What Do Fractional Owners Own?

You've checked out the vacation property opportunities in Ontario, chosen the perfect location and decided that through fractional, or shared, ownership you can enjoy much more luxurious surroundings than you could if you purchased a vacation home outright. You're dreaming about the lake, or ski hill, or golf club that will make your precious holiday time a memorable experience - and you're ready to sign on the fractional dotted line. But what exactly are you buying? It's a good question, and one that has many answers. Since the word "fractional" is not defined by real estate law, the nature of the term "fractional ownership" is determined by the agreement.

Generally speaking, in Ontario there are three possible scenarios that involve shared ownership. The first is fractional ownership of titled condominium units, which means the owners' names are on the title. "Like a downtown condo, the purchasers in this scenario own the unit as tenants-in common - everything from the paint in, and they have the right to use the common elements," says Muskoka-based lawyer and resort development consultant Tom Pinckard. "Owners can sell their interest in the unit, or will it to family or friends."

According to commercial real estate lawyer Les Mason, "The condominium concept is the only way to give titled ownership to the purchasers. But to the general public, the condo is more of a 'city' concept. In the vacation property market, it's much more common that shared ownership involves becoming a member of a not-for-profit association whose members collectively own the assets through that organization. It's like belonging to an equity golf club."

If the vacation property is zoned residential, the condominium concept is a possibility. If it is tourist/commercial, the second scenario of having owners belong to a non-profit corporation that owns the property is the alternative. Gloria Collinson, president of the Canadian Resort Development Association, has been involved with the marketing of fractional ownership properties since they were first implemented in Ontario. "Usually in a cottage situation," she says, "there are 10 owners per cottage who each use the property for five-week intervals. If there are 10 cottages on the property, there would be 100 owners who each own part of the whole. Fractions can be any size, but one-tenth is common."

Pinckard says that one-twelfth fractions are also catching on. "With one-twelfth shares of one four-week period each, it's simpler. Two of the remaining four weeks are used for cleaning, maintenance and repairs, and the other two weeks around Christmas and New Year's are available for purchase separately. This gives developers and purchasers flexibility."

The third form of shared ownership is a hybrid of the first two. In this scenario, the owners do not have exclusive use of the common amenities, which are also enjoyed by typical resort clients. The fractional aspect is a component of the resort.

"The generic term for what fractional or shared ownership purchasers are doing is time-sharing," Mason says. "They buy a fraction of the time the vacation property is used. The big difference is that these purchasers collectively own the property, not the developer as in a traditional time-share arrangement."

Whichever form of shared ownership people choose, they benefit from consumer protection. In the case of the condominium situation, owners are covered by the Condominium Act. In the second model, the new Consumer Protection Act takes precedence. "This level of standards imposed on developers in terms of disclosure and performance works to the benefit everyone involved, "Pinckard says.

The scope of vacation properties available in Ontario is remarkable. In the end, the form of ownership is secondary to the enjoyment people get from tapping into a more extravagant vacation experience than they would ordinarily be able to afford.

For a listing of fractional ownership properties in Ontario, visit www.fractions.ca