St. Helena settles lawsuit with Pacaso over timeshare allegations

Anti-Pacaso protest

An anti-Pacaso protest outside a Riesling Way home in September 2021.

Star file photo

The city of St. Helena has reached a legal settlement with Pacaso that will allow the controversial home co-ownership company to continue operating four homes in town.

The settlement ends almost three years of litigation. Pacaso sued the city in April 2021, arguing that St. Helena’s prohibition on timeshares didn’t apply to Pacaso and the St. Helena homes it owned or managed at the time.

“The settlement ensures that under our current timeshare ordinance Pacaso cannot expand its operations in the City beyond Pacaso’s existing four homes,” according to a statement issued Thursday by the city.

Pacaso can continue operating its four existing homes as “legal nonconforming uses.”

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Pacaso creates a limited liability company to hold the title to a home and allows up to eight co-owners to buy an interest in the LLC. At closing, the owners of the LLC take over ownership of the house while Pacaso stays on as property manager.

Before the suit went to court, city officials determined that Pacaso’s model was indistinguishable from a timeshare.

The city’s fight against Pacaso was supported by neighbors who complained of excessive noise, parking problems, loss of housing for local residents, and the incursion of commercial activity into residential neighborhoods.

Pacaso’s lawsuit accused the city of trying 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.”

While the case was in court, the City Council adopted an updated timeshare ban that expressly prohibited Pacaso’s LLC co-ownership model, while maintaining that it had already been banned under the city’s previous definition of a “time-share plan.”

In a statement, Mayor Paul Dohring said the settlement and the updated ordinance “demonstrate our commitment to preserving the character of our vibrant and unique neighborhoods. 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.”

According to the city’s news release announcing the settlement, the city will allow 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.”

Any discussions with the full council will take place at public meetings with opportunity for public comment.

“We are pleased to have reached a resolution with Pacaso that protects against the expansion of timeshare uses in our residential neighborhoods,” City Manager Anil 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.”

Neighbors react

Neighbors affected by Pacaso's operations remain strongly opposed to what they see as commercial activity in residential areas.

"Timeshare operations belong in commercial districts, not neighborhoods," said St. Helena resident Susan McWilliams. "The lawsuit against St. Helena has held the attention of communities throughout California and helped inspire opposition groups in places like Utah, Texas, Maui and New York."

Leslie Stanton, who has participated in anti-Pacaso street demonstrations, said she would have preferred that Pacaso's St. Helena homes be "dismantled," "but I understand how hard that would be, so a compromise was the best thing to do."

"Not to mention that more litigation would be awful," Stanton said. "The Pacaso house across the street from me is quiet and most of the time no one is there except the pool guys, landscapers, cleaners and the tradesmen. It's a shame no family will ever be able to live there and join the St. Helena community."

As of Thursday, Pacaso’s website wasn’t offering any listings in the St. Helena city limits. The closest listing was the Ink House bed-and-breakfast at Highway 29/128 and Whitehall Lane in the unincorporated county. A 1/8 share of a one-year lease — equivalent to 45 days — was available for $84,000.

Pacaso reacts

In its own statement, Pacaso called the settlement “a victory for homeowners in St. Helena.”

The agreement “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,” the company stated.

Pacaso’s statement quoted St. Helena Pacaso owner Taylor Lopez saying, “This is great news for those of us who co-own homes in St. Helena.”

“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.”

“Today’s announcement is a win for Pacaso co-owners, but it’s also a win for the community,” said Kevin Heneghan, Pacaso’s vice president of legal affairs. “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. 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.”

People are starting to get creative to set foot on the property ladder and are exploring options like fractional homeownership and multigenerational homeownership. PennyGem’s Johana Restrepo has more.