Phuket - New Selling Concept - "fractional Ownership"

[Bel Mondo]

This evening on a show called "Pattaya Plus", I saw some former tennis pro, David Lloyd, and an American architect, Michael Earle, being interviewed concerning Phuket real estate developments and a concept called "Fractional Ownership".

Both indicated that this was NOT a time share, but a "group ownership" concept.

Supposedly the investors were actually "owners" (actually named on the Thai property deed) and would participate in profits from an eventual sale of the property.

I just don't understand this concept within the context of the law of Thailand.

We all know that only Thai citizens can own property.

We all know that foreigners cannot own real estate in Thailand. The only exception, of course, are condos (49% of a condo development)

So -- PRAY TELL -- what is this "new" and "unique" concept of "Fractional Ownership" unless it is simply the usual Time Share concept?

Can either Mr. Lloyd, Mr. Earle or some designated agent please enlighten me on this rather "unique" ownership concept?

If anyone of these "entrepreneurs" can give me an explanation that would pass muster under Thai law, I would be happy to invest -- after all, who wouldn't want a chance to enjoy a day on the yacht that is "supposedly" part of the package!!!!

[johnnyk]

Its time share with lipstick.

you own the right to use the property, otherwise known as a piece of paper.

you don't own any bricks and mortar at all.

[thaiwanderer]

fractional ownership (not a new concept at all) is meant to be different to timeshare in that the former gives ownership (or rather shared ownership) whereas the latter merely gives the right to use - however depending on the exact structure the difference can well be moot as suggested by Johnnyk

i don't know the structure for Absolute but would imagine its along the lines of shares in a company thats the leasholder and perhaps also shares in a company that is or has a stake in the land owning company or shares in a company that owns (or has stake in the company that owns) condo unit titles- either way supplemented with a contract between the shareholders- of itself no more objectionable than company route individuals use except complicated by the very nature of 'fractional' (i.e. multiplied) ownership

a quick search yielded this article

http://www.fractionallife.com/news_fractio...olute_group.asp

with the beatiful line

Price for fractional ownership starts from just 775,000 Baht for 28 nights usages per year for life*.

................with the footnote being * life in this case is a series of renewable 30-year leases

obviously no need for a repeat of the numerous renewal thread discussions but a very interesting definition of life so why use it at all and why not in the main body of the article? i do wonder

also The Bangla Suites project is located right in Soi Bangla, the most famous tourist area in the heart of Patong, surrounded by a variety of entertainment options.

maybe short time ownership would be a better name? - draw your own parrallels from that

Edited June 20, 2009 by thaiwanderer

[trogers]

I remember back in the days of the 80s...a popular past time of the swinging rich was lifetime memberships.

Unfortunately, many lives were short. They meant the lifetime of the holding companies, not yours.

[Capex]

This evening on a show called "Pattaya Plus", I saw some former tennis pro, David Lloyd, and an American architect, Michael Earle, being interviewed concerning Phuket real estate developments and a concept called "Fractional Ownership".

Both indicated that this was NOT a time share, but a "group ownership" concept.

Supposedly the investors were actually "owners" (actually named on the Thai property deed) and would participate in profits from an eventual sale of the property.

I just don't understand this concept within the context of the law of Thailand.

We all know that only Thai citizens can own property.

We all know that foreigners cannot own real estate in Thailand. The only exception, of course, are condos (49% of a condo development)

So -- PRAY TELL -- what is this "new" and "unique" concept of "Fractional Ownership" unless it is simply the usual Time Share concept?

Can either Mr. Lloyd, Mr. Earle or some designated agent please enlighten me on this rather "unique" ownership concept?

If anyone of these "entrepreneurs" can give me an explanation that would pass muster under Thai law, I would be happy to invest -- after all, who wouldn't want a chance to enjoy a day on the yacht that is "supposedly" part of the package!!!!

I am not conversant with the real estate operation in Pattaya which you are referring to, however, I have been involved with "Fractional Ownership" of boats and in this case it means you purchase a share in the Equity of the boat. This means that when the boat is sold you get get your pro rata share of the proceeds of the sale, less costs and depreciation, returned to you. For the price of the cost of a small 30 foot boat, you are able to be part owner of a much larger vessel (usually around 40-50ft). It also means that you are only liable for a proportional share of the costs of operating and maintaining the vessel. This then is different to "Timeshare" in which you purchase the right to use the property for a period of time and do not have any equity in it and consequently no return when it is sold.

I assume that is what is being offered in the Pattaya deal though how they get around the ownership laws would be problematical.

[trogers]

This then is different to "Timeshare" in which you purchase the right to use the property for a period of time and do not have any equity in it and consequently no return when it is sold.

I assume that is what is being offered in the Pattaya deal though how they get around the ownership laws would be problematical.

Sponsor the govt for a change in chanote documentations - use a hardcover book instead of a few sheets of yellow paper to provide space for the names of thousands of co-owners.

[johnnyk]

Wikipedia entry deleted, lead Google reference went nowhere. Hmmmm.....

[PatinBKk]

Fractional Ownership in principle is exactly the same as time share or vacation clubs.......typicaly you would buy one tenth of the value allowing you to stay in the property for 30 days each year, nine others would do the same as you, and the developer would rent the property for the remaining two months.....do the figures and they dont match up....it is a waste of money and remember if you are stupid enough to proceed to check any maitenance fees etc........I worked in the business....timeshare in Thailand isnt too bad, it is easonbly cheap but F.O. is not good value at all....

[H2oDunc]

Time share in drag

[grandpops]

Fractional Ownership in principle is exactly the same as time share or vacation clubs.......typicaly you would buy one tenth of the value allowing you to stay in the property for 30 days each year, nine others would do the same as you, and the developer would rent the property for the remaining two months.....do the figures and they dont match up....it is a waste of money and remember if you are stupid enough to proceed to check any maitenance fees etc........I worked in the business....timeshare in Thailand isnt too bad, it is easonbly cheap but F.O. is not good value at all....

The old adage "there's one born every minute" is clearly well out of date and these people realise that there were at least nine born every minute. I don't know how, but these schemes work and there are plenty of fools here only happy to be parted from their money.

Quite rightly you have pointed out what they will never mention. That is, there will be massive repair bills during a 30 year period. I know many buildings here that had and entire lifspan of less than 30 years. Despite having only been here 17 years I have seen buildings built after my arrival, fall down and be replaced. Service charges, cleaning charges (nobody ever cleans these places properly when they leave) decorating every two years or so, upgrading of intercoms, security systems, re-covering car parks, communal lighting and gardening costs..... The list is endless and you can take that from somebody who really does know what they are talking about on this subject... (for once )

It's really time to stop feeling sorry for these dupes. If they are that stupid, lets have their money rattling round in the Thai economy, as they would surely lose it sooner rather than later in another country.

Those of us who "bought" properties with our wives ten years or so ago for less than one million baht are starting to look like so many suntanned, beer-bellied, balding, hair-dyed, medallioned Einsteins in comparison.

Edited June 21, 2009 by grandpops

[Abrak]

The time share element is obviously there.

There is also talk of 30 year renewable leases.

My guess, from other property enterprises that I have seen in Thailand is that this is achieved through giving shares in a company that then gives out 30 year leases proportional to those leases. Theoretically all 'owners' have shares and can vote to renew the leases every 30 years. Obviously the company owning the land has to be Thai, so the shares are in the holding company which is offshore. The advantage of such a structure is that you can transfer ownership offshore and avoid tax although maybe the word should be evade. One significant disadvantage is that you will not get your voting shares (usually) until the project is complete so you are at the mercy of the developer. Another is that you are not protected in terms of minority abuse as under say the Condo Act. In fact the very structure I imagine gives you little recourse.

As I see it, while the basic concept of timeshare is theoretically ok, it is so riddled with abuse that the natural assumption is that it is undertaken in bad faith. As such you simply have to assume that any ownership structure that can be abused, will be. And that rules out Thailand for off plan build time share completely and utterly 100%.

[thaiwanderer]

Whilst i am no fan of timeshare or fractional it exposes less capital to risk than branded villa / apartment with leaseback purchasers and their lofty talk of 'guaranteed' yields but maybe because of misplaced snobbery that is deemed by many to be more wholesome. IMHO its more stupid.

[eljeque]

Price for fractional ownership starts from just 775,000 Baht for 28 nights usages per year for life*.

So, after 13 buyers put their money into this so that every day of the year is taken, the sellers have pocketed 10,000,000 BAHT!!!

Any ideas on what the real price of the property which they are fractionally selling is worth RIGHT NOW?

Add onto this 775,000 the amount which the fractional owners will pay for yearly maintenance and cleaning while they are in the unit, and they will see... if anything like my friend's timeshare using View Talay Villas, that the cost of cleaning for the year is about what he would actually pay for rent for the unit.

[trogers]

Price for fractional ownership starts from just 775,000 Baht for 28 nights usages per year for life*.

So, after 13 buyers put their money into this so that every day of the year is taken, the sellers have pocketed 10,000,000 BAHT!!!

Any ideas on what the real price of the property which they are fractionally selling is worth RIGHT NOW?

Add onto this 775,000 the amount which the fractional owners will pay for yearly maintenance and cleaning while they are in the unit, and they will see... if anything like my friend's timeshare using View Talay Villas, that the cost of cleaning for the year is about what he would actually pay for rent for the unit.

You will be lucky to even have the chance to pay the yearly cost of cleaning in your life time. Problem is, will the holding company outlive you, or will you outlive the holding company? Same question is now in the minds of those Elite cardholders. Who will die first?

[johnnyk]

I know people who have bought traditional time share and fractional ownership here in Canada and in Mexico.

The lures are:

1) rent your unit and make a guaranteed return on your investment!

2) swap with other 'owners' around the world!

Creative accounting re: maintenance takes good care of #1 (e.g. hire Somchai's brother to take out the garbage at $10.00/bag).

Other owners want the same thing: to be in a warm, sunny place, all during the same three months of the year. Good luck coordinating it.

After the time period is up enjoy your piece of paper. Light a cigar with it, it has some use.

[ubonjoe]

Posts deleted for name and shame which is against forum rules.

[marsteele]

There is an age old saying "A fool and his Money" or as we say in Australia "Come in spinner"

[fino]

Another Scam in the Land of Scam

[H2oDunc]

Another Scam in the Land of Scam

A very informative posting. Nothing else to add ????????????

I think you will find that the amount of THAI PEOPLE scamming the stupid farang into buying this timeshare / fractional ownership con is ZERO! Go look at the amount of people CONNED in Spain before you label this beautiful country the land of scams.

IDIOTS will be scammed no matter where they are! That's life!

[SteamboatFatty]

Regardless of whether you feel Fractional Ownership is a "dodgy" paractice or not, you MUST exercise due diligence and research the companies and the personalities behind it. Be very thorough - it is amazing what you can turn up. Also, be very aware of new organisations that appear out of nowhere offering to sell you your dream

[jessejames]

I agree, timeshare has been a good way for a lot of resorts to get people`s money and then slam the door on them. But I also know that fractional ownership works if done within small collective groups ( like buying a villa among 6 -10 people ) not a resort. When you draft a legal document that only involves a group of owners ( not a club or resort ) there are no chances that things will go bad with your ownership. That is the difference of FO vs TS, in time share the resort, club or company might close doors, but in fractional ownership is the same as owning a house in a marriage, you need both signatures to sell it.

( in the Western world, not sure about Thailand ). I bought a fractional in a villa, in Sosua the Dominican Republic and never have had any problems at all. The problem is that most people don`t get enough info in order to make a good judgment call in terms of how to buy a fractional ownership. I hope you can get the same quality service in other areas such as Thailand, because it does work but fractional needs to be done as such, not as timeshare schemes based on resorts and clubs. I will take a look at some property in Thailand and I will be back here to tell you how successful I was. Don`t fall for unprofessional advice, just do your homework of sorting all providers and finding the right one.

This is the Sosua villa I bought as fractional, ain`t it gorgeous?

Regardless of whether you feel Fractional Ownership is a "dodgy" paractice or not, you MUST exercise due diligence and research the companies and the personalities behind it. Be very thorough - it is amazing what you can turn up. Also, be very aware of new organisations that appear out of nowhere offering to sell you your dream

[123ace]

Fractional is a tool that typically enters an over-supplied market, or an over-heated market where sales values (and critically land values) have risen exponentially. It is also a method adopted by developers with un-saleable product on the assumption that the lower entry point will open the door to a wider market.

Its an approach that happens to suit some peoples lifestyle, particulary non-investors with disposable income, young families in need of a holiday home. It is often an impulse purchase made during a holiday.

Some hotels use it as a cash raisng scheme that allows them to release equity by selling fractional as an investment with shared income. Done properly this can be a very good investment, particulary with an established hotel. Off-plan, it does not work that well.

[johnnyk]

Time share with lipstick.

[sawadeeken]

Just another way to get your money------- in small increments.................

[Mercury]

The lure is people buying into something which they cannot afford outright and do not need on a permanent basis. It sounds great in theory and can work in practice but unless it is very well thought out and all known and potential costs are covered without giving rise to profiteering such as one poster pointed out with a cleaning contract costing $10 per bag of rubbish removed, then it has little success of delivering the objectives it proposed to meet.

If you simplify it and have 12 owners with one month each then who gets February ? Go to 30 days and who gets the other 5 or 6 days ? December and January and the school holidays will be far more desirable than September or October so how do you apportion desirability and thus, how do you justify different prices for the different 30 day periods ? When you have 8 or 10 people interested but you have only the undesirable slots left, how do you market them at anywhere near full price ? I suggest you cannot.

Going it alone and getting 3 other couples and having 4 owners and a flexible though stringent agreement can work. You know you cannot all be there for 3 months each every year so the large empty times make for great flexibility. The issues of cleaning and maintenance remain but you are not handing over any profit to a company setting it all up and overcharging for the property in the first place. I know management companies who could and would organise this for you and even search out vacation rentals if the owners decided that was something they were interested in.

I don't know if you can have 8 names on a condo chanote as co owners. With a house you would need a company unless the guys all had Thai wives (and trusted them). The concept works for sure in certain circumstances but I'll bet this offer is just a way to sell a 6m place for 10m and that is what Thailand is famous for, ripp offs.

[Elwood62]

There is an age old saying "A fool and his Money" or as we say in Australia "Come in spinner"

yep as some have said just another way to rip you off and make you think you have got a good deal..........

[12DrinkMore]

Another Scam in the Land of Scam

Please let's get the Thai terminology right.

It's the Hub of Scams.

[FlatOut]

http://www.47parkstreet.com/index.shtml hmmm looks dodgy...

Not exactly an unknown phenomenon really. The 1980s was 30 years ago. Times have changed. If it's not for you then don't buy into it. Surely the Marriot are a reputable company? As are many others. I honestly can't see why people have their timeshare blinkers on, in Phuket you will probably save money holidaying in FO establishments. Especially as holidaymakers from Australia are regulars (2-3 times a year). If you live here, they aren't for you. If you buy into it, you can stay in a guaranteed top notch hotel across many countries in the world - how is that a scam? I understand the fly-by-night companies who want a quick buck then suddenly disappear.

[witold]

Timeshares and fractionals are *rarely* scams.

What they mostly are is terrible investments. Most people end up paying too much, and getting too little. On top of the initial costs, they usually carry additional fees and restrictions that substantially raise the total cost of ownership.

If you are looking into this sort of arrangement, have a look at the resale market for these things. Once you buy, most people are stuck with theirs, and most of the ones that get resold are sold at substantially lower prices than initial developer price. If you really have your heart set on a timeshare/fractional, buy it in the 2nd hand market for a more reasonable price.