This past week, the city of St. Helena was sued after accusing a stand alone housing operation for being a timeshare entity. Pacaso, a five-home development project, claims to offer homeownership for up to 8 different tenets per each property. But the city hasn’t been buying it and on April 6th, Pacaso fired back.
The federal lawsuit filed in the Northern District Court of California is seeking to “guarantee the legally protected rights of [the site’s] homeowners to enjoy the benefits of owning property in the beautiful surrounds of St. Helena.” In somewhat of a freedom grab, Pacaso is claiming the rights of his business operation have been violated.
Furthermore, the complaint requests a judgment declaring that St. Helena’s timeshare prohibition does not apply to Pacaso. The property is looking for an injunction that barrs the city from “interfering with Pacaso’s economic interests” moving forward.
Is the Location a Timeshare-Like Atmosphere?
Although the real estate dispute is warranted, it’s not Pacaso’s job to determine what defines a timeshare. In fact, at first glance, it’s exactly what the operation appears to be. An LLC was created to hold the title for each home, allowing up to 8 people to buy interest in the limited liability. At the same time, there is a difference that may help the unique St. Helena community stay in business.
At closing, each of the co-owners are able to take full ownership of the property. In a typical timeshare transaction, buyers are simply given access to time via certain dates in the form of a weekly interval or point memberships. The Pacaso development appears to give full ownership to co-inhabitants to manage themselves and seems to be simply listed as the property “manager” – which may seem relatable to an HOA.
Why Does the City Care so Much About Timeshares?
Since timeshares have been banned in the city of St. Helena, it’s more than likely going to be a battle. Buying a single home and owning it yourself is a lot different than what Pacaso offers. Moreover, the Municipal Code defines a timeshare as “an ownership or leasehold estate in property devoted to a time-share fee (tenants in common, time span ownership, interval ownership) or a time-share lease.”
St. Helena Attorney Weighs in on Concept.
City attorney, Ethan Walsh, weighed in on the situation. “Based on the evidence that the City has received of the nature of Pacaso’s and its buyers’ intended use of residential properties in St. Helena, Pacaso appears to be operating, facilitating, and selling timeshares under state law and the City’s code.”
Constant Warnings From City Causes Lawsuit.
Apparently Pacaso has been warned by the city on multiple occasions. The latest outreach attempt came via letter on February 10th. “Simply calling them co-ownership arrangements does not change that fact,” continued Walsh. In turn, Pacaso snapped back, claiming false pretenses were the basis of their warnings.
What Does Pacaso Have to Say About the Matter?
“Defendants have sought to preclude Pacaso and its homeowners from enjoying the benefits of secondary home ownership in St. Helena — a privilege that they have sought to reserve only for those in the upper echelon of financial status,” the company said. “[This is just] the latest chapter in a long history of improper attempts by the City to exclude outsiders from the community.”
“Co-ownership of property via an LLC is common practice in St. Helena and throughout Napa Valley where 36% of second homes are owned by an LLC or a similar vehicle,” the statement proceeded. “As such, this campaign targeted specifically against Pacaso is unfounded.”
“As Americans, we have a constitutional right to privacy and to choose whom we own real estate with. Selectively enforcing against Pacaso and LLC co-ownership is unjust, and a very slippery slope.”
Defendants, Defensiveness and Civil Rights.
The bold lawsuit names the City of St. Helena, Planning Director Maya DeRosa, Mayor Geoff Ellsworth and City Attorney Ethan Walsh as defendants. The Mayor, as well as the other officials, chose not to comment on the matter – but he did tell reporters he believed it was important to say that “St. Helena welcomes people of all backgrounds and ethnicities” to live and visit.
In an era where many prominent timeshare companies lack accountability and transparency, it’s good to see a town stand up to those that discover loopholes. At the same time, Pacaso does have some points for all parties to consider. If the company’s argument can prove the city is benefiting the wealthy and keeping outsiders away, then it could turn into quite an interesting lawsuit. Stay tuned.