tag: North Carolina Land Use Litigator: February 2013

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Tuesday, February 26, 2013, 10:28 AM

Local Ordinances and State Property: Enforcement Issues Under the Boardwalk

We're coming to you today from the local government world to discuss the ever-controversial topic of smoking bans and prohibitions.  This item, in particular, brings the added bonus of an interesting overlap between State law and municipal law, which a more common regulatory problem than one might guess.

This past year, the North Carolina beach municipalities of Wrightsville Beach and Carolina Beach adopted local ordinances prohibiting smoking on beaches adjacent to those towns.  However, generally speaking, ocean beaches in North Carolina are State property, which means the local governments are without power to enforce local ordinances on said property.  This is interesting enough.

But, it gets more interesting.  According to reports, a bill is bouncing around the State's General Assembly to give New Hanover County beach municipalities (including Wrightsville Beach and Carolina Beach) the power to enforce their local smoking ordinances on State property.  Such a "tool" would be in the style of a "local law".  Local laws, which are not uncommon, can be described as laws adopted by the State General Assembly and applicable to a specific county or municipality (as opposed to State-wide) that grant, restrict or modify the powers available to individual jurisdictions.

The apparent problem with the bill is that a local law cannot be used to permit local ordinance enforcement on State property.  Instead, that power must come from State-wide legislation, which is a more difficult proposition for the General Assembly to negotiate and enact.

Land use principles, local government laws, State laws and politics are the tides of our profession.

If you haven't seen this movie, it's about a dispute between neighboring municipalities over dredging rights.  Ok, it's not about that at all.

Mike Thelen practices in Womble, Carlyle's Real Estate Litigation and Land Use practice group. He regularly represents a wide variety of clients, from local governments to businesses, in land use and land development matters in both state and federal venues throughout North Carolina.  Follow the North Carolina Land Use Litigator on Twitter at @nclanduselaw.

Tuesday, February 19, 2013, 3:29 PM

Local Political Considerations and the Impact on Land Use Decisions: The Matter of Rye Playland

We've blogged in the past about Rye Playland, a publicly-owned and publicly-operated amusement park situated in the waterfront suburbs of New York City.  This interests the North Carolina Land Use Litigator as a native of neighboring Rockland County, sure, but it mostly interests us because the tumult surrounding the public amusement park involves all sorts of state and local land use regulatory issues: public-private partnerships, environmental, zoning, planning.  The list likely goes on and on.

It appears that turmoil continues for the Landmark.  According to reports, while it was recently settled by the county executive that a particular private entity would lead a "transformation" of the park (the same private entity responsible for its "revival" of Manhattan's Bryant Park, which is about as hard as revitalizing the space underneath the Eiffel Tower), the county legislature, itself, is now looking at the issue.  One newspaper calls this the "manifestation of a political power struggle". 

As far as we can tell from reports, the central political issue as to competing visions for Rye Playland come down to this: class.  Rye is wealthy, much of Westchester County is wealthy, but parts of Westchester County are not wealthy. 

The plan approved by the county executive, and since corralled by the county legislators "favors a return to the historic design, with public gathering spots along the promenade and shoreline, and the creation of ballfields in the existing parking lot. Sustainable Playland says its plan not only welcomes a more diverse clientele, it relies on that diversity for the new, year-round business model."  In other words, the leading paradigm favors a public park.

However, "County Legislator Virginia Perez, D-Yonkers, raised concerns that the development is leaving out her constituents — less-well-off families who go to Playland as an affordable family outing, mainly for the rides.  'They’re worried Sustainable Playland is meant to keep out minorities,' she said."  In other words, policial concerns from the "less wealthy" favor a public amusement park.

This is a reminder of the political sensitivities that permeate every land use decision.  It is ialso a reminder that those political sensitivities must be heeded just as carefully and wisely as the legal issues are to be heeded.  This is because the political considerations are just as critical, just as important, and, most importantly, just as determinative.  A fine lawyer will tell you that.

Do you want to spend your day here:

Or do you want to spend your day here:

Mike Thelen practices in Womble, Carlyle's Real Estate Litigation and Land Use practice group. He regularly represents a wide variety of clients, from local governments to businesses, in land use and land development matters in both state and federal venues throughout North Carolina.  Follow the North Carolina Land Use Litigator on Twitter at @nclanduselaw.

Friday, February 15, 2013, 4:44 PM

North Carolina Supreme Court Rules on Various Land Use Matters

The Supreme Court of North Carolina has issued a few decisions in the past sixty days with bearing on land use matters.  That the Supreme Court would rule this much in this little time on land use issues is not unprecedented, but it is unusual.  We'd like to briefly cover the crux of these decisions. 

"OK, ok, wait your turn!  I think the water rights people are up next."

Off we go!

I.  Conditions on Department of Transportation Driveway Permits
In High Rock Lake Partners, LLC v. North Carolina Department of Transportation, the Supreme Court determined that the NCDOT exceeded its statutory authority when it placed certain conditions on a residential developer's driveway permit.  The "driveway" was planned to connect a proposed residential subdivision development to a state road, over a railroad crossing. 

Specifically, the Supreme Court invalidated the NCDOT's conditions that the residential developer would need to (1) increase "grade" at an existing railroad crossing, meaning the developer would need to build a bridge over or dig a tunnel under the railroad crossing and (2) obtain the approval of the railroad companies owning and operating the crossing for the "grade change". 

In striking the NCDOT driveway permit conditions, the Supreme Court's analysis takes a literal and arguably restrictive view of the Department's powers pursuant to NCGS 136-18(29), the "Driveway Permit Statute": "This statute authorizes DOT to require applicants to construct and dedicate to the public use certain improvements in exchange for driveway access to, inter alia, secondary roads that average at least 4,000 cars per day. Those improvements are acceleration and deceleration lanes, traffic storage lanes, and medians. The statute additionally empowers DOT to establish policies and adopt rules that regulate the size, location, direction of traffic flow, and construction of connections of a private driveway to a public road. The terms of the statute authorize no further DOT regulation of driveway connections and do not permit the denial of reasonable access to the public highway system."

II.  Riparian Rights and Inverse Condemnation
In L&S Water Power, Inc. v. Piedmont Triad Regional Water Authority, downstream plaintiff hydroelectric power plants claimed inverse condemnation against upstream defendant public water authority over the diversion of water from the Deep River basin. 

Plaintiff claimed that the upstream diversion by the public water company--which, it should be said, was done to "satisfy its projected water demand for the next 50 years or more"--decreased downstream flow and amounted to a taking of plaintiff's riparian rights.  Defendant claims the "reasonable use" doctrine insulates it from liability and, in any event, the State impoundment statutes and North Carolina Environmental Management Commission certificate ("EMC certificate") also protect .

The North Carolina Court of Appeals found in favor of the plaintiffs and determined a taking had taken place, requiring the payment of compensation.  The Court of Appeals held that (1) the "reasonable use" doctrine does not apply to inverse condemnation proceedings, like this one, and (2) nothing in the impoundment statutes or in the EMC certificate excuses a government from paying just compensation.  The Supreme Court affirmed in a per curiam opinion.

III.  Loan Foreclosures and Deficiency Lawsuits
In Blue Ridge Savings Bank, Inc. v. Mitchell, plaintiff filed suit to recover on a loan deficiency.  Plaintiff loaned defendants $130,000, secured by certain property.  Defendants defaulted on the promissory note, at which point plaintiff foreclosed and purchased the property at public sale for $100,000, leaving a $30,000 deficiency.  Defendant fended plaintiff's attempt to recover the deficiency amount on the basis that plaintiff's $100,000 bid was "substantially less than the property's true value" in violation of NCGS 45-21.36.

Distinguishing Supreme Court precedent that a 20% difference between appraised value and sale price triggers the protections of NCGS 45-21.36, the Court of Appeals determined that the 9% difference between appraisal and sale price is not "substantially less" than true value.  The Supreme Court affirmed in a per curiam opinion.

A 9% profit margin isn't bad on real estate, is it?

Mike Thelen practices in Womble, Carlyle's Real Estate Litigation and Land Use practice group. He regularly represents a wide variety of clients, from local governments to businesses, in land use and land development matters in both state and federal venues throughout North Carolina.  Follow the North Carolina Land Use Litigator on the Twitter technological community system ("Twitter") at @nclanduselaw.

Tuesday, February 12, 2013, 1:49 PM

Restrictive Covenants and Home Businesses (or Working from Home)

Great Introduction
Though the economic environment appears to be improving, or maybe it just feels to be improving to the press, times are still less-than-ideal for a number of people.  The benefit to such less-than-ideal employment circumstances is that the true ingenuity of the human mind comes to the fore.  This is not at all to take away from or criticize the benefits of corporate citizenship, of course, but rather to look as fondly as is possible the "brighter" side of the road--creative destruction

I recall hearing an anecdote on NPR several years ago (a timeframe which, sadly and tellingly, could nonetheless encompass this current economic morass) about an interesting anomaly: a small town was the birthplace of a relatively large number of start-up companies, invention and patent claims.  It turns out that the local Boeing plant had either closed or downsized, and those unemployed engineers took it upon themselves to create new wealth.  It's like they say: you can lead a horse to water, but engineers are crazy-creative.

Insanely Smooth Segue
Similarly, current (and ongoing) economic struggles have led a number of individuals to strike out independently on their ideas and skills, outside existing corporate structure.  Here in the Research Triangle Region of North Carolina, for example, we've seen the rise of business/start-up incubators.  Despite such incubator resources, or in some places in the absence of such incubator resources, some new businesses are choosing to operate from home.  

From a land use perspective, operating a business out of a residence can present some unique challenges.  There can be lease issues, restrictive covenant issues, zoning issues, environmental issues (I'm looking at you, home-based nuclear waste disposal company).  

The Lawsuit, Which Is Why We're Here, Talking to Each Other
Last July, the North Carolina Court of Appeals issued an unpublished decision regarding the application of restrictive covenants to a home business--Matthieu v. Miller

In the lawsuit, Plaintiff neighbors sought to permanently enjoin defendant neighbors, the latter who operated an electrical business out of their home, The covenant at issue commanded that the “premises shall be used only for residential single-family dwelling purposes” and included a specific covenant that: "[n]o business, trade, or commercial activity of any kind, including farming and the practice of a profession, shall be conducted on the premises.”

After noting the principles that (1) "restrictive covenants are strictly construed in favor of the unrestricted use of property" and (2) "[d]oubt [about the terms of the covenant] will be resolved in favor of the unrestricted use of property", the court affirmed the trial court's decision to issue an injunction against the home business ("Miller" and "J&S") and to issue the injunction on specific terms.  Specifically, the court determined that the trial court was correct under the restrictive covenant terms to prevent the home business from: (1) meeting with employees or subcontractors of J & S or any other Miller business/sole proprietorship for business purposes; (2) allowing employees or subcontractors of J & S or any other Miller business/sole proprietorship to park their vehicles; (3) parking more than one van or other commercial vehicle; (4) storing commercial equipment or inventory for J & S or any other Miller business/sole proprietorship except for tools kept in the allowed van or other commercial vehicle; and (5) offering commercial vehicles, equipment, or inventory for sale.

What still bothered plaintff neighbors, however, and what the trial court chose not to enjoin (and what plaintiffs therefore appealed) were certain administrative aspects of the electrical business conducted out of the home:  "performing other clerical activities incidentally related to their electrical business, i.e. listing the street address of Lot 16 as a business address, making telephone calls, using the internet, and invoicing."  The appellate court affirmed the trial court's decision not to enjoin these "clerical activities" under the restrictive covenants because these "are all activities that take place within the confines of defendants’ residence, and do not destroy the residential character of the property or defeat purpose of the restrictive covenants."
Plaintiff neighbors may have been overly aggressive, yes.  And we applaud the Court's tempered and practical view of the applicable restrictions.  But folks operating businesses or conducting portions of their business in any form out of their homes in North Carolina, to whatever degree, should still pay attention to the possible restrictions whether in the form of leases, covenants, zoning, or other manner of government or private regulation.  

Also, one is also left to wonder why this was not a zoning case.  Really, selling commercial vehicles and equipment?

Mike Thelen practices in Womble, Carlyle's Real Estate Litigation and Land Use practice group. He regularly represents a wide variety of clients, from local governments to businesses, in land use and land development matters in both state and federal venues throughout North Carolina.

Friday, February 8, 2013, 3:46 PM

Apartments Are Hottest Development In the Triangle. Get It?

As we previously blogged about here, in our post entitled "Realtors Calling 'The Age of Multifamily' Residential Development as North Carolina Sees the Impact", apartment building and apartment transactions (sale and purchase of already-constructed complexes) is on the way up.  Way up.  I can see the construction aspect clearly, right here in Raleigh, as I drive to and from our offices in downtown Raleigh.  As we said then, in October, "Multifamily residential is hot.  Real hot."

But what about rental rates and occupancy rates?  These are, after all, the fundamentals driving the sales, purchases, construction and entitlements referenced in our prior post. 

Well, the Triangle Business Journal published today an interesting blurb on this very topic, entitled "Apartments Springing Up Across Triangle".  The title evokes a story of construction-mania.  But the subject goes deeper, into the kind of information driving the business decisions of developers and private equity funds.  Check it out:

"More than 9,200 apartment units are currently under construction in the Triangle, and another 6,300 units are proposed to be built, according to the most recent semiannual apartment market report from Real Data, a market research firm based in Charlotte.  Real Data’s report for January shows that the vacancy rate for apartment communities in the Triangle dropped to 5.5 percent. The rate is down from a 6.6 percent vacancy rate the year prior, which was already the lowest rate reported since 1998.  The average rental rate for an apartment in the Triangle increased to $868 per month, up from $834 a month the year prior.  But the average rental rate for a new apartment built in the last 12 months is around $1,400 per month."
Yep, the average--average--rental rate for a new apartment in the Triangle, built in the last 12 months, "is around $1,400 per month." 

So, let me get this straight: interest rates are so, so low in the "wake" (or the end, or the close to the end or the almost to the close to the end, or whatever) of the Great Recession, construction prices are competitive, and land is still relatively cheap, yet monthly rental prices for new apartment units are at or higher than they were before the Great Recession?  As an aside and a point of comparison, I paid $1,400/month for my first apartment in Manhattan, on 49th Street and 9th Avenue in Hell's Kitchen.  Granted, that apartment was old.  And small.  But I was some 2 avenue blocks from Times Square.

Anyway, while this isn't a true legal post, I think our readers and clients will find great interest in this latest real estate frenzy--apartments.

Mike Thelen practices in Womble, Carlyle's Real Estate Litigation and Land Use practice group. He regularly represents a wide variety of clients, from local governments to businesses, in land use and land development matters in both state and federal venues throughout North Carolina.
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