Welcome to BuyAssociation.co.uk

South Africa: Part-Ownership, Leaseback & Timeshare

Overview

If you’re looking for a holiday home, you may wish to investigate a scheme that provides sole occupancy of a property for a number of weeks each year. Schemes include co-ownership, leaseback and timesharing.

Don’t rush into any of these schemes without fully researching the market and before you’re absolutely clear what you want and what you can realistically expect to get for your money.

Co-Ownership

Co-ownership is where a number of people – not necessarily related – buy a property together, sharing both the costs and the occupancy. A common deal is a four-owner scheme (many consider four to be the optimum number of co-owners), where you buy a quarter of a property and can occupy it for up to three months a year. However, there’s no reason why there cannot be as many as 12 co-owners with a month’s occupancy each per year (usually shared between high, medium and low seasons).

Co-ownership provides access to a size and quality of property that would otherwise be unimaginable, and it’s even possible to have a share in a substantial mansion, where a number of families could live together simultaneously and hardly ever see each other if they didn’t want to. Co-ownership can be a good choice for a family seeking a holiday home for a few weeks or months a year and has the added advantage that (because of the lower cost) a mortgage may be unnecessary.

It’s usually cheaper to buy a property privately with friends than through a developer, when you may pay well above the market price for a share of a property, although some developers offer a ‘turnkey’ deal, whereby a home is sold fully furnished and equipped.

One of the best ways to get into co-ownership (if you can afford it) is to buy a house yourself and offer shares to others. This overcomes the problem of getting together a consortium of would-be owners and trying to agree on a purchase in advance, which is difficult unless it’s just a few friends or family members.

Some people form a South African company to buy and manage the property, which can in turn be owned by a company in the co-owners’ home country, thereby allowing disputes to be dealt with under local law. Each co-owner receives a number of shares according to how much he has paid, entitling him to so many weeks’ occupancy a year. Owners don’t need to have equal shares and can all be made direct title holders. If a co-owner wishes to sell his shares, he must usually give first refusal to other co-owners. However, if they don’t wish to buy them and a new co-owner cannot be found, the property must be sold.

Co-ownership is usually much better value than timesharing (see below) and needn’t cost a lot more.

Leaseback

Leaseback (or sale-and-leaseback) schemes are designed for those seeking a holiday home for a limited number of weeks each year who don’t want to involve themselves in a co-ownership scheme or buy a timeshare. A leaseback scheme allows you to buy a new property at less than its market value, e.g. 30 per cent less. In return for the discount, you must lease the property back to the developer, normally for around ten years, so that he can let it as self-catering holiday accommodation. You own the freehold of the property and the full price is shown in the title deed. You also have the right to occupy the property for a period each year, e.g. two to eight weeks, spread over high, medium and low seasons. These weeks can usually be let to provide income or possibly even exchanged with accommodation in another resort (as with a timeshare scheme – see below). The developer furnishes and manages the property, and pays the maintenance and bills (e.g. for utilities) during the term of the lease, even when the owner is in occupation.

Properties sold under a leaseback scheme are usually located in popular resort areas, e.g. golf or coastal resorts, where self-catering accommodation is in high demand.

It’s important to have a contract checked by your lawyer to ensure that you receive vacant possession at the end of the leaseback period without having to pay an indemnity charge, or you could end up paying more than a property is worth.

Timesharing

Timesharing, where you purchase the right to occupy a property at designated times, isn’t as popular in South Africa as in some other countries, notably Spain and the US, but it has been experiencing an increase in popularity in recent years and there are currently over 200 resorts/developments operating on a timeshare basis in the country.

The best timeshare developments are on a par with luxury hotels and offer a wide range of facilities, including bars, restaurants, entertainment, shops, swimming pools, tennis courts, health clubs, and other leisure and sports facilities. If you don’t wish to take a holiday in the same place each year, you can choose a timeshare development that’s a member of an international organisation such as Resort Condominium International (RCI, UK 0870-609 0141, www.rci.com), Interval International (UK 0870-744 4222, www.intervalworld.com) or Marriott (www.marriott.co.uk), which allow you (usually for an additional fee) to exchange your timeshare with one in another area or country.

Timesharing (also called ‘holiday ownership’, ‘vacation ownership’ and ‘holidays for life’) has earned a poor reputation in the last few decades, although regulatory bodies have been formed to try to ‘clean up’ the industry and impose a code of ethics. Buyers often have secure occupancy rights and their money is properly protected before the completion of a new property, and timeshare companies are required to allow prospective buyers a ‘cooling-off period’ (normally ten days), during which they may cancel a sales agreement without penalty. However, although such directives technically bind timeshare companies, if they flout them you must usually seek redress in a court of law, which may not be something you want (or can afford) to do!

The Timeshare Institute of South Africa (TISA, www.tisa.co.za) is based in Cape Town and has around 140 members (listed on the website). Its mission is to ‘foster and promote the growth of the industry in South Africa and to serve both the general public and its members through education; mediation; public relations; communication; legislative information; and enforcement of the Code of Conduct.’ A copy of this code can be downloaded from the website.

South Africa isn’t plagued by the timeshare touts common is some countries. However, you may be invited to a ‘presentation’ (i.e. sales pitch) in a popular resort and should know what to expect. If you’re tempted to attend a sales pitch (usually lasting at least two hours), you may be subjected to some of the most persuasive, high-pressure sales methods employed anywhere on earth and many people are simply unable to resist. If you do attend, don’t take any cash, credit cards or cheque books with you so that you won’t be pressured into paying a deposit without thinking it over. Although it’s supposed to be illegal for a timeshare company to accept a deposit during the cooling-off period, many companies will try to get you to pay one. If you pay a deposit, your chance of getting it back is slim (particularly if you pay by credit card); if it is repaid, it’s likely to take a long time. Note that, of those who ‘agree’ to buy a timeshare, around half cancel within the cooling-off period.

It isn’t difficult to understand why there are so many timeshare companies and why salespersons often employ such intimidating, hard-sell methods. A week’s timeshare in an apartment worth around R1 million (£87,000) can be sold for R150,000 (£13,000) or more, making a total income of some R7.5 million (£650,000) for the timeshare company if they sell 50 weeks, plus management and other fees. Top-quality timeshares usually cost at least R100,000 (£8,700) for one week in a one- or two-bedroom apartment in a top-rated resort at a peak period, to which must be added annual management fees, e.g. R1,500 (£130) to R4,000 (£350) or more for each week, plus ‘miscellaneous’ charges and hefty levies, which can run into thousands of rand per owner.

Most experts believe that there’s little or no advantage in a timeshare over a normal holiday rental and that it’s simply an expensive way to pay for your holidays in advance.

Most financial advisers believe that you’re better off putting your money into a long-term investment, where you retain your capital and may even earn sufficient interest to pay for a few weeks’ holiday each year. If you wish to buy a timeshare, it’s best to buy a resale privately from an existing owner or a timeshare resale broker, which sell for a fraction of their original cost. When buying privately, you can usually drive a hard bargain and may even get a timeshare ‘free’ simply by assuming the current owner’s maintenance contract.

Often timeshares are difficult or impossible to sell at any price and ‘pledges’ from timeshare companies to sell them for you or buy them back at the market price are usually just a sales ploy, as timeshare companies aren’t interested once they’ve made a sale. Worse, timeshare companies occasionally go bust, leaving ‘owners’ with nothing to show for their money.

The resale market for timeshares is practically non-existent (despite promises to the contrary by sales people) and, if you need to sell, you’re highly unlikely to get your money back.

Further information about timesharing can be obtained from the Timeshare Council (www.timesharecouncil.net) and the Timeshare Helpline (UK 0181-296 0900) in the UK. The Timeshare Consumers’ Association (Hodsock, Worksop, Notts, S81 0TF, UK, 01909-591100, www.timeshare.org.uk) publishes several useful booklets with advice on timesharing.

More pages

Page 1: Overview

Holiday home insurance from intasure - Click Here UK insurance for your property overseas

The best deals on car hire in the UK, USA, Europe and beyond Alamo has the car you need at the price you want!

Calculate how much you can earn - rent out your holiday home here

Book now, pay when you stay - 100's of hotel rooms worldwide with laterooms.com