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Town council looks at settling ADU court case

Property owners will write checks to Crested Butte’s affordable housing fund

By Mark Reaman

The Crested Butte Town Council is considering whether to allow the owners of two accessory dwelling units (ADUs) in town to be released from the deed restriction obligation of maintaining the units for long-term rental.

In a draft settlement of a lawsuit brought by the property owners against the town in 2016, the two property owners would contribute a total of $550,000 into the town’s affordable housing fund. The council will consider and vote on the settlement proposal at the December 17 meeting.

According to a memo to the council from town manager Dara MacDonald, Christopher Mize, who has a unit at 225 Butte Avenue, and John Kiltz, manager of Sopris 715 LLC, approached the town about the possibility of settling the suit before the next court date, scheduled for January 15 in the Colorado Court of Appeals. Negotiations ensued and a draft deal was struck that would allow each property owner to make a $275,000 contribution in exchange for having the town release the language in the covenants on the property requiring a long-term rental be maintained on each of the two properties.

The property owners lost their case in District Court when Judge Steven Patrick sided with the town’s argument and basically ruled that the court believes the property owners must follow the town code, even if amended, when dealing with the deed restrictions on ADUs in town. Mize and Kiltz appealed the ruling.

“Following the District Court ruling, the town feels our ADU regulations and covenants are on a firm legal basis and will continue to provide affordable housing for people working in the area,” mayor Jim Schmidt declared in an official statement. “As with any good lawsuit settlement, neither side is entirely happy with the outcome of the case. While the town does not wish to encourage ‘buy-outs’ of restrictive covenants, in this particular instance it seems to make both financial and legal sense. The town will be able to utilize these funds to obtain additional deed restrictions and increase the overall inventory of affordable units.”

At the December 3 Town Council meeting, town manager Dara MacDonald said that she, Schmidt and councilman Paul Merck hammered out the details of the settlement with the two plaintiffs, Mize and Kiltz. “We reached what we felt was a suitable settlement,” she told the council.

“Our goal was to be able to provide substitutes for these two units,” explained Schmidt. “They were small units and in trying to do that we looked at perhaps buying comparable units in town.”

But Schmidt said there wasn’t much of similar size available in Crested Butte. One unit is about 400 square feet, while the other is around 715 square feet. “Ultimately it will be up to the council to decide if we want to buy something, build something or buy a deed restriction from an existing free market unit. That’s for a future discussion.”

Schmidt emphasized that while the town would have preferred to receive more money in the settlement, it is still enough to do something of substance. “We would have loved to get more money or not to have had it happen at all,” he said. “We want units under our control and not having someone push the envelope, which is what happened. But we feel we can do a lot with this money to help with workforce housing in the community.”

Councilman Chris Haver had missed a few recent meetings due to personal issues and wanted to get caught up with some of the details and reasoning behind the proposed settlement. He asked that the discussion be continued until the December 17 meeting.

Town attorney John Sullivan said that timing should work since both parties would need to start preparing for the January 15 oral arguments but they could hold off until December 17. “It is still doable,” he assured the council.

The council will consider two ordinances at that meeting, releasing the properties from current land use conditions and restrictive covenants. They will also consider approving a settlement and release agreement related to the specific court case.

The town’s insurance provider has covered costs for Crested Butte’s defense in the lawsuit.

Schmidt said there are about 40 units in town with similar language in the deed restrictions.

“Knowing that the town would have control over the rents and the occupants of such units that replace these two ADUs, fulfills the objective of the town to provide workforce housing,” he concluded.

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