Jun 28, 2007
North Tahoe Tragedy Quietly Averted
Thanks to the heroic dawn efforts of firefighters, an inferno in north tahoe was avoided this morning. I’m not sure what is going on here, whether there is an arsonist on the loose or just a series of unrelated incidents all occurring within a few days. Here’s to hoping it’s just people being foolish and not some fool being an idiot.
At any rate, we’ve begun to lobby the local forest service to re-close the access gates for all forest service roads for the fire season. It seems quite likely that all these fires had one thing in common?people used vehicles and forest service roads to access remote locations where the fires started.
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Jun 27, 2007
Tahoe fire now threatens several lakefront areas / Winds expected late morning
Well, things are still a struggle down in South Lake Tahoe with the firefighters battling to keep the Angora Fire from spreading into the Tahoe Keys area and other populated parts of the town. The winds are expected to make it very dangerous this afternoon, so everyone please keep your fingers crossed that we dodge this bullet.
Up here on the North Shore things are actually pretty calm. The air quality has not deteriorated as expected and I’m looking out at blue skys and clear air again today as I was yesterday. So if you’ve been planning a north Tahoe trip I’d say you don’t need to change your plans because of smoke. That could of course change, and I’ll keep posting new info as I get it.
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Jun 11, 2007
To DRE or not to DRE?
This post is meant to delve into some of the details of the California Department of Real Estate and California Real Estate Law regulation of Shared Ownership Vacation Homes. In particular, there seems to be confusion in the field over when the DRE will consider the creation and or sale of shares in a home, held as tenants-in-common with the other co-owners, as a subdivision of property subject to subdivision regulations.
In California the subdivision regulations require subdivision developers to submit their plans to the DRE for preliminary approval prior to marketing, and then require that they get final approval prior to selling any of the sub-divided units. The Real Estate Law (linked above) states that a subdivision is defined several ways, and it includes the definition that creating 5 or more separate interests in a property is a subdivision. Following that definition, there are many practioners that have decided that DRE approval is required if creation of a tenancy-in-common shared ownership is contemplated with more that 4 co-owners.
However, before jumping to the conclusion that the DRE wants to regulate every co-owned vacation home with more than 4 owners, it is interesting to note that the body of law on this subject (and the few regulatory insights given by the DRE in the form of Letter Opinions) has all been in the context of shared ownership of apartment buildings or other multi-unit buildings being co-owned as an alternative to or pre-step on the way in the condominiumization process, rather than being any analysis of the law as it should be applied to a vacation home being co-owned or fractionalized under a time-sharing arrangement.
The most comprehensive article I’ve seen written by a practioner in this area of law was by Andy Sirkin. It is an example of how the application of subdivision law to timesharing arrangements for shared ownership vacation homes seems to not yet have been considered by practioners or regulators, and it can be viewed through the following link.
Though the Sirkin article is a very thorough analysis of the DRE’s interpretation of the subdivision law as applied to multi-unit buildings being sold as tenant-in-common opportunities, the interesting point to note here is that neither the article nor the DRE’s statements to date in the context of TIC multi-unit buildings apply to or remove the potential root of the confusion over how the subdivision law should be applied in the context of shared ownership vacation homes.
In this regard it should be noted that there is a much newer part of the Real Estate Law called the Vacation Ownership and Timeshare Act of 2004 that leaves open the interpretation that DRE approval is not required for stand-alone shared ownership vacation home projects unless more than 10 interests are created. There is a definitional provision within the older subdivision law that supports this interpretation (California Business and Professions Code subparagraph 11004.5(g)) by stating that any property co-owned under a timesharing arrangement is to be regulated under the Timeshare Act provisions rather than under the Subdivision Law.
At this particular point in time here in California it certainly seems that a lot of shared ownership vacation home opportunities are being created and marketed by folks without going through the DRE subdivision process. Unless and until the DRE decides to address the issue it certainly appears that the newer timeshare law, featuring the exemption from regulation for stand-alone projects involving fewer than 11 shares, is the law of the land as far as shared ownership fractional vacation home opportunities are concerned.
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Jun 06, 2007
New Trends in Tahoe Real Estate: Shared Ownership Vacation Homes - EscapeHomes Article
Here’s an article I wrote published on the EscapeHomes.com website.
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Jun 06, 2007
A Post from a Happy Vacation Home Co-Owner
Why You Should Consider Fractional Ownership in a Vacation Home
If you have ever thought of purchasing a vacation home, you may seriously want to consider fractional ownership. Why? It’s cost-effective, has many real advantages over full ownership for many people, and it works.
When most people think of a fractional ownership, they think of a timeshare, which is a specialized form of fractional, but certainly not the only one. A timeshare is much more limited in what it gives each owner than is a tenancy-in-common, the type of ownership we have. It is my understanding that a timeshare must involve at least 12 owners, and usually is sold in intervals of one week. A tenancy-in-common can have a much more flexible arrangement. Ours has not more than 5 owners and each owner gets the number of weeks of the entire year his fraction allows. For example, a 1/4 owner get 13 weeks per year, a 1/6 owner, 9 weeks per year. For the last fourteen years we have had the following distribution of ownerships: one 1/3 (ourselves), two 1/4, and one 1/6.
Our tenancy-in-common is for a high-end 3-bedroom, 3-bath condominium within walking distance of Lake Tahoe in Incline Village, Nevada. We bought the unit brand-new in 1983 with the intent of subdividing the ownership into fractionals. We attracted our first partner in 1984, our second in 1985 and have had all the shares sold out since then with a limited amount of turnover. The weeks rotate from year to year according to a pre-determined calendar so the same owner does not get Christmas, New Year’s, President’s Day etc. every year. Each owner gets minimum two weeks together during the prime summer months of July and August. In addition, the owners freely trade the weeks among themselves so that they get to combine weeks to make two’s and three’s etc. to suit their particular schedules.
Our shared ownership association has worked extremely well since its inception. We do the calendar and maintain a website where the schedule of weeks is posted, and people can request and confirm trades. That way all the owners have an up-to-date roster of the condo’s use. Each time an owner checks out he is responsible to make sure the unit is cleaned for the next owner. Most owners use the same cleaning service. We have a combination lock-box outside for friends of owners and renters to use, or the owners to use as a convenience. We do not list the unit with a commercial rental agency but allow each owner to independently rent his time if he chooses.
What are the multiple advantages to this fractional ownership association?
- The unit is furnished to a very high standard of comfort, unlike most timeshares and hotel type shared ownership units (e.g. kitchen equipment and tableware, bed linens, towels, beach gear, DVD player, VCR, stereo system, entertainment unit).
- All owners can keep ample ski and summer gear in designated interior and garage storage units. We have both locked and unlocked owners’ storage. They really do “own” a share, unlike most timeshares.
- Owners can add to the furnishings of the unit, or take their own personal furnishings home at any time.
- Unlike a timeshare, the weeks each owner is entitled to use changes from year to year.
- Owners are allowed to (and do) freely trade their weeks among themselves, so that each owner can basically use, rent, or gift to friends and family all the weeks they want to use.
- It has been most helpful to have one couple (in this case ourselves) act as Administering Owner. We take care of all of the bill payments, tax payments, and provide an annual accounting to the other owners as well as attending the annual Homeowner’s Meeting when we can. The others get a “turn key” experience. They just have to show up.
- Many owners buy second homes with the expectation that they can rent the weeks they don’t use while watching their investment appreciate over the years. This turns out to be largely a fantasy as most weeks aren’t very rentable, and the ones the owner usually wants to use himself are the very ones that are the most rentable (like prime summer weeks and holidays). With a fractional ownership, each owner is relieved of the lion’s share of the cost of full ownership, yet is able to use as much time as he can reasonably use each year. He still gets to participate in any appreciation in the unit’s value over the years.
- We collect a modest monthly contribution from each owner to build up a fund for long-term improvements. This fund makes major maintenance, upgrading, and remodels to the unit affordable to all owners. In our case, this has allowed us to make many improvements throughout the years, and to do major remodeling work in 2005 with an additional assessment that the owners could afford. Two of the owners are amateur handymen and have cooperated to do a lot of the work themselves, sometimes staying at the unit at the same time and working together.
- The burden of maintenance and remodeling upgrades is spread between several families and so is much more affordable. Our unit is now the most desirable unit in the 256-unit complex by virtue of its size and great slate of improvements we’ve put in, including a commercial-grade gas range, high-end hood, all new appliances, new countertop, new carpet throughout, new sofa sectional, new paint and a platform bed in the master bedroom.
Is there a downside? Truthfully, not much of one. Over the years there have been a few mix-ups about whose week it was and a few times where the unit was not cleaned when an owner showed up. (This could happen with a single owner, just as well). The owners have been able to agree to the priorities for upgrading the unit and to make choices on materials, when needed. This was done by polling all the owners before making decisions, sometimes using a questionnaire. Our policy is that the Administering Owner makes the final decision after weighing input from all the others.
Some owners bought on referrals from other owners, but in general the group of co-owners did not know each other before agreeing to co-own this condo. We believe that has advantages over going in with friends or relatives. Many friendships have been compromised when disagreements arose over too casual financial arrangements and scheduling. By keeping our group on a strict business basis, everyone has worked together with courtesy and professionalism over the years. Everyone has treated the unit with tender loving care because it truly is the property of all of us.
Karen Reid—Administering Owner of a Co-Ownerhsip Vacation Home in Incline Village, Nevada.
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