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Wednesday, 30 May 2007 00:00

Judge rules Realtors’ loss is not irreparable

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A group of Realtors and developers challenging the legality of Jackson County’s five-month moratorium on new subdivisions lost the first round in court Thursday (May 24).

The group argued they are being financially harmed by the moratorium and that it should be lifted immediately. It was not a full-blown trial on the validity of the moratorium, but rather a hearing for a temporary injunction. A full-blown trial will come later. But the Realtors argued they are being irreparably harmed with each passing day and need relief from the moratorium in the meantime.

“They are losing daily, weekly, monthly thousands if not hundreds of thousands of dollars because of the stoppage of development by the moratorium and the signal that has been sent,” argued Charles Clement, an attorney from Boone representing the Realtors.

Jackson County’s attorney argued that lifting the moratorium pending a full-blown trial would allow a flood of developers to launch subdivisions, counter to the county’s aim of controlling growth. Jackson County would be irreparably harmed if the temporary injunction was granted, argued Sharon Alexander, the attorney representing the county.

“You cannot go and undo those subdivisions,” Alexander said. “Jackson County and its citizens would suffer extraordinary and irreparable harm by the recordation of subdivision plats willy-nilly with no compliance.”

Judge Marlene Hyatt, who presided over the hearing, ruled against granting a temporary injunction. The Realtors and developers failed to meet the two-part litmus test for a temporary injunction: that they are suffering irreparable harm with each passing day and that they have a likely chance of winning their case at a full-blown trial down the road and so should be granted relief in the meantime.

“They have demonstrated financial loss, but not immediate and irreparable damage,” Hyatt said. Hyatt also said the group had not demonstrated a likelihood of success at trial.

However, the plaintiffs did demonstrate a sufficient stake and economic hardship warranting a trial, Hyatt ruled, opting not to dismiss the entire case outright.

The plaintiffs held a conference following the trial, however, and decided to withdraw their case.

“While we appreciate Judge Hyatt’s recognition of our aggrieved position and decision to allow us to move forward with a jury trial, we are disappointed that we were not granted an injunction of the Jackson County Subdivision Moratorium, and plan to continue to monitor the forthcoming county-wide zoning ordinances,” the group wrote in a statement sent out by Marty Jones, a Realtor in Cashiers.

Jones said the economy of the southern end of the county — comprising Cashiers, Glenville and Little Canada — has been harmed not only by the moratorium but the impending passage of restrictive ordinances, with numerous cases of projects being called off and financers and buyers backing out.

 

Chilling effect?

The moratorium on new subdivisions in Jackson County was enacted in February by a 4 to 1 vote of county commissioners. The commissioners were embarking on the county’s first-ever slate of development regulations, a move that would end the free-for-all climate previously enjoyed by developers. Seeing the writing on the wall, many developers sought to get their subdivisions recorded before new regulations went into effect. The number of lots being recorded tripled just before the moratorium was enacted.

Clement argued that the moratorium has placed a cloud over real estate industry in Jackson County, turning would-be developers away and quelling land sales. In other cases, pending sales were lost. One of the Realtors claims he lost a $1 million sale that had been in the works prior to the moratorium.

Alexander argued that the alleged losses are not concrete enough to constitute real damage.

“The allegations of damage are that a couple plaintiffs would like to earn a living on buying and selling real estate. Because folks are now not willing to buy and sell real estate during this five-month period they cannot earn the commission they would otherwise earn — that is speculative,” Alexander said.

Hyatt did rule that the plaintiffs had established a “sufficient stake” and “financial loss,” only that it wasn’t irreparable with each passing day.

One of the plaintiffs is a developer who claims his progress on a subdivision was thwarted by a moratorium. But Alexander argued otherwise.

“One of them said they were getting ready to go to their surveyor — getting ready to,” Alexander said. “None of them say they had hired a surveyor and spent money and had a plan for a subdivision of their property that they now can’t do.”

For that developer, the problem isn’t so much the moratorium but the development regulations Jackson County is expected to pass in coming weeks. The regulations will both increase costs for developers and reduce the number of lots they can put on land — ostensibly affecting the bottom line for developers.

That could be one motive of the lawsuit. The goal might not simply be getting out of the moratorium — since it ends in five weeks anyway — but getting out of the regulations that will follow. If the plaintiffs had succeeded in their temporary injunction, they could have promptly recorded subdivisions and been grandfathered in by the time new development regulations go into effect.

The regulations are poised to be some of the most protective in Western North Carolina — mandating everything from open space in new subdivisions to the portion of a lot that must be left natural on steep slopes.

The county argued that all its planning would be for naught if the moratorium was lifted and developers given a window to record subdivisions before the regulations go into effect. Alexander said the pace of uncontrolled development had become detrimental to Jackson County residents as a whole. Alexander said towns and counties have an inherent right to enact a moratorium while studying regulations to solve such problems.

The moratorium does not apply to existing subdivisions or subdivisions already under way in some form or fashion. Even if lots hadn’t been officially recorded, a developer could be exempt from the moratorium — along with development regulations coming down the road — if he could show that a substantial investment had already been made in surveying, planning or marketing of a subdivision.

The moratorium also does not stop individual lot owners from building homes, or people with existing lots from selling those lots, or the sale of acreage.

It applied only to the creation of new subdivisions — namely preventing tracts from being subdivided into multiple lots through the register of deeds office — unless a landowner could prove it was a project he already had in the works.

Alexander argued the county was within its bounds to enact such a moratorium.

“They had determined there as a need to control growth in Jackson County. It was a very limited subject matter. It wasn’t on building permits. It wasn’t on construction. It was only on subdividing,” Alexander argued.

The attorney for the Realtors and developers argued that the moratorium is not valid, however. Clements said a county can’t apply a moratorium against something for which it has no regulations already in place, citing state statute.

“It cannot be a moratorium in theory only but has to be a moratorium on any county development approval required by law,” Clements said. “The threshold question was whether there was in place prior to the moratorium any county development approval required. If there wasn’t there is no basis for a moratorium.”

Clement offered this example: “It’s like saying ‘we don’t have any speed limits in North Carolina so we are going to adopt a statute on all speed limits until we decide whether to enact a speed limit.’”

Clement’s argument would mean almost no moratoriums would be legal. A moratorium on billboards while counties wrote billboard ordinances, as well as a cell tower moratoriums while counties wrote cell tower ordinances, have both been deployed in Western North Carolina in recent years. In both cases there were not previous restrictions on billboards or cell towers. The moratoriums were intended to keep people from throwing up billboards and cell towers while ordinances restricting them were in the process of being written.

The county’s attorney argued that Clement’s description of how moratorium’s work was inaccurate.

“This is a common law moratorium,” Alexander said. A 1991 court of appeals case sets precedent, giving counties an inherent right to impose a moratorium, a right separate from the state statute Clement was arguing.

 

Technicalities

The attorney for the Realtors and developers also argued some technical points on the validity of the moratorium. One was that the county failed to provide proper legal notice of the public hearing date for the moratorium. By law, the county must put a legal notice in a newspaper of “general circulation” in the county two weeks prior to the public hearing. The legal notice section of a paper usually appears near the classifieds, and includes everything from estate settlements to notices of foreclosures.

The legal notice appeared in the Crossroads Chronicle, based in Cashiers, two weeks prior to the hearing, but appeared in the Sylva Herald only one week prior to the public hearing. Clement argued that appearing in the Crossroads Chronicle alone wasn’t adequate as a newspaper of “general circulation.”

Alexander countered that the legal notice in the Crossroads Chronicle was sufficient. Although the Alexander did not mention it, news of the public hearing appeared in lead articles in the Sylva Herald, Crossroads Chronicle and The Smoky Mountain News up to two weeks prior to the public hearing, which is even more visible than the legal notice section.

The 1,300 people who showed up at the public hearing — by some accounts the most well-attended public hearing ever in Western North Carolina — seems to indicate the public had no trouble learning of the time, date and place.

Clement also protested to what he called a “de facto” moratorium enacted a month before the official moratorium went into place. The night that county commissioner voted to schedule a public hearing for a moratorium, they immediately instituted some of the terms of the moratorium, namely no new recording of subdivision lots with the register of deeds.

However, state law allows moratoriums to become effective from the time a public hearing for one is announced. Otherwise, it would allow a window of opportunity to dodge a pending moratorium.

Clement also argued that the moratorium that was ultimately passed differed from the language in the moratorium that was presented to the public for comment at the public hearing.

“If the ordinance contains alterations that are significantly different than there ordinance that was advertised, there needs to be additional opportunities for a hearing,” Clement said.

Alexander agreed the moratorium language was changed — but the only changes were concessions that would make things easier for developers.

The duration of the moratorium was shortened from six months to five, and the county provided an exemption for subdivisions willing to comply with interim development regulations. Another change made an exception for subdivisions in the case of land that had to be split among heirs as part of an estate settlement,

“Those are changes that would beneficial to the plaintiffs — that lessen the restrictions of the moratorium and therefore would be insubstantial,” Alexander said.

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