Timeshare by another name – or a sound buy?

A reader wants to buy a share of a holiday home in Devon ... plus tips on how to start a business in a recession

What do you think about "fractional ownership"? I would like to buy a share of a property in Devon but my wife says it's just a spin on timeshare and should be avoided.

BR

London

You can own a fraction of anything from a house to a horse to a handbag, and a true "fractional ownership" scheme is different to timeshare. But you have to be very careful or you could find that what you've bought is, legally, a timeshare.

If you buy through a genuine fractional scheme you will own a percentage of the bricks and mortar and you can sell that share. It allows you to buy part of something you possibly couldn't afford to buy otherwise. Along with the other owners you work out who spends what period of time in the property. If you buy timeshare you own time in the property – say two weeks in September, and if you sell you're selling those two weeks. There's no legal definition of "fractional" but there is of timeshare.

Last week the National Association of Estate Agents (NAEA) put out a warning on these schemes. It says that some of the old timeshare operators are dressing up their operations to compete with fractional ownership. They say that in many circumstances the way developers' package "fractional" can mean that the schemes fall within the legal meaning of timeshare; they may claim not to be timeshare but legally they are.

So do all the things you would normally do if buying property. Get your solicitor to check the contracts before you sign up and find out if there's a cooling-off period. Check the lease – some schemes give you a long lease that you can sell later through the management company or a local estate agent or leave to your offspring; others have a short lease – say five years, and then the property is sold and the proceeds divided between the share owners.

Find out how many owners there will be – some schemes will have four or five, some many more. The fewer owners the more you will pay and the bigger your share. You can rent out the weeks you're allocated to stay in the property and some schemes allow you to exchange your weeks for time at a different location. That does sound like the old timeshare, so be absolutely sure you're getting ownership of your share of the building.

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Is a recession a good time to start a business? I've got a small amount of redundancy money which I am planning to put into it and I'll carry out the business from home, but where else can I go for funding if I need it? The bank has said "no".

JD

Portsmouth

I've been asked this question a lot of late. Disney and Microsoft began in recessions but that's no guarantee of success, neither is starting up in a boom. Only around a third of small businesses make it beyond their third birthday – even in good times.

The rules are the same in boom or bust. Do your homework. Make sure you have a good product, do your research and make sure there's a market for your product. By working from home you are keeping your costs down, but is it the right location for the business? Make sure you have good cashflow systems in place – if you don't get paid you're likely to run into trouble. It's harder to get new customers than to keep existing ones so you'll need to budget for your marketing. Check out your competitors and think about adding value to what they offer.

The Federation of Small Businesses says most start-up businesses are run by sole traders, working from home, who are risk averse and take on very little debt. That way they have little to pay back on loans and overdrafts and can keep costs down. Any profits go into building the business rather than on spending on cars and holidays. It's really hard work and you'll need the support of your family and friends.

Get advice. Start with your local Business Link at www.businesslink. gov.uk or call 0845 600 9006. On the website go to Finance and Grants: Government Guaranteed Lending Scheme. Answer the questions there and you'll be assessed for your eligibility for help. For example, there are loans for firms refused bank finance which pay up to £50,000, and mentoring and support.

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After a horrible divorce I've ended up with nothing apart from the small flat I owned before we got married and a big bill from my solicitor which I can't pay. They're threatening to put a charge on the flat. What does it mean? I'm worried I could end up homeless.

KS

Wolverhampton

Your solicitors are proposing to take legal action to secure the amount you owe them against the value of your flat. If they're granted a charge against the property it will work like a mortgage. When the property is sold, they and anyone else with a charge or a mortgage will get their money back. Like a mortgage you will make monthly payments until the debt is cleared and pay interest on the amount you owe. Interest adds on to the debt at 8 per cent a year.

In order to get a charge against your property the solicitors have to take court proceedings. The court will decide if a charging order should be granted. You'll have to reach an agreement with your solicitors about the amount you can pay them on a regular basis to clear your debt in a reasonable time, and, while you keep those payments up, all will be well. But if you stop making the agreed payments, like a mortgage lender, the solicitors can go back to the court and ask for an order for the flat to be sold and their debt paid off in full.

Although there's always the chance you could be made homeless, you're safe while you keep making the agreed payments. The risk comes if you find you can no longer pay up. Maybe you could sell your flat, clear the debt and move somewhere smaller so you don't have this hanging over you. A debt adviser might be able to help you reach a repayment agreement with the solicitors without them applying for a charging order.

And, perhaps most importantly, the adviser will help you go through your finances and see if there's any help you could be getting, anywhere you can make savings, or any other debts that need to be added into the equation.

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