Item F-1 Agenda Report — Beverly Hills City Council, May 16, 2023 (part 1 of 3)

AGENDA REPORT
Meeting Date:

Item Number:

To:

From:

Subject:

Honorable Mayor & City Council
Timothea Tway, AICP, Director of Community Development
Chloe Chen, Senior Planner

AN ORDINANCE OF THE CITY OF BEVERLY HILLS

ESTABLISHING PROHIBITIONS ON FRACTIONAL OWNERSHIP OF

RESIDENTIAL AND COMMERCIAL PROPERTY AND AMENDING

NOTICING REQUIREMENTS
Attachments: 1. Draft Ordinance

2. Planning Commission Resolution No. 2019

3. Required Findings

4. Interim Ordinance No. 21-O-2841

5. Ordinance No. 21-O-2842 (Extension 1)

6. Ordinance No. 22-O-2862 (Extension 2)

7. City of Newport Beach Report on Fractional Ownership

8. Short-Term Rental Regulations (BHMC Sections)

RECOMMENDATION
Pursuant to the Planning Commission’s review and recommendation, staff recommends that the City Council move to waive the full reading of the ordinance and introduce and read by title only the ordinance entitled “A DRAFT ORDINANCE OF THE CITY OF

BEVERLY HILLS ESTABLISHING PROHIBITIONS ON FRACTIONAL OWNERSHIP OF

RESIDENTIAL AND COMMERCIAL PROPERTY AND AMENDING NOTICING REQUIREMENTS”. The draft ordinance as recommended for approval by the Planning Commission is included in Attachment 1.

INTRODUCTION
Fractional ownership is an emerging trend in which shares of ownership rights to a property are sold to multiple buyers, thus allowing each buyer an ownership interest and right to use said property for a certain period of time. At its meeting on June 24, 2021, the City Council discussed the topic of fractional ownership in relation to a proposed development project in the City. This topic was also brought forth as a result of recent awareness that companies facilitating fractional ownership structures had begun to May 16, 2023

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F-1
operate in other communities in California. Former Councilmember Wunderlich (thenMayor) requested that staff prepare an agenda item to more broadly discuss fractional ownership and requested that an interim ordinance be considered to prevent fractional ownership of properties in the City. At a study session meeting on July 15, 2021, the City Council discussed the need to adopt an interim ordinance to prohibit fractional ownership in the City, due to concerns that such ownership structures could have an adverse impact on the public health, safety, and general welfare because of the potential use of these structures to create shared vacation rental properties. The Council agreed that a proactive measure could provide the City additional time to understand the potential impacts of these types of ownership models, especially since there could be situations in which the prohibition would technically apply but is not the type of ownership system that the City intended to limit. Therefore, the City Council wanted to ensure that the interim ordinance included a provision that allows a party who may receive or has received an administrative citation for fractional ownership to request a hearing with the City Council to review the specific details of their fractional ownership operation.

On July 15, 2021, the City Council adopted Interim Ordinance No. 21-O-2841 (Attachment 4), which became effective on July 16, 2021 for an initial period of forty-five (45) days. On August 17, 2021, the City Council adopted Ordinance No. 21-O-2842 (Attachment 5), which further extended the interim ordinance for a period of ten (10) months and fifteen (15) days, resulting in a new expiration date of July 15, 2022. On June 14, 2022, the interim ordinance was further extended for a period of one year (Attachment 6), which results in a final expiration date of July 14, 2023, since the interim ordinance may not be extended further. These extensions were necessary in order to provide additional time for staff to study possible permanent regulations, and prepare a draft ordinance for consideration by the Planning Commission and City Council for adoption. The draft ordinance presented to the City Council at this time addresses the concerns initially raised by the City Council in 2021, and would make permanent the interim ordinance regulations that prohibit fractional ownership of residential or commercial properties. The draft ordinance has been previously reviewed by the Planning Commission at their February 9, 2023 and March 9, 2023 meetings, and the Commission proposed various changes to the ordinance language during the course of their review. Such changes are discussed in more detail in the Discussion section of this report. The Commission adopted Resolution No. 2019 (Attachment 2) on March 9, 2023, recommending approval of the draft ordinance to the City Council.

DISCUSSION
While fractional ownership effectively operates similarly to a timeshare model, it typically conveys actual property ownership rights instead of a more narrow right for use of the property for a certain period of time only, and also divides a property into fewer fractions than a typical timeshare might. In some existing fractional ownership models, properties are bought and held under entities such as limited liability companies (LLCs), and the operating agreement for the entity conveys a fraction of ownership of the property through the sale of interest shares to each member of the entity. A fractional ownership model allows individual owners to also potentially benefit from appreciations in property value, and would potentially profit if the entire property is sold to another party, or if their individual share is sold back to the main ownership entity or to another individual fractional owner.

In a typical fractional ownership structure, the fraction of ownership may directly correlate to the amount of time each owner is permitted to use and/or occupy the

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property, whereas in a typical timeshare structure, the customer typically buys only the rights to use the property for a set period of time. Fractional ownership models often operate as a way to share single-family residences, with only one unit and property that is shared. In contrast, timeshare models are more commonly applied to hotel and condominium-style developments, in which the units are developed around shared amenities, with multiple units on one property. In addition, timeshare properties may often be developed in commercial or mixed use zones in jurisdictions, since their operations are more consistent with hotel or other commercial uses.

The operation of fractional ownership schemes in established single- and multi-family neighborhoods has the potential to create adverse impacts to residents of established neighborhoods that would otherwise not experience impacts from transient uses. Since fractional ownership agreements provide rights to utilize a property for a period of time that is shorter than a typical rental agreement, the property effectively operates as a short-term rental and/or vacation rental home. Given that vacations typically last for short periods of time, these properties would likely experience high turnover rates of occupants and may result in impacts related to their operation such as noise, loss of privacy, loss of community buy-in, and decline in property values. Additionally, the City and the greater Los Angeles metro region are experiencing a housing crisis, in which a lack of housing, including affordable and market-rate products, is available. The purchase of a single-family or multi-family unit for the purpose of private vacation or other short-term uses would further exacerbate this crisis, as it removes available housing units from the market for long-term residents to utilize. Finally, fractional ownership of residential or commercial property can adversely impact future development, redevelopment, safety, and proper maintenance of the property as a result of the complexities associated with the incongruent and changing objectives, intents, and goals of multiple owners. Recently, in other areas of California, several companies have started to advertise fractional ownership shares of vacation dwellings. Such fractional ownership companies have been operating in upscale communities, often due to the desire for luxury second vacation homes. These companies facilitate the sale of fractions of ownership, and manage the shared use of the property. Therefore, the potential proliferation of fractional ownership operations presents a threat to the public health, safety, and general welfare of the city, and the draft ordinance would permanently prohibit fractional ownership to prevent such potentially adverse impacts.

Planning Commission Review
At the February 9, 2023 Planning Commission meeting, the Commission reviewed the draft ordinance, which included regulations that were substantially the same as those that have been in effect under the interim ordinance. During their deliberations, the Commission expressed concern that the draft ordinance did not provide an opportunity for any party who wished to receive a determination by the City Council regarding whether their fractional ownership circumstances should be subject to the City’s prohibition, as the only opportunity provided was for those parties who were already subject to a Community Preservation action. In addition, the Commission expressed a desire to change the required findings for the City Council’s review of the fractional ownership, in order to clarify such findings and make them more specific to the situation that the ordinance intends to capture. The Commission directed staff to revise the ordinance to address these concerns, and to return on a date certain on March 9, 2023.

At the March 9, 2023 Planning Commission hearing, the Commission agreed that the amended ordinance captured their feedback from the previous meeting. In addition, staff noted one further change that was made to the ordinance language in response to a discussion with Community Preservation staff regarding the procedure for enforcing a

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fractional ownership violation. This change removed the reference to an administrative citation, and only kept in a reference to a compliance letter since this is the type of notice that would be sent out if a fractional ownership violation was confirmed. Additionally, a slight change to the ordinance language was made during the deliberations in order to clarify that fractional ownership rights tied to occupancy of a property shall include the “right to occupy, inhabit, or otherwise use, the property for a period of time less than a full year”. The draft ordinance also reflects these changes made during the March 9 Planning Commission meeting. The Planning Commission voted unanimously to adopt the resolution (Planning Commission Resolution No. 2019) recommending approval of the draft ordinance to City Council.

Regulations in the Draft Ordinance
A summary of the regulations of the draft ordinance is provided below, which are mostly identical to the regulations contained in the interim ordinance, and also incorporates revisions to reflect the Planning Commission’s discussions. The draft ordinance also inserts these regulations into the zoning code where appropriate, as well as amends any sections for consistency with the regulations as needed.

Definition of Fractional Ownership (BHMC §10-3-100)
A definition for “fractional ownership” is proposed in order to clarify the meaning of the phrase. The proposed definition, which is consistent with the definition in the Interim Ordinance, is as follows:
“The shared ownership of real property, entitlement to ownership rights of real property, entitlement to use of real property, or possession of real property through any of the following means:
a. Direct ownership of the property;
b. Indirect ownership of the property through a membership, stake, interest, share, association, or similar device in the owner of the property or a subsidiary or parent of the owner of the property; or
c. A membership, stake, interest, share, association, or similar device in an entity, group, association or similar device which by virtue of such membership, stake, interest, share, association or similar device grants entitlement to ownership rights or the use or possession of the property.”
This definition is designed to capture the potential variations of the fractional ownership model, which can include the use of membership structures within entities such as LLCs to grant certain rights and the ability to use the jointly-owned asset (the real property).

Time-Based Occupancy Restriction (BHMC §10-3-307 A.)
The ordinance prohibits fractional ownership models from operating in the City if the fractional ownership includes “any arrangement, schedule, plan, scheme, or similar device, whether by agreement, sale, lease, deed, license, right to use agreement, or by any other means, whereby an owner of the property or a fraction thereof, receives ownership rights in, or the right to use, the property for a period of time less than a full year”, with the exception of those approved through a specific plan. This means that the ordinance language essentially prohibits fractional ownership that correlates to a timebased occupancy agreement, such as one that would allow a part-owner to use a property for a specific and limited amount of time. To clarify, this ordinance would only prohibit fractional ownership schemes that are tied to a time-based occupancy agreement, and would not technically prohibit the fractional ownership of properties where such agreement is not present. This is because fractional ownership schemes are common in their own right, due to property owners sharing ownership amongst family members, or the use of an LLC to hold a property in order to reduce liability or

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increase privacy regarding the owner’s identity. Purely owning a property via fractional ownership is not the type of circumstances this ordinance intends to regulate, but instead aims to prohibit the use of fractional ownership schemes to enable short-term use of the property for vacation or temporary uses. This section has been revised to clarify that the more specific fractional ownership schemes the ordinance intends to regulate shall be referred to as “prohibited fractional ownership arrangements”.

Request for City Council Hearing (BHMC §10-3-307 B.)
Per the City Council’s direction, the draft ordinance also includes a provision to allow a person or party who may receive or has received a compliance letter for operating a fractional ownership scheme to request a hearing before the City Council to discuss the details of their arrangement. This regulation intends to provide some flexibility for cases that may technically fall under the definition of fractional ownership, but are not the types of schemes that the ordinance was designed to prohibit. One example discussed by the City Council was that of a family that may need to share ownership of a communal property in which family members live, though there could be time restrictions related to an individual owner’s stay at the property, such as if the owners were divorced. Thus, the draft ordinance would prohibit fractional ownership models that may create adverse impacts to the community, but still allow this type of ownership model for property owners under certain circumstances, if there is a legitimate reason to do so, since the City Council would be able to determine that such prohibitive regulations were not intended to apply to a specific instance at hand. The City Council would be able to make such determination upon making required findings, as described in the next section. The regulation requires that a request for a City Council hearing is in writing, and would be submitted to the Community Development Department, along with a processing fee for the application. An application that is submitted as a result of the issuance of a compliance letter must be received by the Community Development Department within thirty (30) days after the date of the issuance of the compliance letter. Per the direction of the Planning Commission, this section has also been revised to include language to allow any person to request a City Council determination hearing on whether the fractional ownership prohibition shall apply to the matter presented to them. Parties requesting a City Council determination would follow the same application process as prescribed for a party involved in a fractional ownership circumstance that is subject to a Community Preservation action.

Required Finding for Exemption from Time-Based Occupancy Restrictions for Fractionally Owned Real Property (BHMC §10-3-307 C.)
The draft ordinance also includes a section with required findings that must be made in order to determine that a specific fractional ownership situation is not subject to the otherwise applicable prohibition on fractional ownership, due to unique circumstances that are not intended to be captured in such prohibition. This determination would be made by the City Council at a public hearing, if requested by the applicant pursuant to BHMC §10-3-307 B. above. This hearing could be requested by either a party who is already subject to a Community Preservation action for a fractional ownership scheme, or any other party who wishes to present their circumstances to the City Council. Per the direction of the Planning Commission, the required findings have been revised to state that the City Council shall find that:
1) the fractional ownership situation at hand is not the type of fractional ownership that the City Council intended to prohibit, and 2) the fractional ownership arrangement of the subject real property will not disturb the stability of a residential neighborhood or residential building and will

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not adversely impact existing or future development, redevelopment, safety, and proper maintenance of the real property.

These findings state that the City Council shall make the determination that the specific instance of fractional ownership was not intended to be captured by the blanket prohibition on fractional ownership tied to a time-based use of the subject property.

Required Notification for City Council Hearing (BHMC §10-3-253) Related to the above regulation, the draft ordinance also amends the notification section of the zoning code (Article 2.5, Chapter 3, Title 10) to include the requirements for notification of a City Council hearing on a potential exemption from the fractional ownership prohibition. The requirements are for the applicant to provide the following to the City: 1) a notification list for a 300-foot radius from the property involved, 2) a signed mailing list affidavit form that states the mailing list is accurate under penalty of perjury, and 3) pre-paid labels and envelopes for a courier mailing service with tracking ability for each recipient on the mailing list. As is typical with other notifications, the City would prepare the notice, and ensure that the notice is sent at least twenty (20) days before the date of the City Council hearing.

Neighborhood Meeting Cleanup Amendment (BHMC §10-3-253) In addition, staff would like to note that the draft ordinance also includes a cleanup action to the notification section of the zoning code (BHMC §10-3-253) that removes an outdated requirement for a neighborhood meeting that was previously contemplated and discussed at public hearings by both the Planning Commission and City Council when the City overhauled the public notification requirements in 2021. This clean up action is unrelated to fractional ownership but simply removes the general requirement for a neighborhood meeting for development projects, which was inadvertently left in the code as a result of an oversight in the ordinance language (Ordinance No. 21-O-2849). It was clear this provision was intended for removal per the hearings previously held and the action directed by both the Planning Commission and City Council.

Existing Short-Term Rental Regulations
The following information is provided to help illustrate how the City’s existing short-term rental regulations would interact with the fractional ownership schemes tied to timebased uses of a property. Although a prohibited fractional ownership arrangement may not employ a rental or lease agreement to enforce and permit a timeframe for the use of the subject property (since the timeframe could instead be specified in the arrangement documents), it is possible that if a fractional ownership model with time-based occupancy were operating in the City, an individual fractional owner could rent out the property on a short-term basis to a third party. However, it should be noted that some fractional ownership management companies do not allow rental of the property to third parties, and specify in their agreements that use of the property shall be limited to only the fractional owners. The City’s existing short-term rental regulations for single-family residential areas (BHMC §10-3-401) state that “single-family transient uses” are prohibited in the R-1 single-family zones. A “single-family transient use” is defined as:
rental or lease of a single-family residence or accessory dwelling unit for a period of less than six (6) months, and the code prohibits a single-family transient use more than twice per each calendar year. This means that the short-term rental of a single-family residence can occur a maximum of two times per calendar year, for a maximum of up to a 6-month period. However, the rental of the property for even three weekends per year would be considered a violation of this code. Similarly, a “multi-family transient use” is defined as: rental or lease of a multi-family dwelling unit for a period of less than thirty (30) days. The multi-family residential zone regulations (BHMC §10-3-1202) specify the uses that are permitted in the zone, and do not specify that multi-family transient uses

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are permitted, and are therefore not allowed in these zones. The multi-family regulations are intended to still enable month-to-month lease terms, but prohibiting rentals of multifamily units that are shorter than a 1-month period.

Community Preservation Procedures
The Planning Commission also expressed concern regarding the Community Preservation process to address potential violations of the code, given that the City would likely become aware of a prohibited fractional ownership arrangement once a complaint has been filed with the Community Preservation Division. As such, staff reached out to the Community Preservation Division to provide additional information regarding their existing procedures and clarify how these might interact with fractional ownership violations. Community Preservation staff first explained that any complaint received by the Division requires that they open a case and perform further investigation.

Although not every case results in an enforcement action, all cases are addressed and investigated to determine whether enforcement is needed and appropriate. For example, if a complaint were received, and a responsible party voluntarily complies and cures their potential violation of the code, no further enforcement action would be needed at that time. If a complaint were received from neighbors that a property may be operating a short-term rental or prohibited fractional ownership arrangement, Community Preservation staff would open a case to document this complaint, send an initial outreach letter to inform the property owner and occupants that a complaint has been filed, and provide information related to the potential violation, such as existing code sections and regulations. This letter intends to help educate the property owner about the codes that apply to their property, and also to request voluntary compliance with such regulations. Community Preservation staff will also attempt to obtain more information to determine whether the situation constitutes a violation, and to also obtain proof of violation. In the event that staff are able to confirm a violation, staff will send out an arraignment letter to request immediate compliance, and actions to cure of the violation, or the case will be referred to the City Prosecutor and a court date will be set.

For example, if a violation of the short-term rental regulations in the single-family area is verified (three or more instances of renting the property over a one-year period), the arraignment letter would be issued with no grace period or deadline to comply, but to request immediate compliance, and would require that the responsible party provide proof of curing the violation (i.e., canceling any existing or future rentals of the property for at least the remainder of the one-year period). In a case of a suspected prohibited fractional ownership arrangement, the Community Preservation staff would likely be informed by the responsible party that they are not renting the property, but are an owner of the property, at which time, staff would further investigate the ownership structure of the property. This investigation could include review of public ownership documents, and business entity filing documents, and the request of further ownership documentation from the responsible party.

Information on Fractional Ownership in Other Jurisdictions Staff has found that the City of Newport Beach recently published a report (Attachment 7) that researches the topic of fractional ownership, and how other jurisdictions are addressing this issue through regulatory changes or enforcement actions. As shown in the table on the next page from the report, the majority of jurisdictions classify fractional ownership as a timeshare use, and many of these enforce existing timeshare regulations in order to prevent the proliferation of fractional ownership or have already modified/will modify regulations to address this more explicitly. Some jurisdictions provide a path for approving a timeshare, such as the issuance of a Conditional Use Permit, or require certain permits to be issued for this use, such as a business license. However, it should be noted that many jurisdictions also restrict timeshares to certain zones, such as zones

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oriented towards commercial, hotel, or mixed uses, and often prevent timeshare uses in single-family residential zones due to the fact that their operation is more consistent with hotel and commercial operations. Notably, one fractional ownership company, Pacaso, has filed a lawsuit against the City of St. Helena in California in federal court to attempt to prevent the City from enforcing their timeshare ordinance against fractional ownership uses. This report is being provided to help inform the City Council on the regulatory approaches and perspectives other jurisdictions have taken on fractional ownership, and to highlight the need to craft regulations specific to this type of use.

Table 1. Table Extracted from Newport Beach Study

PUBLIC OUTREACH AND NOTIFICATION
The draft ordinance was noticed in compliance with local and state requirements. A notice of the public hearing on this item was published in the April 21, 2023 edition of The Beverly Hills Courier, and the April 27, 2023 edition of The Beverly Hills Weekly.

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Public Comment
As of the writing of this report, staff has not received correspondence from the public related to this item.

ENVIRONMENTAL ASSESSMENT
Staff has assessed the draft ordinance in accordance with the authority and criteria contained in the California Environmental Quality Act (CEQA), the State CEQA Guidelines, and the environmental regulations of the City. Staff recommends that the City Council find the proposed ordinance exempt from CEQA pursuant to Section 15305 of Title 14 of the California Code of Regulations because the average slope of the City is less than 20 percent and the proposed regulations in the draft ordinance represent a minor alteration in land use limitations and does not result in any changes in land use or density. In addition, the regulations of the draft ordinance will not have a significant environmental impact and are exempt from CEQA pursuant to Section 15061(b)(3) of Title 14 of the California Code of Regulations, which states that CEQA applies only to projects which have the potential for causing a significant effect on the environment. This exemption is applicable because the draft ordinance would not result in physical changes to any properties, since it does not authorize construction, and imposes further restrictions on the use of certain properties in order to protect the public health, safety, and general welfare. Therefore, it can be seen with certainty that the draft ordinance has no potential to cause a significant effect on the environment. Pursuant to the provisions set forth in the California Environmental Quality Act (CEQA), the City Council will also consider finding the project exempt from further review under CEQA.

FISCAL IMPACT
There is no anticipated direct fiscal impact related to the adoption of this ordinance. In the event that a request is submitted for the City Council to review a specific fractional ownership circumstance, the applicant will be required to pay an application fee, which would recover the costs associated with the City Council hearing, including staff time and the use of City resources. The proposed fee is included in the update to the Comprehensive Schedule of Taxes, Fees, and Charges for Fiscal Year 2023-2024, with a note that the proposed fee is contingent upon the City Council’s adoption of the draft ordinance.

Timothea Tway, AICP,
Director of Community Development
Approved By

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Attachment 1
Draft Ordinance

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ORDINANCE NO. 23-O-______

AN ORDINANCE OF THE CITY OF BEVERLY HILLS

ESTABLISHING PROHIBITIONS ON FRACTIONAL

OWNERSHIP OF RESIDENTIAL AND COMMERCIAL

PROPERTY AND AMENDING NOTICING REQUIREMENTS

THE CITY COUNCIL OF THE CITY OF BEVERLY HILLS HEREBY ORDAINS AS FOLLOWS:

Section 1. On July 15, 2021, the City Council adopted Interim Urgency Ordinance No. 21-O-2841 (the “Interim Ordinance”), which enacted a moratorium on the fractional ownership of residential and commercial property in the city. The City Council subsequently adopted Ordinances Nos. 21-O-2842 and 22-O-2862 to further extend the effective period of the Interim Ordinance.

Section 2. On February 9, 2023, and on March 9, 2023, the Planning Commission held duly noticed public hearings to review a draft ordinance that would prohibit, on a permanent basis, the fractional ownership of residential and commercial property. Thereafter the Planning Commission adopted Resolution No. 2019 recommending that the City Council adopt the draft ordinance to prohibit fractional ownership models from operating in the city (collectively, the “Amendments”). On May 16, 2023, the City Council held a duly noticed public hearing, received public testimony, and thereafter introduced this Ordinance.

Section 3. This Ordinance and the Amendments were assessed in accordance with the authority and criteria contained in the California Environmental Quality Act (CEQA), the State CEQA Guidelines, and the environmental regulations of the City. The City Council finds that adoption of the Amendments is exempt from CEQA pursuant to Section 15305 of Title 14 of the

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California Code of Regulations because the average slope of the City is less than 20 percent and the Amendments represent a minor alteration in land use limitations and do not result in any changes in land use or density. In addition, the City Council finds that the adoption of the Amendments will not have a significant environmental impact and is exempt from CEQA pursuant to Section 15061(b)(3) of Title 14 of the California Code of Regulations, which states that CEQA applies only to projects which have the potential for causing a significant effect on the environment. This exemption is applicable because the Amendments would not result in physical changes to any properties, since it does not authorize construction, and imposes further restrictions on the use of certain properties in order to protect the public health, safety, and general welfare.

Therefore, it can be seen with certainty that the draft ordinance has no potential to cause a significant effect on the environment.

Section 4. The Amendments are consistent with the objectives, principles, and standards of the General Plan. General Plan Goal LU 1 – Long-Term Stability calls for land uses that enhance and maintain the long-term durability and stability of the community, as well as preserve the distinct characteristics of the community. These characteristics include the pride of its residents and businesses, as reflected in overall concern for the welfare of the community and wide-ranging commitments to participation in community affairs. Similarly, General Plan Policy LU 3 – Managed Change encourages change that respects and complements the qualities that distinguish the City as a community that provides for the needs of existing and future residents and businesses, and ensures the effective and efficient use of land and infrastructure. General Plan Goal LU 4 – Land Use Distribution and Urban Form also calls for enhancing the distinguishing qualities of the City, and the livability of neighborhoods, while preserving environmental resources and the well-being and health of the City’s residents, employees, and visitors. General Plan Policy

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LU 5.1 – Neighborhood Conservation further requires that the densities, character, amenities, and quality of the City’s residential neighborhoods are conserved. General Plan Policy LU 5.8 – Encroachment of Incompatible Land Uses also calls for the protection of residential neighborhoods from incompatible nonresidential uses, by ensuring that zoning reviews address compatibility issues. Amending sections of the Beverly Hills Municipal Code to prohibit fractional ownership of residential and commercial properties will protect the character of the City’s residential neighborhoods, as it will prevent adverse impacts that could result from fractional ownership models, such as noise, lack of community buy-in, and potential issues with privacy and property maintenance. In addition, the proposed Amendments will help to ensure that the character of residential neighborhoods is preserved, while also protecting homeownership opportunities and preventing further exacerbation of the regional and state housing crisis. For the foregoing reasons, the public interest, health, safety, morals, peace, comfort, convenience, or general welfare requires the code amendments.

Section 5. The City Council hereby amends Section 10-3-100 (Definitions) of Article 3 of Chapter 3 of Title 10 of the Beverly Hills Municipal Code to add a definition of “Fractional Ownership”, after “Floor Area Ratio”, and before “Game Court”, to read as follows:
“FRACTIONAL OWNERSHIP: The shared ownership of real property, entitlement to ownership rights of real property, entitlement to use of real property, or possession of real property through any of the following means:
a. Direct ownership of the property;

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b. Indirect ownership of the property through a membership, stake, interest, share, association, or similar device in the owner of the property or a subsidiary or parent of the owner of the property; or
c. A membership, stake, interest, share, association, or similar device in an entity, group, association or similar device which by virtue of such membership, stake, interest, share, association or similar device grants entitlement to ownership rights or the use or possession of the property.” Section 6. The City Council hereby adds a new Section 10-3-307 to Article 3 of Chapter 3 of Title 10 of the Beverly Hills Municipal Code to read as follows:
“10-3-307: Prohibition on Fractional Ownership; Request for Hearing; Exemption.

A. Fractional Ownership with Time-Based Occupancy Restriction: Unless approved by a specific plan, the fractional ownership of any real property located in the City shall be prohibited if such ownership includes any arrangement, schedule, plan, scheme, or similar device, whether by agreement, sale, lease, deed, license, right to use agreement, or by any other means, whereby an owner of the property or a fraction thereof, receives ownership rights in, or the right to occupy, inhabit, or otherwise use, the property for a period of time less than a full year.

Fractional ownership arrangements meeting the foregoing criteria are referred to herein as “Prohibited Fractional Ownership Arrangements.” B. Request for City Council Hearing: (1) Any person with a fractional ownership of real property in the City who is threatened with enforcement of the prohibition on Prohibited Fractional Ownership Arrangements or to whom a compliance letter from Community Preservation is issued pursuant to this section

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may apply to the City Council for a hearing to review the time-based occupancy restrictions as applied against the real property with such fractional ownership. (2) Any person who believes that the prohibition on Prohibited Fractional Ownership Arrangements is not intended to apply to a specific type of fractional ownership arrangement at any time may apply to the City Council for a hearing to review the time-based occupancy restrictions contemplated by that specific existing or contemplated fractional ownership arrangement.
(3) Any application for a City Council hearing shall be in writing and shall be received by the Community Development Department along with a processing fee as set by resolution of the City Council. Any hearing application filed pursuant to paragraph (1) of this section as a result of the issuance of a compliance letter from the City’s Community Preservation division shall be received by the Community Development Department within thirty (30) days after the date of the compliance letter. Notice of any hearing held pursuant to this section shall be completed in accordance with article 2.5 of this chapter and the City's public notice guidelines.

C. Required Finding for Exemption from Time-Based Occupancy Restrictions for Fractionally Owned Real Property: The prohibition on fractional ownership of real property with a time-based occupancy restriction shall not apply to the real property if the City Council makes the following findings after a hearing as provided in the foregoing paragraph B. above:

1. The fractional ownership of the real property is not the type of fractional ownership arrangement that the City Council intended to prohibit based on the specific facts and circumstances of the arrangement; and,

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2. The fractional ownership arrangement will not disturb the stability of a residential neighborhood or residential building and will not adversely impact existing or future development, redevelopment, safety, and proper maintenance of the real property.”
Section 7. The City Council hereby amends Section 10-3-253 (Notification Requirements) of Article 2.5 of Chapter 3 of Title 10 of the Beverly Hills Municipal Code, to read as follows:
“10-3-253: NOTIFICATION REQUIREMENTS:

The following methods of notice are required for each planning application:

A. Standard Requirements:

Public Notice
Requirements
For Development
Applications
On-Site
Posted
Notice
Newspaper
Notice
Mailed Notice Mailed Notice of
Application within 45
Days of Filing1
Architectural review:

Director: Director level
projects can be processed
administratively and
include: minor landscape
approvals, some
commercial signs, and
minor exterior changes to
multi-family and
commercial buildings
(paint color changes,
replacing like for like
elements). These permits
are generally processed at
the planning counter.

None None None
Commission:

Commission level
projects must be reviewed
by the City's Architectural
Commission (AC) and
Only
projects in
multi-family
residential
zones
None None

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include: sign
accommodations, most
commercial signs, facade
remodels for commercial
and multifamily
buildings, new
construction of
commercial and
multifamily buildings,
and landscaping for
commercial and
multifamily projects.

Cultural heritage:

Director: Director level
projects can be processed
administratively and
include Certificate of
Review for District NonContributor and Director's
determination of
ineligibility.

Certificate of appropriateness for designated landmarks and contributing properties: See section 10-3-3219 of this chapter
Commission:

Commission level
applications include
projects that are reviewed
by the City's Cultural
Heritage Commission
(CHC). The CHC
recommends to the City
Council on landmark or
historic district
designation nominations
and Mills Act contracts.

The CHC acts on
Certificates of
Appropriateness for
Designated Landmarks
and Contributing
Properties, certificates of
ineligibility, and
certificates of economic
hardship.

Certificate of ineligibility: See section 10-3-3221 of this chapter Landmark or historic district designation: See section 10-3-3215 of this chapter
Certificate of economic hardship: See section 10-3-3220 of this chapter Design review:

Director: Director level
projects can be processed
administratively and
None None Owner/applicant

Page 17 of 488 ends

include single family
home remodels and new
homes in the Central Area
of the City that are
determined to be "track
1".

Commission:

Commission level
applications include
projects that are reviewed
by the City's Design
Review Commission
(DRC) including single
family home facade
remodels and new homes
in the Central Area of the
City that are determined
to be "track 2".

Yes None Central area:
100 foot radius
+ block-face
Planning review:

Director: Director level
includes applications that
can be reviewed and
approved by staff.

Yes No Hillside and
Trousdale: 300
foot radius
Central Area:
100 foot radius
+ block-face
Commission/Council
Level
On-site
posted notice
of pending
planning
commission
application
required for
projects
located in
multi-family
and
commercial -
residential
transition
zones
Required
for:

Amendments
(General
Plan, Streets
Master Plan,
Specific
Plan, zone
text, Zoning
Code)
Conditional
use permit
Notice of Public
Hearing:

Central Area:
500 foot radius
+ block-face
Notice of Pending
Planning Commission
Application:

Central Area: 500 foot
radius + block face
Commission/Council
Level (cont.)
On-site
posted notice
of public
hearing
required for
Maps
(tentative,
and parcel)
Specific Plan
Hillside Area:
1,000 foot
radius, plus
notice to either
all properties in
Hillside Area: 1,000 foot
radius, plus notice to
either all properties in
Hillside Zone 1 or
Hillside Zone 2

Page 18 of 488 ends

all
commission
level projects
Variance Hillside Zone 1
or Hillside Zone
2 Trousdale
Estates Area:
1,000 foot
radius
Trousdale Estates Area:
1,000 foot radius
Adjacent Neighbor
Mailed Notice: Required
only for projects in
single-family residential
zones
Notes:

1. The date of filing shall be either: the date of receipt of the application by the City and the payment of fees for an entitlement that requires review and approval by the Planning Commission, or the date of determination that the application shall be referred by the Planning Commission.

B. Special Notice Requirements: The following types of planning applications have special public notice requirements, and do not require any public notice except as specified in this section. Notwithstanding, public notices in this section shall comply with the standards for notices set forth in subsections 10-3-252 B.4. and 10-3-252 B.5. of this chapter.

Development
Application
Special Public Notice Requirements
The following applications have unique noticing requirements:

Common
interest
development
With regard to all forms of common interest development conversions, the property owner shall be responsible to give each tenant and each prospective tenant all applicable notices as required by this Code and State law.

Page 19 of 488 ends

the legal requirements for service by mail. For the purposes of this article, the "legal requirements for service by mail" shall mean the requirements set forth in California Code of Civil Procedure sections 1012 and 1013a, or any successor statutes.

The form of the notice shall be in the form outlined in Government Code section 66452.9 and shall inform the tenants of all rights provided under this Code and State law.

2. Notice Of Public Report: In accordance with the provisions of California Government Code section 66427.1(a) or any successor statute, the subdivider shall provide each tenant 10 days' advance written notice that an application for a public report will be or has been submitted to the State Department of Real Estate, and that said report will be available for review in the Department of Community Development once the report is released by the Department of Real Estate. The written notices to tenants required by this section shall be deemed satisfied if such notices comply with the legal requirements for service by mail.

3. Notice Of Final Map Approval: In accordance with the provisions of California Government Code section 66427.1(b) or any successor statute, the subdivider shall provide each tenant written notification within 10 days of approval of a final map for the proposed conversion. The written notices to tenants required by this section shall be deemed satisfied if such notices comply with the legal requirements for service by mail.

4. Additional Notice To Terminate Tenancy: In accordance with the provisions of California Government Code section 66427.1(c) or any successor statute, the subdivider shall provide to each tenant written notice of the intent to convert at least 180 days prior to the termination of tenancy due to the proposed conversion. The written notices to tenants required by this section shall be deemed satisfied if such notices comply with the legal requirements for service by mail.

5. Notice Of Public Hearing On Tentative Map: In addition to any other notice required by law, at least 20 days prior to the public hearing before the Planning Commission on the tentative map, the subdivider shall provide each tenant written notice of the public hearing. Said notice shall be in the form prescribed by the Director of Community Development or his or her
designee and shall contain, as a minimum, the following information:
a. An estimate as to the length of time before the conversion, if approved, would result in the tenant's eviction;
b. An explanation of the tenant's rights and benefits if the conversion is approved; and

Page 20 of 488 ends

c. The grounds upon which the Planning Commission can
deny the request for conversion.

6. Affidavit Required: In connection with an application for a tentative map to convert an existing multi-family residential apartment building or a common interest development
previously created prior to January 1, 2006, to a common interest development, the subdivider shall submit an affidavit in a form prescribed by the Director of Community Development attesting to compliance with the noticing requirements
prescribed by subsection A of this section. Said affidavit shall be signed by the subdivider under penalty of perjury and shall include copies of the proof of service on each tenant in the building to be converted.

Extension to
Time for
Exercise of
Rights
A request to extend the time for exercise of rights pursuant to section 10-3-207 of this chapter shall be noticed in accordance with the notification requirements in effect at the time of filing the application for the appropriate level of review.

Fractional
Ownership
Hearing
At least twenty (20) days prior to a Fractional Ownership hearing, the City shall mail notice to the owners of each property within a 300-foot radius of the property that is the subject of the hearing. The applicant shall provide to the City:
1) a notification list pursuant to section 10-3-252 B.5. for the owners of each property within a 300-foot radius, measured from the exterior boundaries of the property that is the subject of the hearing, 2) a signed mailing list affidavit form, and 3) pre-paid mailing labels and envelopes for a courier mailing service with tracking ability for each recipient on the notification list.

Large family
daycare permit
Not less than 20 days prior to the date on which the Director shall review the application, notice of the application shall be mailed, by United States mail, postage prepaid, to all owners shown on the last equalized assessment roll as owning real property within 100 feet of the exterior boundaries of the subject site area.

Reasonable
accommodation
At least 20 calendar days before issuing a written determination on the application, the Director shall mail notice to the applicant and adjacent property owners that the City will be considering the application, advising of the standards for issuing an accommodation, and inviting written comments on the
requested accommodation. Written notice of a hearing to consider the application shall be mailed 20 calendar days prior to the meeting to the applicant and adjacent property owners.

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Renewal of
Active
Entitlement
If renewal of an active entitlement is required per the conditions of approval for such entitlement, a request for renewal shall be noticed in accordance with the notification requirements in effect at the time of filing the application for the appropriate level of review, unless specific notification requirements are outlined as a condition of approval for such entitlement.

Resolution of
public
convenience or
necessity
Notice of a public hearing shall be mailed to property owners and occupants within 300 feet of the premises for which a determination is requested. At least 20 days prior to the public hearing a written notice shall be published in the newspaper, and an on site posted notice shall be posted at the premises in accordance with subsection 10-3-252A of this chapter and the public notice guidelines.

Tree removal
permit
Notice of any hearing on such a permit before the Planning Commission shall be mailed to any adjacent property owners whose property rights may be substantially affected by the approval of the requested permit.

View
restoration

1. Adjacent Neighbor Mailed Notice: Notice shall be prepared in accordance with the standards in this chapter and mailed within forty-five (45) days of the receipt of an application and the payment of fees for a View Restoration Permit.

2. Notice to Foliage Owner(s): Notice that a formal request for a View Restoration Permit hearing has been filed with the City, attaching a copy of the application, a copy of the View Restoration Guidelines, and an authorization form that would allow staff and the Planning Commission to visit the Foliage Owner's property shall be mailed in a timely manner after the application for a View Restoration Permit has been deemed complete.

3. Public Hearing Notice: Notice of any hearing held pursuant to this section shall be mailed at least 30 days prior to such hearing by United States mail, postage paid, to the applicant and to all owners who are identified as foliage owners in the view restoration permit application, as shown on the latest equalized assessment roll, as well as residential occupants of the foliage owners' properties.

4. Notice Of Decision: Within 5 days after the issuance of a decision by the reviewing authority, the Director of Community Development shall cause a copy of the decision to be mailed through the United States mail, postage prepaid, to each of the following persons:
a. The view owner, using the mailing address set forth in the application;
b. Each foliage owner that is named on the application, as listed on a current Tax Assessor's roll and to the occupant of the

Page 22 of 488 ends

foliage owner's property if the foliage owner's address is different than the property on which the foliage is located.

The failure of the person addressed to receive a copy of the decision shall not affect the validity or effectiveness of any decision.”
Section 8. Severability. If any section, subsection, subdivision, sentence, clause, phrase, or portion of this Ordinance or the application thereof to any person or place, is for any reason held to be invalid or unconstitutional by the final decision of any court of competent jurisdiction, the remainder of this Ordinance shall be and remain in full force and effect.

Section 9. Publication. The City Clerk shall cause this Ordinance to be published at least once in a newspaper of general circulation published and circulated in the City within fifteen (15) days after its passage in accordance with Section 36933 of the Government Code, shall certify to the adoption of this Ordinance, and shall cause this Ordinance and her certification, together with proof of publication, to be entered in the Book of Ordinances of the Council of this City. //
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Section 10. Effective Date. This Ordinance shall go into effect and be in full force and effect at 12:01 a.m. on the thirty-first (31st) day after its passage.

Adopted:

Effective:
____________________________
JULIAN A. GOLD, M.D.

Mayor of the City of Beverly Hills,
California
ATTEST:
_________________________ (SEAL)

HUMA AHMED
City Clerk
APPROVED AS TO FORM: APPROVED AS TO CONTENT:
___________________________ _____________________________ LAURENCE S. WIENER NANCY HUNT-COFFEY
City Attorney City Manager

Page 24 of 488 ends

Attachment 2
Planning Commission Resolution No.
2019

Page 25 of 488 ends

1 RESOLUTION NO.

A RESOLUTION OF THE PLANNING COMMISSION OF THE

CITY OF BEVERLY HILLS RECOMMENDING ADOPTION OF

AN ORDINANCE OF THE CITY OF BEVERLY HILLS

ESTABLISHING PROHIBITIONS ON FRACTIONAL

OWNERSHIP OF RESIDENTIAL AND COMMERCIAL

PROPERTY AND AMENDING NOTICING REQUIREMENTS
WHEREAS, the Planning Commission has considered the proposed Amendments to the City of Beverly Hills Municipal Code, as set forth and attached hereto as Exhibit A (the “Amendments”); and
WHEREAS, the Planning Commission conducted a duly noticed public hearing on February 9, 2023, and March 9, 2023, at which times it received oral and documentary evidence relative to the proposed Amendments; and
WHEREAS, the Planning Commission finds that the proposed Amendments are required because of the benefit to the public interest, health, safety, morals, peace, comfort, convenience, or general welfare, and that such Amendments are consistent with the general objectives, principles, and standards of the General Plan.

NOW, THEREFORE, the Planning Commission of the City of Beverly Hills hereby finds, resolves, and determines as follows:

Page 26 of 488 ends

2 Section 1. The Amendments were assessed in accordance with the authority and criteria contained in the California Environmental Quality Act (CEQA), the State CEQA Guidelines, and the environmental regulations of the City. The Planning Commission finds that adoption of the Amendments is exempt from CEQA pursuant to Section 15305 of Title 14 of the California Code of Regulations because the average slope of the City is less than 20 percent and the Amendments represent a minor alteration in land use limitations and does not result in any changes in land use or density. In addition, the Planning Commission finds that the adoption of the Amendments will not have a significant environmental impact and is exempt from CEQA pursuant to Section 15061(b)(3) of Title 14 of the California Code of Regulations, which states that CEQA applies only to projects which have the potential for causing a significant effect on the environment. This exemption is applicable because the draft ordinance would not result in physical changes to any properties, since it does not authorize construction, and imposes further restrictions on the use of certain properties in order to protect the public health, safety, and general welfare. Therefore, it can be seen with certainty that the draft ordinance has no potential to cause a significant effect on the environment.

The Amendments are consistent with the objectives, principles, and standards of the General Plan. General Plan Goal LU 1 – Long-Term Stability calls for land uses that enhance and maintain the long-term durability and stability of the community, as well as preserve the distinct characteristics of the community. These characteristics include the pride of its residents and businesses, as reflected in overall concern for the welfare of the community and wide-ranging commitments to participation in community affairs. Similarly, General Plan Policy LU 3 – Managed Change encourages change that respects and complements the qualities that distinguish the City as a community that provides for the needs of existing and future residents and businesses,

Page 27 of 488 ends

3 and ensures the effective and efficient use of land and infrastructure. General Plan Goal LU 4 – Land Use Distribution and Urban Form also calls for enhancing the distinguishing qualities of the City, and the livability of neighborhoods, while preserving environmental resources and the wellbeing and health of the City’s residents, employees, and visitors. General Plan Policy LU 5.1 – Neighborhood Conservation further requires that the densities, character, amenities, and quality of the City’s residential neighborhoods are conserved. General Plan Policy LU 5.8 – Encroachment of Incompatible Land Uses also calls for the protection of residential neighborhoods from incompatible nonresidential uses, by ensuring that zoning reviews address compatibility issues.

Amending sections of the Beverly Hills Municipal Code to prohibit fractional ownership of residential and commercial properties will protect the character of the City’s residential neighborhoods, as it will prevent adverse impacts that could result from fractional ownership models, such as noise, lack of community buy-in, and potential issues with privacy and property maintenance.

In addition, the proposed Amendments will help to ensure that the character of residential neighborhoods is preserved, while also protecting homeownership opportunities and preventing further exacerbation of the regional and state housing crisis. In addition, as noted in Ordinance No. 21-O-2849, the Amendments related to public notification requirements are also consistent with the objectives, principles, and standards of the General Plan. This ordinance previously analyzed the Amendments and found these to be consistent with General Plan Land Use Policy

16.11 and Implementation Program 8.1 Public Information and Involvement. For the foregoing reasons, the public interest, health, safety, morals, peace, comfort, convenience, or general welfare requires the code amendments.

Page 28 of 488 ends

4 Section 2. The Planning Commission does hereby recommend to the City Council the adoption of an ordinance approving and enacting the proposed Amendments substantially as set forth in Exhibit A, which is attached hereto and incorporated herein by reference. //
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5 Section 3. The Secretary of the Planning Commission shall certify to the passage, approval, and adoption of this resolution, and shall cause this resolution and his/her Certification to be entered in the Book of Resolutions of the Planning Commission of the City.

Adopted: March 9, 2023
Myra Demeter, Ph.D.

Chair of the Planning Commission of the
City of Beverly Hills
Attest:

Masa Alkire, AICP
Secretary of the Planning Commission
Approved as to form: Approved as to content:

David M. Snow Masa Alkire, AICP
Assistant City Attorney City Planner
Community Development Department
EXHIBIT A: Draft Ordinance

Page 30 of 488 ends

6 EXHIBIT A

Page 31 of 488 ends

-1-
[DRAFT] ORDINANCE NO. 23-O-____

AN ORDINANCE OF THE CITY OF BEVERLY

HILLS ESTABLISHING PROHIBITIONS ON

FRACTIONAL OWNERSHIP OF RESIDENTIAL

AND COMMERCIAL PROPERTY AND

AMENDING NOTICING REQUIREMENTS

THE CITY COUNCIL OF THE CITY OF BEVERLY HILLS HEREBY ORDAINS AS FOLLOWS:

Section 2. On February 9, 2023, and on March 9, 2023, the Planning Commission held duly noticed public hearings to review a draft ordinance that would prohibit, on a permanent basis, the fractional ownership of residential and commercial property. Thereafter the Planning Commission adopted Resolution No.
recommending that the City Council adopt the
draft ordinance to prohibit fractional ownership models from operating in the city (collectively, the “Amendments”). On ___________, 2023, the City Council held a duly noticed public hearing, received public testimony, and thereafter introduced this Ordinance.

Page 32 of 488 ends

-2-
California Code of Regulations because the average slope of the City is less than 20 percent and the Amendments represent a minor alteration in land use limitations and do not result in any changes in land use or density. In addition, the City Council finds that the adoption of the Amendments will not have a significant environmental impact and is exempt from CEQA pursuant to Section 15061(b)(3) of Title 14 of the California Code of Regulations, which states that CEQA applies only to projects which have the potential for causing a significant effect on the environment. This exemption is applicable because the Amendments would not result in physical changes to any properties, since it does not authorize construction, and imposes further restrictions on the use of certain properties in order to protect the public health, safety, and general welfare.

Therefore, it can be seen with certainty that the draft ordinance has no potential to cause a significant effect on the environment.

Page 33 of 488 ends

-3-
LU 5.1 – Neighborhood Conservation further requires that the densities, character, amenities, and quality of the City’s residential neighborhoods are conserved. General Plan Policy LU 5.8 – Encroachment of Incompatible Land Uses also calls for the protection of residential neighborhoods from incompatible nonresidential uses, by ensuring that zoning reviews address compatibility issues. Amending sections of the Beverly Hills Municipal Code to prohibit fractional ownership of residential and commercial properties will protect the character of the City’s residential neighborhoods, as it will prevent adverse impacts that could result from fractional ownership models, such as noise, lack of community buy-in, and potential issues with privacy and property maintenance. In addition, the proposed Amendments will help to ensure that the character of residential neighborhoods is preserved, while also protecting homeownership opportunities and preventing further exacerbation of the regional and state housing crisis. For the foregoing reasons, the public interest, health, safety, morals, peace, comfort, convenience, or general welfare requires the code amendments.

Page 34 of 488 ends

-4-
c. A membership, stake, interest, share, association, or similar device in an entity, group, association or similar device which by virtue of such membership, stake, interest, share, association or similar device grants entitlement to ownership rights or the use or possession of the property.” Section 6. The City Council hereby adds a new Section 10-3-307 to Article 3 of Chapter 3 of Title 10 of the Beverly Hills Municipal Code to read as follows:
“10-3-307: Prohibition on Fractional Ownership; Request for Hearing; Exemption.

Page 35 of 488 ends

-5-
(2) Any person who believes that the prohibition on Prohibited Fractional Ownership Arrangements is not intended to apply to a specific type of fractional ownership arrangement at any time may apply to the City Council for a hearing to review the time-based occupancy restrictions contemplated by that specific existing or contemplated fractional ownership arrangement.
(3) Any application for a City Council hearing shall be in writing and shall be received by the Community Development Department along with a processing fee as set by resolution of the City Council. Any hearing application filed pursuant to paragraph (1) of this section as a result of the issuance of a compliance letter from the City’s Community Preservation division shall be received by the Community Development Department within thirty (30) days after the date of the compliance letter. Notice of any hearing held pursuant to this section shall be completed in accordance with article 2.5 of this chapter and the City's public notice guidelines.

2. The fractional ownership arrangement will not disturb the stability of a residential neighborhood or residential building and will not adversely impact

Page 36 of 488 ends

-6-
existing or future development, redevelopment, safety, and proper maintenance of the real property.”
Section 7. The City Council hereby amends Section 10-3-253 (Notification Requirements) of Article 2.5 of Chapter 3 of Title 10 of the Beverly Hills Municipal Code, to read as follows:
“10-3-253: NOTIFICATION REQUIREMENTS:

The following methods of notice are required for each planning application:

A. Standard Requirements:

Public Notice
Requirements
For Development
Applications
On-Site
Posted
Notice
Newspaper
Notice
Mailed Notice Mailed Notice of
Application within 45
Days of Filing1
Architectural review:

None None None
Commission:

Commission level
projects must be reviewed
by the City's Architectural
Commission (AC) and
include: sign
accommodations, most
commercial signs, facade
remodels for commercial
and multifamily
Only
projects in
multi-family
residential
zones
None None

Page 37 of 488 ends

-7-
buildings, new
construction of
commercial and
multifamily buildings,
and landscaping for
commercial and
multifamily projects.

Cultural heritage:

Director: Director level
projects can be processed
administratively and
include Certificate of
Review for District NonContributor and Director's
determination of
ineligibility.

Certificate of appropriateness for designated landmarks and contributing properties: See section 10-3-3219 of this chapter
Commission:

The CHC acts on
Certificates of
Appropriateness for
Designated Landmarks
and Contributing
Properties, certificates of
ineligibility, and
certificates of economic
hardship.

Director: Director level
projects can be processed
administratively and
include single family
home remodels and new
homes in the Central Area
of the City that are
None None Owner/applicant

Page 38 of 488 ends

-8-
determined to be "track
1".

Commission:

Yes None Central area:
100 foot radius
+ block-face
Planning review:

Director: Director level
includes applications that
can be reviewed and
approved by staff.

Amendments
(General
Plan, Streets
Master Plan,
Specific
Plan, zone
text, Zoning
Code)
Conditional
use permit
Notice of Public
Hearing:

Central Area:
500 foot radius
+ block-face
Notice of Pending
Planning Commission
Application:

Central Area: 500 foot
radius + block face
Commission/Council
Level (cont.)
On-site
posted notice
of public
hearing
required for
all
commission
level projects
Maps
(tentative,
and parcel)
Specific Plan
Variance
Hillside Area:
1,000 foot
radius, plus
notice to either
all properties in
Hillside Zone 1
or Hillside Zone
2 Hillside Area: 1,000 foot
radius, plus notice to
either all properties in
Hillside Zone 1 or
Hillside Zone 2
Trousdale Estates Area:
1,000 foot radius

Page 39 of 488 ends

-9-
Trousdale
Estates Area:
1,000 foot
radius
Adjacent Neighbor
Mailed Notice: Required
only for projects in
single-family residential
zones
Notes:

Development
Application
Special Public Notice Requirements
The following applications have unique noticing requirements:

1. Notice Of Intent: A notice of intent to convert shall be delivered by the subdivider to each tenant at least 60 days prior to submitting an application for the tentative map in accordance with California Government Code section 66427.1(a) or any successor statute. The written notices to tenants required by this section shall be deemed satisfied if such notices comply with the legal requirements for service by mail. For the purposes of this article, the "legal requirements for service by mail" shall mean the requirements set forth in California Code of Civil

Page 40 of 488 ends

-10-
Procedure sections 1012 and 1013a, or any successor statutes.

The form of the notice shall be in the form outlined in Government Code section 66452.9 and shall inform the tenants of all rights provided under this Code and State law.

6. Affidavit Required: In connection with an application for a tentative map to convert an existing multi-family residential

Page 41 of 488 ends

-11-
apartment building or a common interest development
previously created prior to January 1, 2006, to a common interest development, the subdivider shall submit an affidavit in a form prescribed by the Director of Community Development attesting to compliance with the noticing requirements
prescribed by subsection A of this section. Said affidavit shall be signed by the subdivider under penalty of perjury and shall include copies of the proof of service on each tenant in the building to be converted.

Page 42 of 488 ends

-12-
Resolution of
public
convenience or
necessity
Notice of a public hearing shall be mailed to property owners and occupants within 300 feet of the premises for which a determination is requested. At least 20 days prior to the public hearing a written notice shall be published in the newspaper, and an on site posted notice shall be posted at the premises in accordance with subsection 10-3-252A of this chapter and the public notice guidelines.

View
restoration

The failure of the person addressed to receive a copy of the decision shall not affect the validity or effectiveness of any decision.”

Page 43 of 488 ends

-13-
Section 8. Severability. If any section, subsection, subdivision, sentence, clause, phrase, or portion of this Ordinance or the application thereof to any person or place, is for any reason held to be invalid or unconstitutional by the final decision of any court of competent jurisdiction, the remainder of this Ordinance shall be and remain in full force and effect.

Page 44 of 488 ends

-14-
Section 10. Effective Date. This Ordinance shall go into effect and be in full force and effect at 12:01 a.m. on the thirty-first (31st) day after its passage.

Adopted:

Effective:
____________________________

LILI BOSSE
Mayor of the City of Beverly Hills,
California
ATTEST:
_________________________ (SEAL)

HUMA AHMED
City Clerk
APPROVED AS TO FORM: APPROVED AS TO CONTENT:
___________________________ _____________________________ LAURENCE S. WIENER NANCY HUNT-COFFEY
City Attorney City Manager
2773894.1

Page 45 of 488 ends

STATE OF CALIFORNIA )
COUNTY OF LOS ANGELES ) SS.

CITY OF BEVERLY HILLS )
I, KAREN MYRON, Recording Secretary of the Planning Commission of the City of Beverly Hills, California, do hereby certify that the foregoing is a true and correct copy of Resolution No. 2019 duly passed, approved and adopted by the Planning Commission of said City at a meeting of said Commission on March 9, 2023, and thereafter duly signed by the Secretary of the Planning Commission, as indicated; and that the Planning Commission of the City consists of five (5) members and said Resolution was passed by the following vote of said Commission, to wit:

AYES: Commissioners Wolfe, Kaplan, Ostroff, Vice Chair Ross, Chair Demeter NOES: None
ABSTAIN: None
ABSENT: None
________________________________

KAREN MYRON
Recording Secretary of the
Planning Commission
City of Beverly Hills, California

Page 46 of 488 ends

Certificate Of Completion
Envelope Id: 91F351DB3F6A46D596C9623B466FEDDA Status: Completed Subject: Please DocuSign: PC Reso 2019 - Fractional Ownership.pdf Source Envelope:

Document Pages: 21 Signatures: 5 Envelope Originator:

Certificate Pages: 2 Initials: 0 Karen Myron
AutoNav: Enabled
EnvelopeId Stamping: Enabled
Time Zone: (UTC-08:00) Pacific Time (US & Canada)
455 N. Rexford Drive
Beverly Hills, CA 90210
[email protected]
IP Address: 198.245.189.166
Record Tracking
Status: Original
3/10/2023 9:48:25 AM
Holder: Karen Myron
[email protected]
Location: DocuSign
Signer Events Signature Timestamp
Myra Demeter, Ph.D.
[email protected]
Security Level: Email, Account Authentication
(None)
Signature Adoption: Pre-selected Style
Using IP Address: 107.184.230.67
Signed using mobile
Sent: 3/10/2023 9:52:14 AM
Viewed: 3/10/2023 11:15:54 AM
Signed: 3/10/2023 11:16:24 AM
Electronic Record and Signature Disclosure:

Not Offered via DocuSign
David M. Snow
[email protected]
Security Level: Email, Account Authentication
(None)
Signature Adoption: Drawn on Device
Using IP Address: 38.122.232.202
Sent: 3/10/2023 11:16:26 AM
Resent: 3/23/2023 5:31:05 PM
Viewed: 3/31/2023 9:34:53 AM
Signed: 3/31/2023 9:35:21 AM
Electronic Record and Signature Disclosure:

Not Offered via DocuSign
Masa Alkire
[email protected]
Security Level: Email, Account Authentication
(None)
Signature Adoption: Pre-selected Style
Using IP Address: 198.245.189.166
Sent: 3/31/2023 9:35:23 AM
Viewed: 3/31/2023 4:58:29 PM
Signed: 4/4/2023 5:52:08 PM
Electronic Record and Signature Disclosure:

Not Offered via DocuSign
Karen Myron
[email protected]

COMM DEV COMMISSION SPECIALIST,

CD-PLANNING
City of Beverly Hills
Security Level: Email, Account Authentication
(None)
Signature Adoption: Pre-selected Style
Using IP Address: 198.245.189.166
Sent: 4/4/2023 5:52:09 PM
Viewed: 4/7/2023 9:02:37 AM
Signed: 4/7/2023 9:05:27 AM
Electronic Record and Signature Disclosure:

Not Offered via DocuSign
In Person Signer Events Signature Timestamp
Editor Delivery Events Status Timestamp

Page 47 of 488 ends

Agent Delivery Events Status Timestamp
Intermediary Delivery Events Status Timestamp
Certified Delivery Events Status Timestamp
Carbon Copy Events Status Timestamp
Witness Events Signature Timestamp
Notary Events Signature Timestamp
Envelope Summary Events Status Timestamps
Envelope Sent Hashed/Encrypted 3/10/2023 9:52:14 AM
Certified Delivered Security Checked 4/7/2023 9:02:37 AM Signing Complete Security Checked 4/7/2023 9:05:27 AM
Completed Security Checked 4/7/2023 9:05:27 AM
Payment Events Status Timestamps

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Attachment 3
Required Findings

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REQUIRED ZONE TEXT AMENDMENT (ZTA) FINDINGS
BHMC §10-3-3908: DECISION OF THE PLANNING COMMISSION:

If, from the facts presented at the public hearing, or by investigation by or at the instance of the planning commission, the planning commission finds that the public interest, health, safety, morals, peace, comfort, convenience, or general welfare requires the reclassification of the property involved or the reclassification of any portion of the property, the planning commission shall so recommend to the council.

The recommendation of the planning commission to the council shall be in writing and shall set forth fully the findings and determinations of the planning commission on the matter involved. A decision shall be rendered within a reasonable time, and a recommendation shall be filed with the council within seven (7) days after the decision is rendered by the planning commission. (1962 Code § 10-858; amd. Ord. 95-O-2239, eff. 7-7- 1995)

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Attachment 4
Interim Ordinance No. 21-O-2841

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ORDINANCE NO. 21-0- 2841

AN INTERIM ORDINANCE OF THE CITY OF BEVERLY HILLS

ESTABLISHING A MORATORIUM ON FRACTIONAL

OWNERSHIP OF RESIDENTIAL AND COMMERCIAL

PROPERTY, DECLARING THE URGENCY THEREOF AND

MAKING A DETERMINATION OF EXEMPTION UNDER THE

CALIFORNIA ENVIRONMENTAL QUALITY ACT (CEQA)

THE CITY COUNCIL OF THE CITY OF BEVERLY HILLS HEREBY ORDAINS AS FOLLOWS:

Section 1. Legislative Findings.

A. California is experiencing a housing supply crunch. Existing housing in this state, especially in its largest cities, has become very expensive. California needs an estimated 180,000 additional homes annually to keep up with population growth, and the Govemor has called for 3.5 million new homes to be built by 2025.

B. Fractional ownership of residential property for use or possession of the property for a period of less than a full year, akin to a vacation time-sharing property model, reduces the availability of residential property for long-term occupancies in the City. Thus, creating the need for more housing. Moreover, the use of fractional ownership can be detrimental to the City and its residents because such multiple occupancies disturb the stability of residential neighborhoods.

C. Fractional ownership of residential or commercial property, can adversely impact future development, redevelopment, safety, and proper maintenance of the property as a result of the complexities associated with the incongruent and changing objectives, intents, and goals of multiple owners.

D. The City Council believes that unregulated fractional ownership of residential or commercial properties with time-based occupancy restrictions would unduly impact the City.

The City Council therefore believes there is a current and immediate threat to the public health, safety and welfare that is presented by such ownership models, and that a moratorium is necessary to study the regulation of fractional ownership.

E. The City Council finds that the time provided by the moratorium will allow for a comprehensive analysis of residential and commercial property ownership models, including fractional ownership, with time-based occupancy restrictions. During the moratorium, the City will be able to analyze potential impacts on public health and safety related to time-based occupancy restrictions; and impacts on the public welfare due to the removal of full-time housing units from the market and replacing them with vacation or part-time units, the inference with the stability of residential neighborhoods and the impact on the maintenance and redevelopment of properties. The City Council finds that these analyses will help the City Council determine how to best prevent impacts to the public health, safety and welfare. The City Council further finds that the moratorium will allow time to achieve a reasonable level of assurance that there will not 60785-000 l\2552952v9.doc

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be serious negative impacts to the overall community and ensure a positive and mutually acceptable set of outcomes for the City's residents, business community, and property owners.

F. Based on the foregoing, the City Council finds that if the City fails to enact this moratorium, fractional ownership of properties with time-based occupancy restrictions may be allowed under outdated zoning regulations that do not address the unique impacts of such ownership models. Therefore, a current and immediate threat to the public safety, health and welfare exists.

Section 2. Authority.

Pursuant to Government Code Section 65858, the City Council may adopt, as an urgency measure, an interim ordinance that prohibits any uses that may be in conflict with a contemplated zoning proposal that the City Council is considering, studying, or intends to study within a reasonable period of time.

Sections. Urgency Findings.

The City Council finds and determines that there is an immediate threat to the public health, safety, or welfare, and that fractional ownership of residential and commercial properties with time-based occupancy restrictions constitute a threat to the public health, safety or welfare.

As described in Section 1, the staff report accompanying this Interim Urgency Ordinance, and other evidence in the record, such fractional ownership in the City could threaten the health, safety and welfare of the community through negative impacts that include, but are not limited to, removing full-time housing units from the market and replacing them with vacation or parttime units, interference with the stability of residential neighborhoods and interference with the maintenance and redevelopment of properties. To preserve the public health, safety, and welfare, the City Council finds that it is necessary that this Interim Urgency Ordinance take effect immediately pursuant to Government Code Sections 65858 to prevent such harm.

Section 4. Moratorium Established.

Based on the facts and findings set forth in Sections 1 through 3 of this Interim Urgency Ordinance, and notwithstanding any other ordinance or provision of the Beverly Hills Mimicipal Code, the City of Beverly Hills hereby establishes the following moratorium:

A. Definitions. For the purposes of this moratorium, the following phrase has the meaning given herein.

1. "Fractional Ownership" shall mean shared ownership of a property, entitlement to ownership rights of a property, entitlement to use of a property, or possession of a property through any of the following means:
a. Direct ownership of a property;
b. Indirect ownership of a property through a membership, stake, interest, share, association, or similar device in the owner of the property or a subsidiary or parent of the owner of the property; or
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c. A membership, stake, interest, share, association, or similar device in an entity, group, association or similar device which by virtue of such membership, stake, interest, share, association or similar device grants entitlement to ownership rights or the use or possession of a property.

B. Time-Based Occunancv Restrictions. Unless approved by a specific plan, fractional ownership of any property in the City shall be prohibited if such ownership includes any arrangement, schedule, plan, scheme, or similar device, whether by agreement, sale, lease, deed, license, right to use agreement, or by any other means, whereby an owner of the property or a fraction thereof, receives ownership rights in, or the right to use, the property for a period of time less than a full year.

C. Request for Hearing. Any person with a fractional ownership in the City who is threatened with enforcement of time-based occupancy restrictions or to whom an administrative citation is issued pursuant to this Ordinance may apply to the City Council for a hearing to review the time-based occupancy restrictions as applied against the property with such fractional ownership. Any such application shall be in writing and shall be received by the Community Development Department. Any application as a result of an administrative citation shall be received by the Community Development Department within thirty (30) days after the date of the administrative citation.

D. Notification for Hearing. Hearings pursuant to this Ordinance shall be preceded by public notice by the following method:

1. Mailed Notices: The applicant shall mail notices providing, at a minimum, the property address of the property involved with the hearing, general scope of the request, basic hearing information, and City contact information to recipients of the notice. Such mailed notices shall be sent via private courier service with the ability to track delivery of the notice, and shall be mailed at least twenty (20) days prior to such hearing by the reviewing authority.

Mailed notices shall be sent to properties within a 300-foot radius, measured from the exterior boundaries of the property involved with the hearing.

2. Affidavit/Proof of Mailing: The applicant shall submit an affidavit to the Community Development Department within five (5) days of mailing the notices required by this section, verifying that the mailings are in compliance with this section.

E. Exception to Time-Based Occunancv Restrictions. The time-based occupancy restrictions shall not apply to a property with fractional ownership if the City Council makes the following finding:

1. The fractional ownership of a property will not disturb the stability of a residential neighborhood or residential building and will not adversely impact future development, redevelopment, safety, and proper maintenance of the property.
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Sections. Enforcement.

The provisions of this Interim Urgency Ordinance shall be enforceable pursuant to the general enforcement provisions in Title 1 of the Beverly Hills Municipal Code.

Section 6. CEOA Findings.

The City Council hereby finds that it can be seen with certainty that there is no possibility that the adoption of this Ordinance may have a significant effect on the environment. This Ordinance does not authorize construction and, in fact, imposes greater restrictions on certain properties in order to protect the public health, safety and general welfare because the Ordinance will impose a temporary moratorium on certain fractional ownership in the City in order to protect the public health, safety and general welfare, and will thereby serve to avoid potentially significant adverse environmental impacts during the term of the moratorium. In addition, the Ordinance consists of minor alterations in land use limitations and do not result in any changes in land use or density. It is therefore not subject to the California Environmental Quality Act review pursuant to Title 14, Chapter 3, Sections 15305 and 15061(b)(3) of the California Code of Regulations.

Section 7. Severabilitv.

If any section, subsection, subdivision, paragraph, sentence, clause, phrase, or portion of this Ordinance or its application to any person, place, or circumstances, is for any reason held to be invalid or unenforceable by the final decision of any court of competent jurisdiction, such invalidity or unenforceability shall not affect the validity or enforceability of the remaining sections, subsections, subdivisions, paragraphs, sentences, clauses, phrases, or portions of this Ordinance, or its application to any other person, place, or circumstance. The City Council hereby declares that it would have adopted each section, subsection, subdivision, paragraph, sentence, clause, phrase, or portion hereof, irrespective of the fact that any one or more sections, subsections, subdivisions, paragraphs, sentences, clauses or phrases hereof be declared invalid or unenforceable.

Sections. Effective Date; Approval and Extension of Ordinance.

This Ordinance, being an Interim Ordinance adopted as an urgency measure for the immediate protection of the public safety, health, and general welfare, containing a declaration of the facts constituting the urgency, and passed by a minimum four-fifths (4/5) vote of the City Council, shall take effect immediately upon its adoption and shall continue in effect for a period of not longer than forty-five (45) days. After notice pursuant to Government Code Section 65090 and a public hearing, the City Council may extend the effectiveness of this Urgency Ordinance as provided in Government Code Section 65858.

Section 9. Publication.

The City Clerk shall certify to the passage and adoption of this Ordinance and shall cause its publication in accordance with applicable law.
-4-
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Adopted: July 15, 2021
Effective: July 16, 2021
ATTEST:

HUMA AHMED
City Clerk _
imoi (SEAL)

ROBERT WUNDERLICH
Mayor of the City of Beverly Hills,
California
APPROVED AS TO FORM:

LAURENCE S. WIENER
City Attorney
APPROVED AS TO CONTENT:

GEORGE CHAVEZ
City Manager
B0785-0001\2552952v9.doc

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Attachment 5
Ordinance No. 21-O-2842 (Extension 1)

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ORDINANCE NO. 21-0- 2842

AN INTERIM ORDINANCE OF THE CITY OF BEVERLY HILLS
EXTENDING INTERIM ORDINANCE NO. 21-0-2841

ESTABLISHING A MORATORIUM ON FRACTIONAL

OWNERSHIP OF RESIDENTIAL AND COMMERCIAL

PROPERTY, DECLARING THE URGENCY THEREOF AND

MAKING A DETERMINATION OF EXEMPTION UNDER THE

CALIFORNIA ENVIRONMENTAL QUALITY ACT (CEQA)

THE CITY COUNCIL OF THE CITY OF BEVERLY HILLS HEREBY ORDAINS AS FOLLOWS:

Section 1. Legislative Findings.

A. California is experiencing a housing supply crunch. Existing housing in this state, especially in its largest cities, has become very expensive. California needs an estimated 180,000 additional homes annually to keep up with population growth, and the Governor has called for 3.5 million new homes to be built by 2025.

D. The City Council believes that unregulated fractional ownership of residential or commercial properties with time-based occupancy restrictions would unduly impact the City.

E. On July 15,2021, the City adopted Interim Urgency Ordinance No. 21-0-2841, which imposed an initial 45-day moratorium on the fractional ownership of residential and commercial property within the City during the pendency of the City's review and adoption of permanent regulations governing fractional ownership in the City. The initial 45-day moratorium is scheduled to expire on August 29,2021.

F. The City Council continues to find that the time provided by the moratorium will allow for a comprehensive analysis of residential and commercial property ownership models, including fractional ownership, with time-based occupancy restrictions. During the extended period of the moratorium, the City will continue to analyze potential impacts on public health B0785-0001\256I141vl.doc

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and safety related to time-based occupancy restrictions; and impacts on the public welfare due to the removal of full-time housing units from the market and replacing them with vacation or parttime units, the inference with the stability of residential neighborhoods and the impact on the maintenance and redevelopment of properties. The City Council finds that these analyses will help the City Council determine how to best prevent impacts to the public health, safety and welfare. The City Council further finds that extension of the moratorium will allow time to achieve a reasonable level of assurance that there will not be serious negative impacts to the overall community and ensure a positive and mutually acceptable set of outcomes for the City's residents, business community, and property owners.

F. Based on the foregoing, the City Council ultimately finds that if the City fails to extend the moratorium, fractional ownership of properties with time-based occupancy restrictions may be allowed under outdated zoning regulations that do not address the unique impacts of such ownership models before the City Council is able to review the matter in order to adequately protect the health, safety and welfare of the residents, business community, and property owners of the City. Therefore, a current and immediate threat to the public safety, health and welfare remains in existence.

G. A written report describing the measures taken to alleviate the conditions which led to the adoption of the aforementioned Interim Urgency Ordinance was issued by the City Council on August 13,2021, which was at least ten (10) days prior to the expiration of the Interim Ordinance on August 29,2021, in compliance with State law.

H. Pursuant to Government Code Sections 65858 and 65090, the City Council conducted a duly noticed public hearing on August 17, 2021, at which time the City Council considered this Ordinance to extend the existing 45-day moratorium on the establishment of the moratorium on fractional ownership of residential and commercial property for an additional 10 months and 15 days.

Section 2. Authority.

Section 3. Urgency Findings.

As described in Section 1, the staff report accompanying this Interim Urgency Ordinance, and other evidence in the record, such fractional ownership in the City could threaten the health, safety and welfare of the community through negative impacts that include, but are not limited to, removing full-time housing units from the market and replacing them with vacation or parttime units, interference with the stability of residential neighborhoods and interference wiA the maintenance and redevelopment of properties. To preserve the public health, safety, and -2-
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welfare, the City Council finds that it is necessary that this Interim Urgency Ordinance take effect immediately pursuant to Government Code Sections 65858 to prevent such harm.

Section 4. Moratorium Extended,
Based on the facts and findings set forth in Sections 1 through 3 of this Interim Urgency Ordinance, and notwithstanding any other ordinance or provision of the Beverly Hills Municipal Code, the City of Beverly Hills hereby extends the following moratorium:

A. Definitions. For the purposes of this moratorium, the following phrase has the meaning given herein.

I. "Fractional Ownership" shall mean shared ownership of real property, entitlement to ownership rights of real property, entitlement to use of real property, or possession of real property through any of the following means:
a. Direct ownership of the property;
b. Indirect ownership of the property through a membership, stake, interest, share, association, or similar device in the owner of the property or a subsidiary or parent of the owner of the property; or c. A membership, stake, interest, share, association, or similar device in an entity, group, association or similar device which by virtue of such membership, stake, interest, share, association or similar device grants entitlement to ownership rights or the use or possession of the property.

B. Time-Based Occupancv Restrictions. Unless approved by a specific plan, fractional ownership of any real property in the City shall be prohibited if such ownership includes any arrangement, schedule, plan, scheme, or similar device, whether by agreement, sale, lease, deed, license, right to use agreement, or by any other means, whereby an owner of the property or a fraction thereof, receives ownership rights in, or the right to use, the property for a period of time less than a full year.

D. Notification for Hearing. Hearings pursuant to this Ordinance shall be preceded by public notice by the following method:
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Mailed notices shall be sent to properties within a 300-foot radius, measured from the exterior boundaries of the property involved with the hearing.

2. AfRdavit/Proof of Mailing: The applicant shall submit an affidavit to the Community Development Department within five (5) days of mailing the notices required by this section, verifying that the mailings are in compliance with this section.

E. Exception to Time-Based Occupancv Restrictions. The time-based occupancy restrictions shall not apply to real property with fractional ownership if the City Council makes the following finding:

1. The fractional ownership of the property will not disturb the stability of a residential neighborhood or residential building and will not adversely impact future development, redevelopment, safety, and proper maintenance of the property.

Section 5. Enforcement.

The provisions of this Interim Urgency Ordinance shall be enforceable pursuant to the general enforcement provisions in Title 1 of the Beverly Hills Municipal Code.

Section 6. CEOA Findings.

Section 7. Severabilitv.

If any section, subsection, subdivision, paragraph, sentence, clause, phrase, or portion of this Ordinance or its application to any person, place, or circumstances, is for any reason held to be invalid or. unenforceable by the final decision of any court of competent jurisdiction, such B0785-0001\256n41vl .doc Page 61 of 488
invalidity or unenforceability shall not affect the validity or enforceability of the remaining sections, subsections, subdivisions, paragraphs, sentences, clauses, phrases, or portions of this Ordinance, or its application to any other person, place, or circumstance. The City Council hereby declares that it would have adopted each section, subsection, subdivision, paragraph, sentence, clause, phrase, or portion hereof, irrespective of the fact that any one or more sections, subsections, subdivisions, paragraphs, sentences, clauses or phrases hereof be declared invalid or unenforceable.

Section 8. Effective Date: Approval and Extension of Ordinance.

This Ordinance, being an Interim Ordinance adopted as an urgency measure for the immediate protection of the public safety, health, and general welfare, containing a declaration of the facts constituting the urgency, and passed by a minimum four-fifths (4/5) vote of the City Council, shall take effect concurrent with the expiration of Interim Urgency Ordinance No. 21-0- 2841 at midnight on August 29, 2021, and shall remain in effect for a period of ten (10) months and fifteen (15) days, through and including July 14, 2022, in accordance with California Government Code Section 65858.. After notice pursuant to Government Code Section 65090 and a public hearing, the City Council may extend the effectiveness of this Urgency Ordinance as provided in Government Code Section 65858.

Section 9. Publication.

The City Clerk shall certify to the passage and adoption of this Ordinance and shall cause its publication in accordance with applicable law.

Adopted: August 17, 2021
Effective: August 29, 2021
ATTEST
(SEAL)
AHMET)
City ClefkJ ^

ROBERT WUNDERLICH
Mayor of the City of Beverly Hills,
California
APPROVED AS TO FORM:
/
pi
LAURENCE S. WIENER
City Attorney
APPROVED AS TO CONTENT:

GEOR
City Manager
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Attachment 6
Ordinance No. 22-O-2862 (Extension 2)

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ORDINANCE NO. 22-0- 2862

AN INTERIM ORDINANCE OF THE CITY OF BEVERLY HILLS
EXTENDING INTERIM ORDINANCE NO. 21-0-2841

ESTABLISHING A MORATORIUM ON FRACTIONAL

OWNERSHIP OF RESIDENTIAL AND COMMERCIAL

PROPERTY, DECLARING THE URGENCY THEREOF AND

MAKING A DETERMINATION OF EXEMPTION UNDER THE

CALIFORNIA ENVIRONMENTAL QUALITY ACT (CEQA)

THE CITY COUNCIL OF THE CITY OF BEVERLY HILLS HEREBY ORDAINS AS FOLLOWS;
Section 1. Legislative Findings.

A. California is experiencing a housing supply crunch. Existing housing in this state, especially in its largest cities, has become very expensive. Califomia needs an estimated 180,000 additional homes annually to keep up with population growth, and the Governor has called for 3.5 million new homes to be built by 2025.

C. Fractional ownership of residential or commercial property, can adversely impact future development, redevelopment, safety, and proper maintenance of the property as a result of the complexities associated with the incongrucnt and changing objectives, intents, and goals of multiple owners.

D. The City Council believes that unregulated fractional ownership of residential or commercial properties with time-based occupancy restrictions would unduly impact the City.

E. On July 15, 2021, the City adopted Interim Urgency Ordinance No. 21-0-2841, which imposed an initial 45-day moratorium on the fractional ownership of residential and commercial property within the City during the pendency of the City's review and adoption of permanent regulations governing fractional ownership in the City. The initial 45-day moratorium expired on August 29, 2021.

F. On August 17, 2021, the City adopted Ordinance No. 21 -0-2842, which extended the Interim Urgency Ordinance No. 21-0-2841 for an additional ten (10) months and fifteen (15) days, with an expiration date of July 15, 2022.

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G. The City Council continues to find that the time provided by the moratorium will allow for a comprehensive analysis of residential and commercial property ownership models, including fractional ownership, with time-based occupancy restrictions. During the extended period of the moratorium, the City will continue to analyze potential impacts on public health and safety related to time-based occupancy restrictions; and impacts on the public welfare due to the removal of full-time housing units from the market and replacing them with vacation or parttime units, the inference with the stability of residential neighborhoods and the impact on the maintenance and redevelopment of properties. The City Council finds that these analyses will help the City Council determine how to best prevent impacts to the public health, safety and welfare. The City Council further finds that extension of the moratorium will allow time to achieve a reasonable level of assurance that there will not be serious negative impacts to the overall community and ensure a positive and mutually acceptable set of outcomes for the City's residents, business community, and property owners.

H. Based on the foregoing, the City Council ultimately finds that if the City fails to extend the moratorium, fractional ownership of properties with time-based occupancy restrictions may be allowed under outdated zoning regulations that do not address the unique impacts of such ownership models before the City Council is able to review the matter in order to adequately protect the health, safety and welfare of the residents, business community, and property owners of the City. Therefore, a current and immediate threat to the public safety, health and welfare remains in existence.

I. A written report describing the measures taken to alleviate the conditions which led to the adoption of the aforementioned Interim Urgency Ordinance was issued by the City Council on June 2, 2022 which was at least ten (10) days prior to the expiration of the Interim Ordinance on July 15, 2022, in compliance with State law.

J. Pursuant to Government Code Sections 65858 and 65090, the City Council conducted a duly noticed public hearing on June 14, 2022, at which time the City Council considered this Ordinance to extend the existing moratorium on the establishment of the fractional ownership of residential and commercial property for an additional one (1) year period.

Section 2. Authoritv.

Section 3. Urgency Findings.

As described in Section 1, the staff report accompanying this Interim Urgency Ordinance, and other evidence in the record, such fractional ownership in the City could threaten the health.

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safety and welfare of the community through negative impacts that include, but are not limited to, removing full-time housing units from the market and replacing them with vacation or parttime units, interference with the stability of residential neighborhoods and interference with the maintenance and redevelopment of properties. To preserve the public health, safety, and welfare, the City Council finds that it is necessary that this Interim Urgency Ordinance take effect immediately pursuant to Government Code Sections 65858 to prevent such harm.

Section 4. Moratorium Extended.

Based on the facts and findings set forth in Sections 1 through 3 of this Interim Urgency Ordinance, and notwithstanding any other ordinance or provision of the Beverly Hills Municipal Code, the City of Beverly Hills hereby extends the following moratorium:

A. Definitions. For the purposes of this moratorium, the following phrase has the meaning given herein.

1. "Fractional Ownership" shall mean shared ownership of real property, entitlement to ownership rights of real property, entitlement to use of real property, or possession of real property through any of the following means:
a. Direct ownership of the property;
b. Indirect ownership of the property through a membership, stake, interest, share, association, or similar device in the owner of the property or a subsidiary or parent of the owner of the property; or c. A membership, stake, interest, share, association, or similar device in an entity, group, association or similar device which by virtue of such membership, stake, interest, share, association or similar device grants entitlement to ownership rights or the use or possession of the property.

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D. Notification for Hearing. Hearings pursuant to this Ordinance shall be preceded by public notice by the following method;

Mailed notices shall be sent to properties within a 300-foot radius, measured from the exterior boundaries of the property involved with the hearing.

E. Exception to Time-Based Occupancv Restrictions. The time-based occupancy restrictions shall not apply to real property with fractional ownership if the City Council makes the following finding:

Section 5. Enforcement.

The provisions of this Interim Urgency Ordinance shall be enforceable pursuant to the general enforcement provisions in Title 1 of the Beverly Hills Municipal Code.

Section 6. CEOA Findings.

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Section 7. Severabilitv.

Section 8. Effective Date: iroval and Extension of Ordinance.

This Ordinance, being an Interim Ordinance adopted as an urgency measure for the immediate protection of the public safety, health, and general welfare, containing a declaration of the facts constituting the urgency, and passed by a minimum four-fifths (4/5) vote of the City Council, shall take effect concurrent with the expiration of Interim Urgency Ordinance No. 21-0- 2841, as extended by Ordinance No 21-0-2842, at midnight on July 15, 2022, and shall remain in effect for a period of one year, through and including July 14, 2023, in accordance with Califomia Government Code Section 65858.

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Section 9. Publication.

The City Clerk shall certify to the passage and adoption of this Ordinance and shall cause its publication in accordance with applicable law.

Adopted: June 14, 2022
Effective: July 15, 2022
ATTEST

HUMA AHMED
City Clerk
(SEAL)

THLIBOSSE
Mayor of the City of Beverly Hills,
California
APPROVED AS TO FORM: APPROVED AS TO CONTENT:

LAURENCE S. WIENER
City Attorney

GEORGIXHAVEZ
City Manager
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Attachment 7
City of Newport Beach Report on
Fractional Ownership

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FRACTIONAL HOUSING
‐ i ‐ 27128 Paseo Espada, Suite 1524 San Juan Capistrano, CA 92675 Prepared For:

City of Newport Beach
Community Development Department
August 29, 2022

FRACTIONAL HOMEOWNERSHIP

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FRACTIONAL HOUSING
‐ i ‐
Table of Contents
EXECUTIVE SUMMARY ..................................................................................................................................1 BACKGROUND...............................................................................................................................................1 Known/Suspected Properties in Newport Beach ..................................................................................... 1 BENEFITS AND IMPACTS OF FRACTIONAL HOUSING.................................................................................... 2 Fractional Housing Benefits...................................................................................................................... 2 Fractional Housing Impacts....................................................................................................................... 3 COMMUNITY SURVEY ...................................................................................................................................4 City of Beverly Hills, CA ............................................................................................................................. 5 City of Carlsbad, CA...................................................................................................................................5 City of Carmel by the Sea, CA.................................................................................................................... 5 City of Encinitas, CA ..................................................................................................................................5 City of Fort Lauderdale, FL ........................................................................................................................ 6 City of Hermosa Beach, CA ....................................................................................................................... 6 City of Indian Wells, CA............................................................................................................................. 6 County of Monterey, CA ........................................................................................................................... 6 City of Napa, CA ........................................................................................................................................6 Village of North Haven, NY ....................................................................................................................... 7 City of Oceanside, CA................................................................................................................................7 City of Pacific Grove, CA............................................................................................................................ 7 City of Palm Desert, CA ............................................................................................................................. 7 City of Palm Springs, CA ............................................................................................................................ 7 City of Park City, UT ..................................................................................................................................8 City of Santa Barbara, CA.......................................................................................................................... 8 City of Santa Cruz, CA................................................................................................................................8 City of South Lake Tahoe, CA .................................................................................................................... 8 City of Sonoma, CA....................................................................................................................................9 City of St. Helena, CA ................................................................................................................................9 Town of Truckee, CA .................................................................................................................................9 City of Vail, CO ........................................................................................................................................10 CONCLUSIONS.............................................................................................................................................10

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FRACTIONAL HOUSING
‐ ii ‐
APPENDICES ................................................................................................................................................10 Appendix A – Pacaso Economic Impact Analysis, prepared by EBP........................................................A1 Appendix B – City of Beverly Hills Urgency Ordinance ...........................................................................B1 Appendix C – City of Carlsbad Timeshare ordinance ..............................................................................C1 Appendix D – City of Carmel by the Sea Cease and Desist Order...........................................................D1 Appendix E – City of Hermosa Beach Planning Commission Resolution ................................................ E1 Appendix F – County of Monterey Cease and Desist Order ................................................................... F1 Appendix G – Village of North Haven Code Amendment...................................................................... G1 Appendix H – City of Palm Desert Ordinance ........................................................................................ H1 Appendix I – City of Palm Springs Cease and Desist Order...................................................................... I1 Appendix J – Park City Notice of Amendment.........................................................................................J1 Appendix K – City of Santa Cruz Ballot Initiative..................................................................................... K1 Appendix L – City of South Lake Tahoe Cease and Desist Order ............................................................ L1 Appendix M – City of Sonoma Ordinance..............................................................................................M1 Appendix N – City of St. Helena Ordinance ........................................................................................... N1 Appendix O – Pacaso Inc. v. City of St. Helena....................................................................................... O1 Appendix P – Town of Truckee Ordinance.............................................................................................. P1 Cover Photo by Dex Ezekiel on Unsplash

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FRACTIONAL HOUSING
‐ 1 ‐

EXECUTIVE SUMMARY
The City of Newport Beach (City) is beginning to see the rise of fractional homeownership of single‐family houses. Fractional homeownership is when multiple owners purchase a property and split the allowed time at the property through a formal arrangement, as compared to multiple owners who occupy the residence full‐time or have no formal arrangement for occupancy. In the fractional model, the allotted time for each owner is based on their percentage of ownership. In reviewing available data on fractional homeownership, there appears to be at least ten such properties within the City but there could be more.

The City isreceiving complaintsfrom residentsthat these propertiesfunction similarly to short‐term rental vacation homes and result in significant noise, traffic, and other impacts to residential neighborhoods. As a result of these concerns, the City asked Sagecrest Planning+Environmental (Sagecrest) to investigate how other jurisdictions are dealing with fractional housing and the companies that promote them. Based on thisinvestigation, it appearsthat other communities are adopting moratoriums and pursuing operators of fractional housing companies through code enforcement actions.

BACKGROUND
Fractional homeownership (sometimes called co‐ownership) is an emerging trend in real estate where ownership of propertiesis equally shared among multiple owners(typically between four and 12 owners).

The amount of time the owner may spend at the property correlates to the fraction of ownership (e.g., a 1 /8 share owner would be allotted 45 days per year). This time allotment is not typically used consecutively, but rather one or two weeks at a time. In addition to the cost to purchase their share of the home, the owners are responsible for their share of the maintenance, property management fees, HOA fees, cleaning costs, utilities, taxes, insurance, and payment into a reserve fund to cover long‐term repairs, such as replacement of the roof. Fractional owners maintain an ownership interest, benefit from a change in property value due to appreciation and have the potential to generate income through short‐ term rentals, although the City would maintain authority on short‐term rentals. It should also be noted that some fractional homeownership companies prohibit short‐term rentals in their management agreement.

Companies such as Pacaso, Sharetini, Ember, Equity Estates, and others facilitate the purchase of properties and provide the necessary maintenance, furnishments, property management, and cleaning services in exchange for a monthly fee. Many of these companies utilize ownership models that purchase and hold the properties under entities, such as limited liability companies, to avoid the need for a real estate transaction each time an owner sells their share. Alternatively, an ownership group could forego using a management company and self‐govern the access to fractional housing.

Known/Suspected Properties in Newport Beach
Sagecrest reviewed the listings on various sites to identify properties in Newport Beach. Additionally, Sagecrest reviewed the City’s database to find properties with mailing addressesthat match the fractional home ownership companies. The following table lists the properties that are either known or suspected to be fractional ownership properties.

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Property Address Source
117 25th Street Listed on Pacaso
121 Emerald Avenue Listed on Pacaso
305 Grand Canal Listed on Pacaso
315 East Bay Avenue Listed on Ember
506 West Oceanfront Listed on Pacaso
1703 Plaza del Sur Listed on www.compass.com
2137 Miramar Drive Listed on Ember
2628 Ocean Boulevard City database mailing address match to Pacaso 3803 Marcus Avenue City database mailing address match to Pacaso 4106 River Avenue Listed on Pacaso

BENEFITS AND IMPACTS OF FRACTIONAL HOUSING
Fractional Housing Benefits
The primary benefit of fractional homeownership is to own a second home at a more affordable price.

According to county records, the home at 506 W Oceanfront sold on March 14, 2022, for $6,800,000. A 1 /8 share of this house is currently being offered on Pacaso for $1,098,000.

According to Equity Estates, a vacation home investment firm, the benefits of fractional housing are: 1  It’s more affordable ‐ Perhaps a $4M home is out of reach, but $1M is right in your wheelhouse.

Fractional ownership lets you get the home you want in the most desirable location at the price you can afford. This goes for home upkeep and maintenance, too. By sharing the costs of upkeep, fractional ownership makes long‐term ownership a much more realistic possibility.  The home will get some love ‐ No home should sit vacant 48 weeks out of the year. By sharing the ownership, the home will be opened up at regular intervals. Opening and closing windows and doors, running the water, turning on the AC and heater, and using amenities like the hot tub and pool—all of these are essential to maintaining the home. It provides an opportunity to identify issues early on and preserve the home’s long‐term value.  Peace of Mind ‐ Fractional ownership also means sharing the burden of homeownership. Rather than a single point of failure (i.e., you), you essentially have a group that shares accountability, schedules maintenance, checks on the home, and divides the work and chores that would otherwise be left to a single owner.

Another fractional housing company, Pacaso, claims that its model reduces demand in the housing market. Specifically, they state, “This demand on top of short supply has driven up home prices to unprecedented levels. Instead of eight second home buyers buying eight separate median‐priced homes, which drives up prices even further, Pacaso consolidates those eight buyers into just one luxury home, which alleviates pressure at the median‐priced tier.”2 To address concerns that they do not provide a benefit, Pacaso commissioned an economic impact analysis (Appendix A), which found that the average fractional ownership house generates an average of $48,390 in annual spending compared with the 1 https://equityestatesfund.com/the‐pros‐and‐cons‐of‐fractional‐ownership, retrieved August 16, 2022 2 https://www.pacaso.com/blog/economic‐impact‐study, retrieved August 16, 2022

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average second home. The study further found that fractional housing generates an average of $3,780 additional revenue in local and state tax dollars over the average second home.

Fractional Housing Impacts
Notwithstanding the aforementioned benefits, many communities have received complaints from their residents that fractional housing creates adverse impacts on the neighborhoods in which they are located and the City as a whole. Jurisdictions that have taken a proactive approach to preventing fractional housing in their communities all have expressed concerns about the following:
 Fractional housing adversely impacts the affordability of full‐time homes in the community. As more homes are taken out of the primary housing market and converted to vacation homes, the available housing stock is reduced. Even though the fractional housing companies focus on the high‐end market, any loss in available housing supply results in increase costs across the entire market.
 Due to the high turn‐over of occupants, fractional housing could adversely impact long‐term residents in the surrounding neighborhood. Given that vacations typically last for short periods of time, these properties would have similar impacts as short‐term rentals, such as noise, loss of privacy, loss of community buy‐in, and decline in property values.  The operation of the fractional homeownership companies within residential areas would result in the commercialization of residential neighborhoods. Several communities that Sagecrestspoke with noted that the operations of these companies would require a business license as they are establishing a commercial use.

Sagecrest discussed concerns with fractional housing with a major opponent to fractional housing, Stop Pacaso Now3
. This organization consists of volunteers who provide resources to residents to oppose fractional housing from being established in their community. This includes providing sample yard signs, sample letters, and volunteer coordination guidance. In discussing the effectiveness of their outreach, Stop Pacaso Now stated that they have had great success in communities in which residents have organized. Stop Pacaso Now has sponsored four petitions on change.org (Sonoma4 , Dry Creek Valley5, St.

Helena6
, and a nationwide petition7) against fractional housing with a total of 7,411 signatures.

The Mitchell Hamline Law Journal of Public Policy and Practice published a journal article8 that found that “The increasing commodification of single‐family homes has had cascading effects on housing and on communities in general.” Fractional housing is shared among various owners, as a result, an increase in 3 https://stoppacasonow.com/ 4 https://www.change.org/p/sonoma‐county‐planning‐commission‐pacaso‐time‐shares‐don‐t‐belong‐in‐sonoma‐ neighborhoods, retrieved August 16, 2022 5 https://www.change.org/p/pacaso‐time‐shares‐don‐t‐belong‐in‐dry‐creek‐valley‐s‐agricultural‐zoning‐and‐ farmlands, retrieved August 16, 2022 6 https://www.change.org/p/mderosa‐cityofsthelena‐org‐gellsworth‐cityofsthelena‐org‐stop‐pacaso‐from‐ commercializing‐our‐residential‐neighborhoods, retrieved August 16, 2022 7 https://www.change.org/p/pacaso‐stop‐pacaso‐s‐takeover‐of‐housing, retrieved August 16, 2022 8 Markuson, Christopher (2022) "A Timeshare By Any Other Name: Fractional Homeownership and the Challenges and Effects of Commodified Single‐Family Homes," Mitchell Hamline Law Journal of Public Policy and Practice: Vol. 43: Iss. 2, Article 1. Available at: https://open.mitchellhamline.edu/policypractice/vol43/iss2/1

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the number of units could decrease the demand for hotel rooms. This would likely result in a reduction in the amount of transient occupancy tax accrued by the City.

COMMUNITY SURVEY
Sagecrest researched other communities that have fractional ownership properties to determine if there is a concern with these properties and how the community is addressing these concerns. A summary of the actions is contained in the table below, followed by a description of each community. Considered Timeshare Considered Short‐Term Rental Not Regulated Enforcing Existing Regulations Adopted/Pursuing Code Revisions to Strengthen Regulations Adopted Moratorium Beverly Hills, CA 
Carlsbad, CA  
Carmel by the Sea, CA  
Encinitas, CA 
Fort Lauderdale, FL 
Hermosa Beach, CA  (a)
Indian Wells, CA (b)
Monterey, CA  
Napa, CA 
Village of North Haven, NY  
Oceanside, CA  
Pacific Grove, CA  (a)
Palm Desert, CA  
Palm Springs, CA  
Park City, UT  
Santa Barbara, CA 
Santa Cruz, CA 
South Lake Tahoe, CA  
Sonoma, CA  
St. Helena, CA  
Truckee, CA  
Vail, CO 
Notes
(a) Code Amendment in Process
(b) City Council is split on whether or not fractional housing is a timeshare

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City of Beverly Hills, CA
On July 15, 2021, the City of Beverly Hills adopted an urgency ordinance establishing a 45‐day moratorium on fractional ownerships of residential and commercial properties. In the staff report, the City expressed concerns that the properties would impact the residents in the surrounding neighborhood since they would operate as vacation rental homes. The City noted these properties would likely “experience high turnover rates of occupants, and result in impacts related to their operation such as noise, loss of privacy, loss of community buy‐in, and decline in property values.” In addition to these impacts, the City expressed concernsthat converting homesto fractional housing would remove permanent housing from the housing market. Notwithstanding this prohibition, the moratorium does allow the City Council to approve a fractional ownership dwelling if they adopt a finding that “the fractional ownership of a property will not disturb the stability of a residential neighborhood or residential building and will not adversely impact future development, redevelopment, safety, and proper maintenance of the property” during a duly noticed public hearing.

The moratorium was extended for ten months and 15 days on August 17, 2021 and extended again for a second year on June 14, 2022. The moratorium is now set to expire on July 14, 2023. The moratorium intends to allow the City staff time to study the issue and any potential impacts fractional housing may have on the health,safety, and welfare of those who live in surrounding homes and on the City as a whole.

A copy of the urgency ordinance and staff report is included in Appendix B.

City of Carlsbad, CA
The City of Carlsbad noted that the use of fractional properties constitutes a timeshare. They have an existing timeshare ordinance (Appendix C), which they would enforce if they received a complaint. The City has not had an issue with operation of the fractional homes.

City of Carmel by the Sea, CA
The City is aware of fractional ownership companies and their assertation that they sell and manage properties, not timeshares. The City disagrees with this position and is of the opinion that any fractional housing has the same impacts on surrounding residential areas as short‐term vacation rentals. Not only is it unlawful for any fractional ownership company to commence or carry on any kind of business in the City without first procuring a business license and pay the applicable business license tax, but any such business would be in violation of the City’s prohibition of timeshares. The City noted that their regulations on transient commercial use of residential property have been previously adjudicated.9 Carmel by the Sea hasissued a cease‐and‐desist order(Appendix D), ordering Pacaso to stop all advertising and sale of fractional ownership of residential properties within the City and will proceed through its code enforcement authority to obtain compliance.

City of Encinitas, CA
The City is aware of the fractional ownership model and that other communities are working on regulations. Since Encinitas has not had any issues with fractional homeownership, they are not working on any code updates or taking enforcement actions.
9 Ewing v. City of Carmel‐by‐the‐Sea (1991) 234 Cal.App.3d 1579

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City of Fort Lauderdale, FL
The City of Fort Lauderdale does not regulate fractional housing since they are considered transient lodging. Within the State of Florida, transient lodging is regulated by the State. Provided the fractional housing is within any zone which permits transient lodging, it would be allowed.

City of Hermosa Beach, CA
The City of Hermosa Beach classifies fractional housing as a timeshare. They are concerned that the operation of the fractional housing and timeshares could change the character of residential neighborhoods as the guest of the units may naturally stay out later, entertain more, and gather in larger numbers while on vacation. Currently, the Hermosa Beach Municipal Code does not regulate timeshares, but the City is processing a code amendment to prohibit timeshares in residential zones. If approved, the code amendment would allow timesharesin commercialzones with approval of a Conditional Use Permit.

The Planning Commission conducted a public hearing on the code amendment on April 19, 2022, at which the Commission adopted a resolution (Appendix E) to recommend the City Council approve the code amendment. This amendment is currently scheduled for a public hearing before the Council on September 27, 2022.

City of Indian Wells, CA
The City of Indian wells does not currently regulate fractional housing but has received complaints from residents regarding impacts being created. The City Council discussed the matter on May 19, 2022, at which time the City Council was split if fractional housing constituents a timeshare or not. They expressed concerns about taking legal action on the fractional ownership companies due to the ongoing litigation in other jurisdictions. The City Council directed the City Attorney to return with options for them to consider on how to proceed. At thistime, it is not known when this discussion will be taken back to the City Council.

County of Monterey, CA
Within areas of Monterey County that fall under the County’s zoning jurisdiction, fractional ownerships are classified as timeshares. Pursuant to the Monterey County Municipal Code, timeshare projects are only allowed in zones where a hotel, motel, or similar visitor accommodation use would be permitted, and in such cases a Use Permit or a Coastal Development Permit would be required.

Monterey County is aware of certain homes advertised asfractional housing that are located in the Carmel Highlands and the Del Monte Forest. Both areas are within the County’s zoning jurisdiction and are within residential zones. Monterey County has issued a cease‐and‐desist order (Appendix F), ordering Pacaso to stop all advertising and sale of fractional ownership of residential properties within these areas and will proceed through its code enforcement authority to obtain compliance.

City of Napa, CA
The City of Napa does not have an ordinance regulating fractional ownership citywide but does have a Master Development Plan (MDP) for the Stanly Ranch area. This MDP requires fractional ownership properties to pay a transient oriented tax for stays more than 14 days, but research indicates that no fractional ownership property has paid the TOT. In 2021, the City Council conducted a hearing to discuss the matter, during which residents complained of not wanting their neighborhoodsto turn into a business venture for the wealthy. There has been no further discussion regarding fractional ownership.

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Village of North Haven, NY
The Board of Trustees of the Village of North Haven enacted a prohibition on fractional ownership, timesharing, and interval uses in single‐family homes in January 2022 (Appendix G). The Board found that the needs of transients are adverse to the interest that protect and preserve single‐family homes.

Furthermore, the prohibition was deemed necessary to prevent the unwarranted commercialization of residential areas. In a discussion with the Town staff, the ordinance would be enforced through code enforcement if they receive a complaint, but they were unable to confirm if action had been taken on any existing units.

City of Oceanside, CA
The City of Oceanside is not aware of any specific issues surrounding single‐family homes used as fractional ownerships. The City does allow fractional ownership in their Downtown District as it pertains to traditional timeshare listings, provided a Conditional Use Permit is approved for the use. Given that most of these fractional ownership listings resemble short‐term rental models, staff would consider fractional housing has short‐term rentals in single‐family homes, which would require the issuance of a short‐term rental permit.

City of Pacific Grove, CA
Currently the City of Pacific Grove prohibits timeshares throughout the City. The City Council accepted public comment on fractional housing and timeshares on May 18, 2022, at the conclusion of which the Council directed staff to review the City’s current timeshare ordinance and recommend changes to better effectuate the City’s prohibition of timeshare projects, including fractional housing. The City anticipates having the draft ordinance to their Planning Commission in October 2022 and to the City Council by the end of year.

City of Palm Desert, CA
In November 2021, the City Council discussed the emergence of fractional ownership businesses within the City. In the Staff Report, the City Attorney opined that the fractional homeownership “model fits within that definition of "time‐ share plan" as co ‐owners receive ownership rights to use a property for less than a year on a recurring basis” (Appendix H). The City only allows timeshares in the Planned Residential, General Commercial, and Planned Commercial Resort zones. On May 12, 2022, the City Council adopted an ordinance updating the timeshare provisions of the Palm Desert Municipal Code. The updates include expanding the definition of timeshare that includes the shared use of any property, where the owners have the right of occupancy for less than full year during any given year. The ordinance also established enforcement procedures for violations of the timeshare ordinance.

City of Palm Springs, CA
The City of Palm Springs regulates where timeshares can be located within the City and taxes occupancy of timeshares. Timeshares are only permitted in zoning districts where hotel uses are permitted and with approval of a Conditional Use Permit. Notably, timeshares are not permitted in single‐family zones.

Furthermore, the City’s business license ordinance requires any party that is transacting any business within the City to first procure a business license and pay the applicable business license tax.

Although the fractional ownership companies claim that they only purchase and sell luxury homes, and therefore they do not impact the availability of affordable housing. However, the City believes the basic laws of supply and demand dictate that every home that is made unavailable to a full‐time resident,

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whether “luxury” or not, necessarily reduces the supply of homes, and therefore reduces the affordability of housing in the City. In addition to the loss of housing, fractional ownership companies who involve multiple investors will result in their guests rotating the occupancy of the dwelling throughout the year.

Although the fractional owners are not technically renters, the City believes the neighbors can expect the property to have many of the same secondary impacts that are caused by vacation rentals.

The City of Palm Springs has issued a cease‐and‐desist order (Appendix I), ordering Pacaso to stop all advertising and sale of fractional ownership of residential properties within the City and will proceed through its code enforcement authority to obtain compliance.

City of Park City, UT
Park City, Utah allows fractional ownership in single‐family homes provided the ownership obtains approval of a Conditional Use Permit. The areasin which the City allowsfractional ownership are identified in the City’s General Plan and consists of areasthatsupport the resort economy. These are the same areas that allow timeshares and private residential clubs. The fractional ownership properties must comply with specific prohibitions such as on‐street parking, nightly rentals, the outdoor display of goods and merchandise, and signage. Additionally, the fractional housing must obtain approval of a management plan that outlines a satisfactory level of management and maintenance of the fractional housing.

The City is currently preparing a code amendment which would prohibit fractional ownership in most single‐family zones. The amendments would allow fractional housing in zones where timeshares and private residential clubs are currently permitted. The amendment would also require a business license for fractional ownerships, submittal of a management plan, and prohibition of nightly rentals, on‐street parking, outdoor display of goods, signs, and commercial uses (Appendix J). On August 30, 2022, the Planning Commission and City Council are scheduled to conduct a joint work session on the proposed amendments.

City of Santa Barbara, CA
The City of Santa Barbara does not have any regulation for fractional ownership. The City has received complaints regarding fractional housing in single‐family residential area. The Planning Commission and City Council have conducted hearings on the matter but have not given staff direction for future research to regulate these ownerships.

City of Santa Cruz, CA
Even with fractional homes being offered within city limits, City staff was not aware of this type of ownership model. The City does not currently regulate fractional ownership or timeshares.

Notwithstanding this, the City Council has placed a ballot initiative on the November election to establish a tax on residential properties that are occupied less than 120‐days a year (Appendix K).

City of South Lake Tahoe, CA
The City stated that a property sale or deed that results ownership rights in or the right to use accommodations for a period of time less than full year during any given year is considered timeshare.

Even though timeshares ten or fewer units are not subject to the Vacation Ownership and Timeshare Act of 200410, they are still subject to local authority. In fact, Section 11280(b) of the Business and Professions 10 California Business and Professions Code §§1121‐11288

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Code expressly preserves the authority of local jurisdictions to regulate timeshares through “zoning, subdivision, or building code or other real estate use law, ordinance, or regulation.” South Lake Tahoe hasissued a cease‐and‐desist order (Appendix L), ordering Pacaso to stop all advertising and sale of fractional ownership of residential properties within the City until such time they comply with the City’s timeshare ordinance.

City of Sonoma, CA
On January 19th, 2022, the Sonoma City Council voted unanimously to adopt an urgency ordinance to prohibit timeshares and fractional housing. The Council adopted the urgency ordinance due to concerns that these uses threaten to reduce the housing supply in the City by turning long‐term housing in the City into vacation rentals and reducing the affordable housing stock in the City. Furthermore, there are concerns that timeshare and fractional housing interest uses increase traffic and noise impacts as they have the same character as commercial hotels, motels, and other transient occupancy uses making them inappropriate for residential zones. On June 15, 2022, the Sonoma City Council adopted an ordinance (Appendix M) to amend the code to prohibit all timeshares and fractional housing in the City.

City of St. Helena, CA
Within St. Helena, timeshares are only permitted in Service Commercial District and Central Business District. The City Council recently updated the timeshare ordinance to specifically prohibit co‐ownership of residential properties (Appendix N). The ordinance updated the definition of a timeshare to broaden its applicability to incorporate fractional housing and limits timeshares uses to their Service Commercial and Central Business District zone. The ordinance also bolsters the City’s enforcement authority by including a specific prohibition on timeshare uses in most zones, but also outlines the enforcement process and mechanisms. The enforcement provision was modeled after the City’s short‐term rental ordinance to which they note has been very effective.

It is important to note that Pacaso filed a lawsuit against the City in federal court 11 (Appendix O). Pacaso
seeks to stop the City from enforcing their timeshare ordinance against Pacaso and other fractional ownership properties because they feel the timeshare ordinance is invalid and enforcement of said ordinance violates the fractional homeowners and Pacaso’s due process protection afforded by the 14th amendment to the U.S. Constitution. Pacaso had also claimed that the City’s enforcement actions constituted an intentional interference with prospective economic advantage; however, the Court rejected this portion of the claim. The lawsuit remains pending.

Town of Truckee, CA
In May 2022 the Town of Truckee adopted a general zoning code cleanup ordinance (Appendix P). Among the various amendments included in the ordinance, the Town Council approved changes to the Town’s timeshare uses. This includes outlining the application process, development standards and enforcement and violation protocolsfor time‐share uses; as well as clarifying that timeshare properties are only allowed within existing legal nonconforming single‐family residences in the CG (General Commercial) and CN (Neighborhood Commercial) zones.
11 Pacaso Inc. v. City of St. Helena, 21‐cv‐02493‐WHO (N.D. Cal. Jul. 15, 2021)

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City of Vail, CO
The City does not have regulationsregarding fractional ownership. Explaining the concerns of the business model, the City Attorney would agree it resembles a timeshare model but does not see how any City ordinance would be able to regulate itsince it isthe ownership of a property rather than a use in a portion of a building.

APPENDICES

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Appendix A – Pacaso Economic Impact Analysis, prepared by EBP

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1 PACASO

PACASO ECONOMIC IMPACT ANALYSIS

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2 Pacaso is a real estate marketplace and property management service that aims to make second homeownership more accessible by facilitating co-ownership of luxury homes between families. The company purchases homes above the median price in popular second home destinations, and then sells up to eight shares to individual buyers. Pacaso vets owners, furnishes and manages each property, and provides a mobile app for owners to schedule time at their home.

Co-ownership of homes is an established practice that Pacaso is extending in new ways.

In 2022, Pacaso hired EBP, a national economics firm, to conduct a study to understand the net economic impact of its co-ownership model in five markets: Palm Springs, California, Colorado Mountains, New York City Area, San Francisco Bay Area, and South Florida. Key findings include the following:
• Across the five markets, the average Pacaso home generates nearly 10 times more in annual household spending compared with the average second home. This amounts to about $48,400 more per home. • Compared with the average second home, the average Pacaso home also generates 10 times more in state sales tax revenue and nearly 10 times more in local sales tax revenue. This amounts to $2,400 more in state revenue and $1,400 more in local revenue per home.
• The average Pacaso home costs six times more than the average second home and seven times more than the average year-round home, meaning the company is unlikely to compete with middle-class or lower-income homebuyers in the five markets EBP studied.

Introduction and Overview

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3 The average second home sits empty over ten months out of the year.1
By comparison, the average Pacaso home is
occupied 89 percent of the year — almost 11 months.2
Co-ownership makes more efficient use of second homes
by increasing the amount of time they are occupied. Since the average Pacaso home is occupied more months of the
year than other second homes, their owners spend more
money in the community. This spending benefits local
businesses and generates tax revenue.

As discussed later, Pacaso also enables people to share in ownership of homes that are significantly more expensive than average. By providing an alternative to medianpriced homes, Pacaso can help maintain local housing affordability.
1 Census Bureau, 2019 American Housing Survey.
2 Pacaso, Second Homeowners Survey. Utilization is
calculated based on the number of days a home is reserved.

Figure 1. Average Annual Utilization Rates
Source: Pacaso and Census Bureau.

Utilization
Co-ownership means higher utilization rates.

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4 The average second homeowner spends money on a range of goods and services, as seen in the table below. Because Pacaso homes are utilized more than the average second home, they produce greater spending across all categories. The average Pacaso home generates an average of $48,390 in annual spending compared with the average second home. This additional spending benefits local restaurants, stores, and many other businesses.

Household Spending
Figure 2. Annual Household Spending By Market and Type
Pacaso homes contribute more spending in their communities.

Source: Esri ArcGIS Business Analyst Online and Pacaso.

Notes: Our approach involved adjusting year-round spending patterns from Business Analyst Online to better reflect spending patterns of Pacaso homeowners. See the Notes page for more details.

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5 Pacaso homes also generate additional tax revenue compared with the average second home. This includes revenue collected by states, part of which is distributed back to local communities. The table below shows that the average Pacaso home generates an average of $2,370 in additional state tax revenue compared with the average second home. This tax revenue is generated by spending with local businesses.

State Tax Revenue
Figure 3. Annual State Sales Tax Revenue By Market and Type Greater utilization drives more tax revenue for states.

Source: Avalara.com. Tax rates as of March 2022.

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6 Source: Avalara.com. Tax rates as of March 2022.

Notes: This study does not include the net increase in property tax revenue to counties from Pacaso homes, which is likely higher than that of traditional second homes or homes near the median housing price.

Pacaso homes also generate local tax revenue. The table below shows that the average Pacaso home also generates an average of $1,410 in additional local tax revenue compared with the average second home. This tax revenue is generated by spending with local businesses.

Local Tax Revenue
Greater utilization drives more tax revenue for counties.

Figure 4. Annual Local Sales Tax Revenue By Market and Type

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7 The median Pacaso home is 6.9 times the price of the
typical second home and 8.2 times the price of the typical year-round home, as seen in the figure to the right.3
Through co-ownership, Pacaso concentrates demand
for the most expensive homes in popular second home
destinations, thereby shifting demand away from the
median-priced market. The following page describes this in more detail.
3 Definitions of second homes and year-round homes come from Optimal Blue, which is the source for Pacaso's price data.

Figure 5. Median Listing Price by Home Type
Source: Pacaso.

Housing
Comparison
Pacaso concentrates demand into more
expensive homes.

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8 Housing Impact Market Impact
The concentration of buyers into expensive homes likely relieves pressure on local housing markets in popular
second home destinations. This is because in the absence of a co-ownership model, some second homeowners will
likely purchase a median-priced home, reducing the supply available for year-round residents.

The scenarios to the left illustrate the potential effect of Pacaso on a segment of the housing market.

This effect is most likely to be experienced in in popular second home destinations, where the housing markets
are very competitive, partially because of strong demand for second homes, especially in certain sub-markets.

As Pacaso grows, the mitigating effect on the supply of median-priced homes will only increase.

Co-ownership concentrates demand into fewer homes.

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9 Notes
Pacaso is still in a growth phase, meaning EBP relied on assumptions based on industry and public record data. As Pacaso expands, its effect will likely become clearer, and we encourage future research to this end.

EBP and Pacaso made the following assumptions in completing this study. Adjustments to these assumptions could change the results.
• EBP used a national average utilization rate for Pacaso homes because market-specific rates fluctuate. • We began our household spending analysis using values for all households in all jurisdictions included in our analysis, not spending by second homes or Pacaso homes specifically. To be more accurate, we made the adjustments listed in the table below to household spending categories pulled from our primary data source, Esri ArcGIS Business Analyst Online, which is itself based on data from the Bureau of Labor Statistics Consumer Expenditure Survey. This adjustment process was built on our assumption that second homeowner spending patterns fall somewhere in between shortterm visitors and year-round residents. Compared to visitor spending patterns from various reports, we assumed that homeowners spend comparatively more (as a share of their budget) on food and beverages, a similar amount on retail, less on recreation, and less on transportation.
• For the tax impact analysis, we used state and county tax rates as of March 2022 from Avalara.com, a website that helps businesses calculate their tax bills. After comparing Avalara tax rates with tax rates published on several government websites for jurisdictions included in our analysis, EBP determined that it is a reliable source.

Cover Photography by Pacaso.

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10 Appendix A. Household Spending Category Inclusion
Source: Esri ArcGIS Business Analyst Online and Pacaso.

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11 Appendix B. Annual Household Spending By Market and Category Source: Esri ArcGIS Business Analyst Online and Pacaso.

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12 Appendix C. Median Listing Price by Market and Type
Source: Pacaso.

Appendix D. Market Definitions

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1 BAY
AREA

PACASO ECONOMIC IMPACT ANALYSIS

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Pacaso vets owners, furnishes and manages each property, and provides a mobile app for owners to schedule time at their home. Co-ownership of homes is an established practice that Pacaso is extending in new ways.

In 2022, Pacaso hired EBP, a national economics firm, to conduct a study to understand the net economic impact of its co-ownership model. As described in the following pages, we focused specifically on Pacaso’s impact on home utilization, household spending, tax revenue, and the local housing market in the Bay Area, which includes Napa, Marin, San Francisco, San Mateo, and Sonoma counties.

Introduction and Overview

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Figure 1. Average Annual Utilization Rates
Source: Pacaso and Census Bureau.

Utilization
Co-ownership means higher utilization rates.

Page 100 of 488 ends

4 The average second homeowner spends money on a range of goods and services, as seen in the table below. Because Pacaso homes are utilized more than the average second home, they produce greater spending across all categories. The average Bay Area Pacaso home generates $65,630 more in annual spending compared with the average second home. This additional spending benefits local restaurants, stores, and many other businesses.

Household Spending
Figure 2. Annual Household Spending By Category and Type Pacaso homes contribute more spending in their communities.

Source: Esri ArcGIS Business Analyst Online and Pacaso.

Notes: Our approach involved adjusting year-round spending patterns from Business Analyst Online to better reflect spending patterns of Pacaso homeowners. See the Notes page for more details.

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5 Pacaso homes also generate additional tax revenue compared with the average second home. This includes revenue collected by the State of California, part of which is distributed back to the Bay Area. The table below shows that the average Pacaso home generates an additional $3,710 in state tax revenue on average when compared with the average second home. This tax revenue is generated by spending with local businesses.

State Tax Revenue
Greater utilization drives more tax revenue for the State of California.

Figure 3. Annual State Sales Tax Revenue By County
Source: Avalara.com. Tax rates as of March 2022.

Page 102 of 488 ends

6 Pacaso homes also generate local tax revenue. The table below shows that the average Pacaso home generates an average of $1,580 in additional local tax revenue compared with the average second home. This tax revenue is generated by spending with local businesses.

Local Tax Revenue
Greater utilization drives more tax revenue for the Bay Area.

Figure 4. Annual Local Sales Tax Revenue By County
Source: Avalara.com. Tax rates as of March 2022.

Page 103 of 488 ends

7 The median Pacaso home in the Bay Area is 5.3 times the price of the typical second home and 5.7 times the price of the typical year-round home, as seen in the figure to the right.3
Through co-ownership, Pacaso concentrates demand for
the Bay Area’s most expensive homes, thereby shifting
demand away from the median-priced market. The
following page describes this in more detail.
3 Definitions of second homes and year-round homes come from Optimal Blue, which is the source for Pacaso's price data.

Figure 5. Median Listing Price by Home Type
Source: Pacaso.

Housing
Comparison
Pacaso concentrates demand into more
expensive homes.

Page 104 of 488 ends

8 Housing Impact Market Impact
The concentration of buyers into expensive homes likely relieves pressure on the Bay Area's local housing market.

This is because in the absence of a co-ownership model, some second homeowners will likely purchase a medianpriced home, reducing the supply available for year-round residents.

The scenarios to the left illustrate the potential effect of Pacaso on a segment of the housing market.

This effect is most likely to be experienced in places
like the Bay Area, where the housing market is very
competitive, partially because of strong demand for
second homes, especially in certain sub-markets. As
Pacaso grows, the mitigating effect on the supply of
median-priced homes will only increase.

Co-ownership concentrates demand into fewer homes.

Page 105 of 488 ends

EBP and Pacaso made the following assumptions in completing this study. Adjustments to these assumptions could change the results.
• EBP used a national average utilization rate for Pacaso homes because market-specific rates fluctuate. • We began our household spending analysis using values for all households in the Bay Area, not spending by second homes or Pacaso homes specifically. To be more accurate, we made the adjustments listed in the table below to household spending categories pulled from our primary data source, Esri ArcGIS Business Analyst Online, which is itself based on data from the Bureau of Labor Statistics Consumer Expenditure Survey. This adjustment process was built on our assumption that second homeowner spending patterns fall somewhere in between short-term visitors and yearround residents. Compared with Bay Area visitor spending patterns from a 2019 study by Dean Runyan Associates, we assumed that homeowners spend comparatively more (as a share of their budget) on food and beverages, a similar amount on retail, less on recreation, and less on transportation. • For the tax impact analysis, we used state and county tax rates as of March 2022 from Avalara.com, a website that helps businesses calculate their tax bills. After comparing Avalara tax rates with tax rates published on several government websites for jurisdictions included in our analysis, EBP determined that it is a reliable source.

Cover Photography by Jacob Morch on Unsplash. Report Photography by Pacaso.

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10 Appendix A. Household Spending Category Inclusion
Source: Esri ArcGIS Business Analyst Online and Pacaso.

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1 COLORADO

MOUNTAINS

PACASO ECONOMIC IMPACT ANALYSIS

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2 Pacaso is a real estate marketplace and property management service that aims to make second homeownership more accessible by facilitating co-ownership of luxury homes between families. The company purchases homes above the median price in popular second home destinations like the Colorado Mountains, and then sells up to eight shares to individual buyers. Pacaso vets owners, furnishes and manages each property, and provides a mobile app for owners to schedule time at their home. Co-ownership of homes is an established practice that Pacaso is extending in new ways.

In 2022, Pacaso hired EBP, a national economics firm, to conduct a study to understand the net economic impact of its co-ownership model. As described in the following pages, we focused specifically on Pacaso’s impact on home utilization, household spending, tax revenue, and the local housing market in the Colorado Mountains, which includes Eagle, Pitkin, and Summit counties.

Introduction and Overview

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Figure 1. Average Annual Utilization Rates
Source: Pacaso and Census Bureau.

Utilization
Co-ownership means higher utilization rates.

Page 111 of 488 ends

4 The average second homeowner spends money on a range of goods and services, as seen in the table below. Because Pacaso homes are utilized more than the average second home, they produce greater spending across all categories. The average Colorado Mountains Pacaso home generates $49,650 more in annual spending compared with the average second home. This additional spending benefits local restaurants, stores, and many other businesses.

Household Spending
Figure 2. Annual Household Spending By Category and Type Pacaso homes contribute more spending in their communities.

Source: Esri ArcGIS Business Analyst Online and Pacaso.

Notes: Our approach involved adjusting year-round spending patterns from Business Analyst Online to better reflect spending patterns of Pacaso homeowners. See the Notes page for more details.

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5 Pacaso homes also generate additional tax revenue compared with the average second home. This includes revenue collected by the State of Colorado, part of which is distributed back to the Colorado Mountains. The table below shows that the average Pacaso home generates an additional $1,410 in state tax revenue on average when compared with the average second home. This tax revenue is generated by spending with local businesses.

State Tax Revenue
Greater utilization drives more tax revenue for the State of Colorado.

Figure 3. Annual State Sales Tax Revenue By County
Source: Avalara.com. Tax rates as of March 2022.

Page 113 of 488 ends

6 Pacaso homes also generate local tax revenue. The table below shows that the average Pacaso home generates an average of $1,980 in additional local tax revenue compared with the average second home. This tax revenue is generated by spending with local businesses.

Local Tax Revenue
Greater utilization drives more tax revenue for the Colorado Mountains.

Figure 4. Annual Local Sales Tax Revenue By County
Source: Avalara.com. Tax rates as of March 2022.

Page 114 of 488 ends

7 The median Pacaso home in the Colorado Mountains is

10.2 times the price of the typical second home and 13.9 times the price of the typical year-round home, as seen in the figure to the right.3
Through co-ownership, Pacaso concentrates demand for
the Colorado Mountains’ most expensive homes, thereby
shifting demand away from the median-priced market.

The following page describes this in more detail.
3 Definitions of second homes and year-round homes come from Optimal Blue, which is the source for Pacaso's price data.

Figure 5. Median Listing Price by Home Type
Source: Pacaso.

Housing
Comparison
Pacaso concentrates demand into more
expensive homes.

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8 Housing Impact Market Impact
The concentration of buyers into expensive homes
likely relieves pressure on the Colorado Mountains' local housing market. This is because in the absence of a coownership model, some second homeowners will likely purchase a median-priced home, reducing the supply
available for year-round residents.

The scenarios to the left illustrate the potential effect of Pacaso on a segment of the housing market.

This effect is most likely to be experienced in places like the Colorado Mountains, where the housing market is
very competitive, partially because of strong demand
for second homes, especially in certain sub-markets.

As Pacaso grows, the mitigating effect on the supply of median-priced homes will only increase.

Co-ownership concentrates demand into fewer homes.

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EBP and Pacaso made the following assumptions in completing this study. Adjustments to these assumptions could change the results.
• EBP used a national average utilization rate for Pacaso homes because market-specific rates fluctuate. • We began our household spending analysis using values for all households in the Colorado Mountains, not spending by second homes or Pacaso homes specifically. To be more accurate, we made the adjustments listed in the table below to household spending categories pulled from our primary data source, Esri ArcGIS Business Analyst Online, which is itself based on data from the Bureau of Labor Statistics Consumer Expenditure Survey. This adjustment process was built on our assumption that second homeowner spending patterns fall somewhere in between short-term visitors and year-round residents. Compared with Colorado Mountains visitor spending patterns from a 2019 study by Dean Runyan Associates, we assumed that homeowners spend comparatively more (as a share of their budget) on food and beverages, a similar amount on retail, less on recreation, and less on transportation. • For the tax impact analysis, we used state and county tax rates as of March 2022 from Avalara.com, a website that helps businesses calculate their tax bills. After comparing Avalara tax rates with tax rates published on several government websites for jurisdictions included in our analysis, EBP determined that it is a reliable source.

Cover Photography by Joshua Sukoff on Unsplash. Report Photography by Pacaso.

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10 Appendix A. Household Spending Category Inclusion
Source: Esri ArcGIS Business Analyst Online and Pacaso.

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1 PALM

SPRINGS

PACASO ECONOMIC IMPACT ANALYSIS

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Introduction and Overview

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Figure 1. Average Annual Utilization Rates
Source: Pacaso and Census Bureau.

Utilization
Co-ownership means higher utilization rates.

Page 122 of 488 ends

4 The average second homeowner spends money on a range of goods and services, as seen in the table below. Because Pacaso homes are utilized more than the average second home, they produce greater spending across all categories. The average Palm Springs Pacaso home generates $40,100 more in annual spending compared with the average second home.

This additional spending benefits local restaurants, stores, and many other businesses.

Household Spending
Figure 2. Annual Household Spending By Category and Type Source: Esri ArcGIS Business Analyst Online and Pacaso.

Notes: Our approach involved adjusting year-round spending patterns from Business Analyst Online to better reflect spending patterns of Pacaso homeowners. See the Notes page for more details.

Pacaso homes contribute more spending in their communities.

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5 Pacaso homes also generate additional tax revenue compared with the average second home. This includes revenue collected by the State of California, part of which is distributed back to Palm Springs. The table below shows that the average Pacaso home generates an additional $2,410 in state tax revenue compared with the average second home. This tax revenue is generated by spending with local businesses.

State Tax Revenue
Figure 3. Annual State Sales Tax Revenue By County
Source: Avalara.com. Tax rates as of March 2022.

Greater utilization drives more tax revenue for the State of California.

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6 Pacaso homes also generate local tax revenue. The table below shows that the average Pacaso home also generates an additional $700 in local tax revenue compared with the average second home. This tax revenue is generated by spending with local businesses.

Local Tax Revenue
Figure 4. Annual Local Sales Tax Revenue By County
Source: Avalara.com. Tax rates as of March 2022.

Greater utilization drives more tax revenue for Palm Springs.

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7 The median Pacaso home in Palm Springs is 3.8 times the price of the typical second home and 4 times the price of the typical year-round home, as seen in the figure to the right.3
Through co-ownership, Pacaso concentrates demand for
Palm Springs’ most expensive homes, thereby shifting
demand away from the median-priced market. The
following page describes this in more detail.
3 Definitions of second homes and year-round homes come from Optimal Blue, which is the source for Pacaso's price data.

Figure 5. Median Listing Price by Home Type
Source: Pacaso.

Housing
Comparison
Pacaso concentrates demand into more
expensive homes.

Page 126 of 488 ends

8 Market Impact
The concentration of buyers into expensive homes likely relieves pressure on Palm Springs' local housing market.

This is because in the absence of a co-ownership model, some second homeowners will likely purchase a medianpriced home, reducing the supply available for year-round residents.

The scenarios to the left illustrate the potential effect of Pacaso on a segment of the housing market.

This effect is most likely to be experienced in places
like Palm Springs, where the housing market is very
competitive, partially because of strong demand for
second homes, especially in certain sub-markets. As
Pacaso grows, the mitigating effect on the supply of
median-priced homes will only increase.

Co-ownership concentrates demand into fewer homes.

Page 127 of 488 ends

EBP and Pacaso made the following assumptions in completing this study. Adjustments to these assumptions could change the results.
• EBP used a national average utilization rate for Pacaso homes because market-specific rates fluctuate. • We began our household spending analysis using values for all households in Riverside County, not spending by second homes or Pacaso homes specifically. To be more accurate, we made the adjustments listed in the table below to household spending categories pulled from our primary data source, Esri ArcGIS Business Analyst Online, which is itself based on data from the Bureau of Labor Statistics Consumer Expenditure Survey. This adjustment process was built on our assumption that second homeowner spending patterns fall somewhere in between short-term visitors and yearround residents. Compared with Palm Springs visitor spending patterns from a 2019 study by Dean Runyan Associates, we assumed that homeowners spend comparatively more (as a share of their budget) on food and beverages, a similar amount on retail, less on recreation, and less on transportation. • For the tax impact analysis, we used state and county tax rates as of March 2022 from Avalara.com, a website that helps businesses calculate their tax bills. After comparing Avalara tax rates with tax rates published on several government websites for jurisdictions included in our analysis, EBP determined that it is a reliable source.

Cover Photography by Nathan Dumlao on Unsplash. Report Photography by Pacaso.

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10 Appendix A. Household Spending Category Inclusion
Source: Esri ArcGIS Business Analyst Online and Pacaso.

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1 SOUTH

FLORIDA

PACASO ECONOMIC IMPACT ANALYSIS

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In 2022, Pacaso hired EBP, a national economics firm, to conduct a study to understand the net economic impact of its co-ownership model. As described in the following pages, we focused specifically on Pacaso’s impact on home utilization, household spending, tax revenue, and the local housing market in South Florida, which includes Broward, Miami-Dade, Monroe, and Palm Beach counties.

Introduction and Overview

Page 132 of 488 ends

Figure 1. Average Annual Utilization Rates
Source: Pacaso and Census Bureau.

Utilization
Co-ownership means higher utilization rates.

Page 133 of 488 ends

4 The average second homeowner spends money on a range of goods and services, as seen in the table below. Because Pacaso homes are utilized more than the average second home, they produce greater spending across all categories. The average South Florida Pacaso home generates $37,680 more in annual spending compared with the average second home.

This additional spending benefits local restaurants, stores, and many other businesses.

Household Spending
Figure 2. Annual Household Spending By Category and Type Pacaso homes contribute more spending in their communities.

Source: Esri ArcGIS Business Analyst Online and Pacaso.

Notes: Our approach involved adjusting year-round spending patterns from Business Analyst Online to better reflect spending patterns of Pacaso homeowners. See the Notes page for more details.

Page 134 of 488 ends

5 Pacaso homes also generate additional tax revenue compared with the average second home. This includes revenue collected by the State of Florida, part of which is distributed back to South Florida. The table below shows that the average Pacaso home generates an additional $2,360 in state tax revenue on average when compared with the average second home. This tax revenue is generated by spending with local businesses.

State Tax Revenue
Greater utilization drives more tax revenue for the State of Florida.

Figure 3. Annual State Sales Tax Revenue By County
Source: Avalara.com. Tax rates as of March 2022.

Page 135 of 488 ends

6 Pacaso homes also generate local tax revenue. The table below shows that the average Pacaso home generates an average of $450 in additional local tax revenue compared with the average second home. This tax revenue is generated by spending with local businesses.

Local Tax Revenue
Greater utilization drives more tax revenue for South Florida.

Figure 4. Annual Local Sales Tax Revenue By County
Source: Avalara.com. Tax rates as of March 2022.

Page 136 of 488 ends

7 The median Pacaso home in South Florida is 9 times the price of the typical second home and 9.7 times the price of the typical year-round home, as seen in the figure to the right.3
Through co-ownership, Pacaso concentrates demand for
South Florida’s most expensive homes, thereby shifting
demand away from the median-priced market. The
following page describes this in more detail.
3 Definitions of second homes and year-round homes come from Optimal Blue, which is the source for Pacaso's price data.

Housing
Comparison
Pacaso concentrates demand into more
expensive homes.

Figure 5. Median Listing Price by Home Type
Source: Pacaso.

Page 137 of 488 ends

8 Housing Impact Market Impact
The concentration of buyers into expensive homes likely relieves pressure on South Florida's local housing market.

This is because in the absence of a co-ownership model, some second homeowners will likely purchase a medianpriced home, reducing the supply available for year-round residents.

The scenarios to the left illustrate the potential effect of Pacaso on a segment of the housing market.

This effect is most likely to be experienced in places
like South Florida, where the housing market is very
competitive, partially because of strong demand for
second homes, especially in certain sub-markets. As
Pacaso grows, the mitigating effect on the supply of
median-priced homes will only increase.

Co-ownership concentrates demand into fewer homes.

Page 138 of 488 ends

EBP and Pacaso made the following assumptions in completing this study. Adjustments to these assumptions could change the results.
• EBP used a national average utilization rate for Pacaso homes because market-specific rates fluctuate. • We began our household spending analysis using values for all households in South Florida, not spending by second homes or Pacaso homes specifically. To be more accurate, we made the adjustments listed in the table below to household spending categories pulled from our primary data source, Esri ArcGIS Business Analyst Online, which is itself based on data from the Bureau of Labor Statistics Consumer Expenditure Survey. This adjustment process was built on our assumption that second homeowner spending patterns fall somewhere in between short-term visitors and year-round residents. Compared with South Florida visitor spending patterns from a 2019 study by the Greater Miami Convention and Visitors Bureau, we assumed that homeowners spend comparatively more (as a share of their budget) on food and beverages, a similar amount on retail, less on recreation, and less on transportation. • For the tax impact analysis, we used state and county tax rates as of March 2022 from Avalara.com, a website that helps businesses calculate their tax bills. After comparing Avalara tax rates with tax rates published on several government websites for jurisdictions included in our analysis, EBP determined that it is a reliable source.

Cover Photography by Arnel Hasanovic on Unsplash. Report Photography by Pacaso.

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10 Appendix A. Household Spending Category Inclusion
Source: Esri ArcGIS Business Analyst Online and Pacaso.

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Page 141 of 488 ends

1 NEW YORK

CITY AREA

PACASO ECONOMIC IMPACT ANALYSIS

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2 Pacaso is a real estate marketplace and property management service that aims to make second homeownership more accessible by facilitating co-ownership of luxury homes between families. The company purchases homes above the median price in popular second home destinations like the New York City Area, and then sells up to eight shares to individual buyers. Pacaso vets owners, furnishes and manages each property, and provides a mobile app for owners to schedule time at their home. Co-ownership of homes is an established practice that Pacaso is extending in new ways.

In 2022, Pacaso hired EBP, a national economics firm, to conduct a study to understand the net economic impact of its co-ownership model. As described in the following pages, we focused specifically on Pacaso’s impact on home utilization, household spending, tax revenue, and the local housing market in the New York City Area, which includes Bronx, Kings, Queens, Nassau, New York, Richmond, and Suffolk counties.

Introduction and Overview

Page 143 of 488 ends

Figure 1. Average Annual Utilization Rates
Source: Pacaso and Census Bureau.

Utilization
Co-ownership means higher utilization rates.

Page 144 of 488 ends

4 The average second homeowner spends money on a range of goods and services, as seen in the table below. Because Pacaso homes are utilized more than the average second home, they produce greater spending across all categories. The average New York City Area Pacaso home generates $48,900 more in annual spending compared with the average second home. This additional spending benefits local restaurants, stores, and many other businesses.

Household Spending
Figure 2. Annual Household Spending By Category and Type Pacaso homes contribute more spending in their communities.

Source: Esri ArcGIS Business Analyst Online and Pacaso.

Notes: Our approach involved adjusting year-round spending patterns from Business Analyst Online to better reflect spending patterns of Pacaso homeowners. See the Notes page for more details.

Page 145 of 488 ends

5 Pacaso homes also generate additional tax revenue compared with the average second home. This includes revenue collected by the State of New York, part of which is distributed back to the New York City Area. The table below shows that the average Pacaso home generates an additional $1,950 in state tax revenue on average, when compared with the average second home. This tax revenue is generated by spending with local businesses.

State Tax Revenue
Figure 3. Annual State Sales Tax Revenue By County
Source: Avalara.com. Tax rates as of March 2022.

Greater utilization drives more tax revenue for the State of New York.

Page 146 of 488 ends

6 Pacaso homes also generate local tax revenue. The table below shows that the average Pacaso home generates an average of $2,340 in additional local tax revenue compared with the average second home. This tax revenue is generated by spending with local businesses.

Local Tax Revenue
Greater utilization drives more tax revenue for the New York City Area.

Figure 4. Annual Local Sales Tax Revenue By County
Source: Avalara.com. Tax rates as of March 2022.

Page 147 of 488 ends

7 Though Pacaso does not currently operate in the New
York City Area, the median Pacaso home is expected to
be 6.1 times the price of the typical second home and

8.4 times the price of the typical year-round home. These values can be seen in the figure to the right.3
Through co-ownership, Pacaso is expected to concentrate demand for the New York City Area's most expensive
homes, thereby shifting demand away from the medianpriced market. The following page describes this in more detail.
3 Definitions of second homes and year-round homes come from Optimal Blue, which is the source for Pacaso's price data.

Figure 5. Median Listing Price by Home Type
Source: Pacaso.

Housing
Comparison
Pacaso concentrates demand into more
expensive homes.

Page 148 of 488 ends

8 Housing Impact Market Impact
The concentration of buyers into expensive homes
likely relieves pressure on the New York City Area's local housing market. This is because in the absence of a coownership model, some second homeowners will likely purchase a median-priced home, reducing the supply
available for year-round residents.

The scenarios to the left illustrate the potential effect of Pacaso on a segment of the housing market.

This effect is most likely to be experienced in places
like the New York City Area, where the housing market
is very competitive, partially because of strong demand for second homes, especially in certain sub-markets.

As Pacaso grows, the mitigating effect on the supply of median-priced homes will only increase.

Co-ownership concentrates demand into fewer homes.

Page 149 of 488 ends

EBP and Pacaso made the following assumptions in completing this study. Adjustments to these assumptions could change the results.
• EBP used a national average utilization rate for Pacaso homes because market-specific rates fluctuate. • We began our household spending analysis using values for all households in the New York City Area, not spending by second homes or Pacaso homes specifically. To be more accurate, we made the adjustments listed in the table below to household spending categories pulled from our primary data source, Esri ArcGIS Business Analyst Online, which is itself based on data from the Bureau of Labor Statistics Consumer Expenditure Survey. This adjustment process was built on our assumption that second homeowner spending patterns fall somewhere in between short-term visitors and yearround residents. Compared with New York City Area visitor spending patterns from 2019 studies by Tourism Economics, we assumed that homeowners spend comparatively more (as a share of their budget) on food and beverages, a similar amount on retail, less on recreation, and less on transportation. • For the tax impact analysis, we used state and county tax rates as of March 2022 from Avalara.com, a website that helps businesses calculate their tax bills. After comparing Avalara tax rates with tax rates published on several government websites for jurisdictions included in our analysis, EBP determined that it is a reliable source.

Cover Photography by Laurenz Heymann and Report Photography by Rafael Leão on Unsplash.

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10 Appendix A. Household Spending Category Inclusion
Source: Esri ArcGIS Business Analyst Online and Pacaso.

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Appendix B – City of Beverly Hills Urgency Ordinance

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Appendix C – City of Carlsbad Timeshare ordinance

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1 2
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9 10
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9 19
20 2&
22 23
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28 ORDINANCE NO. 9663

AN ORDINANCE OF THE CITY COUNCIL OF THE CITY OF CARLSBAD, CALIFORNIA AMENDING TITLE 21, CHAPTERS 21.04 AND 21.42 OF

THE CARLSBAD MUNICIPAL CODE BY THE ADDITION OF SECTIONS

21.04.357 AND 21.42.010(10) TO DEFINE AND REGULATE THE
CONSTRUCTION OF TIME-SHARE PROJECTS.

The City Council of the City of Carlsbad, California does ordain as follows:

Section 1: That Title 21 of the Carlsbad Municipal code be amended by the addition of Section 21.04.357 to read as follows:

21.04.357 Time-share Project: "Time-share Project" means a project in which a purchaser receives a right in perpetuity for life, or for a term of years to the recurrent exclusive use or occupancy of a lot, parcel, unit or segment of real property annually or on some other periodic basis, for a period of time that has been, or will be, allotted from the use or occupancy periods onto which the project has been divided.

Section 2: That Title 21 of the Carlsbad Municipal Code be amended by the addition of Section 21.42.010(10) to read as follows:
(10) V-R, R-P, R-3, RD-M and R-T zones only:
(A) Time-share projects as defined by Section

21.04.357 of this code and subject to the
following regulations :
(i) A Conditional Use Permit shall be required
for all time-share projects. All projects
shall be subject to the development
standards and design criteria of Chapter

21.45 of this code, except that:

I. The City Council may reduce the
required resident parking down to one
parking space per unit.

I1 .
////
The City Council may waive the storage
area requirements of Section

21.45.090( 1) . Any reduction in the
parking or storage requirements shall
be supported by a finding that the
reduction is necessary for the
development of the project and will no{
adversely affect the neighborhood.
aPage 161 of 488
26 27
28 If a time-share project is proposed
with reduced standards, the applicant
shall provide a conversion plan showing
how the project can be altered to bring
it into conformance with the
development standards and design
criteria of the Planned Development
Ordinance. A conversion plan shall be
approved as and be made a part of the
permit for the project.

All proposals for time-share projects
shall be accompanied by a detailed
description of the methods proposed to
be employed to guarantee the future
adequacy, stability and continuity of a
satisfactory level of management and
maintenance. A management and
maintenance plan shall be approved as
and made a part of the permit for the
project.

All units in a time-share project shall
be time-share units except a permanent
on site management residence unit may
be permitted. The maximum time
increment for recurrent exclusive use
of occupancy of a time-share unit
shall be four months. A note
indicating this requirement shall be
placed on the final map for the project.

In addition to the four mandatory
findings required for the issuance of a
conditional use permit, under Section

21.42.020, the City Council shall find
that the time-share project is located
in reasonable proximity to an existing
resort or public recreational area and,
therefore, can financially and
geographically function as a successful
time-share project and that the project
will not be disruptive to existing or
future uses in. the surrounding
neighborhood.

Time-share projects may be allowed in
the P-C zone if specified in the Master
Plan for the area in which they will be
located and the land use designation
for the Master Plan area in which the
proposed time-share project will be
located is similar to the R-P, R-3,
RD-M or R-T zones.

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9 10
11 19
20 21
22 23
24 25
26 27
28 (vii) All of the provisions of this section
shall apply to the conversion of an -
existing structure to a time-share
project . (viii) All time-share projects shall be
processed in accordance with this
section except that subsequent to
Planning Commission review, the matter
shall be set for public hearing before
the City Council. The City Council may
approve, conditionally approve or deny
the project. The decision of the City
Council is final.
(ix) A subdivision map filed in accordance
with Title 20 of this code shall
accompany any application for a
time-share project.

Section 3: The City Council hereby declares that it
would have passed this ordinance phrase by phrase, sentence by sentence, paragraph by paragraph and section by section, and does hereby declare that the provisions of this ordinance are severable and, if for any reason any sentence, paragraph, or section of this ordinance shall be held invalid, such decision shall not affect the validity of the remaining parts of this ordinance .

EFFECTIVE DATE: This ordinance shall be effective
thirty days after its adoption, and the City Clerk shall certify to the adoption of this ordinance and cause it to be published at least once in the Carlsbad Journal within fifteen days after its adopt ion.
///I
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1'
21 2
2 2
2 2
2 2
2 INTRODUCED AND FIRST READ at a regular meeting of the Carlsbad City Council held on the day of 1
1983 I and thereafter
PASSED AND ADOPTED at a regular meeting of said City
Council held on the 18th day of January , 1983, by the
following vote, to wit:

AYES : Council plhrnbers Casler, Lewis, Kulchin, Chick and Prescott NOES: None
ABSENT: NOne
C/LNy MARY H. FASLER, &5!24.4- Mayor
ATTEST :
(SEAL)
.4

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Appendix D – City of Carmel by the Sea Cease and Desist Order

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2310 East Ponderosa Drive - Suite 25
Camarillo, California 93010-4747
voice 805.987.3468 - fax 805.482.9834
www.bwslaw.com
Cell No.: 805.377.3565
[email protected]
Los Angeles – Inland Empire – Marin County – Oakland – Orange County – Palm Desert – San Diego – San Francisco – Silicon Valley – Ventura County April 7, 2022

VIA E-MAIL TO
[email protected] and
[email protected]
Patrick Abell
Senior Legal Counsel
Pacaso, Inc.
2021 Fillmore St. Suite 183
San Francisco, CA 94115
Ellen Haberle, Director
Government & Industry Relations
Pacaso, Inc.
2021 Fillmore St. Suite 183
San Francisco, CA 94115
Re: Request to Immediately Cease and Desist Unlawful Operations Dear Mr. Abell and Ms. Haberle:

This law firm serves as City Attorney for the City of Carmel-by-the Sea, California (“City”). In that capacity, we are writing to advise Pacaso Inc. (“Pacaso”) that Pacaso’s current operations within the City are unlawful and must cease immediately. The City has been made aware of at least one property sold by Pacaso within the City at Dolores 7 SW 13th, Carmel by-the-Sea, CA 93921. The sale of this property constitutes the sale of a timeshare prohibited by the Carmel-by-the-Sea Municipal Code (“CMC”) Section

17.28.010.

City Prohibition on Timeshare Uses
CMC section 17.28.010 provides that “[t]imeshare projects, programs and occupancies are prohibited uses within all of the zoning districts within the City.” Timeshare projects, programs and occupancies are further defined in CMC Section 17.70.020:

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Patrick Abell
Ellen Haberle
Pacaso, Inc.

April 7, 2022

Page 2 ends

 A “time-share program” is “[a]ny arrangement for a project whereby the use, occupancy, or possession of real property has been made subject to a timeshare estate, use, or occupancy, whereby such use, occupancy, or possession circulates among purchasers of the time-share intervals according to a fixed or floating time schedule on a periodic basis for a specific period of time during any given year, but not necessarily for consecutive years.”  A “time share estate” is defined as “[a] right of occupancy in a time-share project that is coupled with an estate in the real property.
 A “time-share use” is “a license or contractual or membership right of occupancy in a time-share project which is not coupled with an estate in the real property.”  A “time-share project” is “[a] project in which a purchaser receives the right in perpetuity, for life, or for a term of years, to the recurrent, exclusive use or occupancy of a lot, parcel, unit, or segment of real property, annually or on some other periodic basis, for a period of time that has been or will be allotted for the use or occupancy periods into which the project has been divided.  A “project” specifically includes “[a]ny proposal for a new or changed use.” Pacaso’s Business Involves the Sale and Management of Prohibited Timeshare Uses
Pacaso’s website indicates that its business model involves sales of property held by an limited liability company in 1/8 ownership shares, with the associated right to exclusive use of the subject property by the owner of the share, with Pacaso managing among other things, the upkeep of the property and providing an app to arrange for periods of exclusive use by the share owners. Pacaso’s website further states that each owner of a 1/8 share is entitled to 6 “general stays,” booked at least 61 days in advance, which may range between 2 to 14 nights, and unlimited “short notice stays” booked less than 60 days in advance. However, maximum stay length is limited to 14 nights regardless of the method of booking. Owners of two shares have the option to book stays up to 28 nights.

Pacaso’s business model meets the City’s Ordinance’s definition of a prohibited “timeshare program,” because the ownership of the property through the LLC is an “arrangement for a project whereby the use, occupancy, or possession of real property

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Patrick Abell
Ellen Haberle
Pacaso, Inc.

April 7, 2022

Page 3 ends

has been made subject to a time-share estate, use, or occupancy,” and rights to periods of exclusive use are circulated among the owners of the shares, in specific intervals up to 14 nights per 1/8 share, “according to a … floating schedule on a periodic basis for a specific period of time during any given year.” Additionally, division of the property into fractionalized ownership under Pacaso’s business model will create either a “time-share estate” or “time-share use” — either the owners of the shares of the LLC hold a “right of occupancy” and “an estate in the real property” which establishes a time-share estate, or if the LLC is deemed the sole holder of the “estate in the real property,” then such owners have a “time-share use” because they will hold a right to determine and establish their rights of occupancy pursuant to their right to operate and control the LLC under the terms of any membership or operating agreements.

We are aware that Pacaso has asserted to other jurisdictions that the properties that they sell and manage are not timeshares, but rather “fractionalized ownerships.” According to Pacaso, a Pacaso home is no different from any other single family residence. However, this is simply not true. Regardless of what Pacaso wants to calls its business model, the impact is the same — this type of commercially managed short-term vacation use has the same impacts on surrounding residential areas as short-term vacation rentals, which are generally prohibited by the City’s municipal code. (See CMC Sections 17.08.040, 17.68.030; 17.28.040.) The frequent, rotating occupancy of the owners is functionally akin to short-term rentals, and the City’s existing regulations on timeshare uses are specifically intended to minimize the impacts created by this type of use and occupancy of land. Similar prohibitions on short-term rotating occupancies have already found lawful under Ewing v. City of Carmel-by-the-Sea (1991) 234 Cal.App.3d 1579, which found that the City could lawfully prohibit short-term rental of residential property for transient occupancy in residential neighborhoods as an incompatible “commercial” use.

Finally, several significant policy reasons justify the City’s prohibition against timeshares. The City’s prohibitions on timeshares were first adopted in 1988 in order to preserve housing stock. The Housing Element of the City’s General Plan includes Goal G3-2, which is to “[p]reserve existing residential units and encourage the development of new multifamily housing in the Commercial and R-4 Districts.” Furthermore, Goal G3-4 specifically requires that the City “[p]rotect the stability of residential neighborhoods by promoting year-round occupancy and neighborhood enhancement.” As part of this goal, the City has committed to “maintain and encourage the expansion of permanent residential housing stock,” because the Housing Element notes that “[a] substantial percentage of the City's housing stock lies vacant much of the

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Patrick Abell
Ellen Haberle
Pacaso, Inc.

April 7, 2022

Page 4 ends

year as second homes occupied for weekends, vacations or on a seasonable basis” which “has the effect of reducing the number of permanent, year-round residents in the City.” To avoid depletion of residents and associated impacts on community, City services, Goal G3-4 of the City’s Housing Element specifically requires the enforcement of the prohibitions on short-term, transient rentals and timeshares in residential dwellings.

In sum, conversion of any existing housing stock into timeshares or “fractionalized ownerships” reduces the available supply of homes for occupation for full-time residency, and therefore reduces the affordability of housing in the City, based on basic laws of supply and demand.

Pacaso is Unlawfully Operating Without Required Business Licenses Pursuant to CMC section 5.04.020, it is unlawful for any person employed by Pacaso to commence or carry on any kind of business in the City without first procuring a business license and pay the applicable business license tax. (CMC section 5.04.020.) Pacaso does not possess a City business license, nor has it paid any business license tax to the City. As a result, Pacaso’s operations within the City also are in conflict with the City’s business license ordinance. However, we note that even if Pacaso obtains a business license, the business may not operate in the manner described above due to the prohibitions in the City’s Municipal Code regarding timeshares.

Request to Cease Unlawful Operation
In conclusion, Pacaso’s current operations within the City are unlawful and must cease immediately. The City requests that Pacaso cease all advertising and sale of fractional ownership of residential properties within the City. Failure to comply may result in enforcement. Any violation of City zoning prohibitions is subject to administrative citation and imposition of new fines for each day of unlawful operation pursuant to CMC Chapter 18.04. Furthermore, any violation of CMC section 17.28.010 prohibiting timeshare uses is a misdemeanor subject to criminal prosecution, punishable by a fine not exceeding $1,000 and imprisonment for a term not exceeding a period of six months. (CMC 1.16.010, 17.66.040.)
We are requesting your written response to this letter by April 21, 2022 which you may submit to me via email to [email protected]

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Patrick Abell
Ellen Haberle
Pacaso, Inc.

April 7, 2022

Page 5 ends

Thank you for your cooperation.

Sincerely,
Brian A. Pierik
City Attorney
City of Carmel-by-the Sea
BAP:SAR/jc
CAM #4855-3499-0355 v1

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Appendix E – City of Hermosa Beach Planning Commission Resolution

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Appendix F – County of Monterey Cease and Desist Order

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MONTEREY COUNTY

OFFICE OF THE COUNTY COUNSEL
168 WEST ALISAL STREET, 3
RD FLOOR, SALINAS, CALIFORNIA 93901-2439
(831) 755-5045 FAX: (831) 755-5283
LESLIE J. GIRARD KELLY L. DONLON

COUNTY COUNSEL ASSISTANT COUNTY COUNSEL
June 24, 2022
Patrick Abell
Senior Legal Counsel
Pacaso, Inc.
2021 Fillmore St. Suite 183
San Francisco, CA 94115
[email protected]
Ellen Haberle, Director
Government & Industry Relations
Pacaso, Inc.
2021 Fillmore St. Suite 183
San Francisco, CA 94115
[email protected]
Sent via email
Re: Request to Immediately Cease and Desist Unlawful Operations Dear Mr. Abell and Ms. Haberle,
I write to bring your attention to the requirements of the Monterey County Code1 with regard to Pacaso’s operations. As detailed fully below, to the extent that Pacaso’s advertisements or operations are occurring in zones within the unincorporated areas of Monterey County (“County”) where timeshares are not allowed, Pacaso’s operations are unlawful and must cease immediately. For Pacaso’s operations in zones where timeshares are allowed under the Monterey County Code (“MCC”), Pacaso must apply for a Use Permit in the inland zone or Coastal Development Permit in the coastal zone as applicable.

Under Chapters 20.06 and 21.06 of the MCC the following definitions are relevant to Pacaso’s operations:
- “Timeshare Estate” is defined as “a right of occupancy in a timeshare project which is coupled with an estate in the real property.”
- “Timeshare Use” is defined as “a license or contractual or membership right of occupancy in a timeshare project which is not coupled with an estate in the real property.”
- “Timeshare Project” is defined as “a development in which a purchaser receives the right 1 https://library.municode.com/ca/monterey_county/codes/code_of_ordinances http://www2.co.monterey.ca.us/planning/docs/ordinances/Title20/20_toc.htm

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in perpetuity, for life, or for term of years, to the recurrent, exclusive use or occupancy of a lot, parcel, unit or segment of real property, annually or on some other periodic basis, for a period of time that has been or will be allotted from the use or occupancy periods into which the project has been divided. The definition of time share project includes a timeshare estate and a timeshare use.”
Pacaso’s website indicates that its business model involves sales of property held by limited liability companies in 1/8 ownership shares, with the associated right to exclusive use of the subject property by the owner of the share, with Pacaso managing among other things, the upkeep of the property and providing an app to arrange for periods of exclusive use by the share owners. Pacaso’s website further states that each owner of a 1/8 share is entitled to 6 “general stays,” booked at least 61 days in advance, which may range between 2 to 14 nights, and unlimited “short notice stays” booked less than 60 days in advance. However, maximum stay length is limited to 14 nights regardless of the method of booking. Owners of two shares have the option to book stays up to 28 nights.

Pacaso’s business model clearly meets Monterey County’s definitions of “Timeshare Estate” and “Timeshare Project”, because Pacaso provides a right of occupancy which is coupled with an estate in real property. Specifically, individuals have a right to occupy/use the real property for a certain number of days per year, and they hold a fractional ownership interest in the real property.

Sections 20.64.110 and 21.64.110 of the MCC state that Timeshare Projects are only allowed in zones where a hotel, motel or similar visitor accommodation use would be permitted and in such a case a Use Permit or a Coastal Development Permit is required. Specifically, these zones include the following: High Density Residential, Mixed Use, Light Commercial, Heavy Commercial, Visitor Serving, and Coastal General Commercial. As such, in order for Pacaso to market and sell homes within these zoning districts, it first must apply with the County’s Housing Community & Development department for a Use Permit or Coastal Development Permit depending on the prospective home’s location.

Monterey County is aware of certain homes advertised on Pacaso’s website that are located in the Carmel Highlands and the Del Monte Forest. Both of these areas are zoned Low Density Residential, Rural Density Residential or Medium Density Residential, and therefore Timeshare Projects are not allowed per the MCC. The County respectfully requests that Pacaso cease all advertising and sale of fractional ownership of residential properties within incorporated zones where Timeshare Projects are not allowed. The County also requests, if applicable, that Pacaso apply with Housing Community & Development for an appropriate land use entitlement in zones where Timeshare Projects are permitted. Failure to comply with the MCC may result in enforcement. Any violation of the MCC is subject to administrative citation and imposition of new fines for each day of unlawful operation pursuant to Chapter 1.22 of MCC. Furthermore, any violation of the MCC is a misdemeanor subject to criminal prosecution, punishable by a fine not exceeding $1,000 and imprisonment for a term not exceeding a period

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of six months pursuant to Chapter 1.20 of the MCC.

I appreciate your prompt attention to this matter. Please feel free to contact me with any questions at [email protected] or 831-755-5313.

Sincerely,
LESLIE J. GIRARD
County Counsel
By: ______________________________
Kelly L. Donlon
Assistant County Counsel
cc: Monterey County Board of Supervisors
Charles J. McKee, County Administrative Officer
Leslie J. Girard, County Counsel
Erik Lundquist, Director of Housing Community & Development

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Appendix G – Village of North Haven Code Amendment

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North Haven adopted this legislation last Tuesday night.

PUBLIC NOTICE PLEASE TAKE NOTICE that the Board of Trustees of the Village of North Haven will hold a public hearing on the 18th day of January 2022, at 5:00 P.M., location to be determined based on current COVID-19 safety measures in place at the time of the meeting (please call 631-725-1378 for updates), to consider the adoption of a Local Law as follows:

LOCAL LAW NO. OF 2022 A LOCAL LAW ADDING TO
VILLAGE CODE CHAPTER 163 ENACTING ARTICLE XII
§ 163-96 BE IT ENACTED BY THE BOARD OF TRUSTEES
OF THE VILLAGE OF NORTH HAVEN AS FOLLOWS:

SECTION 1. THE ENACTMENT OF THE VILLAGE CODE
ARTICLE XII §163-96 §163-96 FRACTIONAL

OWNERSHIP, TIME-SHARING, OR INTERVAL USES

PROHIBITED
The creation fractional ownership, time-sharing, or interval projects are prohibited in single-family residences within the Village.

A. Findings and Purpose. An important function of local land use regulation is the establishment and protection of single-family residential districts in which tranquil, healthy, and safe neighborhood environments are maintained for
the quiet enjoyment of resident homeowners and their
families.

1. Fractional ownership, time-sharing, or interval
ownership projects have the same character as
commercial hotels, motels, lodges, and other commercial occupancy uses due to their transient nature and multiple short-term (less than six months annually) occupancies.

Such commercial or quasi-commercial like uses is
inappropriate in residential areas due to the increased traffic generation and multiple occupancies disturbing the peace and quiet of residential neighborhoods.

2. The needs of transients are averse to the interests
sought to be protected and preserved in single-family
residential districts because commercial uses for
transients may sacrifice other values critical to residential neighborhoods.

3. The Village deems it necessary and appropriate to
protect the existence of single-family residences and the quiet and peace of the Village by preventing unwarranted commercialization from encroaching therein, including
commercialization caused by the misuse of single-family residences. Thus, the Village Board finds and determines that this section is necessary to protect the public health, safety, and welfare of the residents of the Village.

4. B. Prohibition of fractional ownership, time-sharing, or interval projects in single-family zoning districts.

The use of any property in any single-family zoning district as a fractional ownership, time-sharing, or interval project shall be prohibited. A fractional ownership, time-sharing, or interval project shall exist if the following features are found: Multiple owners: Ownership is divided amongst 3
or more unrelated property owners, either through direct ownership of the property or indirect ownership through a membership, stake, interest, share, association, or similar device that grants entitlement to ownership rights or the use or possession of a property for the purpose of interval occupancy.

1. Time-sharing or interval occupancy: Use, possession, or occupancy of the property is transient in nature based on an arrangement, schedule, plan, agreement, license, or any other means or scheme whereby an owner of the
property receives ownership rights or the right to use the property for a period of time less than six months.

2. Commercial purpose: Use of the property is commercial in nature based on an agreement, arrangement, or any
other means or scheme whereby the owners retain, hire,
or otherwise utilize a third-party individual or entity for a fee (service, management, etc.) to control, manage, or
facilitate scheduling the use or occupancy of the property.

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3. C. Exceptions. This subsection shall not be deemed to preclude the creation of mortgages, liens, easements or other similar interests encumbering the residential
property as a whole to secure a loan or for any other
legitimate purposes.

D. Severability. If any section, subsection, sentence,
clause or phrase of this section is for any reason held to be invalid or unconstitutional by the decision of a court of competent jurisdiction, such decision shall not affect the validity of the remaining portions of this chapter.

E. Injunctive Relief. Any land use activity conducted
contrary to this chapter may be enjoined or restrained by injunction or otherwise abated in a manner provided by
law.

F. Violations and penalties. In addition to or as an
alternative to any penalty provided herein or by law, any person who violates the provisions of this chapter shall be guilty of a violation punishable by a fine not exceeding $500, or imprisonment for a period not to exceed six
months, or both, for conviction of a first offense; for conviction of a second offense, both of which were
committed within a period of five years, punishable by a fine not less than $750 nor more than $1,000, or
imprisonment for a period not to exceed six months, or
both; and upon conviction for a third or subsequent
offense, all of which were committed within a period of five years, punishable by a fine not less than $1,000 nor more than $2,500, or imprisonment for a period not to
exceed six months, or both. Each week’s continued
violation shall constitute a separate additional violation.

SECTION 2. EFFECTIVE DATE. This Local Law shall take
effect immediately upon filing with the Secretary of State as provided by law. All persons in interest will be heard by the Board of Trustees at the public hearing to be held as aforesaid and may appear in person or by representative.

The Village Hall is accessible to handicapped persons.

Dated: January 6, 2022 BY ORDER OF THE BOARD OF
TRUSTEES OF THE VILLAGE OF NORTH HAVEN. BY:

Eileen Tuohy, Village Clerk/Treasurer

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Appendix H – City of Palm Desert Ordinance

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ORDINANCE NO. 1378

AN ORDINANCE OF THE CITY COUNCIL OF THE CITY OF PALM DESERT,

CALIFORNIA, AMENDING PALM DESERT MUNICIPAL CODE, CHAPTER 25, MODIFYING SECTION 25.34.60 REGARDING TIME-SHARE PROJECTS CASE NO: ZOA 22- 0001
WHEREAS, the Planning Commission of the City of Palm Desert, California, did on the 18th day of January 2022, hold a duly noticed public hearing to consider the request by the City of Palm Desert for approval of the above -noted, and adopted Resolution No. 2805, recommending that the City Council adopt the Zoning Ordinance Amendment ( ZOA) for said projects regulating the time- share projects; and
WHEREAS, the Zoning Ordinance Amendment ( ZOA) modifies the Palm Desert Municipal Code (PDMC) Section 25.34.60 (Time -Share Projects) and implements a requirement for time share uses; and
WHEREAS, the City Council of the City of Palm Desert, did on the 24th day of February 2022, hold a duly noticed public hearing to, the City Council opened the public hearing and approved staffs request to continue to the 24th of March 2022. On the 24th of March 2022, another continuance of the public hearing was granted to the 28th of April 2022. On the 28th of April 222, the City Council considered the request by the City of Palm Desert for approval of a ZOA determined that the time- share process is consistent with the City' s General Plan; and
WHEREAS, at said public hearing, upon hearing and considering all testimony and arguments, if any, of all interested persons desiring to be heard, said City Council did find the following facts and reasons exist to approve said request:

SECTION 1. Adootion of Recitals. The City Council hereby adopts the foregoing recitals as its findings in support of the following regulations and further finds that the following regulations are beneficial and appropriate to protect the health, safety, and welfare of the residents and businesses of Palm Desert within the City limits.

A. The City of Palm Desert, California (" City") is a municipal corporation, duly organized under the constitution and laws of the State of California; and B. The Planning and Zoning Law authorizes cities to establish by ordinance the regulations for land use and development.

SECTION 2. Amendment. The City Council of the City of Palm Desert, California, approve, and adopt the PDMC amendment to Section 25. 34. 60 ( Time -Share Projects) as shown in Exhibit A, which is attached hereto and incorporated herewith.

SECTION 3. Severability. If any section, subsection, subdivision, paragraph, sentence, clause, or phrase in this ordinance or any part thereof is for any reason held to be

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ORDINANCE NO. 1378
unconstitutional or invalid or ineffective by any court of competent jurisdiction, such decision ' shall not affect the validity or effectiveness of the remaining portions of this ordinance or any part thereof. The City Council hereby declares that it would have passed each section, subsection, subdivision, paragraph, sentence, clause, or phrase thereof irrespective of the fact that one ( 1) or more subsections, subdivisions, paragraphs, sentences, clauses, or phrases be declared unconstitutional, invalid, or ineffective.

SECTION 4. Publication. The City Clerk of the City of Palm Desert, California, is hereby directed to publish this ordinance in The Desert Sun, a newspaper of general circulation, published and circulated in the City of Palm Desert, California, and shall be in full force and in effect thirty ( 30) days after its adoption.

PASSED, APPROVED, AND ADOPTED by the City Council of the City of Palm Desert, California, at its regular meeting held on the 12th day of May 2022, by the following vote, to wit:

AYES: KELLY, QUINTANILLA AND HARNIK
NOES: JONATHAN
ABSENT: NESTANDE
ABSTAIN: NONE
J C. HA IK, MAYOR
ATT ST:

HONY J. M I CLEW

TY OF PALM ESERT CALIFORNIA
2

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ORDINANCE NO. 1378
EXHIBIT A"

ZONING ORDINANCE AMENDMENT
SECTION 1. Amendment to Palm Desert Municipal Code. Palm Desert Municipal Code section 25. 34. 060 is hereby amended as follows:

25.34.060 Time -Share Uses
A. Purpose. The purpose of the special use regulations for time- share uses is to establish special location and site development standards.

B. Definitions.

1. " Accommodation" means any dwelling unit, apartment, condominium or cooperative unit, hotel or motel room, or other structure constructed for residential use and occupancy, including but not limited to a single family dwelling, or unit within a two family dwelling, three family dwelling, multiple family dwelling, or townhouse dwelling as defined in Section 17. 04. 160.

2. " Developer" means person, who at any point in time, owns, or has an option or contract to acquire eleven or more time-share interests for purposes of sale in the ordinary course of business if the time-share interests were acquired or are to be acquired from the original recipient of a public report for the time-share plan, or from a person who succeeded to the interest of the original recipient in eleven or more time- share interests in a time- share plan.

3. " Owner" means owner of a time-share interest.

4. " Person" means a natural person, corporation, limited liability company, partnership, joint venture, association, estate, trust, or other legal entity, or any combination thereof.

5. " Time- share instrument" means one or more documents, by whatever name denominated, creating or governing the operation of a time- share plan and includes the declaration dedicating accommodations to the time-share plan.

Time-share interest' means and includes either of the following:
i) A "time-share estate," which is the right to exclusively occupy a time- share property for a period of time on a recurring basis pursuant to a time- share plan, coupled with a freehold estate or an estate for years with a future interest in a time- share property or a specified portion thereof.
ii) A " time-share use," which is the right to exclusively occupy a time- share property for a period of time on a recurring basis pursuant to a time-share plan, which right is neither coupled with a freehold interest, nor coupled with an estate for years with a future interest, in a time- share property.

7. ' Time- share plan" means any arrangement, plan, scheme, or similar device, whether by membership agreement, sale, lease, deed, license, right to use agreement, or

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ORDINANCE NO. 1378
by any other means, whereby a purchaser, in exchange for consideration, receives the right ' to exclusive use of an accommodation or accommodations, whether through the granting of ownership rights, possessory rights or otherwise, for a period of time less than a full year during any given year, on a recurring basis for more than one year, but not necessarily for consecutive years. " Timeshare Plan" does not include arrangements whereby multiple parties join in directly purchasing full ownership of an accommodation and thereafter agree upon arrangements for their shared use.

8. " Time- share property" means one or more accommodations subject to the same time- share instrument, together with any other property or rights to property appurtenant to those accommodations.

9. " Time- share use" means the use of one or more accommodations or any part thereof, as a time- share property pursuant to a time- share plan.

C. Permitted zones. A time- share use shall be permitted only in a planned residential zone, a general commercial zone, or a planned commercial resort zone. Any timeshare use shall be developed in conjunction with a resort hotel having 500 or more rooms and an 18- hole golf course of not less than 6,400 yards, and then only if and when a conditional use permit has been obtained from the Commission in accordance with Section

25. 72. 050 ( Conditional Use Permit) of this code.

D. Application submittal requirements. In addition to standard application submittal requirements, an applicant for a conditional use permit approval involving a time- ' share use shall submit in the application at least the following information:

1. Copies of documents and information required pursuant to Article 12. 2 of the California Code of Regulations, Sections 2809. 1, 2809. 2, and 2809. 3 wherein the requirements for a " properly completed" application for a final subdivision public report are enumerated, excluding those documents so enumerated which are subject to the approval of the City and therefore otherwise available to the City. In the event such documents and information have not been filed with the California Department of Real Estate at the time an applicant applies for a conditional use permit, the applicant shall furnish such documents and information upon the submission of such documents and information to the Department of Real Estate, but in no event later than the issuance of the conditional use permit.

2. In the event an existing condominium project is proposed to be converted to a whole or partial time- share use, a verified description or statement of the number and percentage of the current condominium owners desiring or consenting to the proposed conversion of some or all of the units to a time- share basis shall be submitted. Also, in such instance there shall be submitted to the Commission prior to or during the hearing process, a verified statement of the number and percentage of owners who have received notification, either personally or by receipted certified US mail.

3. In the case of a new mixed project ( i. e., time- sharing condominium/ rental), a description of the means proposed to be employed to disclose the number and location of all time-share accommodations within the time-share use shall be submitted.

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ORDINANCE NO. 1378
1 4. Description of time periods, types of accommodations, and which accommodations are in the time- share program ( if less than all), and the length of time each of the accommodations are committed to the time- share plan shall be submitted.

E. Requirements. Notwithstanding any other provisions of this chapter, the following requirements must be met by any time- share use in any permitted zone:

The time- share use must be composed of time- share interests.

2. All maintenance agreements and conditions, covenants, and restrictions must be approved by the City.

3. The minimum time- share interest exclusive occupancy period shall be for one week (seven days).

4. Developer of the time- share plan shall post a maintenance bond, letter of credit, or cash deposit to ensure the maintenance of any landscaping along the perimeter of the time- share use abutting any public right- of-way. The amount of the bond, letter of credit, or cash deposit shall be equal to 25 percent of the annual budget of the time- share use owner' s association having the duty to maintain the exterior of the time- share property which is for such landscaping expenses. The bond, letter of credit, or cash deposit shall run to the City and shall remain in place for life of the time- share plan.

5. With respect to a time- share use, all interests created therein shall be subject to a public facilities impact mitigation fee of $150 per week share. With respect to each week share in a time-share use, a public facilities impact fee payable under this section shall be paid on the first day of the first calendar month following the sale and conveyance of such week share by the developer of a time- share plan to an individual consumer ( excluding bulk sales from one developer to another, in which case the successor developer shall have the obligation to pay the public facilities impact fee described herein upon the sale and conveyance of a week share to a consumer). On the first day of each calendar month, or less frequently if required by the Council, a developer of a time- share plan shall also submit a written report to the City which specifies the number of week shares in the time- share plan which have been sold and conveyed in the preceding calendar month.

F. Minimum number of units. The minimum number of units in a time- share project shall be 50.

G. Development standards. Time-share uses shall be designed to conform to the standards for hotel developments in the event the time- share use is located in a planned commercial resort or general commercial zone. The time- share use must comply with all development standards of the zone in which it is located. With respect to time- share uses developed within a planned residential zone, the density of the time-share uses shall not exceed the density permitted in such zone for residential projects; with respect to time- share uses developed in a general commercial zone or a planned commercial resort zone, the density of the time- share uses shall not exceed the density permitted in such zone for general commercial or planned commercial projects. In determining the density of a time- share use, upon the request of an applicant, the Director shall have the authority to transfer the density permitted in other similarly zoned property owned by an applicant to the time- share use.

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ORDINANCE NO. 1378
H. Violations, Enforcement and Civil Penalties

1. Any responsible person, including but not limited to an owner of a time- share interest, management entity, agent, or broker who uses, or allows the use of, or advertises or causes to be printed, published, advertised or disseminated in any way and through any medium, the availability for sale or use of an accommodation in violation of this section is guilty of a misdemeanor for each day in which such accommodation is used, allowed to be used, or advertised for sale or use in violation of this chapter. Such violation shall be punishable pursuant to Chapter 1. 12 ( General Penalty).

2. Any responsible person, including by not limited to an owner of a time-share interest, management entity, agent, or broker who uses, or allows the use of, or advertises or causes to be printed, published advertised or disseminated in any way and through any medium, the availability for sale or use of an accommodation in violation of this section is subject to administrative fines as set forth in Chapter 8. 81 ( Administrative Citations). Any person issued an administrative citation pursuant to this section shall for each separate violation be subject to: ( 1) an administrative fine in an amount not to exceed one thousand dollars ($ 1, 000) for the first citation; ( 2) an administrative fine in an amount not to exceed three thousand dollars ($ 3, 000) for a second citation issued for the same offense within a twelve-month period of the date of the first offense; and (3) a fine in an amount not to exceed five thousand dollars ($ 5, 000).

3. Time- share use, and/ or advertisement for time- share use, of an accommodation in violation of this section is a threat to public health, safety or welfare and is thus declared to be unlawful and a public nuisance and may be abated pursuant to Chapter

8.20 ( Public Nuisances), Chapter 9. 24 ( Noise Control), and Chapter 9.25 ( Multiple Responses to Loud or Unruly Parties, Gatherings or Other Similar Events).

4. Each day the violation of this chapter occurs shall constitute a separate offense.

5. The remedies under this section are cumulative and in addition to any and all other remedies available at law and equity.

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Appendix I – City of Palm Springs Cease and Desist Order

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55575.18100\34590098.1

Indian Wells
(760) 568-2611
Irvine
(949) 263-2600
Los Angeles
(213) 617-8100
Manhattan Beach
(310) 643-8448
Ontario
(909) 989-8584
655 West Broadway, 15th Floor, San Diego, CA 92101
Phone: (619) 525-1300 | Fax: (619) 233-6118 | www.bbklaw.com Riverside
(951) 686-1450
Sacramento
(916) 325-4000
San Diego
(619) 525-1300
Walnut Creek
(925) 977-3300
Washington, DC
(202) 785-0600
Jeffrey S. Ballinger
(619) 525-1343
[email protected]
December 6, 2021
VIA E-MAIL [email protected]
Ellen Haberle
Director, Government & Industry Relations
Pacaso.com
2021 Fillmore St. Suite 183
San Francisco, CA 94115
Re: Pacaso’s Operations within the City of Palm Springs, California Dear Ms. Haberle:

As you know, this law firm serves as City Attorney for the City of Palm Springs, California.

In that capacity, we are writing to advise Pacaso.com that Pacaso’s current operations within the City are unlawful and must cease immediately.

While I appreciate your recent efforts to meet with City officials and present Pacaso’s position as to why the City’s timeshare ordinance does not apply to Pacaso, as set forth more fully below, such a position it not legally tenable.

Pacaso is a company that holds itself out as a new way to own a second home. According to Pacaso’s website (https://www.pacaso.com/learn), accessed earlier this year, Pacaso operates as follows:
“Co-ownership with Pacaso is the best way to buy and own a great second home.

From buying to closing here’s how Pacaso works. First, tell us a little about yourself and what you are looking for in a second home. Then, start shopping. If a listing currently on Pacaso is not a fit, find one you love on any real estate site and share it with us. If the home is a match for Pacaso, we will partner with you to purchase up to half of the property in a private and professionally managed LLC uniquely designed for co-ownership. This LLC is referred to as the Pacaso Home LLC. On behalf of Pacaso, we line up financing for the LLC and close quickly. In parallel Pacaso remarkets remaining ownerships shares in the home to interested buyers. Buyers can purchase their desired amount of ownership from one-eighth

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Ellen Haberle
December 6, 2021

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to one-half of the whole home. We enable qualified buyers to access funds in the LLC and finance up to half of their purchase. The financing relationship is directly between the LLC and the buyer. Pacaso signs closing paperwork on behalf of the LLC. In parallel buyer signs the LLC owner operating agreement to complete their purchase. Ownership is recorded in the owner’s schedule section of the owner operating agreement. Following closing the collective owners own 100% ownership interest in the LLC. We transform the home with modern interior design and address any necessary repairs. Owners use the mobile app to book stays 2 days to 24 months in advance. Scheduling is easy and equitable based on the number of shares owned. From there we take care of everything, overseeing local property management, bill pay and platform technology, all from the mobile app. Owners simply show up, relax and enjoy their Pacaso.”
The maximum length of a stay is based on shares owned. Owners of one share can enjoy a stay anywhere from 2 to 14 nights. A stay with a duration of 2-7 nights counts as one general stay, while a stay with a duration of 8-14 nights counts as 2 general stays. Owners of two shares have the option to book stays up to 28 nights.

Pacaso asserts that the properties that they sell and manage are not timeshares. According to Pacaso, a Pacaso home is no different from any other single family residence. Pacaso further asserts that Pacaso co-owners agree to several restrictions to help ensure that their use promotes the public interest, safety and comfort. For example, Pacaso states that there is a maximum of eight co-owners for any home, with only one family using the property at a time; co-owners are prohibited from having large events or parties that exceed the maximum occupancy of the home; co-owners must adhere to a 9pm to 7am quiet hour policy; co-owners are prohibited from renting the home; and Pacaso encouraged homeowners to avoid parking on the street unless absolutely necessary. However, Pacaso does not provide any documentation or explanation of how these rules are enforced. The stays are reserved on an app, and while each co-owner is prohibited from renting the home as a short-term rental, they are permitted to allow other guests to stay there during their allotted days.

According to Pacaso, as of September, one single-family residence within Palm Springs has been fully sold, and Pacaso was marketing four others within the City.

City of Palm Springs Timeshare Ordinance
The City of Palm Springs regulates where timeshares can be located within the City and taxes occupancy of timeshares. Specifically, under the City’s zoning ordinance, a timeshare

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December 6, 2021

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project is allowed only in those zoning districts where a hotel use would be permitted (i.e., R-3, R-4, R-4VP, C-B-D, C-1, C-1AA and C-2 zones, and G-R-5 and R-2 zones when fronting on a major or secondary thoroughfare). (Palm Springs Zoning Code, § 93.23.11(B).) Indeed, such uses are not allowed by right, but instead require a conditional use permit. Notably, timeshares are not permitted in single-family zones.

The City’s Zoning Ordinance defines a “timeshare” as follows:
“…a “time-share project” is one in which time-share rights or entitlement to use or occupy any real property or portion thereof has been divided as defined in Section 3.24.020(7) of the Palm Springs Municipal Code into twelve (12) or more time periods of such rights or entitlement.” (PSZC, § 93.23.11(A).) Section 3.24.020(7) defines timeshares, for purposes of taxation. It defines a “timeshare” as
“occupancy related to the situation wherein a purchaser receives the right or entitlement in perpetuity, for life, or for a term of years or other extended term, to the recurrent, exclusive use or occupancy of a lot, parcel, unit, room(s), hotel or portion thereof, or segment of real property, annually or on some other seasonable or periodic basis, for a period of time that has been or will be allotted from the use or occupancy periods into which the time-share project which is involved has been divided. The said right or entitlement to occupancy may attach in advance to a specific lot, parcel, unit, room(s), or portion of a hotel, or segment of real property, or may involve designation or selection of the same at a future time or times.” Despite Pacaso’s assertions to the contrary, Pacaso’s business model meets the City’s Ordinance’s definition of a “timeshare”. The City’s definition, broken down into its constituent parts, applies to Pacaso.

Specifically, Pacaso’s business model fits the following definition: “wherein a purchaser receives the right in perpetuity… or other extended term, to the recurrent, exclusive use or occupancy of a lot … annually or on some other … periodic basis, for a period of time that has been or will be allotted from the use or occupancy periods into which the time-share project which is involved has been divided.”
Here, purchasers of a Pacaso LLC receive the right, in perpetuity or some other period defined in the LLC agreement, to the recurrent and exclusive use of the lot on which the residence

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is located. The right to such use is on some periodic basis, for a period of time that is allotted under the LLC agreement.

Thus, by its terms, the City’s ordinance applies to a use such as Pacaso’s. As such, Pacaso’s operations are not permitted in single family-zones within the City of Palm Springs, California.

In addition to the City’s Zoning Ordinance, the City’s business license ordinance requires any party that is transacting any business within the City to first procure a business license and pay the applicable business license tax. (Palm Springs Municipal Code, § 3.48.010.) Pacaso does not possess a City business license, nor has it paid any business license tax to the City. As a result, Pacaso’s operations within the City also are in conflict with the City’s business license ordinance.

Finally, several significant policy reasons justify the City’s prohibition against timeshares in single-family zones. As the City’s Housing Element of the General Plan states, “Palm Springs considers housing affordability to be a critical issue. The inability to afford housing leads to a number of undesirable situations, including the doubling up of families in a single home, overextension of a household’s financial resources, premature deterioration of housing due to the high number of occupants, situations where children and seniors cannot afford to live near other family members because of the lack of affordable housing options, and in more extreme cases, homelessness.” (City of Palm Springs General Plan, Housing Element, p. 3-19, (2014-2019).)
For every house that Pacaso sells to one of its limited liability corporations, to be used as a second, vacation home, that house becomes unavailable to a buyer or renter who could live there full time. This necessarily reduces the amount of housing stock that is available for full time residents in the City. The reduction in housing stock, in turn, feeds the affordability crisis, making the remaining houses within the City more costly.

Pacaso may claim that it only purchases and sells “luxury” homes, and therefore does not impact the availability of affordable housing. However, basic laws of supply and demand dictate that every home that is made unavailable to a full time resident, whether “luxury” or not, necessarily reduces the supply of homes, and therefore reduces the affordability of housing in the City.

One of the policies of the City’s Housing Elements is to “protect established single-family residential neighborhoods from the transition, intensification, and encroachment of uses that

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December 6, 2021

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detract and/or change the character of the neighborhood.” (Housing Element, HS1.8, p. 3-63.) Pacaso portrays its business model as “the modern way to buy and own a second home”. However, Pacaso’s “modern way” involves up to eight (8) investors and their guests rotating occupancy throughout the year. Although the LLC investors are not technically “renters”, neighbors can expect the property to have many of the secondary impacts of vacation rentals, which are currently prohibited in many Coachella Valley cities and heavily regulated in Palm Springs. For example, house cleaners will have to come to the home in between each stay, and the home can turn over multiple times in a week. To a neighbor, that impact is very much the same as if the occupants were short-term vacation renters. In addition, the “co-owners” of the limited liability company really have no connection with one another, other than their investment in the company. All of this necessarily changes the character of a neighborhood, in contravention of the City’s stated policy of preserving the single-family residential character of its neighborhoods.

Another Housing Element policy is to “preserve the supply of affordable rental housing in the community, including mobile home parks, publicly subsidized rental housing, and special needs housing.” (Housing Element, HS2.9, p. 3-68.) As stated above, Pacaso’s business model removes single-family homes from the housing market for individuals or families who wish to reside in Palm Springs and therefore reduces the supply of affordable rental housing for those individuals or families.

Therefore, Pacaso’s current operations within the City are unlawful and must cease immediately.

Should you have any questions, please do not hesitate to contact me.

Sincerely,
Jeffrey S. Ballinger
of BEST BEST & KRIEGER LLP
City Attorney
City of Palm Springs

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55575.18100\34590098.1
VIA E-MAIL [email protected]
Ellen Haberle
December 6, 2021

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cc: Hon. Mayor and Councilmembers
Justin Clifton, City Manager
Teresa Gallavan, Asst. City Manager
Flinn Fagg, Development Services Director

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Appendix J – Park City Notice of Amendment

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Appendix K – City of Santa Cruz Ballot Initiative

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Ballot Title:

AN INITIATIVE MEASURE PROPOSING AN ORDINANCE ADDING CHAPTER 3.38 TO

THE SANTA CRUZ MUNICIPAL CODE TO ESTABLISH AN EMPTY HOMES TAX, A

PARCEL TAX ON VACANT RESIDENTIAL PROPERTY IN THE CITY OF SANTA CRUZ Summary:

If approved by the voters, this initiative would add Chapter 3.38 to the Santa Cruz Municipal Code, establishing a tax on residential parcels that are in use less than 120 days within a calendar year (“vacant parcels”). This would be a special tax, i.e., the City could use the revenue only for purposes specified in the measure. The tax would apply to various types of vacant properties, including single-family and multi-family residential parcels, condominiums, and townhomes.

The measure would require each owner of a residential parcel to submit an annual declaration to the City regarding the vacancy status of their property. The City would also be required to establish a process to annually audit properties declared “in use” to verify vacancy status.

Making a false declaration as to a property’s vacancy status would constitute a misdemeanor.

Other violations of proposed Chapter 3.38 would be charged as infractions for the first two violations in a one-year period, and misdemeanors for three or more violations in the same time period.

The following annual tax rates would be established, subject to an annual CPI adjustment:
 $6,000 per vacant single-family residence;
 $6,000 per residential parcel with six or fewer units, where all units are in use less than 120 days per calendar year;
 $3,000 per vacant residential unit of a condominium or townhome; and  $3,000 per vacant residential unit on residential parcels with seven or more units.

An owner would be permitted to claim an exemption from the tax in a number of enumerated circumstances, including demonstrable hardship, as defined, where the owner has experienced a significant medical event, construction activities are active or pending, where the property is affected by natural disaster, and other circumstances as specified.

The use of tax revenue would be restricted to specified purposes, including financing affordable housing construction, purchasing existing units for the purpose of maintaining or converting them to affordable housing, providing restroom and hygiene services to the homeless, and paying the costs of administering the tax and for independent audits of the use of tax revenues.

An Empty Home Tax Oversight Committee would be established to oversee the administration of the tax and to make recommendations to the City Council for improvement of zoning and land use designations in the interest of creating affordable housing. The Committee would have up to nine members, including three members who must be renters, two low-income individuals, two with financial expertise, one UCSC student, and one unionized city employee. The measure would require the City Manager or designee to provide clerical assistance, administrative support and technical assistance, and to attend Committee meetings.

This measure would authorize the City to adopt rules and regulations for implementation and administration of the tax. A simple majority of voters is required to pass the measure.

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Appendix L – City of South Lake Tahoe Cease and Desist Order

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Appendix M – City of Sonoma Ordinance

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City of Sonoma

AN ORDINANCE OF THE CITY COUNCIL OF THE CITY OF
SONOMA AMENDING SONOMA MUNICIPAL CODE TITLE 19,
SECTION 19.10.050 (ALLOWABLE LAND USES AND PERMIT
REQUIREMENTS) AND AMENDING TITLE 19, SECTION

19.50.140 (TIME-SHARES) TO THE CITY OF SONOMA

MUNICIPAL CODE
WHEREAS, time share and fractional interest uses have been and currently are prohibited as uses not specifically enumerated in the Sonoma development code; and WHEREAS, the City has recently become aware of time-share companies or fractional interest companies wishing to operate in the City; and
WHEREAS, a severe housing crisis exists in the state with the demand for housing outpacing the supply; and
WHEREAS, the City of Sonoma is particularly experiencing a housing emergency due to its relative isolation, limited housing supply, and desirable location; and WHEREAS, time-share or fractional interest uses threaten to reduce the housing supply in the City by turning long-term housing in the City into vacation rentals and reducing the affordable housing stock in the City; and
WHEREAS, time-share and fractional interest uses increase traffic and noise impacts and have the same character as commercial hotels, motels, and other transient occupancy uses due to their transient nature making them inappropriate for residential zones; and WHEREAS, the development of time-share or fractional interest uses in Commercial and Mixed Use zones (which also have a “residential component” requirement) will reduce the City’s ability to collect valuable property tax, sales tax, or Transient Occupancy Tax; and WHEREAS, by allowing time-share or fractional interest uses in the City, market pressure will incentivize property owners to convert their existing commercial, hotel or residential uses, thereby reducing revenue to the City in the form of commercial property taxes, sales tax, Transient Occupancy Tax, and valuable existing housing stock; and WHEREAS, allowing time-share or fractional interest uses in the Commercial and Mixed Use zones reduces the availability of suitable lands to provide housing units to meet the City’s Regional Housing Needs Allocation for the 5th and 6th Cycles; and WHEREAS, by allowing times-share or fractional interest uses in the City, developers of those uses will seek to convert underutilized commercial uses (in Commercial and Mixed Use zones), thereby reducing the City’s ability to identify those sites as potential Housing Opportunity sites in the development of the City’s 6th Cycle Housing Element; and WHEREAS, on January 19, 2022 the City Council adopted an Urgency Ordinance pursuant to Government Code Sections 36934 and 36937 to make express the City’s existing prohibition on time-share and fractional ownership uses in all zones in the City; and

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Beverly Hills City CouncilMay 16, 2023

Beverly Hills City Council
May 16, 2023