When looking at Private Residence Clubs and Luxury Fractional Homes, you might come across some unfamiliar terms. This glossary describes some of the most commonly used terms and phrases.
Annual Dues: The yearly cost to members, in addition to their one-time initial fee. Annual fees will vary considerably ranging from $4,000 to $20,000+ depending on the club and the size of your share. Services covered by annual dues also vary, but may include staff salaries, supplies, maintenance, landscaping, trash removal, refurbishing and maintenance of property and facilities, utilities, property taxes, transportation, valets, concierge and insurance. Some fractionals include golf club, sports club and spa memberships in their annual fees.
Co-Ownership (Or Shared Ownership): These are synonyms for fractional ownership. Some resorts or developers like to call their properties co-ownership, others use shared ownership and others talk about fractional ownership. They all mean the same thing - several people sharing ownership of a property.
Equity Ownership: The owners own equity through being on the title deed for the property or through being a shareholder in a company or other entity that owns the shared property. For stand alone single family homes an LLC is a common ownership entity, and the owners are all members of the LLC. (See also Non-Equity below)
Exchange System (or Trading System): Most fractionals and Private Residence Clubs (PRCs) have a mechanism in place to allow owners to exchange some of their time for vacations in other locations. Where the resort or fractional manager is part of a group or brand such as the Ritz Carlton, then owners can exchange time within this group. Other programs allow owners to trade across a variety of independent locations. For more information read our article Fractional Home Exchanges and Trading Programs.
Fractional: Fractional buyers buyers usually own real estate and so typically have a recorded deed and title. The most common ownership fractions are ¼, 1/7, 1/8, 1/10 and 1/12. You may often see these expressed in terms of weeks, for instance 1/12 ownership is equal to 4 weeks of usage each year.
Guest Usage: Most PRCs and Luxury Fractionals offer flexibility with regard to who can use the property. Family and friends are usually free to stay unaccompanied by the member.
Housekeeping Fees (or in residence fees): Additional fees charged per stay. These fees can consist of access to resort facilities and other luxury services such as health club memberships, restaurants, pools, ski lift tickets, stocking fridge, green fees, as well as housekeeping and gratuity. Some fractionals charge extra for these services, with others its all included in the annual dues. The most common is a housekeeping or cleaning fee for each stay.
Non-Equity (or non-deeded): Most PRC and Fractional ownership is an equity ownership, in that buyers will own deeded real estate. However, a few clubs are "right to use" and do not offer a deeded title.
Peak Season or High Season: These are the key weeks during the winter and summer seasons when travel is at its most popular. School vacation weeks and holidays fall under this category too. It may be more difficult to reserve a vacation week during these periods. The various reservation plans can help to spread out these weeks to owners for equal usage.
Private Residence Club (PRC): The luxury end of Fractionals. Property usually sells for >$1,000 per square foot and provides owners with the full services and amenities that they'd expect in exclusive high-end or five star luxury hotels and resorts. Private Residence Clubs are multi unit developments, for instance there may be 10, 20 or 30+ similar units within the development.
Recorded deed: Once the deed to a fractional property is recorded, the purchaser will have a record of ownership for that property. This is a legal document meant to provide protection for the owner in case they want to sell the deed in the future.
Rental Program: Some fractional managers have a program in place to manage renting out the property if the owner does not want to use all their time. Income from rental programs can help to offset the annual dues, but on the flip side it means that there is less "space available" time for owners to use.
Resale Programs: The PRC manager or developer may have specific programs to help with the resale of a title deed.
Reservation System or Usage plan: The specific way a club allocates weeks/days to owners. There are a variety of plans:
- Fixed Plan: Owners initially choose the weeks/months they want to use and keep them year after year.
- Floating Plan: Owners can reserve vacation time during a specific season or time period, but not for a specific week each year. Although owners have a fixed amount of vacation time, the usage is much more flexible with a floating plan.
- Hybrid: A blend of floating and fixed plans. The typical use plan for a PRC provides for two weeks of prime winter and summer use with unlimited flexible use during non-peak periods year round. Often key holidays are also fixed under this system.
- Rotating Priority System: Developed to equally distribute usage time among PRC owners using floating plans. This plan helps owners to receive equal peak-season and holiday usage over a period of time.
- Planned Reservations: Allow owners to schedule long-term getaways and ensure availability for their guests up to two years in advanced.
For more details read our article Fractional Reservation Plans & Usage Systems
Space Available (short notice): The weeks available after all owners have been allocated their respective vacation time for the year. With space available time, owners usually have a booking period of less than 45 days, but will be able to book unlimited time throughout the year with no extra cost (as long as it is available). There may be some restrictions on the amount of days/weeks an individual or family can book at one time.
Size of Share (or Fraction): This may be expressed as either a fraction or weeks. The number in the fraction represents a portion of the year. This number is based on factors such as seasonal demand, average length of stay, and size of residence. The fraction of a PRC is typically from one sixth to one eighth but can vary significantly depending on availability and exclusivity. Luxury fractional properties tend to be more exclusive and can allow for smaller fractions.
Tenants in Common: When two or more individuals hold title to the same piece of real estate. There is no limit to the amount of people who can hold title to the same property.
Let us know if you have questions about any other Private Residence Club or Luxury Fractional terms you may come across. You can use the contact us page or email us at info at sherpareport.com