Threat of affordable housing lawsuit irks CB council

Can a 2015 ordinance govern a 1990s covenant?

By Mark Reaman

The Crested Butte Town Council did not react kindly to the threat of a lawsuit over an accessory dwelling unit (ADU) enforcement issue in town last Monday. Tension filled the council chambers at the regular Town Council meeting during a presentation by attorney Marcus Lock, who is representing two Crested Butte second homeowners who do not want to long-term rent their ADUs.

Lock said he was hoping to reach a quiet settlement with the town in part because he felt a court ruling on the regulation could actually impact scores of deed restrictions on ADUs in Crested Butte and make the renting requirement null and void.

John Kiltz of 715 Sopris, LLC, who owns a house and ADU at 715 Sopris Avenue, and Chris Mize, who owns similar property at 225 Butte Avenue, have retained Lock after being notified by the town that they were out of compliance with town code by not actively renting the units.

Active enforcement of restrictive covenants and deed restrictions began last March at the request of council. After sending several compliance letters and granting extensions, the town issued notices of violation to the property owners on September 15. Kiltz and Mize hired Lock to fight that action.

Lock filed appeals for Kiltz on September 23 and Mize on September 28. Under the town code, appeals of such violations are heard by the town manager. According to town manager, Dara MacDonald, the hearing was set for October 13 to accommodate discussions about a possible settlement.

The town has been working since spring to actively make sure any ADU that received tap fee breaks and density bonuses complied with the town code, updated in 2015, that required such ADUs to be physically rented.

As a result, the majority of ADUs in town were brought into up-to-date compliance.

When the units in question were originally constructed, detailed rental requirements were not part of the town code. At the time, the covenant attached to the property read simply that the property had to maintain a long-term rental unit as defined by the Crested Butte Municipal Code.

In 2015, the town tightened up the ADU regulations. According to building and zoning director Bob Gillie, the intent of the 2015 ordinance was “to more fully express the original intent of the deed-restricted regulations. The rule set was amended to state that a vacancy of three months or more was not in compliance with the definition of long-term rental. Also a more definitive penalty and appeal process was defined for non-compliance.”

Fines for noncompliance could be up to $100 per day.

Proposed settlement not settled

Lock appealed the action by the town to force the property owners to comply with the updated language. He told the council Monday night that he had worked out a settlement in October with attorney Barbara Green, who was hired to represent the town in the matter.

Town attorney John Belkin explained that, given the quasi-judicial nature of the appeal, he was there to advise MacDonald, who would hear the appeal while Green would represent the staff who enforced the regulations. Because of MacDonald’s decision-making role in the hearing, she and Gillie did not communicate about the details of the enforcement actions or proposed settlement in the days leading up to the hearing.

On October 13, MacDonald was presented with the proposed settlements and officially heard the appeal and decided to uphold the notices of violation. This essentially meant that the property owners had to abide by the updated code and they were given six weeks to rent their properties.

MacDonald said Lock threatened to sue the town over the issue and requested to be placed on an upcoming agenda to speak directly to the council. She and Belkin decided that, due to the significant public impact of the issue, Lock should be given a chance to address the council. He did so Monday.

“I don’t want to turn a mole hill into a mountain,” Lock said. “We don’t want to do great damage to the good work done by Bob Gillie with affordable housing in town. We are not asking anything of you. The code says the town manager has the final word. But that does not preclude your hearing the issue. There is an opportunity to resolve the dispute. My clients have given me the authority to file litigation but we all would prefer to work through the situation. I feel there is an opportunity to reach a compromise on the issue.”

But the council was in no mood to compromise over the two deed-restricted affordable housing units.

A court decision could impact scores of other units

“You’re here to threaten us?” asked mayor Glenn Michel.

“No, “replied Lock. “I felt we had reached a settlement with [town legal representative] Barbara Green. The town has a 98 percent compliance rate. My two clients do not feel the 1990s code requires them to do what the 2015 regulations state. Litigation could impact 40 or 50 other accessory dwelling units that have the same deed restriction language.”

MacDonald said the number of ADUs that could be impacted is actually more than 80.

“You are threatening the town of Crested Butte,” said Michel. “There are longtime citizens living in those ADUs and you are saying litigation could take that away?”

“If the outcome is adverse to the town of Crested Butte, it could impact 50 or so units,” Lock said. “The law is the law. If it is illegal for my clients, it would be illegal for all such situations. It’s not a threat to allow a court of law to determine what is legal or illegal. In my opinion, litigation is always a lose-lose situation. I always try to avoid it.”

Lock then showed the council five slides making his argument. He said that a 2015 ordinance “cannot be applied backwards. How you interpret a 1990s deed restriction has to be done based on the code in the 1990s. The one-sentence deed restriction at the time said ‘A long-term rental unit as defined by the Crested Butte Municipal Code will be maintained on the property.’”

Lock said the property owners are ”maintaining” the structure as required.

Lock told the council that if he could explain a case in five slides, “I would implore the other side to settle the case.”

“Affordable housing is so important to the community right now,” said Michel. “Why would we let these two go?”

“Policymakers in the 1990s did what they could. Current policy makers want to do more. But you can’t go backwards,” said Lock.

“The spirit of the 1990s was to give the homeowners who were building such accommodations something in exchange,” said councilman Chris Ladoulis, citing tap fee breaks and density bonuses. “If the spirit has lasted 30 years, one could argue the 2015 ordinance was meant to commemorate that spirit.”

“What was agreed to in the 1990s and today is different. The language has changed,” said Lock. “The 2015 language says you have to rent it and to whom. It didn’t say that in the 1990s. I would ask that you look hard at this. I spent a lot of time negotiating a settlement with Barbara Green. Consider that result.”

An upset councilman Jim Schmidt said he had been on the council in the 1990s and “the absolute intention was to provide long-term housing for people living in the valley. People were given tap-fee breaks that were paid for by the town. Providing as much housing as we could was important to us. I would say there was no doubt what the intention of the properties were. To think we would say build it and we will give you a break but don’t use it, is ridiculous. I’m just disappointed that your clients don’t believe what we believe with affordable housing. To step backwards seems like a terribly wrong way to go. The popular interpretation of the law is that this was meant as long-term housing.”

“The deed restriction had to be in the title work,” added councilwoman Laura Mitchell. “If they missed it, it’s their fault. It has to be there. It’s certainly a clear intent.”

“I am highly disappointed with this,” said councilman Roland Mason. “I really support the staff position. I support the 2015 ordinance. It would be hard for me to settle with two people when everyone else has come into compliance. I want to stay firm right now.”

“For me it started when the council instructed the staff to bring all the ADUs into compliance,” said Michel. “To get down to two and have this is disappointing. I commend the town manager on her decision. I do not want to settle with Marcus. The answer is no. The council will stand firm and uphold [MacDonald’s] decision.”

Property owners have until December 19 to rent their ADU

On Tuesday, MacDonald said the town would follow up with the property owners to see if they come into compliance with the town ADU regulations by December 19. If not, they will be considered in violation of town code.

When asked why she didn’t take the advice of the town legal representative who had worked out a settlement with Lock and the property owners, she said there were obviously “significant shortcomings with the proposed settlements.”

Among other issues, she said, the agreement would not have required the units to be rented long-term or to locals. “This would have put the town in the position of telling one property owner that it was fine that they did not have their ADU rented while asserting to 80-plus other property owners with identical or similar covenants that they had to rent theirs out,” MacDonald said. “Although Marcus argued that Kiltz and Mize would not reveal the contents of the settlements, the documents were presented during a public meeting and are therefore public. In addition, Crested Butte is a small town and it was unrealistic to believe that word would not get around through them or subsequent owners.”

MacDonald said the council direction was clear after Lock’s Monday presentation. “The council indicated at the meeting that protecting the availability of long-term rental units—the town has made concessions and provided funding to establish—is a huge priority,” she said. “Given that the cost of obtaining one long-term rental unit could easily exceed $300,000, the council is prepared to vigorously defend the units that already exist.

“As a community the decision was made 25-plus years ago to tolerate additional density and provide tax dollars towards these units in order to ensure there were rental housing options for those who work here,” MacDonald continued. “These are an important component of the broader workforce–affordable housing efforts.”

There are 241 units in Crested Butte that are deed-restricted, covenant-limited or otherwise restricted to long-term or affordable housing.

No definitive decision has been made about when or if to file a lawsuit against the town.