UK: Clubbing Together

Last Updated: 20 December 2007
Article by Tom Page

Have you dreamt of spending your hard-earned retirement jetting between properties in the hip cities of Paris and Milan, the golf courses of Florida and the Algarve and the beaches of the Riviera and the Caribbean? For most of us it remains just that, a dream.

However, dreams can occasionally come true. There is a growing market for the destination or residence club, a hospitality product that is becoming widely available on the market at relatively affordable prices. Members are attracted to these clubs, because instead of spending their life savings buying their own villa in Spain, they are able to spend a similar amount buying a share in a number of holiday properties around the world.

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Clubbing Together

Have you dreamt of spending your hard-earned retirement jetting between properties in the hip cities of Paris and Milan, the golf courses of Florida and the Algarve and the beaches of the Riviera and the Caribbean? For most of us it remains just that, a dream.

However, dreams can occasionally come true. There is a growing market for the destination or residence club, a hospitality product that is becoming widely available on the market at relatively affordable prices. Members are attracted to these clubs, because instead of spending their life savings buying their own villa in Spain, they are able to spend a similar amount buying a share in a number of holiday properties around the world.

Fractional ownership

This trend is part of the growing concept of "fractional ownership" that is now being applied to leisure properties, supercars, yachts and executive jets. London recently saw its first trade show dedicated to the fractional ownership market. This market is creating an affordable way of accessing a lifestyle that would otherwise be out of reach for many of the target customers.

Destination and Residence Clubs

Destination clubs and residence clubs have been a long-standing feature in the US hospitality industry. They are now beginning to become more common in the UK and Europe. Fractional ownership schemes in Europe have been tainted by timeshare scandals at the low end of the market. But the new generation of residence and destination clubs are a large step up from timeshare. These clubs are often run by highly reputable hotel companies, who are leveraging their knowledge and expertise in hospitality to exploit the fast-growing fractional ownership market.

The term "residence club" often refers to members’ shared ownership in just one property or unit within a larger property. An example in London is Marriott’s 47 Park Street. A "destination club" (or "vacation club" as they are often known as in the United States) is a club that owns a number of different properties in different locations.

But the terms "destination club", "residence club" and "vacation club" are often used interchangeably and the products available do not always neatly sit in one definition or the other. For example, at 47 Park Street, you can trade your usage rights for stays at other Marriott Vacation Club properties around the world.

Club membership rights and costs

To join a destination club, a member pays a lump sum deposit and usually a smaller annual service charge. Some of the deposit is returned when the member leaves or sells their membership. Membership buys the right to use a number of residential properties owned by the club. These are often apartments or villas in holiday, golf or ski resorts. The member is entitled to a fixed number of weeks or points per year that can be exchanged for stays at club properties of their choice.

The majority of the clubs on the market at the moment require initial deposits of around £100-300,000 and annual service charges of around £5-15,000. These are firmly in range of anyone who might otherwise have considered purchasing a second home. Some at the very top of the market will cost millions to join for extended use of some of the very best properties money can buy.

Equity clubs

Equity destination clubs are less common. These are clubs where the member actually acquires an equity interest in the club and hence a share in the underlying values of the properties. Unlike other destination clubs, an equity destination club allows the member to share in any capital appreciation of the properties within the club. This is on top of the rights to use the properties throughout the period of membership. They are often marketed as investments with extra benefits of usage, rather than simply as a leisure product.

Club structures

Non-equity clubs can simply be a form of contractual relationship between the members and the club operator and property owner and as a result, their structures are both more flexible and more simple.

Equity clubs are more complicated due to the need to vest a share of ownership of the real estate in each member and also the fact that the marketing of memberships as investments are often strictly regulated by financial services laws in the jurisdictions in which the club and its members are located.

Equity clubs consist of a corporate or partnership vehicle in which members acquire shares or a partnership interest. The properties may be held by that vehicle, but for tax reasons (and especially if the club’s properties are spread across several jurisdictions) the properties are more likely to be held by separate corporate vehicles owned by the club holding vehicle. The club will then enter into a management agreement with the manager who will maintain the properties on behalf of the club and operate the reservations system that allocates time to members based on their requirements and their usage rights.

The home jurisdiction of the club will depend not only upon where the properties are located but also the target market for members. For example, if all members were to be recruited from the United Arab Emirates, then for tax and securities laws reasons, you would choose a different jurisdiction than if you were marketing the same club to UK and Irish members. Detailed knowledge of international tax treaties is vital to find the most efficient tax structure for members and the property holding companies.

Reservations systems

One of the biggest challenges for clubs has actually been the reservations policy. Some clubs operate a first-come, first-serve basis, but popular weeks or properties use up more points to even out demand. Other clubs have a rotating priority system where all requests from members are collected and allocated according to a strict rotation. Coming up with a system that will give all members fair access to all the properties, whilst still retaining the flexibility demanded by people who are used to getting what they want, can be the most difficult part of setting up such a club.

This article was written for Law-Now, CMS Cameron McKenna's free online information service. To register for Law-Now, please go to

Law-Now information is for general purposes and guidance only. The information and opinions expressed in all Law-Now articles are not necessarily comprehensive and do not purport to give professional or legal advice. All Law-Now information relates to circumstances prevailing at the date of its original publication and may not have been updated to reflect subsequent developments.

The original publication date for this article was 18/12/2007.

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