A New Fight Is Brewing Over The Commercialization Of Nantucket Homes

While the debate over short-term rentals on Nantucket continues to boil for the third consecutive year, it appears another fight over the commercialization of residential homes on the island has just begun.

On Sept. 12, the San Francisco-based company Pacaso purchased a recently-completed seven-bedroom, single-family home at 11A Meadow Lane on Nantucket. Pacaso - which promises customers “second home ownership at 1⁄8 the cost” - almost immediately began marketing the 6,800 square-foot home as “Wyndham” with 1⁄8 ownership shares selling for $1.25 million.

Neighbors and others quickly took notice. It looked and sounded like a timeshare, which is prohibited in residential island zoning districts.

“I want to report an illegal timeshare that is for sale on my street,” one neighbor wrote in a formal complaint to the town’s zoning enforcement officer in early October. “I trust you will agree this is against Nantucket’s zoning laws and issue a cease and desist on the timeshare sale as soon as possible.”

Late last month, zoning enforcement officer Marcus Silverstein agreed with that assessment. In an Oct. 21st letter to Pacaso co-founder Austin Allison regarding the 11A Meadow Lane property, Silverstein described the company’s actions as a violation of Nantucket’s zoning bylaw.

“Please be advised that Time-Sharing or Time-Interval-Ownership (as defined in § 139-2 of the Nantucket Zoning Code) of a property and/or dwelling constitutes the use of such property and/or dwelling as a Transient Residential Facility,” Silverstein wrote to Allison, a former Zillow executive. “‘Transient Residential Facility’ is a prohibited use of property within the R-20 district..”

The enforcement letter sets up a dispute that is playing out across the country in communities where Pacaso and other companies like it are buying residential properties. And it’s a fight Pacaso is prepared to wage on the premise that its business model is actually not a timeshare.

The company calls it “fractional ownership,” and has been attempting to persuade abutters, zoning officers, and town officials in communities from California to South Carolina that it should be exempt from existing regulations and restrictions on timeshares.

“Pacaso is not a timeshare,” said Brian McGuigan, Pacaso's director of corporate communications. “We help families co-own second homes, an established practice in Nantucket and around the country. Pacaso is modernizing the process and bringing together buyers. Otherwise these homes operate similar to any other co-owned home which have never been considered a timeshare.”

Beyond the Meadow Lane home it already owns, Pacaso has its sights set on two more Nantucket properties - one off Miacomet Road and another in Monomoy - that it has identified as “prospects.”

Pacaso describes itself as a licensed real estate broker and property management company that ultimately retains no ownership in the homes it buys after selling shares to second-home buyers. It acts as a property manager after those sales, and claims to enforce a “Code of Conduct” among the fractional owners which prohibits rentals, limits the number of guests, and regulates noise, parking - even garbage.

Pacaso representatives are attempting to meet with Nantucket’s elected officials to discuss its model, and it’s unclear if the next step will be in the meeting room or before the Zoning Board of Appeals.

Similar disputes over Pacaso and the timeshare vs. fractional ownership question have played out in Sonoma Valley in California, Palm Springs, Park City, Utah, Sullivan’s Island in South Carolina, Maui, and elsewhere.

On Nantucket, ACK Now, the political action group that mobilized to regulate and restrict short-term rentals, applauded the enforcement letter sent to Pacaso’s Allison.

“We give kudos to the Building Commissioner for enforcing local zoning laws which prohibit timeshares,” ACK Now’s Julia Lindner said. “Judging by their website and the LLCs created, Pacaso had plans to grow its footprint on Nantucket.”

Lindner said ACK Now's concerns about short-term rentals are similar to the criticisms lodged against Pacaso in other communities where it has been acquiring properties.

"The common thread is that Pacaso buying residential homes on Nantucket goes against the large majority of residents who would say they want neighbors in their neighborhoods," Lindner said. "Pacaso is a real estate manager and developer with a pool of money planning to buy half a dozen Nantucket homes in the near term to turn them into timeshares. They try to call this model 'an established practice in Nantucket,' which is ridiculous. Thankfully, there is a zoning bylaw in place to prevent them, and the Town came to the rescue of the neighbors by enforcing the bylaw."

Nantucket’s zoning bylaws defines timeshares as:

A local real estate agent told the Current Pacaso’s model was unquestionably a timeshare and pointed to the language in the zoning bylaw definition that says “including but not limited to” as giving the town flexibility to enforce its existing rules on companies like Pacaso.

As it notes on its web site below, Pacaso apparently has big plans for Nantucket. Unlike the short-term rental cases that have prompted zoning enforcement requests, however, it seems as though neighbors of Pacaso properties may have an ally in the town in pushing back against the venture capital-backed start-up.