Companies offering fractional ownership of luxury properties in Miami Beach will have to follow new city regulations.
The Miami Beach City Commission on Friday unanimously approved an ordinance that requires condominiums and single-family homes that are owned by investors that buy shares of a property to abide by the city’s law that bans short-term rentals in some neighborhoods.
The fractional ownership ordinance largely targets Pacaso, a San Francisco-based tech company that allows investors to purchase as little as a one-eighth interest in second homes.
In Miami Beach, Pacaso is offering investment opportunities in a condominium and two single-family homes on the Venetian Islands and on Alton Road, according to the company’s website. The minimum investment for the three properties ranges from $385,000 to $867,000.
The new ordinance requires Pacaso and similar firms to have a local manager, available 24 hours a day, for each fractional ownership property in Miami Beach, as well as to comply with a code of conduct. Fractional ownership property managers will also be required to sign affidavits that condos and houses will not be rented on a short-term basis.
City staff worked with the fractional ownership industry to draft the ordinance, Miami Beach commissioner Alex Fernandez said at the commission meeting. Fernandez sponsored the measure.
“We can’t prohibit [fractional ownership,]” Fernandez said. “But this is what we can do.”
In a statement, Pacaso CEO Austin Allison said his company will adhere to the new ordinance.
Pacaso expanded into South Florida in 2021. The company sets up limited liability companies for joint ownership and collects maintenance fees from clients. Pacaso manages more than $200 million of real estate and has annualized revenue of $330 million, according to a press release.
Miami Beach has some of the toughest short-term rental restrictions in South Florida that come with hefty fines for owners who violate the city’s regulations. Sometimes, the city’s crackdown has led to favorable outcomes for property owners. In 2021, the city settled a lawsuit brought by an affiliate of Miami-based Safe Harbor Equity, which owns a four-bedroom house at 3098 Alton Road. Safe Harbor sued the city over short-term rental fines assessed on the property.
Miami Beach agreed to pay Safe Harbor $250,000, as well as waive about $200,000 in fines.
Source: The Real Deal