If you’re a commercial property developer, investor or any other professional connected in some way to the real estate market, you have probably heard the term “fractional ownership” thrown around from time to time.
According to Wikipedia, “In business, fractional ownership is a percentage share of an expensive asset. Shares are sold to individual owners. A fractional owner enjoys priorities and privileges, such as reduced rates, priority access on holidays and income sharing.”
As it relates to commercial real estate, fractional ownership is when several individuals join together and purchase commercial property that would otherwise be too expensive to buy or extremely difficult for any one of them to manage solely. Typically, fractional ownership is ideal for large expensive properties, and not for smaller, more affordable real estate.
Let’s assume you’ve found a property you’re unable to purchase alone. Thus, you and 9 other people decide to purchase the property together in exchange for 10% (1/10) ownership of the property. Your 10% would be considered your “fractional ownership” of said property.
As a fractional owner of property, you’re not solely responsible for the upkeep of the property or the property taxes. Just as you share ownership, you share use of the property, as well as the burdens and other responsibilities.
Although fractional ownership is often confused with timeshares, the two are very different. With timeshares, you pay to use a property for a specific amount of time (i.e. 1 month in the summer or a couple of weeks in the winter). This is very common with vacation and resort-style properties. Unlike timeshares, with fractional ownership you actually own a percentage of the property you use periodically.
As with any commercial property acquisition, if you’re considering entering into a fractional ownership arrangement in Florida, you should hire an experienced Florida property acquisition attorney to negotiate the terms of the agreement and protect your interests. The property acquisition attorneys of Schecter Law represent developers, buyers, and sellers of commercial property. Contact us to discuss your commercial property and fractional ownership needs.
