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| WHAT ADDITIONAL RISKS ARISE IF THE FRACTIONAL VACATION HOME IS LOCATED IN A FOREIGN COUNTRY? |
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© March 16, 2007 by D. Andrew Sirkin.
Any reproduction or use of this document or any part of its content
requires the written consent of the author. Mr. Sirkin is chief attorney for Paris Pied-à-Terre Fractional Ownership. Contact Mr. Sirkin at
dasirkin@earthlink.net, or visit www.andysirkin.com
Where the fractional vacation property is located abroad, prospective co-owners are less likely to be familiar with either the real estate market or the local real estate transaction system. This lack of familiarity creates risk of overpayment for the property or its improvement and furnishing, or of wasting money and time in connection with the transaction formalities. In addition, the laws of many foreign countries do not offer the same level of consumer protection as U.S. laws. Ongoing management, enforcement of the co-ownership agreement, and resale transactions can also be problematic. All of these difficulties can be compounded by a language barrier. To manage these risks, it is essential to involve both a U.S. attorney, and an attorney licensed in the country where the property is located, in the formulation of the co-ownership agreement and ownership structure.
Owning the vacation property as a U.S. LLC or other U.S. entity can help solve some of the difficulties associated with shared vacation property located abroad. U.S. entity ownership allows sales and rental transactions to occur in the United States, avoiding the formalities and costs involved in transferring real estate in the country where the property is located as well as the expense and inconvenience of foreign lawyers, real estate agents and notaries. In addition, use of the U.S. LLC or other U.S. entity enables the relationship of the co-owners to be governed by U.S. law and any disputes among them to be resolved in U.S. courts or U.S. arbitration rather than through the legal system of the foreign country. In some cases, certain types of transfer and inheritance taxes can also be avoided.
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