We are investigating the fractional-ownership market and have a site in mind that we saw featured in a national newspaper. The idea is to invest £30,000, plus £1,660 in service charges, for five weeks’ use of a cottage over 12 months. The site we are interested in is connected to a hotel that owns the surrounding land and retains the freehold. What do you advise?

DG, by e-mail

Fractional ownership was born in America and is quickly gaining popularity both on our shores and in overseas destinations popular with British holidaymakers and investors. It isn’t possible for me to comment on specific developments, but I can explain the basic principles and point out any potential pitfalls.

Generally speaking, you buy a period, or fraction, of anything from four to 13 or so weeks each year, during which the property is yours either to use personally or to rent out. It is one way to help cover the costs of service charges, which can be quite high.

The size of your fraction determines the amount of time you may use the property each year. To make it fair, the weeks in which you will be able to use the property usually vary from year to year; still, someone is always going to be saddled with the rainy season or weeks outside the school holidays, which may be harder to let.

Proponents of fractional-ownership schemes stress that, unlike with its disreputable cousin, time-share, you have a stake in the property itself, which gives you a share of the title and allows you to benefit from any capital gain if its price rises.

As with any property investment, you should consider your exit strategy: the resale market for fractional-ownership schemes is not yet well developed, and it may be difficult to sell, especially while there are other new fractional-ownership opportunities available elsewhere.

There are some critics out there who question the financial benefits of investing in this way – instead of paying annual fees, you could simply rent a place and have more flexibility over the location and the time you go on holiday. Also, you will only ever be a part owner, so will never have total control over decisions on what happens with the property, or the level of service charge. As with any significant financial investment you make, understand the contract and have it checked by an independent lawyer.

Bill Blevins is the managing director of Blevins Franks International, providers of tax and investment advice; www.blevinsfranks.com

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