By TCI News Now Contributor
Island- and resort-loving investors can now own their dream vacation home in the Turks and Caicos Islands for only a fraction of the total cost and not worry about whether they are fully protected by locally enacted laws.
Property owners in TCI are mostly of the upper income and ultra-rich from the United States, Canada and Europe. Changes in the economy in those countries have seen buyers looking for more attractive ways to enjoy their second or third home usually with friends. The new laws in Turks and Caicos will help fill this desire.
Fractional ownership legislation was given the go ahead last week and is expected to ignite the flagging real estate market, while stimulating even further the sale of luxury units in condo-hotels and destination resorts.
Governor Gordon Wetherell announced that the British government would now seek ways to stimulate the TCI economy with new measures, much to the delight of political leaders like the Peoples Democratic Movement’s (PDM) Douglas Parnell, who called on the British government to launch an open for business campaign last year January.
Parnell was in the United Kingdom in February, promoting the country through private meetings with business persons and to a large gathering of would-be investors and other interested persons in the TCI, along with PDM deputy leader Clarence Selver, chairman Princie Harris and former Chief Minister Derek Taylor.
Progressive National Party (PNP) leader Clayton Greene has also expressed a similar desire to see the interim administration find ways of boosting the economy.
Fractional ownership seems to form the bedrock of these new measures. Senior partners Owen Foley, Gordon Kerr and Emma Riach in the law firm Misick and Stanbrook were all part of the legal fraternity who have been advocating for changes to law for some time and sources say had a hand in assisting the interim administration with the research and drafting to accommodate the changes in the real estate model in Turks and Caicos Islands.
The Alexandra, in which former PNP Chief Minister Washington Misick is a major shareholder, is one of many Grace Bay condo hotels and resorts that are jumping on the fractional ownership bandwagon with advertising campaigns that say, “Redefine the meaning of the phrase Asset Reallocation. There is no reason to let your money linger about in under-performing stocks and investments that bring you no joy when you can allocate that money toward the immediate happiness of your friends and family.”
Many other condo hotel and destination resort developers and managers are now tweaking their marketing strategies to take advantage of the new opportunities coming on line because of fractional ownership laws.
In October of last year, against the backdrop of a significant excess supply of unsold high-end and middle market condominium properties and more competitive market conditions regionally, the Advisory Council discussed a presentation on the proposal to introduce legislation to facilitate fractional ownership of residential properties.
Unlike timeshares, fractional ownership involves the division of a property into marketable equity shares. The objective would be to help boost real estate sales while beefing up repeat visitor numbers and public revenues. At that time the Council welcomed the concept, but indicated that more work was needed to assess international experience, the local market and administration costs and on the detailed design of the legislation.
The term fractional ownership originally became popular for business jets. Richard Santulli of NetJets pioneered the concept of allowing businesses to purchase shares in a jet to reduce costs. Members will typically fly in any jet available, not necessarily the one in which they own shares. The management company will reposition jets as necessary and provide flight crews. Companies with greater needs purchase larger shares to get access to more time.
The fractional-ownership concept has since been extended to smaller aircraft and has now become common for single-engine. Fractional ownership has played a significant role in revitalizing the aviation industry since the late 1990s, with most aviation manufacturers actively supporting fractional ownership programs.
Similarly, many developers and owners of resorts and luxury hotels are tapping into new opportunities based on the concept of fractional ownership.
In the TCI and elsewhere, a key aspect for any fractional owner is to understand usage rights and the reservation plans. These vary from property to property. Some offer fixed occupancy periods in which an owner uses the same time each year. Some offer "floating" periods, in which the occupancy times rotate throughout the year, and some offer a mixture of these, with some time fixed and some floating.
Another variation in the business model is what are called "destination resorts". These are typically properties, whether hotel rooms, suites, or freestanding villas, located on property owned and managed by a hotel developer, and which provide amenities typically expected of a high class hotel or resort. Some hotels are also developed as a condo-hotel where individual rooms are sold off to individual owners.
The new fractional ownerships laws in the Turks and Caicos were finally realized when at their meeting on Wednesday, 2 March, the Advisory Council members reviewed a number of papers and recommendations presented by Chief Economic Adviser, Brian Titley. These included establishing a new ordinance to facilitate the fractional ownership of property in the TCI.
A press release issued by TCIG after the meeting said, “Fractional ownership is a popular model for second and vacation homes in the US and Canada, and has been gaining interest in the region following the financial crisis and collapse in property markets in 2008. Fractional ownership overcomes the stigma, risks and complexity of timeshares by allowing purchasers to own part of the title of a property through shared ownership and usage. This can help boost sales and repeat visitor numbers.”
According to the government’s press release, realtors in the Turks and Caicos Islands have welcomed the introduction of new rules to governing fractional ownership.
Kathryn Brown, President of the Turks and Caicos Real Estate Association said, “This is a positive step in encouraging investors to purchase real estate in the Turks and Caicos. Having a new ordinance in place creates a classification of regulations for the real estate professionals and more importantly, the clientele. For sellers it opens up an option that was not available previously. For the buyer it creates greater confidence to purchase.”
Titley, the TCI Chief Economic Adviser, said the changes involved modest but nonetheless important adjustments aimed at modernizing the economic and regulatory framework in the country and encouraging new activity.
”The great advantage of small economies should be their ability to react quickly and flexibly to changing market conditions. However, there are many obsolete laws and regulations in the Turks and Caicos Islands that impede this. Improving the regulation of markets, including through removing or modifying old and unnecessary legislation and restrictions, will remove some burdens on business and should release their potential for growth in the longer term,” he said.