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Court rules in favor of town once again over ADU lawsuit

Appeal is likely

By Mark Reaman

The town of Crested Butte has scored another court victory in its legal dispute with two Crested Butte property owners from Texas who are arguing that their Accessory Dwelling Units (ADUs) do not need to comply with the latest town ordinance governing the issue.

Gunnison district court judge Steven Patrick ruled last week in favor of the town on two issues: the owner’s claim that the town was illegally forcing rent control on the property and the town action resulted in a “takings” of their property value.

Those rulings were the final two in regard to the original six claims filed by Christopher Mize and John Kiltz of Sopris 715 LLC through Law of the Rockies attorney Marcus Lock.

The October 24 ruling is in line with Patrick’s earlier decisions that basically made clear the court believes the property owners must follow the town code, even if amended, when dealing with the deed restrictions on ADUs in town.

The original deed restriction made clear the purpose of the ordinance and the three subsequent amendments were “to facilitate the availability of rental housing for local residents,” Patrick wrote.

As part of the original deed restriction on Crested Butte ADUs, density bonuses were awarded to property owners and tap fees were reduced.

The deed-restricted ADUs in question were built in the 1990s and the portion of the town code governing the restrictions has been amended, most recently in 2015. The lawsuit was filed against the town in 2016.

Lock argued for the homeowners that the town cannot change the rules governing the ADUs. He said the original deed restriction on the properties provides that “a long-term rental unit as defined by the Crested Butte Municipal Code will be maintained on the property.” He said both owners were currently maintaining such a unit that is capable of being rented for a period of six months or more as a long-term rental unit. Lock says they are not bound to the current regulation to actually rent the units.

But Patrick noted earlier that neither Kiltz nor Mize are actively renting their ADUs to “any natural person who resides in Gunnison County as that person’s primary residence for a term of not less than six months…” as mandated by the 2015 amendment to the town code. The 2015 amendment also states that if a deed-restricted ADU is vacant for more than three months, it is out of compliance.

Both property owners submitted that they were legally renting the properties when they charged $1 per month. The town contended to the court that the property owners were not acting in “good faith” to abide by the terms of the deed restriction agreement.

“The town is pleased that Judge Patrick has consistently found in the town’s favor on this case,” said town manager Dara MacDonald. ”Accessory dwelling units are an important component of local housing in the community and the town wants to ensure that they remain available for rent to actual locals.”

“My clients intend to appeal the District Court’s decisions in this case,” said Lock.

The town had filed two counterclaims in the case. “Our counterclaims are reformation (stating that the Court should rewrite the contract to match the parties original intent, if it had agreed with Plaintiffs’ claim that the long-term rental definition did not apply to the deed restrictions), and breach of covenant of good faith and fair dealings (stating that Plaintiffs did not act in good faith to abide by the terms of the agreement),” explained MacDonald in an email.

MacDonald said there could be continued discussion with the plaintiffs regarding settlement of the counterclaims. She said if a settlement cannot be reached, mediation is set for January and a trial date is set for April 2018.

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