(I’m going to use boats as my example in this article because using the word “asset” over and over again gets truly tedious, but the principles apply to holiday homes, motorhomes and other assets.)
These tricky financial times are not receding as quickly as everyone hoped and many boat owners are wondering if they can justify keeping their boat or if they need to sell to extract some equity (or reduce their debt). They will also be aware that selling their boat might take a long time.
Most owners don’t even consider selling one, two or maybe three shares. I’m not saying that finding the right partner is going to happen overnight either. But with a little patience, it can be an excellent alternative: the owner keeps their boat and gets some equity.
Most “original” owners fully understand that they need to ensure that their new partners feel equal in the syndicate, but there are some who never really accept that the boat isn’t still entirely theirs and buyers should be alert to this. As with any sharing arrangement, there needs to be extensive discussions to work out all the aspects of the sharing arrangement and this should in turn be recorded in the contract. During this process, the new partners also need to assure themselves that the owner is really willing to share!
I’ve spoken to several people who’ve sold several shares in the asset they previously owned outright and the best method I’ve seen is for each partner to be bought in one by one. For example, say the ideal is to sell three shares so the boat ends up with four owners each with a quarter. The owner finds the first partner who buys half the boat and agrees with the plan to bring in two further partners. The two partners then look for the third partner, and when this sale nets a further third of the value of the boat, this is split between the first two partners. The three partners then look for the fourth partner, and the proceeds of the sale of the quarter are split between them. The contract is amended as necessary at the sale of each share.
The advantage of this process is that at each stage all the existing partners have an equal say in all matters. If each partner simply buys a quarter share, then the original owner inevitably has more control and may be able to push through the sale of a share to a partner that isn’t acceptable to the others. The other alternative is to wait until all three new partners are available. However this might take some time and there is the risk is that the first potential partner gets fed up waiting.
Many owners think that the potential partner will be unwilling to make this greater investment and indeed some will be unable to do this. But if I was that potential partner, I’d prefer to buy the half at the outset so that I knew I had equal input on decisions down the line.
As with all sharing arrangements, there are many ways of doing things, and all require an investment in time, discussion and negotiation to discover the best solution for a particular group of partners. The pay-back is that when set up correctly the vast majority of syndicates work really well, providing much joy, very cost effectively, for many years.