Fractional Ownership: A Viable Exit Strategy? Critical Legal Considerations

Mel S. Weinberger is a Partner based in our Washington office.

Fractionals have transformed the vacation ownership industry in recent years and are quickly emerging as preferred alternatives to wholly-owned vacation homes for many consumers. Typically, fractionals attract consumers who could easily afford a second home but can't justify the cost and inconvenience of whole ownership when their use of the property is usually limited to several weeks each year. This distinguishes fractionals from one-week timeshare interests that are usually sold as a hedge against rising vacation costs.

For developers confronting the incredibly tight credit market that currently prevails, coupled with decreased discretionary spending by the overwhelming majority of consumers, converting a whole ownership property, whether a detached single family home, townhome, hotel suite, or condominium unit, to fractional ownership might provide an effective exit strategy through the creation of