Highlands UDO amendments regarding STRs gets a do-over

After months of discussions and heated arguments, the Highlands Board of Commissioners voted to approve changes to the town’s Unified Development Ordinance in regard to its short-term rental policies at the May Town Board meeting.

However, due to a failure to properly notify the community of a public hearing to discuss the STR issue in the media, the town must hold another public hearing.

The town is required by state law to notify the community of any public hearings through subscription-based media, in this case The Highlander.

The Town released the following statement on June 9 regarding the procedural mishap.

“The Town of Highlands held a public hearing for the proposed amendments to the Unified Development Ordinance (UDO) pertaining to, among other things, Short Term Rentals. Staff sent proper notice of the public hearing to the newspaper to be published on February 10 and 17. The public hearing was held with a large number in attendance. Recently, however, Staff learned the affidavit had not been received from the newspaper confirming the publication. After contacting the newspaper, it was discovered the publications were never published by the newspaper. Due to the newspaper’s failure to publish the notice as required under State law, the Town plans to re-notice the public hearing and send the current version of the proposed UDO amendments to the Planning Board for a second review and recommendation. A second public hearing will then be held before the Town Board of Commissioners where the Board can again consider adoption of the proposed UDO amendments.”

Leadership at The Highlander did not respond to multiple requests for comment.

As there are two physical newspapers in Highlands, the free Highlands Newspaper and the paid subscription newspaper The Highlander, Highlands Mayor Pat Taylor clarified.

“According to NC statutes, official legal notices can only be run in subscription newspapers, i.e. The Highlander,” said Taylor. “We sent in the request to run the legal notice. Our staff failed to follow up to make sure the notice would appear in the paper.”

Taylor added that he will discuss the issue further in his column this week and that the policy to notify the public should be reviewed.

“I think the statute concerning legal notices in subscription papers is outdated and flawed,” he said. “There should be other options for municipalities.”

Taylor is not alone concerning the “Legals” notification policy. Publisher of Highlands Newspaper Kim Lewicki said the current requirement is not effective.

“There are three free newspapers available in Macon and Jackson counties – Highlands Newspaper, Macon News, and Smokey Mountain News,” said Lewicki. “Those three newspapers have far-reaching distribution, both on the streets each week and on the web. If the true reason to require ‘Legals’ be published in newspapers is to make sure citizens get critical information, then they should be published in the vehicles that reach the highest numbers of citizenry, which in these times, are the ‘free’ papers. The bottom line is taxpayers shouldn’t have to purchase a newspaper to get vital Legal information. This statute is indeed outdated.”

By Brian O’Shea, Plateau Daily News

Town Board’s final word on STR policy before procedural mishap

The town’s final word on Short-term Rentals was heard at the May Town Board meeting with the passage of amendments to the Unified Development Ordinance, which went into effect at the close of the meeting May 19. 

The Highlands Neighborhood Coalition – which wants STRs disallowed everywhere except business districts – says the amendment is a “good first step.”

“The Highlands Neighborhood Coalition was formed by homeowners throughout Highlands to preserve the historic character of our Town and to ensure that there are neighborhoods in Highlands that are purely residential and free from commercial activity, specifically short-term rentals (STRs),” reads their statement submitted by Cathy Henson.

“We welcome the Town Board’s May 19 action of amending the current Unified Development Ordinance (UDO) as a good first step in halting the unchecked proliferation of STR’s in Highlands. The changes clarify what some saw as ambiguities in the previous language, which did not use the term “short-term rental.”  Short-term rentals are now defined in the UDO as a Commercial Use and prohibited in certain residential neighborhoods – those zoned R-1 and R-2.  

“The difficulty the Board has struggled with since last summer – as many, many communities have done throughout the country – is what to do with currently operating STR’s in these now prohibited residential zones.  After consultation with two prominent land use attorneys, hours of public comments, a thorough review of state statutes, and an analysis of the recently decided Schroeder v. City of Wilmington decision by the North Carolina Court of Appeals, the Town Board determined that the best way forward is to allow these STRs in R-1 and R-2 to continue operating as long as they can provide proof to obtain a Nonconforming Use Permit (NUP) and then must operate strictly within the parameters of past use.  

“In addition, all STRs, no matter where they are located in Highlands, must obtain a permit to operate a short-term rental (STR Permit).  The standards for obtaining both permits are clear and reasonable, as are the compliance rules.    For example, any STR attached to the Town sewer system cannot exceed 12 guests.  All STR guests must comply with Town nuisance, noise and trash ordinances.  Special events are not allowed.  Vehicles cannot park on the public right-of-way.  Contact information for the STR owner or operator must be posted on the premises. 

“Permitting and enforcement will be time-consuming for the town and we trust that they are up to the task they have created for themselves.  The Mayor accurately predicted that no one will be totally happy with these changes.  For those of us who want to live quietly in our mountain homes, the option chosen by the Town still leaves many of us with mini-hotels operating next door.  And so HNC remains concerned, but hopeful that this first step will allow the Town to fully understand and manage the problems created by commercial activities in residential neighborhoods. 

“Commissioner Amy Patterson said it best at the meeting.  ‘The future of the town is worth fighting for.’  We agree and will continue to support the Town’s efforts to preserve the character we cherish about Highlands.” 

But Save Highlands – which believes STRs should be allowed throughout town – is now armed and ready to continue with its lawsuit with the town which had been “stayed” pending amendments to the UDO regarding STRs.

“The lawsuit is very much alive,” said David Bee of Save Highlands.

“The ordinance on its face clearly violates the law of the State of North Carolina. Here is an excerpt from the North Carolina Vacation Rental Act that was signed into law by Gov Cooper on July 1, 2019… ‘…cities and counties are not authorized to do any of the following, among other things: Adopt or enforce any ordinance that would require any owner or manager of rental property to obtain any permit or permission from the local government to lease or rent residential real property or to register rental property with the local government.’ 

“This board has blatantly and recklessly dismissed the advice of the NC School of Government. They have ignored the legal advice of at least two reputable land use attorneys, including their own hired outside legal counsel. They completely scrapped and dismissed the proposal set forth by the Town of Highlands Planning Board — the only officials who attempted to mediate instead of unnecessarily squandering taxpayer dollars on legal fees. 

“In addition, Commissioner Patterson made it abundantly clear that spending in excess of $200,000 of taxpayer money is a worthwhile use of taxpayer funds that could be better spent on items such as workforce housing solutions. 

“Finally, after months of deliberation and awaiting a verdict in Schroeder v. Wilmington, the Town completely disregarded the judge’s ruling and decided to rush through an overreaching and invalid ordinance with no public comment. The entire thing is illogical and perplexing.” 

Though commissioners hoped the amended UDO would clear up the STR debacle the town started last August when it systematically disallowed STRs in the R1 district effective Jan. 3, 2022, the amendments have made the issue murkier than ever.

Before the board considered the amendments, Commissioner Marc Hehn requested the board send the proposals to land use Attorney Craig Justice who first worked with the town’s STR committee made up of Commissioners Amy Patterson, Brian Stiehler and staff.

“I make a motion that we send this to Craig Justice and ask him to go over it with opposing council to talk about the lawsuit to see if there are any possible compromises,” said Hehn.

Commissioner Patterson led the discussion against the motion which failed 4-1 with Hehn dissenting.

“We’ve had eight months of lots of public comment and lots of opinions from lawyers. We have had emails and phone calls. I think we have done our due diligence here,” she said. 

Background

Early on Justice told the STR committee that the town couldn’t abruptly prohibit STRs, that NC was a property rights state and grandfathering of uses would be allowed to continue even if properties sold because the uses follow the land.

This didn’t sit well with some members of the committee, so the town hired attorneys from Poyner Spruill, Chad Essick and Bob Hagemann who helped the committee come up with the STR amendments to the UDO which went into effect Thursday night – which, as it turns out, permits STRs to continue in all zones as a vested interest, with limitations.

Those “limitations” involve the requirement of three permits from STR owners across the spectrum – a Zoning Compliance Permit, a Short-Term Rental Zoning Compliance Permit and a Non-Conforming Use Permit for those in residential districts where STRs are grandfathered.

The amount of information required on all three permits is a lot and only a few aspects were discussed at the meeting – namely the relation of occupants of the STR and the requirement of liability insurance.

First, STR rentals allow two people per bedroom plus two additional people. But the number of bedrooms can’t exceed the number of bedrooms approved for the dwelling in an improvement permit issued for the property by the county. 

For properties served by a public wastewater system, overnight occupancy shall not exceed 12 people. 

In residential zoning districts, the total number of overnight occupants who are not related by the fifth degree of consanguinity, blood, marriage, or adoption can’t exceed three. 

Commissioner Patterson said the purpose of that stipulation was to prohibit party houses.

“If there are three unrelated couples and they’re not causing a disturbance and no one is complaining then no one is going to knock on doors to see how many are related there,” she said. “But if eight occupants are allowed and they aren’t related then it’s a party house and that isn’t allowed. The renter can be held accountable for renting to unrelated people. Party houses aren’t allowed and that’s the only way we could figure out how not to allow party houses. But if you have two families with two kids apiece and they don’t disturb the peace, no one is going to report them so it’s not going to be a problem.” 

Regarding liability insurance, the proposal said: The owner or operator shall maintain general liability insurance on the property, which covers the short-term rental use and guests – but with the urging of Commissioner Dotson the board unanimously struck it.

“If someone gets hurt on the property it would be a civil problem; it’s not the town’s responsibility. It would be a civil issue between the tenant and the landlord,” said Dotson.

Commissioner Patterson said it was a way to protect everyone.

“The insurance is to cover the town, and as a government we are trying to protect visitors and citizens alike,” she said.

Town Attorney Coward said the provision didn’t have to be in the ordinance, but it didn’t hurt either. It would only matter to the town if a town employee got hurt on the property.

Commissioner Dotson said that wasn’t justification to require liability insurance for STRs and it would become onerous for the town to require a landlord to buy insurance.

In the end everyone agreed the liability insurance wasn’t necessary.

The ordinance goes on to say STRs can’t be used for special events or gatherings in excess of the overnight occupancy limit; occupants of STRs must comply with the town’s Nuisance Ordinance, Noise Ordinance, and its General Code of Ordinances.

In addition, the name and phone number of the owner, operator or an agent of the owner operator shall be conspicuously displayed inside near the main entrance of the short-term rental. 

Every contract for a STR must have a signed acknowledgment from the renter(s) that they have received and understand the rules in Highlands ordinances concerning noise, trash, parking, etc.; exterior rental signage is allowed and temporary signs are allowed without a permit.

Failure to comply with the standards and regulations can result in remedies and penalties. If three violations are committed by the owner or operator within a 12-month period, the Short-Term Rental Zoning Compliance Permit may be revoked by the Planning and Development Director for a period of one year.

But there’s more.

In the Zoning Compliance Permit a site plan is required drawn to an appropriate scale of the parcel showing its actual dimensions and indicating the size, location, and distance from property lines of the proposed building, any other existing building(s), and any other improvements proposed to be accomplished, including but not limited to driveways, sidewalks, and parking areas.

Everything about the property must be included on the STR permit – the address of the property; name and contact information etc., including a copy of the Macon or Jackson County Tax Department property information card, a copy of the Macon or Jackson County Occupancy Tax Registration Form for the property and much more.

Two requirements – one regarding septic fields and one regarding sewer connections may be problematic.

Proof must be provided of an improvement permit issued by Macon County Environmental Health Services or the Jackson County Department of Public Health and a certificate issued within the preceding 60 days from a qualified licensed sanitarian professional that the septic system serving the property is safe and adequate for the number of bedrooms as reported. 

If the property is served by a public wastewater system, a written statement from a licensed plumber is required saying that the connection to the system is operational and free of detectable leaks. The trouble is area plumbers are said to be booked solid.

Plus, plumbers aren’t typically qualified licensed sanitarian professionals with the authority to sign off on a septic system, so the county would have to check and sign off on a septic system – a process that could take months. 

According to county staff, the issuance of new septic field applications is three months out in Macon County so getting people to come up to Highlands to check on existing septic fields in a timely manner is unlikely.

As it is now, the county has two people on staff and has had to contract out septic system field work from adjoining counties – two from Swain and two from Jackson County.

Commissioner Hehn voiced his concerns over the amount of paperwork and verifications the town is requiring for STRs.

The recent court case Schroeder vs. Wilmington clearly said the registration of properties wasn’t allowed and according to Commissioner Hehn the town’s proposed permitting process smacked of “registration.”

“I am concerned that all of this might be considered registration and registration is in violation of Shroeder vs. the City of Wilmington,” he said.

But Mayor Pat Taylor said their legal advisors said the proposed permitting process doesn’t contradict Schroeder vs. Wilmington. 

Commissioner Patterson said the committee considered that but said since the town had zoning there can be rules attached to those zones.

“We have zoning, and we have rules about uses in zoning and we have to have some way of knowing and letting people know what those rules are so they will comply. It doesn’t do any good if we have no way of knowing if they are complying,” she said. “This is just like a Special Use Permit or building permit or a land disturbing permit, or a county permit. There are rules so everyone complies. This is not a registration. This is simply, in the light of zoning, how we figure out if someone is complying with the rules of the community they have decided to live by.” 

Mayor Taylor said the town’s legal advisors said the permits don’t constitute registration.

Major Changes

The amended UDO was distributed prior to the Town Board meeting in the agenda packet. At the time, Town Manager Josh Ward said he didn’t expect very many, if any changes to the proposed and delivered UDO but as the meeting progressed, that wasn’t the case.

There were two big unannounced changes regarding STRs allowances – the first in B4 and the second in R2.

Since the proposed ordinance permitted STRs in commercial zones B1, B2 & B3, it followed they should be permitted in B4 which is a buffer zone between residential areas and whose intensity is greater. So, the board quickly agreed that STRs should be permitted in B4.

The next unannounced change regarded STRs in the R2 zone. 

In a surprise move, the board decided to treat R2 like R1 when it came to STRs.

Initially, Commissioner John Dotson said Tourist Homes have always been allowed in R2. 

“Historically we have allowed Tourist Homes in R2, so the perception of real estate agents is that R2 historically has been rental available,” he said. 

Commissioner Marc Hehn agreed saying Highlands needed to take some ownership considering what it has allowed in the past.

But Commissioner Amy Patterson disagreed.

“STRs are not conducive to what Highlands is,” she said. “Allowing STRs in R2 will drag down the rest of Highlands with it.”

The mayor agreed.

“I have gotten feedback from the folks in R2 who would like the zone to be treated like R1 which will guarantee there won’t be a transition of all STRs in R2,” he said. “If grandfathered, all the people in R2 who are doing it can continue; this just won’t allow a rapid expansion of them.”

Commissioner Stiehler said R2 should have the same protections as R1.

‘The future of Highlands shouldn’t be a STR venue. We need to protect what we have in the way of neighborhoods and residents who contribute to our town in so many different ways. I doubt STR people who come here for 3-5 days for a wedding attribute to Highlands,” said Commissioner Patterson. 

She questioned what the district might turn into.

“We don’t know how many are out there and if we don’t put something in here then that district will become entirely STRs,” she said. “STRs are not conducive to what Highlands is. Rentals might be fine, but STRs that are used weekends for destination venues is not what we are. If we don’t prohibit new STRs in R2 then STRs will explode in R2 regardless of what we have done in R1 and it will drag the rest of Highlands down.”

Commissioner Hehn reminded the board that the town has allowed STRs. 

“When the UDO was amended in 2012, regulations weren’t clear and it didn’t prohibit STRs,” he said. 

Commissioner Patterson agreed saying the town should have done something years ago. 

“But that doesn’t mean we shouldn’t do something now,” she said.

With a 4-1 vote with Hehn dissenting, new STRs are not allowed in the R2 district but they are grandfathered in as a nonconforming use like in R1 with stipulations outlined in the Non-Conforming Use Permit.

That permit must be submitted to the Planning & Development Director no later than September 1, 2022, or within 90 days of the use becoming nonconforming which is May 19.

If an applicant is unable to provide evidence concerning the STR history or that the level of intensity is less than 30 days, the property shall not be used as a STR for more than 30 days per calendar year. 

Hehn voiced concern for the property owners who invested money in their homes who don’t have “history” to account for their efforts.

“There is the case where someone hasn’t rented yet but made an investment and is ready to go but doesn’t have the history. Making this so restrictive, will invite a lawsuit,” he said.

Attorney Coward agreed saying that may be a common law vested right case.

“I don’t want a lawsuit, but I think some things are worth defending,” said Commissioner Patterson. “We pay $200,000 every year to keep the pool open so we are talking about the future of Highlands and what we want Highlands to be and the protection of the character of Highlands and the character of our neighborhoods.”

Patterson said she knew nobody in the room was happy with what they did. 

“But we have to move forward,” she said.

Town Manager Josh Ward said the amended ordinance is on the town’s website and the forms for the three required permits will be posted online by the end of the week.

By Kim Lewicki, Highlands Newspaper