Lawsuit was ignited by Flagler County’s ordinance to control short-term vacation rentals. New ‘unfair taking’ claims by plaintiffs prompted both sides to issue press releases yesterday.
PALM COAST, FL – October 9, 2015 – February 19, 2015, Flagler County adopted an ordinance to control short-term vacation rentals. March 6, 2015, the county was hit with a lawsuit challenging the ordinance. The lawsuit is led by Steve Milo, principal of Vacation Rental Pros, the dominant vacation rental management company in the county. Milo is a rental property owner. Today, Milo’s side issued a broadside of Bert Harris Claims against the county, accompanied by a press release. The county responded with a press release of its own.
Both press releases can be found at the end of this article.
The plaintiffs claim comes with a supporting schedule asserting a loss of value to 35 vacant lots and multi-bedroom homes in the Ocean Hammock/Cinnamon Beach area. The homes each have from six to eleven bedrooms. They had been built and/or modified to be utilized for short-term vacation rental. Flagler’s new ordinance puts strict limits on this use. Prior to the ordinance, similar “mini-hotels” could have been built on the vacant lots as well.
Bert Harris Act
First some information about Bert Harris claims. The concept of eminent domain has a long history. It is used by the state or national government to take (expropriate) private property for the public good (e.g. roads, schools). The private property owner is compensated for their loss.
But what happens when the government does something that diminishes the value of private property without taking title to it? The value of the property is nonetheless stripped. For example, a change in zoning might exclude or limit a more profitable previously allowed use of the property. In the interest of fair play, the property owner should be compensated for the economic loss.
Florida’s Bert Harris Act was passed in 1995 “to provide for relief, or payment of compensation, when a new law, rule, regulation, or ordinance of the state or a political entity in the state, as applied, unfairly affects real property.”
Lucas v. South Carolina Coastal Council
Ironically, the Bert Harris Act and similar statutes in other states grew out of a now famous South Carolina case with which I am very familiar. I lived only a block away from the subject property at the time and have met and talked with the plaintiff.
In 1986, David Lucas bought two residential oceanfront lots in Wild Dunes for $975,000. Wild Dunes is located on Isle of Palms, a barrier island just north of Charleston, S.C. [Wild Dunes is similar in nature to the development that encompasses Hammock Dunes, Hammock Beach, Ocean Hammock and Cinnamon Beach.] At the time of purchase, single family homes could be built on each of the Lucas lots without additional permits from the S.C. Coastal Council.
South Carolina subsequently passed a landmark Beachfront Management Act which directed the Coastal Council to establish a “baseline” along the shoreline beyond which new homes construction would be prohibited. The baseline was drawn through the middle of the Lucas lots. They became “unbuildable.” Lucas filed suit claiming that a ban on construction constituted an “unfair taking” of his property without just compensation. Appealing all the way to the US Supreme Court, Lucas prevailed. The state was required to purchase the lots for $850,000.
Two wrongs do not make a right, but three do
The State found itself the owner of two worthless Oceanfront lots. With the apparent belief that two wrongs don’t make a right, but three do, South Carolina exempted the two lots from the building restriction, enabling them to be sold as buildable lots. Two multi-million dollar homes now occupy these once worthless properties. You can't make this stuff up.
Back to the case at hand
The plaintiffs will have to prove that their property values were diminished and that the loss is attributed to the new Flagler ordinance. The property list of asserted claims of lost value provides no supporting information. However, three of the homes are currently listed for sale at prices well above the diminished-value assertions found on the Bert Harris Claims list. The "asking price" clearly sheds doubt on the validity of the asserted lost value.
1 Ocean Ridge Blvd N
- Asserted “Before Value”: $827,000
- Asserted “After Value”: $620,000
- Asserted “Diminution in Value”: $207,000
- Current MLS Listed Price: $1,300,000
21 Ocean Ridge Blvd N
- Asserted “Before Value”: $960,000
- Asserted “After Value”: $725,000
- Asserted “Diminution in Value”: $235,000
- Current MLS Listed Price: $1,100,000
28 Hammock Beach Cir S
- Asserted “Before Value”: $900,000
- Asserted “After Value”: $685,000
- Asserted “Diminution in Value”: $215,000
- Current MLS Listed Price: $850,000
Although the final outcome of the claims rests with the judicial system, both Plaintiffs and Defendant are doing their best to affect public opinion. Their dueling press releases follow.
From the Plaintiffs
Flagler County Socked with $22.7 Million Property Claim
Anti-vacation rental ordinance has opened county to massive liability claim under Bert J. Harris Private Property Rights Protection Act
Flagler County Commissioners were served this morning with letters and copies of property appraisals from 35 property owners showing that the county’s anti-vacation rental ordinance passed this spring will cost each of them an average of $650,000 in lost property value. The appraisals were submitted as part of litigation filed by the property owners under the Bert J. Harris Private Property Rights Protection Act.
“County officials have placed an inordinate burden on these property owners by severely restricting and vindictively targeting their properties with this ordinance,” said attorney Pete Heebner, who represents a number of the property owners. “We’re going to fight tooth and nail to protect the private property rights of everyone in Flagler County. These county officials have no right to single out one type of property owner over another. If they keep it up, it’s going to cost all county taxpayers millions of dollars.”
The majority of the properties are situated in the Cinnamon Beach area, and the $22,704,000 total property value loss is linked directly to the Flagler County ordinance that restricts how these 35 homes can be used.
“When these properties were purchased, this overreaching ordinance wasn’t in place,” said Heebner. “Homeowners rightfully had the freedom to use the properties as they wish, just like everyone else. But now, Flagler county commissioners have decided to single out certain types of properties and restrict their use, which has resulted in a significant drop in values.”
If successful, the claim against Flagler County would represent one of the largest judgements against any local government for the taking or inordinate burden of private property values.
“Not only are county leaders stripping rights from property owners and driving down home values, they are opening up county taxpayers to even more liability,” said Heebner.
The lawsuit was filed on March 6th, 2015.
Previously, Mr. Heebner’s law firm won a $30 million judgment against the city of Ponce Inlet, Florida, in a lawsuit filed there in 2010. A jury found that city leaders stopped citizens from completing a development project after they had already invested substantial sums of money.
From the Defendant
Flagler County in receipt of Bert J. Harris Jr. claims
October 8, 2015 – An attorney representing some of the largest short-term vacation rentals on Thursday presented Flagler County with 35 Bert J. Harris Jr. claims.
The claims contend that Flagler County’s short-term vacation rental ordinance has devalued the lots and homes purchased for use as short-term vacation lodging in single-family residential neighborhoods. These homes are often occupied by more than 20 people at a time, creating numerous problems for these neighborhoods.
“We are in receipt of a series of documents,” County Administrator Craig Coffey said. The claims are under review.
“The County Ordinance incorporated numerous safeguards to protect these properties, adjoining property owners and our visitors,” Flagler County Attorney Al Hadeed said. “We painstakingly provided them a special vesting procedure, which they apparently are now totally ignoring. With a proper certificate, they can have up to 14 people in a single-family home. How many more do they want in the homes?”
Circuit Judge Michael S. Orfinger on May 27 ruled in favor of Flagler County and its short-term vacation rental ordinance in lawsuit filed March 6 that sought a declaratory judgment and injunctive relief. Orfinger ruled that an emergency motion for preliminary injunction was unfounded.
Flagler County’s short-term vacation rental ordinance was approved in February and amended in March to change the application period for existing vacation rentals from April 15 to June 1. This will allow potential applicants additional time to apply. It also provides those who qualify six months, until Dec. 1, 2015, to come into compliance with safety standards established in the ordinance.
“We are confident that in the event that actions are actually filed, that the County will again prevail just as it did with the initial challenge to the Ordinance,” Hadeed said.