Traverse City News and Events

East Bay Township Delays Short-Term Rental Rollout Over Lawsuit Threat

By Beth Milligan | March 11, 2019

East Bay Township is delaying the rollout of a new licensing program for short-term rentals after a group of homeowners threatened to sue the township over the ordinance.

Township trustees recently held a special meeting and unanimously voted to push back the implementation of new short-term rental (STR) rules from March 1 to May 1. The vote came after attorney Dane Carey of Dingeman & Dancer, representing approximately 20 East Bay homeowners, sent a letter to the township requesting a two-month delay on enforcing the new regulations to give residents “an opportunity to present sensible modifications” to the ordinance. If the township refused, Carey said, the firm had been instructed “to initiate legal proceedings against the township to challenge the validity of the STR ordinance.”

Carey’s memo states that homeowners are “not opposed to short-term rental licensing as a fundamental matter” and that their desire is not to sue the township, but rather to see the policy changed to address their concerns. As has occurred in many other northern Michigan communities, East Bay Township has spent the last several years attempting to find a regulatory compromise between homeowners seeking to rent out their properties to vacationers and neighbors complaining of noise, traffic, parties, and other potential impacts of STR properties.

The township’s new rules require STR owners to obtain a license for their properties by completing an application and paying a $450 annual fee. Property owners not connected to a public sewer system are required to have their septic systems or holding tanks professionally inspected, and all owners must submit a range of documents including off-street parking plans (including for boats and trailers), an affidavit confirming that all adjacent property owners have been notified of the STR and provided with emergency contact information for the owner, a sketch of the dwelling unit that includes the size and square footage of each room, and photographs of the STR property and structure. Owners are also limited to one short-term rental per calendar week, meaning a full seven days must pass between the start dates of rentals.

Carey’s memo outlines numerous legal objections to the new ordinance, including the $450 annual fee. Township officials set the fee based on a number of factors, including covering "the township’s expected costs" for legal counsel, staff time, and hiring a community police officer (CPO) to help enforce the ordinance, among other officer responsibilities. According to the township’s website, the fee – which is two to three times higher than fees in most surrounding communities, including Traverse City and Suttons Bay – “places the cost of the short-term rental program on the owners of the short-term rentals, rather than taxpayers and residents absorbing these costs.”

Carey challenged the fee as an “illegal tax,” saying that using a STR fee – which is supposed to cover the direct costs associated with administering the program – to raise revenue to hire a CPO providing general law enforcement services for the township and public is prohibited. He continued that the “amount of the fee is not proportionate to the benefit to the user of the township’s costs to provide the service. Indeed, the projected revenue from these fees is $107,000. Other public documents illustrate that a much lower fee was initially recommended and chosen based on a survey of the fees charged in other municipalities – none of which exceeded $200.”

Carey also argued that the new STR rules – which were passed as a township police power ordinance – should have been passed as a zoning ordinance, since they regulate land use. “The more cumbersome process to create and adopt a zoning ordinance is designed to place many legal due process and property rights protections on zoning,” Carey wrote. He accused the township of improperly enacting the ordinance - not following required meeting guidelines for introducing and publishing the ordinance in advance of a vote – and said the new rules contain arbitrary and unreasonable provisions. He pointed to the seven-day buffer rule between renters as an example: “There is no meaningful difference in the impact of renting to one group of occupants for an entire week and renting to two groups of occupants within the same period,” he wrote. For those and other reasons outlined in his memo, the attorney said he was “confident that the STR ordinance is not enforceable and that it would be declared invalid if challenged in court.”

Homeowners also wrote directly to the township to share their concerns. Gayle Miller said the ordinance “unfairly singles out STR hosts for burdensome permits and inspections,” such as having to obtain septic inspections while other homeowners do not. Noting that she believed a majority of hosts are locals who “rent their rooms or homes because they need to,” she suggested East Bay create different categories of hosts, including full-time residents who rent a room in their home, entrepreneurs who rent for profit, and cottage owners who rent to “keep a family home in the family.”

Julie Bruce says she’s in the latter category, renting out a cottage on Lake George that was passed on to her and her siblings from her late father. “Please reconsider this unfair move…we rent our property very little, just to pay the taxes and to do some needed repairs,” she wrote to township officials. “We have a large family and each of us choose a week of the summer to bring our own families up to the cottage, which leaves little time to rent but has managed to help us pay the taxes.”

East Bay Township Supervisor Beth Friend, in consultation with township legal counsel, acknowledged at the township’s special meeting that some of the legal challenges outlined by Carey and homeowners “may have merit, or something that we want to amend in the ordinance to clean up language. And some of them may have no merit at all. That’s what we need to go through and evaluate.” Delaying the licensing implementation by two months “seems a reasonable time from our counsel to take a look at those issues,” Friend said. Township Planner Rick Brown noted his office would continue to accept STR applications, but would not process them until May 1. Friend said the delay could ultimately lead to a strengthened ordinance, but cautioned that reviewing the legality of the rules didn’t necessarily mean the township would completely rewrite its regulations to meet all of the demands of homeowners, citing the multi-year public process that went in to creating the policy.

“We are weighing the impact to people with very different perspectives,” Friend said. “This is an issue that we have found pretty commonly evenly divides the population…half the people aren’t crazy about it and half the people want short-term rentals. It just divides the population. It’s nothing different than any other jurisdiction has seen as well across the country…we’re balancing those (viewpoints) and I think we want to be real careful, because we’ve gone through a long process to do that.”

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