Nestled on a parcel that overlooks miles of pristine sandy beach is a fully furnished retreat designed by award-winning architect Ray Johnston. The Sanderling Beach Home in Westport is the epitome of a luxury beachfront getaway. It is also breaking the mold with an innovative ownership option.
Tenants in Common ownership, though not a new concept, may be new territory for many buyers. It’s essentially when multiple parties share the cost of ownership. It is not, however, to be confused with a timeshare.
“This type of ownership [Tenants in Common] is ideal for people who want ownership of a high-quality, well-sited vacation home at a price that makes sense relative to the use and/or allows them liquidity to invest in more than one location,” said Mike Coverdale, designated broker with Windermere Real Estate/Westport. “It recognizes the fact that, as a second home, the owner will most likely spend less than 100 days per year at the home and matches the investment level appropriately with that use, adding the convenience of property management and maintenance, which typically only condominium owners enjoy.”
As explained by Coverdale, Tenants in Common ownership confers fee simple title to an undivided interest in a specific home. A four-owner property purchase, for example, would convey fee simple title to a 25 percent undivided interest in the home by way of warranty deed, which can be sold individually or bequeathed. This is the case for Sanderling Beach Home, which is being offered as a four-owner Tenants in Common fee simple property.
Timeshare ownership, on the other hand, is more of a mid market alternative to renting. It consists of the purchase of a “fraction of time” in a development or property with no related title to the real estate.
Shawn and Allison Hintz of Bellevue invested in a shared vacation home in 2008 in Westport and spend about 30 nights there every year with their two kids, ages 9 and 6. “We weren’t going to be able to spend enough time at the house to support sole ownership,” Shawn Hintz said, saying that the whole experience has been great. “We would recommend it to anyone.”
The family chose to buy in Westport because they love the ocean. Plus, Westport is only a little more than two hours away from the Eastside.
Tenants in Common is a great fit for unrelated owners, and the price point of ownership allows a luxury high-end home for much less than the cost of full ownership.
At Sanderling Beach Home, for instance, each buyer would pay $275,000, and annual costs (including real estate taxes, insurance, utilities, maintenance, and housekeeping) would total less than $8,000.
Compare that with full ownership of this $1 million home. A single owner with a down payment of $275,000 would face annual costs of nearly $70,000.
“I believe that the fundamental concept of sharing the use of an asset that traditionally didn’t get used that much has a lot of sensibility and a lot of practicality to it,” said Michael Burns, owner of Seattle-based Private Residence Resorts, which specializes in the development, marketing, sales, and management of boutique, fractional ownership properties. Burns was instrumental in the structuring of the Tenants in Common package for the Sanderling Beach Home.
Burns noted that the concept took off about 15 years ago, and people have been developing informal Tenants in Common deals for years. However, when the 2008 recession hit, the real estate market was dealt a devastating blow. Given the upswing in today’s economy, Burns expects the market will see a resurgence of this innovative model.
“I think as [resort homeownership] prices now continue to come up and the recognition that it doesn’t get fully utilized, I see a resurgence of the concept of fractional ownership where you share it and have a use plan that allows for fair and equitable distribution of the time, at key time periods, to those owners,” Burns said.
An existing fully furnished home that is offered as a Tenants in Common property, as in the case of the Sanderling Beach Home, can be an especially attractive option for buyers. This eliminates the burden of structuring a Tenants in Common ownership model on your own. And because the property is professionally managed, the maintenance, upkeep, bills, cleaning, and operational aspects are taken care of, which allows the owners to simply use and enjoy.
A use calendar is created wherein each owner has scheduled one week per month through the year (for a total of 84 days per year). These scheduled weeks can be traded with other owners to make longer stays possible or to suit the individual property owner’s needs. The use calendar rotates so that over time, each owner has the week related to different holidays for fair distribution.
“It gives you the beauty of ownership without any responsibilities and any of the worries. That’s just left to somebody else,” said Burns.
Hintz added, “Consider how much time you will actually be able to spend at the property. Also consider what type of property you could afford on your own vs. what type of property you could afford if you pooled resources with a few partners.”