tag: North Carolina Land Use Litigator: May 2014

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Thursday, May 22, 2014, 11:57 AM

"Lien In": North Carolina General Assembly Revisits New Mechanics Lien Laws

Last April, we wrote about the significant changes to the North Carolina mechanics lien laws, which are continuing to create issues and opportunities for owners, contractors, subcontractors and title companies working in the State.  As with any significant legislative revision -- to shamelessly employ a metaphor or two especially pertinent in the construction space -- the "dust has settled" to a degree and some "touching up" must now take place.  The North Carolina General Assembly is back in session, in Raleigh, tackling a number of issues.

Are the mechanics lien laws one such issue?  Yes.

Ok, but what's going on in that mechanics lien law space?  Well, our fine Raleigh colleague, Laura DeVivo, updated the world on her must-read, up-to-the-minute blog "Keeping Up With Jones Street" about the sometimes relevant but always impactful "goings on" at the North Carolina General Assembly.  To those outside the State, "Jones Street" is a reference to the location in Raleigh of the State's legislative office building.

Laura's blog entry can be accessed here in its website form, and it states:
HB 1101 - An Act to Enhance the Protection provided to Persons Making Improvements to Leased Real Property Under Article 3 of Chapter 44A of the General Statutes, as Recommended by the LRC (Legislative Research Commission) Committee on Mechanics Liens and Leasehold Improvements.  This bill would amend the statute concerning bond requirements for people making improvements to leased property; requires that anyone who leases property must secure bonds for changes to public buildings, and which parties must secure bonds; and provides that public-private partnerships subject to GS 143-128.1C are not subject to this bill. You can read the bill here: http://www.ncleg.net/Sessions/2013/Bills/House/PDF/H1101v0.pdf
HB 1102 - An Act to Clarify the Information Required to be Provided in a Notice to Lien Agent, as Recommended by the LRC Committee on Mechanics Liens and Leasehold Improvements.  This bill would amend the statute concerning the identification of life agent, notice to lien agent, and effect of notice to provide that service of the Notice to Lien Agent does not satisfy the service or filing requirements that apply to a Notice of Subcontract. Further, a Notice to Lien Agent cannot be combined with or refer to a Notice of Subcontract or a Notice of Claim of Lien upon funds. You can read the bill here: http://www.ncleg.net/Sessions/2013/Bills/House/PDF/H1102v0.pdf
The LRC on Mechanics Liens and Leasehold Improvements is made of House and Senate Members and held public meetings since adjournment last summer.
 We and Laura will keep an eye on this legislation as it moves through the system.

"As Sheryl Sandberg says, 'You've got to lien in'.  Wait, that's not right."

**UPDATE - May 23, 2014***

Laura updates us here, on her blog "Keeping Up With Jones Street".  She says:
HB 1101 and HB 1102 dealing with Mechanics Liens which we wrote about earlier this week will be considered Wednesday 5/28 at 10:00 in the Subcommittee C of the House Judiciary Committee. The bill sponsor is Representative Sarah Stevens who also chairs this subcommittee. There is no public audio connection for this committee room so I will report on committee actions.
***UPDATE - June 6, 2014***

Laura updates us again on her blog "Keeping Up With Jones Street".  She says:
Mechanics Liens, HB 1101 and HB 1102 passed the House and are parked in the Senate Rules Committee. (Use of the Rules Committee is a very powerful tool. It's a place to kill a bill, park a bill, rewrite a bill, horse trade...the possibilities are endless. Mischief abounds). We're not sure what's next for these bills but will keep you posted.
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 and "like" us on Facebook here.

Tuesday, May 20, 2014, 3:46 PM

One Too Many: Oregon "Privatizes" Sale of Liquor, With Which North Carolina Has Also Flirted

North Carolina is an alcoholic beverage control state, meaning it is one of 17 states with a monopoly over the retailing of distilled spirits.  North Carolina is also a "local option" state, which means that county and municipal voters decide whether distilled spirits shall be sold within the voting borders. Today, 50 North Carolina counties and 118 municipalities allow and control the retail sale of distilled spirits.  What this means practically, to the consumer, is that one can buy wine and beer in grocery stores in North Carolina where the voters have allowed such sale, and one can buy distilled spirits -- your vodkas, gins, tequilas and rums, for example -- in county or municipality allowing the sale and in a store run by the North Carolina Alcoholic Beverage Control Commission or "ABC store".  

"Privatization" remains on the mind of the North Carolina General Assembly, which has received no shortage of news coverage or discussion on this blog.  Craft drinking -- beer, wine and liquor made down the street -- is equally as hot in the public mind, especially in the South.

Last April, the North Carolina House of Representatives introduced and filed a piece of legislation entitled, "An Act to Allow Distilleries in North Carolina to Sell to Patrons Who Have Participated in a Tour of a Distillery at Retail Spiritous Liquor That Has Been Distilled at the Licensed Distillery for the Price Set by the North Carolina Alcoholic Beverage Control Commission of That Particular Brand of Spirit to Include All Applicable Excise and Sales Taxes."  In short, the bill in its original form would allow distilleries to sell liquor to individuals who had participated in a tour of the distillery.  Before passage by the House, however, the bill was modified to "An Act to Study the Sale of Spiritous Liquor By the Holder of a Distillery Permit to Patrons Who Have Participated in a Tour of the Distillery".

Many, including the North Carolina League of Municipalities, saw the original legislation as filed -- HB 842 -- as a step toward the "privatization of the ABC system" in North Carolina, which the League did not favor.  It's reported today that many distilleries in North Carolina are also opposed to the "privatization" of the system, which would take the ABC store system out of the equation and allow grocery stores to sell distilled spirits directly as they do in North Carolina with beer and wine.  The privatization of liquor sales is an issue of the moment in Oregon, mentioned by the Triangle Business Journal and explained here and here.

State and local government, booze, privatization, revenue, economic development, booze?  This is an interesting and potentially volatile combination, one that may not flare up, itself, in North Carolina, but could just as easily serve as the tipping point on other public-private issues.  And if it does flare up, with additional moves toward privatization of the retail liquor system in North Carolina, a number of industries will want to find the legal and business opportunities that await.  

"One Screaming Viking, coming up."

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 and "like" us on Facebook here.

Friday, May 16, 2014, 12:43 PM

N.C. General Assembly Is Back In Session: Local Government Powers Are In the Spotlight

The North Carolina General Assembly has returned to Raleigh for its "short session", and the legislative bodies are already off to the races with proposed legislation affecting land use controls and local government powers in the State.  It's Friday, and it's a sunny and cool afternoon.  So, let's take a quick, breezy review of what's in the queue.

Local Governments and Limits on "Aesthetic and Design" Controls of Residences
We've blogged last year here and here about a bill that would limit when local governments can set standards for the architecture, appearance or other design of single- or double-family homes. The bill passed the House last session, and is scheduled to make its way to the Senate beginning on Monday. There are exceptions in the bill for historic areas -- like the Oakwood section of Raleigh, subject of national attention -- but some of the newer zoning laws developing nationwide, such as Raleigh's new "form-based" code, might be open to challenge if the bill becomes law.

Local Privilege License Taxes
Privilege license taxes have come into the spotlight in the wake of a North Carolina Supreme Court decision striking a tax assessed against a sweepstakes business in the City of Lumberton.  Accordingly, the House has proposed an omnibus tax bill -- House Bill 1050 -- that includes a provision that would cap local privilege license taxes at $100 for most businesses.  Proponents feel the provision will maintain an equitable system across the State and will move to eliminate an allegedly problematic method of taxation, which is based on revenues and can involve an unwelcomed inspection of business records.  Opponents fear that local governments will lose out on a stream of revenue as a result of the cap resulting in higher property taxes, or will lose out on the ability to assess against the government resources consumed by such a business.

Professor Chris McLaughlin of the U.N.C. School of Government has an interesting take on what the General Assembly has done, is doing, and will do with regard to local government privilege license tax authority.

Local Government Regulation of Fertilizers
On the lighter side, a bill introduced yesterday into the Senate -- Senate Bill 734 (May 15, 2014) -- seeks to "clarify the authority of local governments to adopt certain agricultural and environmental ordinances".  The proposed legislation aims to prevent local governments in North Carolina from regulating the "use, sale, distribution, storage, transportation, disposal, formulation, labeling, registration, manufacture, or application of fertilizer in any area subject to regulation by [the Board of Agriculture]".  The zoning powers are carved from this prohibition, as are the fire prevention and inspection powers vested with local governments.  

We'll follow these and other pieces of pertinent legislation as they wind through the system, and we'll continue to watch what's happening in Raleigh before the members break for the summer.

"How does a bill become a law, you ask? Simple. First, it's bitten by a radioactive spider."

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 and "like" us on Facebook here.

Thursday, May 15, 2014, 1:52 PM

Signed, Sealed, Delivered, Rezoned: City of Raleigh to Begin City-Wide Rezoning and "Remapping" Process

We've posted here before about the wholesale change to the City of Raleigh's land use laws upon the September 1, 2013 effective date of a new unified development ordinance (UDO).  Changes to the land use laws includes the creation of new and different zoning districts, which requires the rezoning of properties in the City.  But what properties, exactly?  And when does that occur?  And how does that occur?

Here is what we said previously about the rezonings in the wake of Raleigh's new UDO:
A moment about these "legacy districts."    Development of these districts continues to be regulated in part by the old zoning code, save for where the new UDO applies to all zoning districts as outlined in the above paragraph.  This "uneven" regulation will continue until the City is able to "remap" these old zoning districts to new UDO zoning districts, which the City expects to occur over the next 18-24 months: the transition period.   A somewhat helpful slideshow on navigating the transition period is viewable  here. Of course, a landowner in a "legacy district" may petition for a rezoning to the new UDO to expedite that remapping, if desirable.
Over the past year, the City has been working tirelessly on what is termed the "Zoning District Remapping Project" to address these zoning and "legacy district" issues.  Most of the residential zoning districts have already moved over to the new UDO meaning there is no need for a subsequent rezoning as to those properties.  The new UDO retains the City's former zoning districts R-4, R-6 and R-10, which are lower density in nature, such that the effective date of the new UDO did not affect the zoning designations of properties already within those zoning districts.  Notably, however, many income-producing commercial and industrial properties and higher-density residential properties -- like shopping centers, office buildings and condominiums -- do not translate directly to the new UDO and will thus require rezoning.  Upon this large-scale rezoning, which the City calls the "final phase of implementing the [UDO] that took effect last September", development "in all areas of the City would then be governed solely by the UDO".  

What properties are being rezoned, exactly?
It's estimated that "[a]pproximately 30 percent of the City's land area" -- somewhere around 34,000 parcels -- will require rezoning to fully embrace the new UDO.  Currently, these properties have retained their zoning designation as it existed before the September 1, 2013 effective date of the new UDO.

When does this massive rezoning occur?
Over the next several weeks, the record owners of these 34,000 parcels will receive a postcard from the City at the owner's property tax address. To comply with State and local laws, the postcard will identify the parcel to be rezoned and the proposed zoning district to which it will be rezoned and a copy of that same postcard will be mailed to the record owners (again, by property tax address) of parcels within a 100 foot radius of the parcel to be rezoned.  In other words, the post office will be very, very busy.

All will want to pay close attention to any postcards received from the City, and any changes proposed as a result of the anticipated rezoning.  For example, concepts like building type, building height, frontage and other regulations emanating from the new UDO could have significant impact on valuable properties in a booming City.

While a retention of an existing zoning district is not an option -- those properties subject to rezoning are without a zoning home under the new UDO, hence the rezoning -- there is some degree of control that can be exercised over the rezoning.  For example, perhaps the proposed new zoning district is not in the owner's best interest or perhaps the City should retain certain conditions resulting from a conditional zoning under the City's prior law that the City is otherwise seeking to cancel with the proposed rezoning.

How does this massive rezoning occur?
The mailings will arrive in the next month or so, as stated.  Through September 30, 2014, owners and neighbors within 100 feet can review, comment on and challenge to the City staff the new zoning districts proposed for a property.  After September 30, the rezonings will be referred to the City's Planning Commission, which will hold public hearings.  After those hearings, and after the Planning Commission reports its recommendations to the City Council -- which will likely take some time, perhaps into 2015 -- the City Council will conduct its own review, public hearings and vote.  According to the City, though there are thousands of individual parcels at issue, the rezoning is being treated as one comprehensive case, subject to one vote.  Upon the City Council's vote, if adopted, the rezonings become effective.    

Watch the mail, Raleigh landowners and really watch mail, owners of property in Raleigh currently zoned for commercial, industrial or dense residential, like multifamily.  And once you watch the mail, watch the land use regulations applicable to the proposed rezoning under the new UDO.

"Greetings from Raleigh! Also, now you're in an overlay district."

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 and "like" us on Facebook here.

Tuesday, May 13, 2014, 3:15 PM

N.C. Court of Appeals Upholds Use of Zoning Powers Against Landlords to Regulate Parking By Tenants

Pretty, Huh?
Chapel Hill, North Carolina is a beautiful town like any other beautiful town.  It has restaurants and parks and movie theaters and many renting and owning residents.  But Chapel Hill is also a college town, part of the large University of North Carolina system, which means a number of the town's "residents" are college students renting rooms, apartments and houses for the academic year.  It also means a house of five students will, more than likely, feature five cars, one for each student.  The converse is also a fair statement: that "the number of vehicles parked on a residential lot in the [zoning district] is a reasonable approximation of how many people are living at the property".

But You Can't Park Here.
It is in part this latter statement upon which Chapel Hill based its adoption of a zoning ordinance amendment to "limit[] the number of cars that may be parked on a residential lot in the [zoning district] to four cars", applicable both to owner-occupied and rental properties.  In other words, the "parking limitation" is actually a zoning ordinance, with the number of cars serving as a proxy for determining the number of occupants to a residential structure.  According to the North Carolina Court of Appeals, "[O]ver-occupancy leads to other problems, [and] decreasing the over-occupancy of rental properties is a valid goal of a zoning ordinance".  This, in itself, is not so controversial.

And If You Do Park Here, I'll Ticket This Other Guy.
Rather, the controversy erupted over enforcement of the zoning ordinance against rental properties.  It seems the ordinance is enforced "by citing the owner of the property for violations [of parked cars numbering greater than 4]".  In other words, is Chapel Hill able to cite the record owner of a residence, rather than the cars, for violations of the parking rules?  According to the plaintiffs -- owners of rental properties subject to the parking rules -- the answer is "no".  According to the trial court and the North Carolina Court of Appeals, the answer is "yes": Chapel Hill is authorized to adopt a zoning law limiting the number of cars parked at a residence and to enforce violations of that zoning law against the owner of the residence, even a rental residence.

The Lawsuit.
Local government powers in North Carolina have been under the microscope, as of late.  A series of judicial decisions -- culminating in the relatively recent Lanvale Properties, LLC v. County of Cabarrus, 366 N.C. 142 (2012) from the North Carolina Supreme Court -- have put some question to the limits of and the manner of determining the limits of municipal powers.  It is in the wake of these decisions that Chapel Hill's actions will be reviewed in Patmore v. Town of Chapel Hill, COA 13-1049 (April 1, 2014).

The Patmore plaintiffs, landlords, advanced three separate arguments challenging the enforcement of Chapel Hill's zoning laws limiting parking.

First, the enforcement of the zoning law violates State substantive due process protections because "the ordinance is enforced exclusively based on the existence of more than four parked cars on a lot without any determination as to the reason for the parking of those cars."  In other words, the enforcement of the zoning law against "non-culpable landowner-lessors" is "arbitrary and capricious".

The Court did not buy plaintiffs' first argument.  The Court instead put stock in Chapel Hill's affidavit evidence regarding the efficacy of landlord ticketing and in a federal district court decision from Michigan: "[T]he practice of more avidly enforcing the Code against owners of property in the City than against their relatively transient tenants appears to be reasonably calculated to efficiently and effectively secure compliance with the Housing Code."  Cunningham v. City of East Lansing, 2001 U.S. Dist. LEXIS 15967 (W.D. Mich. Sept. 28, 2001).     

Second, the zoning law “is invalid as being unauthorized under N.C. Gen. Stat. §160A-301”, which addresses a municipality's power to "regulate" the "parking of vehicles" in "privately owned public vehicular area[s]" but does not address municipal power to regulate "parking on private property".

The Court did not buy plaintiffs' second argument, which was based in the "expressio unius est exclusio alterius" canon of statutory construction.  The Court makes it clear that the zoning law is that -- a zoning law -- and not a parking regulation adopted pursuant to NCGS 160A-301:  "[T]here is no basis for assuming that our General Assembly intended legislation allowing a city to regulate parking in public vehicular areas to diminish a town’s authority to adopt land use zoning regulations that deal with population density or over-occupancy of rental homes."  Regulating parking as a proxy for a zoning action does not render the zoning law a parking law.

Third, plaintiffs contend that "the decision ... in Lanvale Properties, LLC v. County of Cabarrus, 366 N.C. 142 (2012), 'establishes that the instant parking regulation is not authorized by the general zoning power.'"

No on the third argument, as well.  The Court stated that the key to the holding in Lanvale, which invalidated a county ordinance, is that the ordinance was determined not to be a zoning law.  Here, however, the parking regulation is a zoning law, which renders Lanvale inapposite in the Court's mind to an analysis of "a local government's authority to enact a bona fide zoning ordinance or the requirements of a valid zoning regulation".

Let us pause here for a moment and re-state that:  "[h]ere, however, the parking regulation is a zoning law, which renders Lanvale inapposite in the Court's mind".  Is the Court saying that the reach of the Lanvale decision may be limited, insofar that it cannot be employed against what is clearly a zoning law?  But isn't a legal challenge to the "authority to enact a bona fide zoning ordinance" or to "the requirements of a valid zoning regulation" actually challenges to the "bona fides" or the "validity"?  Maybe not.  We'll see if the plaintiffs try to push this up to the Supreme Court.

"We're not parking it.  We're abandoning 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 Twitter at @nclanduselaw and "like" us on Facebook here.

Friday, May 9, 2014, 1:38 PM

Little Pink Houses: Debate Regarding Zoning Laws and Accessory Dwelling Units Getting More and More Relevant

We've blogged previously about the accessory dwelling unit or the so-called "in-law suite", and how zoning rules addressing these dwelling units can "foment" (or stymie) increased urban density.  The accessory dwelling unit is, essentially, a room or set of rooms in a single-family home in a single-family zone that has been designed or configured to be used as a separate dwelling unit physically detached from the single-family home.

The desire for "urban density" is only increasing among millenials and other newly-forming households as well as among older generations seeking walkable or at least convenient living.  Evidence of this desire is everywhere, and we see it in the increased focus on "share the road" programs, in the growing and growing noise about mass transit investment, and in the continued boom in multi-family construction in many American cities of large and mid-size population counts.  We also see it with growing conversation about the permissibility and desirability of accessory dwelling units.

An article in the New York Times entitled "Grandma Never Had It So Good" trumpets the virtues of accessory dwelling units and the cities -- like Portland, Oregon -- that embrace them, warning that "[i]n most cities, adding a second house to a single-family lot would be illegal or would set off an epic battle with the neighbors".   In Raleigh, the wholesale revision of the City's unified development ordinance nonetheless left the issue of permitting accessory dwelling units to the "back burner" due to its sensitivity.  At the state level, a total of nine states "have passed legislation at least enabling" accessory dwelling unit reform: California, Washington, Vermont, Florida, Maryland, Rhode Island, Hawaii and Massachusetts. Margaret Brining and Nicole Garnett, Accessory Dwelling Unit Reforms: Death by a Thousand Paper Cuts?, Zoning and Planning Law Report (April 2014).

How much density is too much density?  Like any development regulation or innovation, visions of quality workmanship, affordable and efficient housing, and good neighborly citizenship -- the image from the New York Times piece or the notion of grandma having her own space at night and providing free daycare during the light hours -- are often pitted against tales of overcrowding, poor workmanship, or de facto slumlording.

So what is the vanguard of regulation of accessory dwelling units, and how is that playing out?  In a recent academic piece, a pair of Notre Dame Law School professors analyzed the impact of a California law applicable statewide and "mandating that local governments either amend their zoning laws to permit [accessory dwelling units] in single-family zones, accept the imposition of a state-dictated regulatory regime, or demonstrate why they could not conform to the state mandate".  Brining and Garnett,  Zoning and Planning Law Report. The piece concludes that even well-intentioned statewide legislation is oftentimes either undermined by the local governments (the "parochialism" that any state legislator should see coming), or the legislation itself is undermining the facilitation of this new kind of urban density.  Some localities in California are embracing the notion of accessory dwelling units, some localities are not because they do not want to see them in the locality and still others localities are not because they simply do not want the state to tell them how to run their communities at that level.

In other words, feelings are still quite mixed about that neighbor out back not being a neighbor but someone on your property.

The "grey tsunami" is coming, as is a generation of elderly who will need to live with their children. Also coming is a generation seemingly focused on local, right-sized living without the anecdotal "trappings" of suburban life, like long drives, chain restaurants and mcmansions.  The regulatory landscape of accessory dwelling units will continue to evolve to suit these growing sentiments, eventually finding that second bed: the one that was juuuuuust right.

"Here is the foyer, and over here is the bathroomcouchkitchenbedroomporch."

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 and "like" us on Facebook here.
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