Vacation Plan and Timesharing Act AND any other applicable statutes i.e. HOA (720), CONDO (718) COOPERATIVE (719).

The Florida Vacation Plan and Timesharing Act applies to all plans consisting of more than 7 timeshare periods over at least three years. Therefore, when you are considering selling an interest which is less than 100% ownership to multiple persons, you are most likely dealing with fractional and/or timeshare law.

As a developer, a fractional/timeshare project can be a good exit strategy for certain projects when whole ownership is no longer viable or financially attractive. For example, a condominium unit that would sell for $500,000.00 as whole ownership might sell on a fractional basis for $850,000.00 or more depending upon the project. However, this is not without a cost. The amenities for a fractional project are generally much higher (resort pools, spa, gym, etc). The carry costs for the start-up of the project are typically higher as well in that the budget usually contains all operating costs for the units (utilities and RE taxes too). Due to the level of complexity the legal fees tend to be higher. And, the sales and marketing expenses are substantially higher as the cost to get people to and thru the project as part of the sales process requires more significant promotional materials and offers.

A buyer may want to consider a fractional/timeshare project, as it can be a good way to get more “bang for the buck” in that a buyer will only pay for the portion of time which they are going to use (i.e. 4 weeks/year). Accordingly, the buyer can typically get more than they would if they had to buy that same unit as whole ownership. There is a trend toward high-end finishes and FF&E packages which results in the buyer getting a higher qualities product with more “bells & whistles” than would otherwise be available (i.e. concierge services, transportation, spa, etc) in a whole ownership structure. For example, the condominium unit described in the preceding paragraph would cost a buyer $500,000.00 for whole ownership. However, the cost for the buyer to purchase 4 weeks/year in that same condominium might only cost $75,000.00.

Additionally, many projects are part of much larger multi-site plans which allow buyers to swap time at one location for time at an affiliated location. Taken one step further, most projects have created affiliate relationships with certain external exchange companies which allow the buyer to take that time on the beach and swap it for a week on the ski slopes and so forth.

Come talk to us about whether fractional/timeshare real estate can work for your project. Let us put our experience to work for you.


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