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The possibility of “fractional ownership” happening in Beverly Hills wasn’t on the city’s radar until the One Beverly Hills project was considered.
However, officials are now “sensitive” to its potential impact on the city, as the City Council on July 15 passed an urgency ordinance establishing a 45-day moratorium on fractional ownership, a practice similar to the timeshare business model.
“The One Beverly Hills project opened my eyes a little bit to what could be fractional ownership in Beverly Hills,” City Attorney Larry Wiener said. He also referenced a startup company utilizing the practice in Northern California.
“That further made me think that we need [an ordinance] before this happens in Beverly Hills.”
Ryan Gohlich, the city’s director of community development, said fractional ownership refers to the sale of property to multiple buyers, who are given the right to use the property for a certain period of time that may or may not be proportionate to the amount of property they own.
Generally, these buyers use their time for vacations, he said. Whereas timeshares are usually sold by the week, fractional ownerships can have eight to 12 buyers who have a right to the property, rather than a license or a right to time, Gohlich said.
Since the practice uses properties as short-term rentals, fractional ownership can lead to a greater probability of noise, a loss of privacy and community, and potentially a decline in property value, Gohlich said. It could also impact future redevelopment, as well as exacerbate the housing crisis by removing traditional housing units, he said.
“We do know that there are several companies out in the market that are currently selling fractional ownerships in various parts of the state and country,” Gohlich said. “We’re not aware of any in Beverly Hills at this time, but we do know it is a practice that has gained popularity in the region.”
Mayor Bob Wunderlich initiated the request for staff to look into the issue. He said he is “increasingly aware” of groups trying to develop a fractional ownership market for buying single family homes and condos.
“I’m concerned about the impact that it could have on residential neighborhoods,” Wunderlich said, adding that the practice raises many questions, such as whether owners in these situations would be allowed to send their children to Beverly Hills schools.
While One Beverly Hills may have been the catalyst for the urgency ordinance, it will not be affected by it, the mayor said.
“This would be separate from that,” he added. “This would be generally for single-family residences and condominiums in the city.”
Council members expressed concerns that the moratorium was too broad and could have unintended consequences.
“Just to give you a flavor, there are court-ordered distributions of property in divorce which would fall within the purview of this,” Councilman Julian Gold said. “I’m fine with the ordinance, but I would like for there to be some process for some sort of review. …That’s my only real hesitation about that.”
Councilman John Mirisch supported the urgency ordinance. He said fractional ownership was not appropriate at One Beverly Hills, nor is it good for the community.
“It’s almost a syndication in a way,” Mirisch said.
During the moratorium, staff members will continue to analyze the practice’s potential impact on Beverly Hills and provide updates to the council.
“I’m OK with it as a safety valve,” Gold added.
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