St. Helena Reaches Settlement With Pacaso Home Co-Ownership Company

NAPA VALLEY, CA — The city of St. Helena and Pacaso, a home co-ownership platform, agreed to a settlement Thursday after years of debate and litigation regarding the regulation of co-owned homes in St. Helena.

The settlement was approved by a unanimous vote of the St. Helena City Council and concludes the litigation filed against the city by Pacaso in April 2021 challenging the city's authority to enforce its timeshare ordinance against Pacaso’s operation of co-owned homes in the city.

Pacaso believes the agreement reached with the city protects the property rights of Pacaso owners in St. Helena and protects the continued use and enjoyment of the existing Pacaso homes in the city.

According to case documents for Pacaso Inc vs. City of St. Helena, Pacaso sued the city on July 15, 2021 for for blocking it and its homeowners from enjoying home ownership in St. Helena and attempting to enforce a zoning ordinance that prohibits the creation of a timeshare project.

Pacaso cited a March 16, 2021, letter sent by City Attorney Walsh to all real estate agents in St. Helena concerning the city's timeshare and short-term rental ordinances and the potential violation of those ordinances by persons selling fractional interests in residential properties.

Pacaso launched in 2020 as Niner Homes seeking to "open the second home market, which has traditionally only been accessible to affluent and predominately white buyers," by simplifying and streamlining the co-ownership process that makes second home ownership possible at a more accessible price point, according to court documents.

Pacaso currently advertises co-ownership of a five-bedroom, five-bath home in Palm Springs for $285,000; a four-bedroom, six-bath home in Breckenridge, Colorado for $755,000; a four-bedroom, five-bath home in Napa for $683,000; and a three-bedroom, three-bath home in Malibu from $675,000, among others.

For each home, Pacaso creates a property-specific LLC which owns deeded title to the real property. Pacaso then organizes and vets a maximum of eight co-owners, who hold co-ownership interests in the LLC and co-own the home in increments ranging from 12.5 percent to 50 percent. At closing, the co-owners enjoy 100 percent ownership of the property and Pacaso's only role remains to serve, at the discretion of the homeowners, as program manager overseeing the LLC and employing local businesses to care for the home. Pacaso homeowners can sell their interest at any point after the first year of ownership by listing the property on the Multiple Listing Service with a local real estate agent, and they are strictly prohibited from renting out the property at any point to anyone.

At the time of the lawsuit, Pacaso owned or managed five single-family homes in the City of St. Helena and contended that Pacaso homeowners were "part and parcel of the underlying economic ecosystem of St. Helena "unlike absentee second homeowners" because "Pacaso homeowners use and occupy their home year-round," and "Pacaso itself employs between 8-10 local businesses per property, including real estate agents, property managers, landscapers, pool cleaners, home cleaners, laundry services, handymen, local artists, and more."

Under the settlement agreement, four existing Pacaso homes will not be subject to any further action and will be considered legal nonconforming uses under the city's zoning code. Other than the four homes, Pacaso nor any parent company, subsidiary or affiliate of Pacaso can market, sell or use any single-family home that is or is intended to be fractionally owned in the city.

According to the city, the settlement ensures that under its current timeshare ordinance, Pacaso cannot expand its operations in the city beyond Pacaso’s existing four homes. Moreover, the city will continue to enforce its timeshare ordinance to preserve the character of the city’s residential neighborhoods.

"This agreement, along with our updated timeshare ordinance, demonstrates our commitment to preserving the character of our vibrant and unique neighborhoods," St. Helena Mayor Paul Dohring said. "The City Council believes this settlement agreement reflects a good compromise that protects the City from the further expansion of timeshares in its residential areas, while limiting the ongoing cost, risk, and uncertainty associated with protracted litigation."

As part of the settlement, Pacaso and the City of St. Helena will engage in ongoing discussions about the future of co-ownership in St. Helena.

"This is great news for those of us who co-own homes in St. Helena," St. Helena Pacaso owner Taylor Lopez said about the settlement. "The reality is, co-ownership is a decades-long tradition here in wine country, where people enjoy visiting for weeks or months out of the year, contributing to the local economy, and can afford to own a home by sharing the cost with other families. I’m glad that the City of St. Helena has done the right thing by settling this matter."

Kevin Heneghan, vice president of legal affairs for Pacaso, called the announcement a win for Pacaso owners and a win for the community.

"Co-ownership allows families to come together and buy a second home that is better utilized and more affordable than traditional second homes would be," Heneghan said. "We look forward to continued discussions with city officials in St. Helena and across the country to have dialogue about how co-ownership can benefit communities."

According to the city, it maintains an open-door policy with all businesses operating in the city, and in the spirit of that policy, the settlement agreement allows Pacaso to initiate conversations with the city over the next 18 months to discuss its operations within the city, the allowable number of Pacaso homes in the city, and potential revenue streams relating to its operations in the city.

Under the settlement agreement, no action could be taken that would allow Pacaso to sell or market new timeshares in the city without City Council action, following extensive public input. Any conversations with Pacaso that involve the City Council as a whole would only take place at a noticed public meeting in conformance with the Brown Act, and the public would have the opportunity to comment on those discussions as part of that meeting, city officials said.

Additionally, any attempted expansion of operations by Pacaso in the city would require an amendment of the city’s timeshare ordinance, which could only be brought forward through noticed public hearings before both the Planning Commission and City Council.

City Manager Anil Comelo expressed satisfaction over the settlement.

"We are pleased to have reached a resolution with Pacaso that protects against the expansion of timeshare uses in our residential neighborhoods," Comelo said. "The City of St. Helena is committed to the well-being of our residents and intends to vigorously enforce our timeshare ordinance and other rules enacted by our Council to preserve the unique small-town character of our city."