PROView - January 2008 - (Page 12) the property, which then allows multiple owners or investors to own shares in the company. This permits the transfer of shares without the need to reflect changes on the title or deed to the property, and also facilitates sharing of tax benefits. A property affiliated with a resort company providing ongoing management and amenities gives a benefit to buyers. Q - What legal restrictions apply to fractionals? A - Four categories of rules apply: a) state real estate laws and regulations b) local real estate laws and regulations c) private deed restrictions d) federal and state securities laws a) In Florida, regulatory approval is required if there will be more than seven co-ownership shares. That’s why most of the time you’ll see 7 or less fractions, because more than seven fractions triggers the need for full compliance with the Florida Timeshare Statute rules. b) Local regulation can be based on number of co-owners, usage allotment, zoning, or building codes. c) the governing documents of home owners associations may restrict or prohibit home sharing arrangements. d) Federal & state securities law apply where rental income is pooled among owners, management is delegated, or the purpose is primarily investment. given the reality that people change as well as their needs. Next, ensure that there is a reserve fund sufficient to handle contingencies, and that the funding for this occurs on a regular basis. Q - What type of documentation is needed? A - Two types of documents are needed: 1) documents detailing owner rights (usage, alteration, financing, resale, alternate exit strategy) and 2) documents outlining owner obligations (cost allocation, dues structure, repair/replacement, and rules. The documents must be complete, clearly written, and understood by the owners. Most fractional arrangements involve a combination of recorded and unrecorded documents, with a variety of different names. On your client’s behalf, you’ll need to make sure all the important content items are present among the various documents. Q - How are usage rights allocated? A - This can vary, but in the most popular approach each owner is assigned the exclusive right to use the home during a specified number of days, weeks or months each year. Usage periods can be fixed, variable (rotating) or a combination of fixed and variable. “With fractional ownership, the reward to your buyer is owning and being able to use a beautiful property in a destination location at a cost far less than whole ownership.” Q - What kind of risks does fractional co-ownership create? A - The risk/reward factor is clear…without some risk, there is usually no reward. With fractional ownership, the reward to your buyer is owning and being able to use a beautiful property in a destination location at a cost far less than whole ownership. The risks are sharing property with others and relying on them to fulfill their obligations to you. Sharing use means you can’t do what you want when you want, and that others may do things that displease you. Sharing obligations means that necessary maintenance and management tasks might not be completed as agreed upon. These risks cannot be eliminated – but they can be reduced. Probably the single most important step to lower the risk of co-ownership is a thorough, written, signed co-ownership agreement that deals with the issues, including events you don’t expect to happen, 12 PINELLAS REALTOR® ORGANIZATION There are numerous variations and hybrids of usage, and each group/owner needs to find an approach that works for them and their property, and buyers need to see a match for their lifestyle. Q - What happens if a co-owner doesn’t fulfill his/her obligations? A - While this occurrence is extremely rare, the possibility exists. That’s why the documentation created is so important, because a co-ownership agreement must permit the group and/or a management company the power and means to deal with a default quickly and effectively. In addition, an established default reserve fund provides security for everyone. Q - What about management of the fractional ownership property? A - These tasks fall into four categories: 1) usage allocation, 2) accounting, 3) cleaning and 4) repair. Any of these jobs can be handled by either co-owners or outside professionals, can involve compensation or not, January 2008
Table of Contents Feed for the Digital Edition of PROView - January 2008 PROView - January 2008 Contents Chairman's Notes Feature ProActive Marketing Finance Marketplace Analysis Home Sales Report MLS Update MLS Mind Your Manners Education Calendar of Events & Programs PROBiz Special Feature Brokerage Design New Affiliates and Members for 2008 PROView - January 2008 PROView - January 2008 - PROView - January 2008 (Page Cover1) PROView - January 2008 - PROView - January 2008 (Page Cover2) PROView - January 2008 - Contents (Page 1) PROView - January 2008 - Chairman's Notes (Page 2) PROView - January 2008 - Chairman's Notes (Page 3) PROView - January 2008 - Feature (Page 4) PROView - January 2008 - Feature (Page 5) PROView - January 2008 - Feature (Page 6) PROView - January 2008 - ProActive (Page 7) PROView - January 2008 - Marketing (Page 8) PROView - January 2008 - Marketing (Page 9) PROView - January 2008 - Finance (Page 10) PROView - January 2008 - Finance (Page 11) PROView - January 2008 - Finance (Page 12) PROView - January 2008 - Finance (Page 13) PROView - January 2008 - Marketplace Analysis (Page 14) PROView - January 2008 - Home Sales Report (Page 15) PROView - January 2008 - MLS Update (Page 16) PROView - January 2008 - MLS Mind Your Manners (Page 17) PROView - January 2008 - Education (Page 18) PROView - January 2008 - Calendar of Events & Programs (Page 19) PROView - January 2008 - PROBiz (Page 20) PROView - January 2008 - Special Feature (Page 21) PROView - January 2008 - Brokerage Design (Page 22) PROView - January 2008 - Brokerage Design (Page 23) PROView - January 2008 - Brokerage Design (Page 24) PROView - January 2008 - Brokerage Design (Page 25) PROView - January 2008 - New Affiliates and Members for 2008 (Page 26) PROView - January 2008 - New Affiliates and Members for 2008 (Page Cover4)
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