This factsheet is designed to inform and assist individuals who wish to set up a new car or motorbike sharing scheme (also known as fractional ownership) so that it operates legally, fairly and smoothly.

Cars
The term ‘car-sharing’ has different connotations to different people. It can refer to the sharing of a single car by several people for a particular journey (or more accurately ‘shared car travel’, sometimes known as ‘car-pooling’), It can also be used to describe an arrangement of shared car use or ownership where the sharers do not always travel together. Both types of schemes are useful from an environmental and community point of view as they reduce problems of traffic congestion and parking, as well as the reduction in emissions (both in use and manufacture) which results from having fewer vehicles on the road.

This factsheet describes the second variety of car sharing, where several people group together to share the ownership or use of the car, but not necessarily travelling together for the same journey. These arrangements are essentially informal car clubs.

According to Carplus.org.uk, there are currently 82,151 car club members in the UK, sharing 1,990 vehicles in over 40 locations. This is estimated to have removed over 40, 000 cars from UK roads.

Motorbikes
The idea of sharing a motorbike is not as common as car sharing, and perhaps many people will have never thought about it as an option. However, sharing a motorbike can have many of the same benefits of sharing a car.

Many people may own a motorbike but simply do not have the need or time to ride it very often. To prevent the bike spending most of its time in a garage it could be a great solution to share the bike with one or more people who you know or who live close to you.

Alternatively if you and some friends have always dreamed of owning a motorbike, but perhaps cannot justify the expense, buying a shared bike together might be the best answer.

This factsheet describes a motorbike sharing arrangement which involves two or more people sharing the use of the motorbike, but not necessarily travelling together on the motorbike at the same time.

Increasing vehicle ownership has led to enormous rises in the number of vehicles registered for road use in recent years. In 2000 there were 24,406,000 cars and 954,000 motorcycles licensed for road use, and in 2008 there were 28,390,000 cars and 1,291,000 motorcycles. Including all types of vehicle there were 34.2 million vehicles licensed in 2008 (source: Department for Transport www.dft.gov.uk). These increases have led to heavy traffic congestion in our cities and pressure on the finite number of parking spaces in our streets and lanes. Also it is wasteful as many more adults own vehicles than would be necessary if people shared them between neighbours, friends or colleagues.

In recent years there has been a proliferation of car sharing schemes or car clubs which aim to alleviate some of these problems, and reduce the costs and inconvenience of car ownership.

There are several varieties of vehicle sharing schemes. At one level, there are commercial operators who run schemes similar to a leasing service with vehicles available either by the hour or by the day. At the other end of the spectrum are the many informal sharing arrangements that exist between friends, partners and siblings when one vehicle is jointly used by members of the same family or community.

Commercial car clubs now operate in many major cities and other parts of the country. Although they provide a proven systemised formula for shared use, they are often relatively expensive and there is little financial saving in comparison to traditional budget car hire firms for daily or longer usage. Some example costs are provided at the end of this factsheet.

For people with the time and interest, there can be considerable savings to setting up your own private scheme between friends, neighbours or local contacts. For those who wish to share a motorbike, setting up an informal sharing group is the only viable option because widespread commercial sharing clubs do not exist.

Sharing is a concept that has been widely recognised in law for centuries, both as joint ownership of moveable assets, and as a method of owning land with other people through the legal mechanisms of joint tenancy and tenancy in common. It is also possible to write contracts which allow assets to be shared with others even if ownership is not shared. For such a contract to be enforceable it is important that all parties provide ‘consideration’ (e.g. money, time or services) and that the sharing is not simply a gift by one person to others.

Although it is advisable in many situations to have a written agreement to regulate a sharing relationship, there is nothing in law to prevent an informal arrangement being agreed verbally. However, difficulties with a verbal agreement arise when one party wants to prove the contents of the agreement and the others disagree about what was said.

Car share clubs and similar unincorporated associations have no legal identity separate from the individuals involved in running the club, unlike companies. This means that club members will jointly carry the risk of liabilities incurred by any other member of the group using the shared vehicle. Using a written legal agreement will enable the sharers to allocate most of these risks between themselves.

In the UK, it is a legal requirement that every motorised vehicle must be registered with the DVLA and licensed. A vehicle can, by law, only have one registered keeper. For shared vehicle ownership schemes, this means either that one of the sharers must be selected to be the registered keeper or that a legal body such as a limited company must be set up as the registered keeper.

Vehicle Choice
The selection of the vehicle can be crucial to the success of the sharing scheme. It is important to choose a vehicle that suits the common needs of the group. It could be a vehicle already owned by one of the parties or it could involve finding a vehicle that will be suitable for the sharing scheme and purchasing it for that purpose.

Avoid choosing a vehicle that is highly-cherished or with sentimental attachments as it is unlikely that the other sharers will feel the same sense of pride about the vehicle. Sharers must be prepared that it is more likely that the vehicle could get damaged or scratched when in use, even when driven with utmost care, simply as it is likely to be driven for longer and for higher mileage than a single-ownership vehicle.

Choose a vehicle that suits the budgets and profile of the share members. For example, if your car sharing group includes members who are heavily reliant on the car for their work or professional use, then it is essential that a vehicle is chosen that is reliable and fit for the intended purpose. In this example, it may be better to select a new or low mileage vehicle for this type of shared use. However, if the people using the car will include families, then it may be more appropriate to use a larger car with more space.

When choosing a motorbike the needs of the members must be considered – is a powerful bike needed for exhilarating track days, or is the bike only required for trips to the shops in which case storage space is most important, not speed? This will greatly influence the choice of vehicle.

Number of Sharers
It is crucial that before an agreement is entered into the potential sharers think about how often they want to use the vehicle, and how many sharers they should have in the agreement. Having ten sharers will bring the costs per person down considerably, but it will not be very convenient for sporadic use about town, since the vehicle is likely to be pre-booked all of the time. If the vehicle is intended to be used reasonably frequently then perhaps a maximum of three or four members is sensible. If the vehicle is required less frequently, then more sharers may be acceptable.

Sharing Models
A vehicle sharing scheme may take two forms:

• Shared ownership and shared usage
• Single ownership with shared usage

(1) Shared ownership and shared usage:
Under this method of sharing the sharers will either buy a vehicle together as joint-owners, or the sharers may purchase shares in a vehicle already owned by another member thus becoming shared owners. There is no need for the sharers to all own an equal share, but it does help to ensure that the sharers take care of the vehicle if they own a share.

Advantages:

• All costs and responsibilities are shared between the sharers.

Disadvantages:

• Costs need to be recorded in detail and apportioned between the sharers, so there is a significant amount of administration and accounting required.
• When a member leaves their share will need to be valued in order to be sold to a new owner or for the arrangement to be otherwise re-negotiated, so this model is slightly less flexible.

(2) Single ownership and shared usage:
Under this method of sharing the single owner will pay the purchase price of the vehicle, and then charge the other sharers an agreed mileage charge to cover the running costs.

Advantages:

• Can be set up easily with minimal administration, usually requiring the share members to pay a standard mileage charge. An optional annual charge or deposit may also be desired to ensure that the sharers take care not to damage the vehicle.
• Effective for low capital cost items, such as a second hand car or small motorcycle, as it is simpler for the single owner to pay the whole cost price rather than each sharer contributing and becoming an owner-in-common with the other sharers.

Disadvantages:

• There is less transparency on costs for the non-owning sharers as they are reliant on the owner estimating the running costs by way of mileage-related and annual charges, and charging them accordingly.
• The single owner must be especially careful not to make a profit from charging the sharers, otherwise his insurance could be invalidated.

Booking System
It will be vital for a vehicle sharing scheme to have a method by which all bookings are accurately recorded and easily accessed by all sharers. A paper record made by one of the sharers may be satisfactory, but the making of bookings would be limited by the availability of that person to record them. For this reason, an electronic web-based calendar on which bookings can be made by all sharers at all times may be more effective. However, it is possible to use any booking procedure that is suitable for the particular sharing group in question.

Termination
The vehicle sharing scheme should specify a procedure to take effect when a sharer wishes to leave the scheme. Depending on the sharing model used ownership may need to be redistributed amongst the other members according to a pre-determined formula, or their share sold to another person at the best market price.

Fines and Penalties
To ensure that the scheme operates efficiently it may be necessary to impose penalties to encourage the sharers to follow the rules of the scheme, such as those in relation to costs contributions, fuel and maintenance.

Indemnity
The scheme should include a method for ensuring that any parking tickets, speeding penalties and other fines or proceedings are dealt with by the sharer to whom they are attributable.

Cost Sharing
A successful vehicle share scheme requires a well-designed system to apportion the various running expenses of the vehicle between the sharers. In addition to the fuel used by each member, road tax, insurance, servicing, MOTs and any extra repair work will need to be paid for.

There are two common methods of sharing these running costs:

• Full cost apportionment
• Agreed mileage rate

(1) Full Cost Apportionment
All maintenance and running costs are recorded and split between the members. These costs can either be divided in accordance with the percentage ownership share that is held, or they can be divided equally or according to some agreed formula based on the respective annual mileages travelled in the vehicle by each member. Although this method requires detailed recording of all costs compared to the mileage rate model, there is greater transparency and reporting of all the shared costs.

(2) Agreed Mileage Rate
In this system, there is a pay-as-you-go mileage pricing system to cover mileage-related costs, such as fuel, oil, tyre wear/replacement and mileage-related servicing. There may also be an additional annual charge to cover non-mileage-related items, such as insurance, depreciation and tax. This is a simple and effective system, and operates most efficiently in conjunction with a journal completed for each and every journey. The mileage driven by each sharer should be noted and receipts kept as evidence of the costs incurred.

Refuelling
The largest single cost incurred by the sharers in using the vehicle is often the cost of fuel. A convenient system needs to be implemented so that the vehicle is always sufficiently fuelled, and the cost is fairly apportioned to members. The options available include:

• Sharers replace fuel as used (perhaps by insisting that the tank is always kept one quarter full)
• Sharers pay an agreed standard mileage charge which covers the cost of any fuel used

It should be ensured in advance that sharers are compatible, both logistically and also in temperament, as such conflict is probably one of the most common causes of break-ups in shared ownership or shared use arrangements.

Logistically
Check that there are not likely to be frequent clashes in booking requirements, or if there are, try to work out whether the sharers can share journeys together in the car or on the motorcycle.

Temperament
Briefly inspect a potential sharer’s own existing vehicle (if any), or agree to meet them at their own house prior to entering into a sharing agreement with them. This should help you to determine what their approach to caring for their belongings is. Try to judge whether they are organised and tidy or whether their lives seem disorganised and chaotic. Sharing just doesn’t suit everybody, and some people struggle to work as a group and to have respect for systems, rules and fair play. It is easier to exclude them at the selection stage than bring them into your shared scheme and then go through the inconvenience of having to eject them at a later date if things go wrong.

Do I need a written agreement?
A written agreement is not mandatory, but will prove very helpful if there is a dispute. A verbal agreement will be valid but does not provide a record or evidence of the agreement that has been made, and there is often no thought given to what will happen if the parties were to fall out and wish to terminate the agreement and sell the vehicle.

The agreement should include:

• The names and address details of the sharers
• The agreed formula or arrangement for sharing the costs of running the vehicle
• A procedure for booking the use of the vehicle
• Provisions addressing the maintenance and servicing of the vehicle
• The procedure for terminating the arrangement when the sharers wish to leave the scheme
• An indemnity, where sharers agree to indemnify the registered keeper for any fines or penalties that they incur whilst driving the vehicle

Suitable agreements for car sharing and motorbike sharing whether on a shared ownership basis or simply a shared use basis can be obtained from the website: www.sharingcontracts.com

www.carplus.org.uk
This website provides information, advice and support to communities, local authorities and partner associations developing car share clubs across the UK.
Based in Leeds: 0113 234 9299

Typical Car Club Costs:

Annual membership is: £50 - £60

A 10 mile journey over 2 hours costs: £8 - £14

A weekend away (2 days) involving a 200 mile journey costs: £140 - £160

The insurance excess is: £500