New drafts of UDO presented to Town

Last Thursday, the Highlands Town Board of Commissioners were presented with two options of a Unified Development Ordinance draft proposed by their new attorney Bob Hagemann with Poyner Spruill.

With the first draft option being a similar draft to the first one approved in March, the second draft was the highlight of the meeting, with mentions of a complete banning of short-term rentals in all residential districts after two years.

“These draft proposals have come from the working group that we have had and also from the dialogue that we had with the full board in closed session with our attorneys,” Highlands Mayor Patrick Taylor said.

Hagemann started out his presentation by telling the board they did have the right to approve sending either one or both of the drafts to the planning board, but they are early drafts of the UDO.

“These proposals are subjected to change through the process based on the planning board’s review and recommendations, as well as public comments when you have a public hearing,” Hagemann said. “There is an opportunity for whichever of these drafts that you send to the planning board to be revised, refined and changed. This is a starting point for the process you are about to embark on.”

He went on to state the minor changes to the first draft of the UDO.

“Essentially this is what the commissioners approved initially and as you all know it was discovered after the fact that the public hearing was not properly advertised,” Hagemann said. “So, once it was realized and determined that the public hearing had not been advertised, of course, that approval by the commissioners was invalid. So, we have made a couple of minor tweaks. The earlier version limited the number of occupancy in short-term rentals to three unrelated individuals. There was a bedroom limitation based on related individuals. This draft takes that from three to five, which is consistent with the definition of family that is already in the UDO. Second, there is a slight tweak on who can certify the adequacy of the septic system. Third, there is a clarification that existing contracts prior to adoption can be honored. Fourth, there is a mechanism for potential revocation for up to a year and there is a clarification that if a short-term rental right is revoked for a year, that does not cost the right to continue as a non-conforming use. Those are essentially the very, very minor tweaks to the amendments that the board had previously approved.”

For the second option, Hagemann said they decided to take a different approach.

“The first version, of course, in R-1 and R-2, allows units or properties that have previously been used as short-term rentals to continue to be used as short-term rentals, subject to a limitation on intensification. The second version takes a different approach. One, it takes away permitting completely for short-term rentals. Under the second proposal, short-term rentals are permitted, by right, subject to certain performance limitations in the R-3 and the business zoning districts. In the R-1 and R-2, the way the ordinance is structured, there is no permit issued for short-term rentals, but there is no prohibition for two years. Those two years are subject to change based on public input and planning board recommendations, but early discussion has been two years. The date in the draft is Sept. 1, assuming there is a late August adoption.”

If the board chose to adopt option two, basically it would allow any units in the R-1 and R-2 zoning to be used for short-term rental, with a permit, without reporting and without registration, regardless to whether they had been previously used for a short-term rental.

“Essentially what it is, is a level playing field for all property owners in the R-1 and R-2,” Hagemann said. “They can choose to use their property for short-term rental as frequently or infrequently as they and the market allow and again, without a permit by right, but after two years, the short-term rental use must cease. The word for this is amortization. It’s an elimination of a nonconforming use after a certain period of time. So, during the period of time up to the date when teh use must cease, they are allowed in R-1 and R-2 as a non-conforming use. Again, to repeat myself, the proposal would then, at that given date, require the cessation of the use throughout R-1 and R-2. Those are essentially the differences between the two proposals. There is plenty of opportunity for the public to review the drafts, for the planning board to consider them and make any recommendation they choose to make and, of course, the board of commissioners can choose, using its legislative discretion at the end of the process, what, if anything, it chooses to adopt.”

After Hagemann delivered the proposals to the board, commissioner Marc Hehn had several questions for the attorney about the proposed amendments.

The first question was about section 4.7.1 of the first option, the Zoning Compliance Permit, and if it would be considered registration.

“I don’t believe so,” Hagemann said. “Ultimately, the court would have to decide. As you and the rest of the board knows, Wilmington’s ordinance was challenged and went to the State Court of Appeals. The court held that local governments could, under current law, have the authority to zone short-term rentals and require permits. They did conclude that registration, which was part of Wilmington’s ordinance, was preemptive. It was a very, very technical ruling based on the structure of one sentence within a state statute. We have done our best in the first draft to frame both the language and the substance of the proposal to legally fall clearly within the realm of permitting and not registration.”

Stating that he is the most cautious person in the room, Hehn said that he is worried about telling someone that they can’t operate something that has been permitted in the town, however, the other commissioners interjected stating that short-term rentals have not been allowed.

“It is my understanding that since 2012, short-term rentals have been allowed and permitted,” Hehn said. “People have spent money and they have invested. If they are allowed and someone is suddenly denied $40,000 a year, we have an obligation to make them whole. I think we need to open our eyes to how big of a problem we will have. I think we really need to go slow and be careful.”

With the amortization option on the table, Taylor asked Hagemann what the likelihood would be that the town would end up in litigation if they were to pass that option.

“It is clear to me, with the high interest of this issue in the community, it seems like there are residents nad property owners with different viewpoints of what they would like to see, and it’s not unusual for those that are disappointed to look and see if they have legal options to challenge it,” Hagemann said. “What I can tell you, particularly in regard to amortization, that was an issue in the Wilmington case. The plaintiffs in the Wilmington case were represented by an organization called the Institute for Justice and one of their primary objections, I believe, was to establish law in North Carolina around amortization. There is a Supreme Court decision that they dates back to the 1970s and at least two Court of Appeals decisions that upheld the concept of amortization. There are clearly those with a strong philosophical and even a legal objection to the concept and tool of amortization. It should not be surprising at all, if you do adopt the amortization option, that it might be challenged. Again, in my view, the law is clear and dates back to 1970, that it is an available constitutional tool in North Carolina, but I don’t deny that there are lawyers that have a contrary point of view and, ultimately, if it is drawn forward, it would be something that would be handled by the courts.”

Steihler made a motion to approve to send both of the draft proposals to the planning board for the review and it was passed by a vote of 4-1, with Hehn opposing.

After the meeting, The Highlander reached out to both of the STR groups for a statement.

Below is the statement from Save Highlands:

“Last week’s community discussions seemed to be dominated by the mayor’s comment that both sides should come to a compromise. The mayor went on to claim that he and the Town had not received any word from Save Highlands. This, of course, is factually incorrect. Moreover, it ignores members of Save Highlands publicly saying at least five times since this has started that we are willing to meet, including clear statements even last week preceding the town council meeting to this effect. In response to these repeated overtures of compromise and pleas for discussion from Save Highlands, the Town suggested and presented the most stringent proposed ordinance to-date which include a rapid fire amortization provision. This proposal simply postpones the Town’s outright ban and its attempt to cancel valid, non-conforming use rights by two years. It seeks to eliminate vacation rentals altogether--regardless of grandfathered rights--as we’ve always assumed was their ultimate goal.

“We’ve now learned that even though our attorneys sent a registered letter to the town’s attorneys in March 2022 with a detailed redline of the then-proposed ordinance along with an annotated letter explaining the suggested changes, some on council are claiming they didn’t receive it. In the registered correspondence, we attached the Town’s proposed ordinance amendment (with the Planning Board’s redlined edits), and we highlighted portions of the proposed ordinance that we believed were either problematic or unlawful.  Each highlighted ordinance provision had a corresponding elaboration in the body of the letter. Taken together, we designed the letter and the redlined, highlighted ordinance to reflect our position on the short-term rental amendment.

“Finally, before last week’s town council meeting, Jennifer Huff wrote a letter to the mayor and copied several others to make clear yet again that Save Highlands would meet to discuss this issue and potential solutions. It concluded, “So, in case there is still some doubt about our willingness to work with others towards a compromised resolution, please take this email as evidence that Save Highlands would accept any invitation to participate with other interest groups, elected officials, appointed officials, and/or staff on this issue. We’ve yet to receive any response.”

The Highlands Neighborhood Coalition sent the following statement:

“The Highlands Neighborhood Coalition totally supports the Town Board proposing amendments to prohibit all short-term rentals in R-1 and R-2. While we wish the timeline for phasing out existing STRs were limited to one year or less, we understand the Board’s desire to be fair and reasonable. Eliminating short-term rentals is the only option that preserves the historic nature of the Town of Highlands and the residential neighborhoods that have made it so special for well over a century. We are very appreciative of their efforts on behalf of the full-time and part-time residents of Highlands.”

Moving forward, the planning board will review the draft proposals at their regularly scheduled meeting, July 25, and then a public hearing was scheduled for Aug. 25 at 6 p.m. 

- By Christopher Lugo