From: “Brown, Eric P.” <EPriceBrown@washoecounty.gov>
Date: June 17, 2022 at 12:44:38 PM PDT
Cc: “Hill, Alexis” <AHill@washoecounty.gov>
Subject: FW: Pacaso and Incline Village/Crystal Bay Update
My staff and I met with the Pacaso folks as I told you we would along with Commissioner Hill. After hearing what they had to say we find no basis for taking any action to regulate Pacaso properties in a manner any different than how other stand alone residential homes are handled. Please see the attached analysis from Chad Giesenger on our team.
June 15, 2022
TO: Washoe County Managers Office c/o County Manager Eric P. Brown
FROM: Chad Giesinger, AICP Planning Manager Community Services Department, Planning and Building Division
SUBJECT: Pacaso – Community questions regarding how the Planning and Building Division will classify/regulate the real estate business model utilized by Pacaso
It has come to the attention of the Planning and Building Division that several residents of Incline Village/Crystal Bay have noticed what appears to be a new real estate business model occurring in the area. This real estate activity has raised concerns that the business practices utilized by Pacaso amount to either a Time Share or Short Term Rental land use activity. Each of these land use classifications have specific land use regulations that the residents claim are not being applied to Pacaso-managed properties. Specifically, Code Enforcement has received multiple complaints that illegal Time Share uses are occurring. For example, under current Washoe County Code, Vacation Time Share uses may only occur in the Tourist Commercial regulatory zone with approval of an Administrative Permit by the Board of Adjustment.
The Planning and Building Division (the Division) has been asked to explain how Pacaso properties are classified and how they will be regulated by the Division. To answer this question, the Division must classify the land use activity as falling under one of the uses contained in the Washoe County Development Code, Article 304. This memorandum sets forth the conclusions of the Division regarding the classification of Pacaso’s real estate activity and how it will be regulated by the Division.
According to its employees, Pacaso is a property management service that supports real estate buyers who wish to co-own second homes, primarily in the high value luxury end of the associated real estate market. Pacaso organizes ownership interests through creation of an LLC and caps the fractional ownership to a maximum of 8 total owners or less. Participants in co-ownership have real property ownership interest (and therefore pay property taxes) and cannot “time share” or “swap” their ownership interest with non-owners. Pacaso assists the owners in scheduling use of the property, property maintenance, and enforcement of property use contracts, among other services.
The Division has met with Pacaso representatives and conducted research on how their business model comports with Nevada Revised Statutes (NRS) and the Washoe County Development Code. Based on internal discussions and staff research, and on currently available information, the Division has reached the following conclusions:
- Pacaso is not engaging in a Vacation Time Share use as regulated by NRS Chapter 119A, nor as contemplated by the Washoe County Development Code (Chapter 110), Article 318.
Basis for conclusion: Even if the argument can be made that an “ownership interest” is no different than a “time share” interest, NRS 119A.170(a) exempts the sale of 12 or fewer time shares from the application of the regulations in NRS Chapter 119A. In addition, it is our understanding that the State is not requiring registration or a permit from Pacaso pursuant to NRS Chapter 119A. Washoe County’s Development Code classifies Vacation Time Shares as a commercial use under “Lodging Services.” The “Lodging Services” use type refers to establishments primarily engaged in the provision of lodging on a less-than-weekly basis with incidental food, drink, and other sales or services intended for the convenience of guests, including common facilities. See WCC 110.304.25(u). Vacation Time Shares are only allowed in Tourist Commercial (TC) regulatory zones where hotels and casinos are allowed and Single Family Detached residential uses are prohibited. Pacaso purchases only Single Family Detached residential properties not intended for Lodging Services use.
- Pacaso is not engaging in Short Term Rental activity as defined by the Washoe County Development Code, Article 319.
Basis for conclusion: Pacaso properties are only used by the owners of the property and their guests, like any other property that is co-owned by more than one interest. According to Pacaso representatives, rental activity is forbidden by contract and the properties are not advertised on short term rental platforms. If county staff discovers a Pacaso managed property is advertising or engaging in Short Term Rental use, then code enforcement will apply the enforcement actions authorized by WCC 110.319 and WCC Chapter 125.
- The Division will therefore regulate Pacaso properties like any other fee simple, single-family residential property.
Basis for conclusion: Given the conclusions in points 1 and 2 above, the only remaining classification for the Pacaso real estate business model is as a Single-Family residential use. Co-ownership of a property through an LLC instrument does not automatically make the property a commercial property, nor is such an ownership structure prohibited on residential properties. In fact, there are many properties owned by LLCs that already exist throughout the Incline Village/Crystal Bay community.
Please do not hesitate to contact me at (775) 328-3626, or firstname.lastname@example.org if you have any questions.
Chad Giesinger, Planning Manager
AT THE TIME OF THIS POST, Pacaso has established MORE LLC’s. They now have 10 registered LLC’s recorded on the Nevada Secretary of State website (nvsos.gov). They currently own 3 homes in Incline Village.