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Wednesday, October 10, 2012

Fractional Ownership in Italy: Tips for Prospective Buyers

After reporting the piece Own a Piece of the Dream: Fractional Ownership in Italy and detailing three fractionals in Tuscany, Le Marche and Umbria, I  became a fan of the concept of fractional ownership. That said, it's a complicated transaction, and the arrangement may not suit everyone. With that in mind, here's a list of tips before purchasing a fractional in Italy:
Visit the Property: This sounds obvious, but we have to state it outright. Not only do you want to make sure the structure, be it a freestanding house or apartment, passes muster, but you want to get a sense of the location, and whether you see yourself spending time there for years to come.

Read the Fine Print: Fractional properties can be structured in any number of ways, depending in part on the developer's provenance. So, a U.S.-based owner will draw on U.S. legal structure, a U.K.-based owner on their own. The transaction will also draw on the site country's laws. Study both carefully. Understand how the property's annual fees work, how the property is run, what role owners have in rules, etc. Critical is how owners determine which weeks they get each year. Another consideration: Insurance obligations and shareholder liability.

Perform "Scenario" Due Diligence: Run through possible scenarios, and ask the developer how they'd handle them. For instance: What if there's an unusually high one-time expense, like a major roof repair? What if one of the owners is a loose cannon, and doesn't respect the week rotations or other rules? What if you decide after a few years to sell, how might that work?

Evaluate Your Schedule: If you and/or your spouse are still working, you want to make sure your professional schedule is flexible enough to accommodate a fractional ownership time table. You won't have total control over which weeks you get to stay at the property.

Talk to an Attorney: Check with an attorney specializing in transactional sales and also perhaps an estate attorney since this is likely to be a long-term investment. -- Barbara Benham

Photo of Borgo di Vagli

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