How do fractional vacation home co-owners allocate usage?
Deciding how the vacation home will be used is usually the first step in structuring the co-ownership arrangement. Focusing on usage first usually makes the rest of the organizational process easier. This is because a co-owner’s right to use the home, or his/her right to earn rental income, are the most important and valuable benefits of ownership. There are two basic models for allocating usage rights. The first (and less popular) model for allocating usage rights is the ’”Pay-To-Use Approach”. In this arrangement, co-owners pay a pre-agreed “usage fee” for each day or week of usage. The usage fees, along with any rental income generated if the home is also rented to non-owners, are used to pay the expenses of ownership. If the usage fees and rental income together exceed the expenses, the surplus is divided among the owners; if there is a shortfall, each owner must contribute. When the Pay-To-Use Approach is used, the purchase price and ownership of the home can be divided based on w
