CB council approves settlement in deed restriction lawsuit against town

Town gets $550,000; Kiltz and Mize get out of deed restriction

By Mark Reaman

In considering a series of ordinances and agreement documents on Monday the Crested Butte Town Council voted reluctantly 5-2 several times to approve a settlement in a lawsuit between the town and two property owners over long-term deed restrictions.

In settling the so-called ADU (Accessory Dwelling Unit) lawsuit settlement, the council agreed to accept two one-time payments of $275,000 from each property owner into the town’s affordable housing fund. In exchange, the town agreed to release those properties from deed restriction language in the covenants requiring a long-term rental be maintained on each property.

The lawsuit was headed to the Colorado Court of Appeals on January 15, 2019 after District Court Judge Steven Patrick ruled in favor of the town. After several closed-door executive sessions in which council received advice from attorneys involved in the case, council members appeared to indicate during public discussion of the issue that they were not absolutely confident the district court decision would be upheld. There was concern that if the town did have the decision overturned on appeal, another 41 units in Crested Butte with similar covenant language could be impacted and those deed restrictions could be lost as well.

Crested Butte town manager Dara MacDonald told the council that the plaintiffs, Christopher Mize, who has a unit at 225 Butte Avenue, and John Kiltz of Sopris 715 LLC had recently approached the town to propose a settlement. Staff and council representatives negotiated the agreement that will result in $550,000 for the town.

“It is a settlement and not a precedent,” emphasized town attorney Barbara Green. “At the court of appeals, it is a situation where you win it all or lose it all.”

“I know there are strong opinions on this and I was upset that we were being sued over this,” said mayor Jim Schmidt. “The big difference was between the intent of the restriction and what was written back then.”

“The district court ruled that we were right,” noted Green.

“My goal is to get people in workforce housing at a reasonable rate,” said Schmidt. “The goal was to get enough money to replace these units. The idea that we as a town would control and ensure that people would actually live in these units was what was appealing to me. That’s probably the main reason I think this should pass.”

“It is worrisome to show people that we are willing to deal on this,” countered councilman Will Dujardin. “I liken it to Whatever USA. We didn’t get enough money and it ended up sowing division within the community. I don’t think our price was high enough on this settlement.”

“I’m disappointed to be in the position that Kiltz and Mize put us in,” said councilman Kent Cowherd. “I disagree with their position in the paper that this is doing the town a favor. I feel we need to do this based on the attorney’s advice but I am not happy about it.”

“Going off that legal advice, I feel it is a hard one to win but we probably have to go with this,” added councilman Paul Merck.

“It doesn’t feel good,” said councilman Jackson Petito.

“I agree it doesn’t feel good and I wish we could have gotten more money,” said Schmidt. “I wish they had put people in those units but they didn’t and they weren’t helping at all.”

Petito said he had originally agreed to the proposed settlement but since talking to citizens, he had changed his position. “And that is why I will be voting no.”

And he did vote against the settlement, along with Dujardin. The council reluctantly voted 5-2 to approve two ordinances releasing the restrictive covenants and the two settlement and release agreements.

The cost of the lawsuit for the town has been covered by the town’s insurance provider.