Q&A Fractional Ownership
I hope the following answers your questions about fractional home ownership, but of course if there’s anything else you’d like to know, please don’t hesitate to drop me a line!
What is Fractional Ownership?
In 1998, I found and fell in love with a farmhouse nestled among the vineyard of the Dordogne. It seemed impractical and expensive
to own and maintain a home we planned to use for a month each year. After hour of research with attorneys on both sides of the pond, we became the first to use an American company to buy a French property outright and to then have other like-minded souls join us in ownership of that company.
Fractional ownership is a unique opportunity to purchase French property/real estate without a large outlay of capital. As an exclusive member (shareholder) of our LLC, you literally own percentage share of the LLC (limited liability Company) which owns and manages the property. Unlike a lease back plan, our home shares are typically older homes of character and charm and the shares are easy to transfer or resell as defined in our operating agreement.
How is it different from Timeshare?
It is completely different. You own your percentage of the deeded property outright which you can easily sell or donate your time to another person. You can also participate in the appreciation of the property. Typically an owner can use of 6 or more weeks per year. This is truly YOUR home away from home.
With a time share you do not “own” your property or participate in any appreciation of it. Also you are restricted to specific dates which you can use within certain locations in a fixed number of years. Think of it this way- have you ever heard a time share owner invite you to “their” home?
Why do we use an US Limited Liability Company?
When we first envisioned the creation a home share in 1998, we sought legal advice in order to be governed by US inheritance laws instead of the rather restrictive French system. Our LLC home shares are member-formed companies which allow the shareholders to own and manage real estate in accordance with the conditions of the Operating Agreement. We have members from the US, Canada, the UK, Denmark and Australia.
What is an Operating Agreement?
The Operating Agreement sets out the rights, obligations and duties regarding the LLC and its assets and liabilities. An agreement typically includes: Definitions, Formation, Members and Membership Interests, Management, Budgets and Accounts, Meetings, Member Use Rights, Accounting and Records, Transfer of Interest, Distributions, Withdrawal and Dissolution, Indemnification, and Amendments.
How does each shareholder reserve time at the house?
This varies from home share to home share. In France we typically use an on-line calendar to book time equitably for the shareholders. At the first annual meeting, each shareholder draws a number from 1-13, which becomes their first lottery pick. Some homes have rotational picks for high and for low season. In one the Uzes properties, your selection number jumps up by four slots each year. In the other property, you can purchase up to 3 consecutive months and this period moves forward by a season each year.
What annual expenses might I expect as an LLC shareholder?
Expenses will include homeowners insurance, taxe d’habitation (property taxes), and routine utilities and maintenance. These costs are estimated to be between 400-700 euros/year per shareholder. The beauty of a home share is that all house costs are divided by the number of shares in the L.L.C.
How do I reserve a share?
Some buyers choose to visit the property prior to purchase and others who are more distant, may wish to preview our CD of the house and the region without a visit. All members must sign our operating agreement which states your rights and obligations as a member.
When you have decided to buy a share, instructions on how to transfer funds to the LLC escrow account will be sent to you upon your request.
Are the annual meetings typically in the states? How do you accommodate those of us who live a great distance away?
Our annual meetings thus far have been in the states however we do have additional members from Denmark, the UK, France, Canada, and Australia. In the past, these members have been included via speaker phone, web camera or on Skype.
Is there a caretaker who oversees cleaning and assesses the condition of the apartment?
Yes, each of our LLC’s has an established caretaker who is responsible for cleaning and linens after each visitor. Additionally, she provides us with water and electric usage per visit as well as reporting any and all damages to the property or complaints from building occupants. Each member (or their guests) is personally responsible for leaving the home share in the same condition they found it. Our policy has been that each visitor leaves a sum in cash (ie: 75 E for one bedroom) and (85E for two bedrooms) in an envelope on the counter for cleaning services and linens.
Can we rent out our time?
Our Operating Agreement does not typically allow for commercial rentals. We do, however, have the option of occasionally allowing our family or friends to use our time and pay our operating expenses so long as each guest has read, signed, and will abide by the house rules instructions.
Is there a resale market?
Yes, there is a resale market. The IPS newsletter is mailed to about 2600 readers who have shown an interest in fractional living. Of course friends of the members as well as other family members often show an interest in resale share. Typically IPS shares have sold for the same or higher prices. The procedure for resale is outlined in our operating agreement.
Can we trade time with owners from other properties?
Yes! This is one of the very nice bonuses of owning an International Property Share home. If you should find yourself wishing to spend some time in Provence and you are an owner in Umbria, why not be in swap times and enjoy a completely different experience? I’m happy to help!
So what’s next?
- Learn whether a shared home in France or Italy is right for you.
- Ask for a fact sheet describing the in’s and out’s of fractional ownership.
- Take a look at a sample Operating Agreement which describes the rights and responsibilities of joint ownership.
- Learn what other owners have said about owning a pied a terre in France
- To better assess which property is a good fit for you, complete and return the IPS questionnaire.
- Decide to either travel to visit the property or view it by seeing our videos
- Call Ginny to get acquainted: 585 412 4904 EST