Fractional ownership (joint ownership, shared ownership, co-ownership, group ownership, multiple ownership, interval ownership, asset sharing partial ownership or part ownership, to name but some of its many terms!) of property or real estate is a well established idea, which is also now often called collaborative consumption.
For years groups of families and friends have clubbed together to buy homes, particularly second homes. Now some real estate developers are offering to put strangers together to buy assets in syndicates.
The fractional ownership property syndicates that put strangers together have many variants: some offer a share in the title of the asset, timeshare and destination clubs require payment of a membership to join and this entitles you to use the asset. Here is a comparison of the main types of property ownership and use. Some expect to let the asset on your behalf when it is not in use, giving you some income but less flexibility to use the asset yourself. Most have a five star specification, provide you with excellent amenities and generally incur high management fees. If this suits you perfectly, browse or search the ads and look for those advertised by an agent..
But if you can’t afford or justify the expense of the property and/or the large fractional syndicates aren’t what you are looking for, and/or you haven’t got any appropriate family or friends to buy with, then it may have been hard to make fractional ownership work for you. Now yours2share allows you to find like-minded people with whom you can share exactly what you want, how you want and where you want.
The information on this page, and the whole of the yours2share website, is based upon the laws in England and Wales only. However the law in Scotland and Northern Ireland is similar.
The laws on joint ownership and renting, both of property (buildings and land) and possessions (chattels or personal property) vary from country to country. You need to get independent professional advice on both legal and financial aspects specific to that country. Make sure that there is a legal and financial framework for the sharing agreement you are contemplating that protects you properly.
Guidance about setting up sharing agreements
What issues need to be covered in a Trust Deed (or Declaration of Trust) for joint ownership of any asset?
- Part 1 – Ownership, exit strategy and costs
- Part 2 – Use of the asset
- Part 3 – Fittings, handover and condition reports
- Part 4 – Meetings and disputes
Is there any limit on the number of joint owners or property?
Yes, only four names can be entered as joint owners on the property’s title recorded at the Land Registry in the UK. Technically more than four people can be owners, but the four named owners would hold the other owners’ shares in trust as defined in the Trust Deed. If more than four people want to co-buy a property, you may consider setting up a company or partnership to do this.
How does fractional ownership (joint ownership) of property work?
If more than one name is on the Land Registry or the title deeds to your home, you are joint legal owners. The type of joint ownership you have will affect how you share your home and who can inherit it if you die. There are two legal forms of joint ownership of property:
- Tenants in common
- Joint tenants
In this context the term ‘tenants’ has nothing to do with rented property.
Tenancy in common: the joint owners each have a definite share in the property. For example two sharers could own the property in equal shares, or one could own two fifths with the other owning three fifths. There are two specific ways in which ownership is usually shared: area and time. Be aware of the difference. Joint ownership on a shared area basis occurs when all the owners live in the property at the same time and it is the main residence of them all. Joint ownership on a shared time basis occurs when the owners rarely if ever occupy the property at the same time and it is definitely not their main residence. The latter case occurs when the property is used for holidays, or used for specific weeks or days by each owner.
For sharing agreements of property, yours2share strongly recommends that you are “tenants in common”.
Do I have to pay stamp duty on the value of the share or the whole property?
In the UK, stamp duty applies to the value of the propety that changes hands, so it is only payable on the share being sold and not on the whole value of the property.
How can fractional ownership (joint ownership) be financed?
In general you can finance your investment in a joint ownership sharing agreement with available cash, or cash acquired through an unsecured loan, or loan secured against another asset owned wholly by you, for example your main residence. To the other sharers, these all appear as cash investments.
However if all the sharers need to borrow money to raise the capital and have no other asset that they can use as security, then you can raise a joint mortgage. In the UK, up to four people are allowed to take out a joint mortgage on a property. This scenario is generally likely to apply only to a group of sharers wanting to buy their first property.
There are several major implications of joint mortgages. All owners are jointly and severally responsible for making the mortgage payments unless the mortgage lender allows you to change your terms. You can insure against inability to pay a mortgage as your property might be at risk if payments on it are not kept up. Mortgage payment records and bank statements must always be kept in the event of legal action being required.
You will probably have a joint mortgage and a joint bank account. You can pay different deposits and different amounts of the mortgage, and you might decide this gives you rights to varying proportions of the equity when you come to sell. This will all need to be detailed in the Trust Deed. Records must be kept to determine who has paid what towards the property.