Loading...
HomeMy WebLinkAboutMemo - Mail Packet - 5/23/2017 - Information From City Attorneys Office Re: Explanation Of The Basis For Considering Short Term Rentals As Non-Confirming Uses - May 5, 2017Explanation of the Basis For Considering Short Term Rentals As Nonconforming Uses May 5, 2017 ______________________________________________________________________________ In March, Council enacted Section 3.8.34(F) of the Short Term Rental Land Use Code (“LUC”) regulations, effective as of March 31, 2017. This provision treats certain short term rentals (“STRs” or “STR”) now prohibited in certain zone districts as nonconforming uses. In order to be deemed a nonconforming use, an STR must have been a lawful use as defined in Section 3.8.34(F) prior to March 31, 2017. City Council has requested an explanation why any STR should be considered to have been a lawful use prior to Council’s action in March. A nonconforming use is one that lawfully existed prior to the enactment of a zoning ordinance prohibiting such use and continues after the effective date of the ordinance. Nonconforming uses are entitled to protection under the law. Colorado Revised Statute § 38–1– 101(3)(a), states “Notwithstanding any other provision of law to the contrary, a local government shall not enact or enforce an ordinance, resolution, or regulation that requires a nonconforming property use that was lawful at the time of its inception to be terminated or eliminated by amortization.” Section 38–1–101, C.R.S., is part of the state statutes related to eminent domain and it provides that the City would be liable under the theory of inverse condemnation, also known as a regulatory taking, for improperly depriving a property owner of the ability to continue a nonconforming use. Case law has further established the legal protections afforded nonconforming uses. The reason certain short term rentals operating with City sales and lodging tax licenses were considered to be a lawful use and were afforded nonconforming use status was based on the following information: 1. Prior to March 31, 2017, the City Code did not contain any basis for distinguishing among types of rental uses of single-family residential properties, except to the extent the “U + 2” occupancy restriction applied or it came under the definition of bed and breakfast. Because of this, there was no basis for differentiating between STRs (now defined as rentals of dwelling units for less than thirty days) from other residential rental uses, such as rentals of dwelling units for thirty days or more. a. The rental of dwelling units for thirty days or more is generally viewed, subject to certain occupancy restrictions, as an allowable use of a dwelling unit even though such rental use is not specified in the permitted uses in LUC Article 4 for any zone district. b. For example, in the Neighborhood Conservation, Medium Density District described in LUC Division 4.8, single family detached dwellings are a permitted residential use subject to basic development review. For many years, the City has Short-Term Rentals as Nonconforming Uses May 5, 2017 Page 2 of 2 consistently viewed the rental of such a single family detached dwelling to be part of the permitted residential use and no distinction was made regarding the number of days it was rented. In light of this context, prior to March 31, 2017, the City did not take enforcement action against an STR on the basis that it was a use prohibited by the LUC. 2. Chapter 25, Articles III and IV, of the City’s Municipal Code impose sales and use and lodging taxes on lodging furnished for consideration for periods of less than thirty days. STRs are considered subject to these taxes and must obtain sales and use and lodging tax licenses and remit taxes. a. City records indicate that the earliest sales and use and lodging tax licenses were issued as of January 1, 2011, for a “Short-Term Furnished Rental.” b. At the June 9, 2015, Council work session, there was discussion of the City’s sales and lodging tax collections from Vacation Rental By Owner (VRBO) and Airbnb rentals between May 2014 and April 2015. Staff reported that during that time, the City collected $36,000 in sales tax and $27,000 in lodging tax from VRBO/Airbnb use with 54 STRs remitting taxes as of May 26, 2015. The current total number of STRs with sales and lodging tax licenses is 231; of these, 66 have obtained the new STR license. c. Throughout the time during which the STR regulations were being considered, and up through the effective date of the Land Use Code and Municipal Code STR regulations, tax licenses continued to be issued for STRs. Because STRs are distinguishable from general rentals of a residential property only by the length of rental, during the time there was no such distinction in the LUC the City’s power to prohibit the rentals of a shorter length was in question. As a result, while the discussion of potential approaches to defining and regulating STRs was underway, the City did not take the position that STRs were not a permitted use or take action to prohibit them, and continued to issue sales and use and lodging tax licenses and collect sales and lodging taxes. Taken as a whole, STRs were consistently treated as a lawful use of a residential dwelling prior to the effective date of the short term rental regulations. As a result, the recently adopted LUC regulations treated licensed STRs as legal nonconforming uses as required under Colorado law.