To Share or Not to Share?

I am happy to announce that share #13 of Le Palace des Vosges is sold and now anyone wanting a share of the property will have to wait until one of the owners decides to sell their share. We don’t expect that to happen for a long time to come so don’t hold your breath. The owners all say that they “are in for the long term” — meaning it’s a property they intend to keep, use and pass on to their kids.
Le Palace des Vosges is a “fractional ownership” property that we launched in the fall of 2009. At the time, properties of this kind were blossoming — developers were developing them, and buyers were buying them. The shares were selling quickly. Then the economic crash came crashing down and all those ‘nest eggs’ set aside for purchases of this kind went to financial heaven (or should I say ‘hell?’)
So, it took a lot longer for Le Palace des Vosges (and the others like it) to find its complete owner group, but it now has and happily so. In fact, one of the most amazing things about this ownership group is the cohesiveness of the group, the camaraderie of the individuals and the single-mindedness. When placed in one room at one time, this group would feel like family, even though they come from all over the U.S. and Australia.
Fractional ownership is a brilliant idea as it allows a number of different parties to share in the usage of a property at a greatly reduced cost than if it were individually owned. It works well when it’s designed well. This means that the property itself must be well produced a
nd well managed leaving little to question or argument by the owners.
As the sales force of the property, one of the things to which we paid a lot of attention was how well a new buyer fit with the current owner base. It was so important to have a like-minded congenial group of people to avoid any petty arguments or issues. But 13 owners is easier to manage than two! Our legal advisors have remarked that there are more legal disputes with smaller groups of owners than with large groups — a bigger piece of the pie is at stake, so there is more desire for control.
I know of one seriously sad situation that occurred with a developer of a fractional property who only wanted to trade her role as developer for a bit of usage. It was a rental apartment that went up for sale, but she couldn’t afford to buy it on her own. We advertised the shares for her and within 48 hours she had sold four shares, keeping one for herself. So, together the group purchased the property, but her legal advisor made a huge mistake on her behalf.
She mistakingly agreed to 20% of the usage for only 5% of the ownership and was paid nothing for her efforts to bring the group together and create the structure and administer the purchase. I tell you this, because I never hope to see such inequality again in any deal! The only reasonable deal for her to have made was 20% usage for 20% ownership with no cost to her. Period.
What ensued was resentment by the other owners for carrying an additional 15% of costs on behalf of her 20% usage, but only 5% ownership. One of the owners held two shares and therefore had a hefty vote with 40%. They made her life miserable and the whole group ended up in a legal battle.
The end result for her was a fortune in legal fees and total loss of her ownership and usage in a property for which she was fully responsible developing.
This is the kind of tale that fortunately we don’t hear often. Normally, the properties can function very, very well…as does Le Palace des Vosges and the others we are pleased to represent.
For more information, visit French Property Fractional and pay particular note to those with remaining shares:

Le Notre Dame: A petit studio located next to Notre Dame
Rue Colonel Combes: One-Bedroom, one bath, 7th arrondissement near the Eiffel Tower
Le Muguet: Exceptional medieval Two-bedroom, two bath property in Provence
Note: when a share comes up for sale, normally the other owners have first right of refusal before it’s sold on the open market. And if you’d like to design your own, we can help your own group purchase a property!
A bientôt,
Adrian Leeds
Editor, French Property Insider & Director of The Adrian Leeds Group, LLC
 
Email: [email protected]

 
 

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