Fractional ownership is the latest buzz term in the property market, with golf estates tempting investors with the dream of owning a property beside a pristine fairway at a fraction of the usual price. But starry-eyed investors are not always aware of the potential hazards.

For example the tax treatment of fractional ownership is controversial and not always understood by those involved, nor is the allocation of time or how the asset will be managed.

Having identified a need to clarify issues associated with fractional ownership, the Professional Development Project at the University of Cape Town has arranged a workshop targeting property developers, estate agents, legal practitioners and potential investors wanting to get a better grip on the topic.

The workshop on Mach 28 will explain the many ways in which fractional ownership can operate and time allocation methods, management approaches, and a wide range of other issues depending upon the type of asset, that have to be carefully written down and agreed upon. The many variations of tax treatment that can be used in structuring and dealing with fractional ownership will also be addressed.

Fractional ownership is defined as the collective ownership of an asset and has emerged as a rapidly growing alternative to whole ownership of luxury vacation homes. According to statistics, this area of ownership is growing at over 150% per year, both locally and internationally, and is only in its infancy as a trend.

It affords much of the freedom and usage benefits offered in timeshare, with the fundamental difference that with fractional ownership the purchaser owns part of the title (as opposed to units of "time"). So if the property appreciates in value, then so do the shares. As with whole ownership, fractional owners can sell whenever they deem necessary, releasing the capital growth from their bricks and mortar investment.

Usage of the asset is normally allocated to the shareholders (owners) by means of an ownership usage roster and running costs are divided among the shareholders. The issue is complicated by the number of owners involved, so it is vital for the success of any fractional share purchase that the contract is clearly written and understood by the owners.

The workshop at UCT will be presented by Shelley Mackay-Davidson and Robert Gad. Mackay-Davidson has 18 years of experience in commercial and property related work. She serves as a committee member on the Cape Law Society's Property and Communications Committees and is a founding member of the South African Association of Fractional Intermediaries.

Robert Gad has 22 years of experience in direct and indirect tax. His clients include leading corporations in the retail, property and financial services sectors, and high net worth individuals. Gad has advised clients in relation to tax planning and assisted clients in relation to disputes with the South African Revenue Service. He is a member of the South African Law Society's Committee on Exchange Control and Tax Matters.

Contact Irèna Wasserfall on (021) 650 5621 or or visit www.uct.ac.za/law for more details.

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