Draft of fractional ownership ordinance reviewed by Town

“Our code needs to be fixed”

The Crested Butte Town Council could make developing fractional ownership properties within town more difficult with  a new ordinance that will restrict such development.

However, Town officials say the changes could provide more "hot beds" for the Town.   
Town staff identified "fractional fee ownership" of properties as an area in Town code that needed to be updated last spring, after a proposal to turn the Crested Butte Club on 2nd Street into a fractional property was put forward. The proposal has since been dropped, but several other potential development projects with the same request have surfaced, prompting the need for an updated ordinance, according to Town attorney John Belkin.
"Our code needs to be fixed," Belkin said.
Belkin and the Town’s building and zoning director, Bob Gillie, presented a draft ordinance on fractional ownership to the Town Council during a work session on Monday, December 10.
Belkin explained that fractional ownership is essentially when a property gets spilt, purchased and deeded into multiple pieces. In practice, this means that many individual owners share the property with terms specifying use restrictions.
Fractional ownership is also referred as timesharing, interval ownership, vacation ownership, fractional interest and vacation clubs, Belkin said.
"The Town can only regulate use; it can not regulate forms of ownership," Belkin said, indicating the new ordinance would not prohibit fractional ownership in Town, but put restrictions on it.
The Town’s current code regulating fractional ownership was first created in 1980s and its main purpose was consumer protection, Gillie explained. This past summer the Town Council changed portions of the existing code to address concerns with single-family homes sold as fractional properties. The Town was concerned with the impact of fractionalized homes on neighborhoods and about the home’s ability to be recaptured as a single unit after being fractionalized. The code was changed to allow properties to be divided into quarter shares without regulation.
However, fractionalization beyond quarter shares constitutes a pattern similar to a hotel, motel, lodge or resort use and those uses are not allowed in residential zoned areas, Gillie said.
The existing code does not include regulations for developments such as these, which is the reason for the new ordinance, Gillie added.
"We have a code regulating this now but it’s not comprehensive enough to get us what we want out of proposed developments," Gillie said, noting the town has several new hotel development proposals requesting fractional ownership as a provision of the development.
Belkin says there are a handful of issues within the ordinance the council will need to decide on that will address requirements for public access verses owner use. Gillie says various models are used to determine exact number requirements.
"Some of these issues are addressed in the draft ordinance but the numbers can be debated," Gillie explained.
Gillie also said provisions addressing the timing of public use could possibly be the most valuable to the Town and its goal of increasing "hot beds" in town. The Town has repeatedly expressed an interest in creating more hotel rooms within its limits. The provisions would allow the Town to require the developers to limit when owners could use the units and for how long.
The ordinance, Gillie said, "is a way to get more hot beds in the high season, not just during the shoulder season."
Belkin said several work sessions will be needed to address each individual provision of the ordinance and presenters from both sides of the issue will be invited to speak to the council.
"This is a big, big thing and a fairly complex issue, and tonight’s presentation is only an initial overview. We will present the ordinance in pieces," Belkin said.
Gillie said he hopes the ordinance can be finished by mid-spring; otherwise, the Town would have to use the existing code for pending developments. Town manager Susan Parker said the ordinance should be a priority for the council in 2008. "We need to give the staff tools to use," Parker added.
Town Council member Skip Berkshire asked if the ordinance would treat short-term rentals the same as fractional ownership. "Short-term rentals and timesharing go hand-in-hand," Berkshire added.
Belkin said the ordinance would clearly define hotels, condominiums, short-term rentals and timesharing. "That is an important distinction we will want to go over in a future work session," Belkin told the council, reiterating the purpose of the ordinance was not to prohibit commerce.
Town Council member Leah Williams said she wanted to make sure the ordinance was balanced and thought it was a good idea to learn about models used in other communities.
"What we need to do is find what works for the Town and what works for the developer, because it has to work both ways," Williams said.
Gillie said the negatives to allowing fractional ownership could be extensive, but decreased with regulation. The ordinance will include regulations governing the approval process of such developments, marketing tactics, structure of ownership associations and reserve funds for maintenance.
Town Council member Dan Escalante said he was worried some of the ordinance might be too harsh for the size of developments Crested Butte is likely to face. He requested the council review provisions that require front desk personnel and other common hotel amenities.
"The size of development in town might not be big enough to accommodate the requirements of the ordinance," Escalante said, noting the Elk Mountain Lodge does not have a full-time front desk person.
Gillie said the purpose of the ordinance was to force fractionalized properties to function similar to a hotel; otherwise, it defeats the purpose. Gillie said the ordinance would try to tie fractional ownership to zones where motel/hotels are allowed.
Belkin says that although the Town can not prohibit timesharing outright, it can regulate it and that was a positive move forward. "It’s about regulating the impact of these things," Belkin said.
The Town Council had not scheduled the next work session as of press time, but Parker says it should be sometime in January.