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Park City Planning Commission signals willingness to regulate ‘fractional’ home ownership

Park City Chamber/Bureau

After several residents in Park City raised concerns over “fractional” ownerships of single-family homes, the Park City Planning Commission indicated that it is willing to regulate the practice in the future.

Fractional home ownership involves a group of buyers coming together to split the cost of purchasing property through limited liability companies, commonly called LLCs.

Buying property through an LLC is nothing new and perfectly legal. Family members and friends frequently pool resources to purchase property. What complicates the practice is when fractional ownership is seen as a business opportunity.

Maybe the most common type of co-ownership model is a timeshare. Timeshares are regulated in Park City and are prohibited in certain neighborhoods, similar to how nightly rentals are.

In recent years, a new fractional ownership model has come to the market, and is gaining ground in Park City.

Craig Kipp lives in the Aerie neighborhood and warned the planning commission that if fractional ownerships are allowed to flourish in Park City, long-term residents will slowly be forced out.

“Once these are turned into these fractional ownerships, it’s gonna be impossible to go backwards," said Kipp. "The house will never become a single-family residence because you can’t get eight or 16 or four people to agree to sell it back to a single owner and leave the residence.”

One company that offers a fractional ownership model is called Pacaso. Pacaso’s business model is to help buyers set up an LLC and then manage the property for them. Pacaso manages fractional ownerships across the country and has several properties in Park City.

Pacaso CEO Austin Allison told KPCW in 2020 that the company isn’t doing anything out of the ordinary. He said Pacaso is just streamlining the home-buying process and offering what he called “co-ownership in a box.”

Critics of this practice claim the properties are effectively functioning as timeshares in neighborhoods where they are not permitted.

The planning commission held a work session on Wednesday to discuss possible changes to the city’s code targeted specifically at fractional ownerships acting as businesses.

Proposed changes include clearly defining the differences between timeshares, private residences, and fractional ownerships; requiring conditional use permits and business licenses for fractional ownership properties; and prohibiting fractional ownerships in some residential zones.

Commissioners supported some form of regulation, but wondered what the city could actually do to limit their prevalence in local neighborhoods.

City Attorney Mark Harrington told the commission that, yes, Park City can regulate the practice. But he cautioned the commissioners against going too far, citing active lawsuits in California where fractional ownership companies have sued municipalities that moved to ban the practice.

“To answer your question directly, yes, we believe this is within our authority," Harrington said. "There is pending litigation in California with jurisdictions that have attempted to go further and those appear to be on hold and not really gonna give us any guidance due to COVID and other reasons.”

The commission did not vote on Wednesday, but the issue will be back in front of the planning commission on May 25, where the commissioners could cast a vote on the code changes.

Commissioners asked city staff for more clarity on the impacts of fractional ownerships and which neighborhoods are most affected by them before they make a decision.

Sean Higgins covers all things Park City and is the Saturday Weekend Edition host at KPCW. Sean spent the first five years of his journalism career covering World Cup skiing for Ski Racing Media here in Utah and served as Senior Editor until January 2020. As Senior Editor, he managed the day-to-day news section of skiracing.com, as well as produced and hosted Ski Racing’s weekly podcast. During his tenure with Ski Racing Media, he was also a field reporter for NBC Sports, covering events in Europe.