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What is fractional ownership?


Nupoor Mahadev

Keep going and never look back

What do you understand by the term fraction? It means a part or percentage of something. Similarly, fractional ownership is percentage ownership in an asset. In other words, it can be defined as a way of sharing the ownership of a particular asset so that it becomes unobtainable by an individual. Shares are sold to individual owners who are all allowed to access the benefits of the asset. However, they need to share in the income that results from it.

Breaking down fractional ownership
Fractional ownership can be beneficial for an individual as it allows them to own a percentage in a luxury property that they may not be able to afford alone. However, this option can also be opted by people who can buy the property on their own but don’t have time to maintain it.

Types of fractional ownership
Fractional ownership can be of different types.

  1. One of the most cost-effective ways is to purchase an asset in a group or jointly. Interested people can decide on the asset they want to buy and then draw up ownership documents. Every individual owns a share of the asset is liable to manage and maintain the asset themselves.
  2. For a more cost-effective method, you can even opt for an owner or developer-led scheme. In this case, the individual fractions are sold directly by the owner or developer.
  3. The next type is Ownership Clubs. This is when the above-mentioned types are merged. However, the main drawback of the system is that none of the terms have a legal meaning and therefore, it is completely up to the buyer to find out about the ownership, booking, exit arrangements, etc.

To conclude, fractional ownership can be useful in certain cases. But at the same time, it does have some major drawbacks to look into.

Read more: What are the types of business ownership?

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