Planning Commission Votes Against Fractional Ownership

The Beverly Hills Planning Commission unanimously passed a motion supporting a draft ordinance that would establish permanent prohibitions on fractional ownership of residential and commercial properties in the city.

“In a time in which we’re all very concerned about providing housing, this–the fractional ownership vehicle–really takes housing off the market because they would be used as second homes, and that’s another reason I favor this ordinance,” Commissioner Peter Ostroff, one of the five commissioners to support the draft ordinance, said during the March 9 meeting.

Fractional ownership is an ownership scheme when a property is owned by multiple owners. Similar to a timeshare, it’s a practice whereby multiple people own a single property and use it for different amounts of time. Fractional ownership often takes place in single-family homes.

According to city staff, Beverly Hills is aware of companies that handle management duties for such properties’ multiple owners. 

Proponents of regulating fractional ownership argue the properties essentially function as short-term rentals; there’s high turnover for occupancy turnover and they exacerbate an already-existing housing shortage. 

The ordinance, if passed, would prohibit only those fractional ownership models that correlate to a time-based occupancy agreement.

In 2021, the City Council passed an urgency ordinance prohibiting fractional property ownership. That ordinance, which has been extended the maximum amount of times, is set to expire in the summer. Therefore, the Planning Commission moved to adopt a permanent ordinance to replace the urgency ordinance regulations.

The debate over fractional ownership was prompted in 2021 by the announcement of condos designed as shared vacation homes as part of One Beverly Hills, a $2 billion hotel and residential complex proposal.  City Council was enthusiastic about the project but expressed concern about the precedent being set by the proposed fractional ownership concept. 

This month’s meeting followed up discussions from a Feb. 9 Planning Commission meeting, during which the Commission debated how to draft an ordinance that’s tough on the practice while maintaining pathways for exemptions in certain scenarios. 

On March 9, all of the commissioners spoke in favor of the ordinance, including revisions made by city staff to the ordinance since the Feb. 9 meeting. Those revisions included a provision allowing anyone to request a City Council hearing regarding their intention to enter into a fractional ownership scheme.

While there was no public comment, several of the commissioners had questions and input on the latest iteration of the ordinance. Commission Vice Chair Gary Ross suggested a minor language amendment. 

“I think this was a really good idea,” Commissioner Jeff Wolfe later said. “It was thought out well and implemented appropriately.”

Commission Chair Myra Demeter, for her part, expressed concern about young affluent men who go in together on the purchase of a residential property and use the residence as a place for parties. Demeter wanted to know if the passage of the ordinance would prohibit that kind of behavior–which, she said, was detrimental to the surrounding neighborhood.

In response to the chair’s concern, city staff said that homes used primarily for partying is already addressed by an ordinance prohibiting noise nuisances – which assuaged Demeter’s concerns about the ordinance not being broad enough in its prohibitions. 

Ostroff interjected it was not only young men who were responsible for purchasing or renting homes and using them for partying but people of all ages and backgrounds. He was also concerned about the possibility of a lawsuit against the city that would prevent enforcement of timeshare regulations, similar to a current suit in St. Helena, a community in Napa Valley.

With each of the members voting in favor of the draft ordinance, it is now set to go before City Council for a final vote.

The meeting also included discussion of a development plan review to allow for the construction of a third-story addition with an outdoor terrace on an existing commercial building. The companies at the center of the project and represented at the meeting were Rolex/Patek Philippe, which are housed in the Gearys Beverly Hills store location on Rodeo Drive. 

Each of the commissioners spoke in favor of the proposal, saying they looked forward to the ways in which it would contribute to the luxury business community in Beverly Hills. 

“I think this is a beautiful project,” Commissioner Terri Kaplan said. “It will certainly enhance Rodeo Drive and the surrounding area.”