Fractional home ownership grows, lack of regulation raises questions

Billed as the first-ever fractional ownership of a multimillion-dollar home, eight shares of $2 million each were offered for a home in Incline Village. Included in the price were resort-style amenities such as a Hummer, a boat, concierge service and use of a condominium with lakefront property.

But no one purchased a share, according to Bob Wheeler, associate broker for Intero Real Estate.

The fractional ownership listing was taken off the market Nov. 29, Wheeler said, and now is listed as a single-family home by Dan Schwartz of Coldwell Banker Realty for $12.95 million.

Wheeler said it was the first time anyone had offered a fractional ownership for that cost, and right now, the price was too much.

"I had a lot of interest, but individuals didn't want to be the first one in," Wheeler said.

However, despite the hesitation on the price of this particular listing, the notion of a fractional ownership is one accepted - and growing in popularity - throughout the United States, said Wheeler, an Incline Village Realtor for 25 years.

In Truckee, fractional ownership has been an increasing development tool, according to Sam Drury, owner/broker of Padden Properties, who sells the Northstar Club, which offers one-seventh ownership in condominiums at Northstar Village.

He said those opened in 2000 and initially were sold out in 2001. He currently lists the fractional ownership resales. He noted that after the Northstar Club opened, the Tonopalo in Tahoe Vista sold one-seventh ownerships, and now Old Greenwood in Truckee is selling 1/17th ownerships in cabins and villas.

Although the types of fractional ownership vary widely, and its definition is different in California than in Nevada, the reasons it is popular are the same.

"Fractional ownership is popular because of the overall increase in the cost of property. When it costs nearly a million or more to buy a home or condo, people start asking, 'How often will I really use it?'" Drury said. "Fractional ownership solves this cost-to-benefit ratio."

On the South Shore, a new, 2,700-square-foot vacation home next to the Inn at Heavenly is for sale as quarter shares, with each share priced at $395,000, according to the Chase International Web site. The site also lists several other fractional ownership properties in South Lake Tahoe.

The Incline Village/Crystal Bay Citizens Advisory Board isn't so sure fractional ownership is good for the community. The CAB board, at its March 5 meeting, asked Washoe County staff to investigate fractional ownership in Incline Village and report back in May.

The board wanted to know about the extent of fractional ownership in Incline Village, the ramifications for the integrity and economy of the village, and the potential wear and tear of infrastructure as single-family homes are sold and inhabited by multiple families throughout a year.

"If this style of ownership proliferates, we will be decimating the population that is keeping our community alive," said CAB Chairman Gene Brockman.

The loss of community was one of the primary concerns discussed at the meeting.

CAB member Patrick McBurnett said how the community of Whistler, British Columbia, has changed since timeshares and fractional ownership proliferated.

"If it's all timeshares, the community is gone. We have such a precious thing here, you have to regulate it somehow," McBurnett said.

Audience member Dennis Diullo, of the property management company CSMI, agreed.

"The whole demographic of this village has changed in the last eight years," Diullo said.

CAB member David Zeigler also said more people sharing a single home will bring more people to the community that will add wear and tear to the infrastructure.

"We need to have some oversight, some plan on how to handle these in the future," Zeigler said, likening it to the impact on a library if 12 people used one library card.

Timeshares - which have more than 12 owners - are regulated through Nevada state law, and through Washoe County and Tahoe Regional Planning Agency community plans. There are only certain, limited areas that timeshares can be sold in Incline Village. However, fractional ownership is not regulated and can be sold anywhere in the village.

"The crux is that these seem to be operating as a business," said CAB member Guy Burge.

While the CAB struggled to come up with a legal definition of fractional ownership, Wheeler said the definition is easily defined as a property with "tenants-in-common."

"It's not a timeshare. It's a manner of holding title," Wheeler said. "You're not changing any zoning. It is a single-family home in which more than one person owns it. It's very distinct."

There are no fractional ownerships listed in Incline's Multiple Listing Service, he said. However, fractional ownerships have been sold here in the past.

"It's been here in Incline since the 1980s. I don't see how they can stop it. It is a legal way to hold title to a property," Wheeler said.