Frequently Asked Questions

What is the legal structure of your fractional ownership properties in Paris?

How does fractional ownership differ from timeshares?

Are owners tied to the same personal use weeks each year? If not, how are the assignments made?

Can I share my use time in the property with family or friends? What happens to my allotted weeks if I do not use all of them?

How are decisions made concerning the maintenance of the property? How are the expenses determined?

Are taxes and other closing costs represented in the ‘total share price’? Are there any hidden fees?

Can the individual owners take out mortgages on the property?

Will I have to deal with paying French taxes on the property? What is the likely tax treatment for my share ownership in my home country?

Can I sell my share of property at any time? If I want to sell my share, can it be done privately, or must I sell it back to to you?

Can I review the purchase and governing documents with my accountant or financial advisor? When are these documents available for me to see?

What is the legal structure of your fractional ownership properties in Paris?

Each co-owner will be a shareholder in an US-based company, which in turn will hold the shares in a French real estate entity, called a société civile immobilière, or SCI. This double company structure is set up in order to ensure the simplest and most transparent ownership structure for the property, as well as to make shares easily transferable without disrupting the underlying ownership structure of the property. In this way, re-sales, gifts, or inheritances of fractional shares will occur in the United States, thereby avoiding the administrative intricacies of French real estate transactions.

This ownership structure will also provide a platform for mortgages from U.S. lenders which are just beginning to appear for non-U.S. fractional ownership properties, and are expected to become more readily available to finance foreign properties.

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How does fractional ownership differ from timeshares?

While the hassle-free ownership, full management and shared usage benefits of fractional ownership may sound similar to timeshares, there is a fundamental difference. Fractional owners actually own a proportional share of the title of the property. Timeshare owners simply own days or weeks of usage time. If the property appreciates in value, the fractional shareholders share in that appreciation. With a timeshare, this investment aspect does not exist.

This important difference is also what distinguishes fractional ownership properties from the recent wave of destination clubs. Destination club members purchase a fixed amount of time to use the club's properties. Like a timeshare, they do not hold any ownership right in the real property, and thus do not enjoy the capital appreciation of those properties.

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Are owners tied to the same personal use weeks each year? If not, how are the assignments made?

For our private co-ownership properties, each of the five owners is entitled to 10 weeks of usage time per year. Owners submit their requested dates at the end of each year for the following year. If there is an overlap between the requests of two owners, the property management works with them to determine who might have flexibility to change dates. If both owners insist on wanting the same time period, lots are drawn to determine who will use the property during that desired period. The owner whose choice was not fulfilled is guaranteed first choice for the following year. Because of the small number of owners, overlap and conflict is rare and is easily resolved.

Unclaimed weeks from this initial calendar process go into the rental pool. At any point during the year, owners may request additional time for their personal use or for friends, family or for trade, and will have access to the property if it is available.

As our traditional fractional properties have twelve owners, the larger owner group would make the full-choice process described above unwieldy. Instead, when purchasing their shares, owners may choose 4 fixed weeks, 4 flexible weeks or a combination of 2 fixed and 2 flexible weeks. In this way, buyers who wish to visit Paris at the same times each year, or buyers looking to visit in various seasons on a rotating schedule, can both have what they want. Owners may trade among themselves, allow family or friends to use the apartment, or take advantage of the vacation home swap network, similar to the owners in the private co-ownership group. Our traditional fractional ownership offerings are unique in the flexibility of choice that they offer investors.

Please see the Usage Calendar for a complete discussion of usage options.

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Can I share my use time in the property with family or friends? What happens to my allotted weeks if I do not use all of them?

Each owner is allotted a certain number of weeks of personal use time each year. Depending on the structure of the fractional offering, this can be either 4 or 10 weeks per year. The owner can use the time himself, or offer those weeks to friends or family. In addition, Fractional Paris’ properties are part of a network of hundreds of privately-owned luxury destination properties around the world. Owners can trade unused weeks in their fractional ownership property for time in these other properties.

In our private co-ownership structure, any time not used or traded is pooled and, with management’s oversight, is rented out through short-term luxury rental partners in Paris. The income generated from these rentals is divided proportionately between the owners, based on the number of weeks they contributed to the pool. This income can be used to offset annual mortgage and upkeep expenses. A conservative estimate of potential rental income projects that an owner who uses 7 out of his 10-week allotment, will at least break even on his annual expenses. Owners who do not use the property at all, can expect to generate an income of up to $10,000 per year.

In our traditional fractional ownership group, owners may use their personal time or rent it out on their own. Rental income is not pooled between the owners, and each owner is free to decide whether to rent out their personal use time or not. Since four weeks is a much smaller time commitment than the ten weeks available with private co-ownership, most owners opt to use, give away, or trade their unused weeks.

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How are decisions made concerning the maintenance of the property? How are the expenses determined?

The costs associated with cleaning and maintenance, property management, property taxes, utilities, building assessment fees, and a reserve fund for repairs and replacement are incorporated into the annual operating budget. The budget is prepared by the management company and presented to the co-owners every year for their review. Ongoing maintenance decisions are designed to keep standards high and costs low. Owners will have full visibility and oversight regarding maintenance and upkeep.

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Are taxes and other closing costs represented in the ‘total share price’? Are there any hidden fees?

The total share price includes all closing costs and title transfer taxes, legal and financial fees, supervision of the purchase, furnishing and renovation. There are no additional fees, taxes or hidden charges for the owners.

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Can the individual owners take out mortgages on the property?

For our private co-ownership properties, a mortgage from a French bank has already been secured on behalf of the owners in the process of purchasing the property. Individual owners will pay the down payment in full upon delivery of the property, and will benefit from the mortgage already in place for the balance of the purchase price. Some owners choose to finance their down payment through a home equity line of credit on their primary residence, or through other means on their own.

For traditional fractional ownership buyers, there is no mortgage in place for the buyers in France. However, US-based lender, First Again, offers loans of up to $100,000 at very competitive rates for our fractional properties. In addition, prospective buyers would be wise to investigate a home equity line of credit on their primary residence or a loan on other sole-owned vacation property, which may offer attractive terms and a larger loan amount.

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Will I have to deal with paying French taxes on the property or the rental income? What is the likely tax treatment for my share ownership in my home country?

The ownership structure – a US company that holds shares in a French company (the SCI), which, in turn, owns the property – means that each individual owner can avoid the tax filing and other formalities that normally come with owning a property in France. All French taxes are paid by the SCI, a process entirely managed on behalf of the owners so that they have no confusing foreign documents to fill out or legal requirements to fulfill. Each co-owner will receive a concise tax statement for their portion of the income (if applicable) and expenses, which they can then include in their personal income tax statements in their home country. We strongly suggest that each of our clients obtain individual tax advice, to understand the possible tax benefits or liabilities in light of their personal tax situation and planned usage of the property.

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Can I sell my fractional ownership share at any time? If I want to sell my share, can it be done privately, or must I sell it through you?

Each owner is fully vested for his or her share ownership and is free to sell it privately at any time. The solvency of the buyer will be evaluated so that the shareowner can be released from all future liability for mortgage and upkeep/maintenance expenses.

We do not buy back shares from individual investors. However, through our database of interested shareholders-to-be, we are glad to assist you in locating a willing buyer. We are constantly being contacted for our fractional offerings, and currently have a waiting list for upcoming Paris fractional ownership properties.

Existing owners may also be interested in purchasing additional shares and they will be offered the opportunity to do so.

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Can I review the purchase and governing documents with my accountant or financial advisor? When are these documents available for me to see?

All the structural and financial documents are available for your review before making a full commitment to fractional ownership of one of our properties. Upon executing the purchase agreement, investors will have 60 days to review all the documents and decide whether or not fractional ownership is the right investment for them.

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If you have not found an answer to your question here, please contact us and we will be glad to speak with you further about your interest in fractional ownership.

   
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