HomeMy WebLinkAbout27 Timeshare OrdinanceSTAFF REPORT
CITY OF PALM DESERT
MEETING DATE: November 18, 2021
PREPARED BY: Robert Hargreaves, City Attorney, Best Best & Krieger LLP
REQUEST: Update on Timeshare Ordinance
Recommendation
By Minute Motion, request the Planning Commission to review of the timeshare ordinance
and provide City Council with any recommended amendments.
Background Analysis
INTRODUCTION
Recently, the City has become aware that a new business model, "Pacaso", that features
"co -ownership" shares in residential properties, has begun operating within the City.
Given the nature of its use of residential property, it is my opinion that it is a timeshare
use, as defined by California law and regulated by Section 25.34.060 of the Municipal
Code.
The Palm Desert timeshare ordinance (Municipal Code Section 25.34.060) has not been
updated since 2013. As a preliminary matter in considering regulatory responses to the
Pacaso-type businesses, we are recommending that Section 25.34.060 be updated to
provide a more robust definition, to refer to current California law, and to provide a broader
scope of potential regulation, should the city decide to pursue it.
DISCUSSION
Pacaso is a corporation that sells "co -ownership" shares in residential property. The
company started by purchasing homes in tourist destinations in California, though they
are rapidly expanding throughout the United States and internationally. Pacaso's
business model is as follows: Pacaso will purchase or enter into a contract to purchase
single family homes, then markets "co -ownership" interests in the homes to up to eight
individuals. Pacaso then forms a limited liability company ("LLC"), which owns title to the
residential home. The "co -owners" each purchase a one -eighth share, and are entitled
to use the residential property for a certain number of days per year according to their
share of ownership in the LLC. The one -eighth interest entitles the purchaser to stay at
the property for up to 45 days per year in increments of 2-14 days, including one "special
November 18, 2021 - Staff Report
Update of Timeshare Ordinance
Page 2 of 4
day" (Fourth of July, Thanksgiving, Christmas, etc.). 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. Once shares
in an LLC are sold, Pacaso continues to manage the homes, including providing
landscaping and pool maintenance, furnishing the homes, and paying all expenses, which
are then passed through to the co -owners. It is our understanding that there is currently
at least one property in Palm Desert that is being marketed by Pacaso.
Section 11212(z) of the Business and Profession Code defines the following significant
terms:
"Time-share plan" means any arrangement, plan, scheme, or similar device, other than
an exchange program, whether by membership agreement, sale, lease, deed, license,
right to use agreement, or by any other means, whereby a purchaser, in exchange for
consideration, receives ownership rights in or the right to use accommodations 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. A time-share plan may be either
of the following:
(1) A "single site time-share plan" that is the right to use accommodations at a
single time-share property.
(2) A "multisite time-share plan" that includes either of the following:
(A) A "specific timeshare interest" that is the right to use accommodations
at a specific time-share property together with use rights in
accommodations at one or more other component sites created by or
acquired through the time-share plan's reservation system.
(B) A "nonspecific time-share interest" that is the right to use
accommodations at more than one component site created by or acquired
through the time-share plan's reservation system, but including no specific
right to use any particular accommodations.
It is clear that the Pacaso 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.
Pacaso is not currently regulated by the State, as it does not meet the State's ten -share
threshold for regulation.
Palm Desert Section 25.34.060 does not dwell on the definition of "time-share" and
provides: "The time-share project must be composed of "time-share estates" as defined
in California Business and Professions Code Section 11003.5 [now section 1121]."
Nor does the ordinance provide any specific enforcement provisions.
November 18, 2021 - Staff Report
Update of Timeshare Ordinance
Page 3 of 4
In the attached draft ordinance, the definition of time-share is more elaborate, and is
consistent with current California statutes. It also provides enforcement options against
persons that own, manage, or market illegal time-shares.
At this point, the draft ordinance is before the council for discussion and direction. If the
council directs that the update proceed, the ordinance will be put before the planning
commission for consideration and recommendation, before it is brought back to the city
council for adoption.
November 18, 2021 - Staff Report
Update of Timeshare Ordinance
Page 4 of 4
Fiscal Analysis
There is no direct fiscal impact associated with this item.
LEGAL REVIEW DEPT. REVIEW FINANCIAL ASSISTANT
REVIEW CITY MANAGER
RWM N/A N/A Andy Firestine
Robert W. Hargreaves Janet M. Moore Andy Firestine
City Attorney Director of Finance Assistant City Manager
City Manager L. Todd Hileman: L. TOO(Oi I-t�Levv v�
ATTACHMENTS: Draft ordinance
CITY COUNCIL ON
APPROVED DENTED
RECEIVED OTHER
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VERIFIED BY A<ii)�
Original on File with City Ck's Office
ORDINANCE NO.
AN ORDINANCE OF THE CITY COUNCIL OF THE CITY
OF PALM DESERT, CALIFORNIA, AMENDING PALM
DESERT MUNICIPAL CODE SECTION 25.34.060
REGARDING TIME-SHARE PROJECTS
THE CITY COUNCIL OF THE CITY OF PALM DESERT DOES ORDAIN AS
FOLLOWS:
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 Projects Uses
A. Purpose. The purpose of the special use regulations for time-share projects 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.
6. "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 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.
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.
B C. Permitted zones. A time-share project use shall be permitted only in a planned
residential zone, a general commercial zone, or a planned commercial resort zone. Any time-
share project 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.
E D. Application submittal requirements. In addition to standard application submittal
requirements, an applicant for a conditional use permit approval involving a time-share project
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 Administrative Code of Regulations, Sections 2810 2809.1, 2809.2, and 2809.3
wherein the requirements for a "substantially 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 project 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 units accommodations within the project time-share use shall be submitted.
4. Description of time periods, types of units accommodations, and which units
accommodations are in the time-share program (if less than all), and the length of time each of
the units accommodations are committed to the time-share program plan shall be submitted.
D. E. Requirements. Notwithstanding any other provisions of this chapter, the following
requirements must be met by any time-share development use in any permitted zone:
1. The time-share project use must be composed of time-share estates" interests -as
de fned it Calif B sines an,a Prof ssi ns rode Section 1 i 003 c
2. All maintenance agreements and conditions, covenants, and restrictions must be
approved by the City.
3. The minimum time-share use interest exclusive occupancy period shall be for one
week (seven days).
4. Project sponsor 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 project 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 project
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 project time-share plan.
5. With respect to a time-share project 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 project 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 sponsor developer of a time-share project plan to an individual consumer
(excluding bulk sales from one sponsor developer to another, in which case the successor
sponsor 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 sponsor developer of a time-
share project plan shall also submit a written report to the City which specifies the number of
week shares in the time-share project 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.
F7 G. Development standards. Time-share projects uses shall be designed to conform to
the standards for hotel developments in the event the time-share project use is located in a
planned commercial resort or general commercial zone. The time-share project use must comply
with all development standards of the zone in which it is located. With respect to time-share
project, uses developed within a planned residential zone, the density of the time-share project
uses shall not exceed the density permitted in such zone for residential projects; with respect to
time-share prefects uses developed in a general commercial zone or a planned commercial resort
zone, the density of the time-share project 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 project 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 project use.
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 subiect 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 ($3,0001 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 ($5,0001.
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."
SECTION 2. Severability. If any section, subsection, subdivision, paragraph, sentence,
clause or phrase of this Ordinance, or any part thereof, is for any reason held to be
unconstitutional, such decision shall not affect the validity of the remaining portion 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 any one or more section, subsection, subdivision, paragraph, sentence, clause or phrase
be declared unconstitutional. If for any reason any portion of this Ordinance is found to be
invalid by a court of competent jurisdiction, the balance of this Ordinance shall not be affected.
SECTION 3. Certification and Publication. The City Clerk of the City of Palm Desert
shall certify to the adoption of this Ordinance and cause publication to occur in a newspaper of
general circulation and published and circulated in the City in a manner permitted under
California Government Code Section 36933.
SECTION 4. CEQA. The City Council finds that adoption of this Ordinance is not a
"project," as defined in the California Environmental Quality Act because it does not have a
potential for resulting in either a direct physical change in the environment or a reasonably
foreseeable indirect physical change in the environment and concerns general policy and
procedure making.
PASSED, APPROVED, AND ADOPTED at a regular meeting of the City Council of
the City of Palm Desert on the day of , 2021, by the following vote.
AYES:
NOES:
ABSTAIN:
ABSENT:
Kathleen Kelly, Mayor
ATTEST:
Norma Alley, City Clerk
APPROVED AS TO FORM:
Robert Hargreaves, City Attorney