Exemptions from subdivision review and County zoning – a short, pragmatic primer

1. Exemptions from subdivision review and County zoning – ashort, pragmatic primer Marty Lambert, Gallatin County Attorney MCAA Winter Meeting, Nov. 30-Dec.2, 2011 marty.lambert@gallatin.mt.gov 406.582.3745

2. Exemptions – no survey required 76-3-201, MCA – exemptions not subject to the Montana Subdivision and Platting Act unless the method of disposition is adopted for the purpose of evading this Chapter: • Created by court order or by operation of law. 1. Court to “notify Commissioners . . . and receive written comment”. 2. Sale of part of a lot for delinquent RID is exempt as “Operation of law”. 39 Op.AttyGen. No. 48. b. Security for mortgage, lien, or trust indenture. 1. For the purpose of construction, improvements to the land being divided, or refinancing purposes. 2. Exempt parcel is to be conveyed only to financial or lending institution holding the mortgage, lien or trust indenture or to a purchaser of the mortgage, lien or trust indenture upon foreclosure. If the parcel is conveyed to anyone else then the transaction must go through subdivision review.

3. b. Security for mortgage, lien, or trust indenture.cont’d 3. In Riverview Homes II, Ltd. v. Canton, 2001 MT 309, 307 Mont. 517, 38 P.3d 848, Canton sold six lots to Riverview. The lots were depicted in plats or surveys drawn up for unapproved subdivisions. Canton defaulted on his contract with Riverview. Riverview sought to sell the lots. Held: District Court held, and SC affirmed, that the lien exemption, 76-2-201(1)(b) did not apply as the lots were not properly created under the Act.

4. 76-3-201 exemptions – cont’d c. Oil, gas mineral or water interest. • Cemetery lots. • Reservation of a life estate. • For lease or rent for farming or ag purposes. • Division is on land not subject to state jurisdiction. • Created for rights-of-way or utility sites. 1. If the utility use changes to residential, commercial or industrial then the transaction must go through subdivision review.

5. Exemptions - 76-3-207, MCA • “. . . unless the method of disposition is adopted for the purpose of evading this chapter”. • The gospel is 40 Op.AttyGen No. 16 (1983): a. Act must be liberally construed to effectuate promotion of public health and welfare; b. Exemptions must be narrowly applied;

6. Exemptions – 76-3-207, MCA cont’d c. A county may require the applicant to make an evidentiary showing – to meet a burden of proof; d. An applicant may be required to submit an affidavit; e. A hearing procedure may be established; f. County may evaluate relevant facts – business interests, prior history of tract, proposed configuration. This is not a exhaustive list – the County is entitled to consider all relevant circumstances.

7. Exemptions – 76-3-207, MCA cont’d g. “The exemptions . . . were not provided to allow a developer to create a division of land which is for all intents and purposes nothing less than an unreviewed subdivision. Rather, they were provided to deal with exceptional circumstances under which, in the Legislature’s judgment, full plenary subdivision review is unnecessary.” 40 Op.AttyGen No. 16 (1983).

8. Exemptions – 76-3-207, MCA cont’d • Two district court cases you should know about: a. Big Blue River, LLC v. Gallatin County, 18thJud.Dist.No. DV-08-731C. Big Blue applied for a common boundary exemption, which was denied. Big Blue submitted a second, revised application. The applicant attempted to address the concerns expressed during the hearing and set forth in the Commission findings for the first application exemption. The second application was denied. Big Blue sued. Among other things, Big Blue claimed the County’s regulation pertaining to common boundary exemptions was unlawful, in that it established a rebuttal presumption that an application had the purpose of evasion of the Act. The regulation: [A] rebuttable presumption exists when a proposed relocation of common boundary lines is adopted for the purposed of evading the Act, if: . . . b. The Certificate of Survey for the relocation of common boundary lines significantly rearranges multiple parcels with little or no resemblance to the original configuration of the parcels.

9. Exemptions – 76-3-207, MCA cont’d The District Courtheld that the County regulation was unlawful: “The County regulation quoted above sets out what is in essence a per se or automatic rule. It goes well beyond maintaining the county’s discretion to determine whether the applicant’s purpose is to evade Sec. 76-3-207, MCA.” 2. Boyer v. Lewis and Clark County, 1st Jud.Dist.No. BDV-2010-666. The Boyers sought to use the family transfer exemption to create five lots on property located on Hauser Lake. The property was sold to the Boyers by Shaver. From 1981 through 2008 Shaver used exemptions to subdivide the property on seven separate occasions.

10. Exemptions – 76-3-207, MCA cont’d In Lewis and Clark County a review committee makes the initial determination regarding the propriety of exemption applications. The Committee denied the exemption . The County Commissioners affirmed that decision. The Boyers sued, claiming the decision was arbitrary and capricious and that it was an abuse of the County’s discretion. The District Court granted the County’s summary judgment motion. The Court held that a subdivision should not be approved unless the subdivision is in the public interest, and that exemptions are to be narrowly construed. The Court cited with approval 40 Op.AttyGen. No. 16. The Court considered the rebuttable presumption of evasion, as set forth in Lewis and Clark County’s regulation, and held that the applicant had not overcome the presumption. Thus, the County Commissioners did not act arbitrarily or capriciously, nor did they abuse their discretion. Boyer v. Lewis and Clark County, 1stJud.Dist.No. BDV-2010-666.

11. Exemptions – 76-3-207, MCA cont’d SC cases you may want to be familiar with: Hampton v. Lewis and Clark County, 2001 MT 81, 305 Mont. 103, 23 P.3d 908. Owner placed an ag covenant on a parcel in order to subdivide using the ag exemption, 76-3-207(1)(c). Owner sold to Hampton. Hampton sought to have the County remove the ag covenant, and County refused. Hampton claimed , inter alia, that the County failed to investigate whether the ag exemption should have been granted owner in the first place. Held: County has no duty to make any specific kind of investigation before it may grant an exemption request. Important in that it protects the County from claims that my be brought by persons opposed to certain exemption requests.

12. Exemptions – 76-3-203, MCA Shults v. Liberty Cove, Inc., 2006 MT 247, 334 Mont. 70, 146 P.3d 710. Property at issue was created in 1983 through the filing of a COS. The parcels exceeded 20 acres thus the parcels could be created without subdivision review. Liberty Cove proceeded with a condo development based upon the condo exemption found in §76-2-203(2003). The critical Language: Condominiums . . . constructed on land subdivided in compliance with this chapter . . . are exempt from the provisions of this chapter . .. Shults asserted that the exemption could not be granted as the parcels had never undergone subdivision review. Liberty Cove asserted that the Act did not apply to the parcels in the first place as the parcels were greater than 20 acres.

13. Exemptions – 76-3-203, MCA Held: Based on the law in effect in 1983, the parcels were never subject to the strictures of the Act. Thus, the parcels were created “in compliance with the [Act]” and Liberty Cove was entitled to the condominium exemption. Thornton v. Flathead County, 2009 MT 367, 353 Mont. 252, 220 P.3d 395 Osprey Ridge, Misty Cliff I and Misty Cliff II were proposed condo projects in Flathead County. The developers asserted that the §76-3-203, MCA exemption applied to the projects. As no subdivision review had occurred for any of the projectsthe County refused to accept the projects’ deeds for filing and the developers sued. Held: As to Osprey Ridge, the parcels had been created “in compliance with the Act”. The parcels were not, however, in accord with the applicable zoning regulation. The fact that the regulation did not expressly deal with condominiums did not equate to “conformance . . . with the applicable zoning regulation”.

14. Exemptions – 76-3-203, MCA This holding is helpful - owners and developers cannot infer permission for certain uses merely because the zoning regulation does not specifically address those uses. Held: As to Misty Cliff I and II, the condo project parcels were “subdivisions” . As the parcels were created before the Act became law in 1973, the parcels were not created “in compliance with the [Act] “ and were not exempt pursuant to §76-3-203, MCA. Held: The County was not estopped from asserting that the projects must undergo subdivision review. The fact that the County had accepted the condo declarations for filing did not constitute a waiver of its ability to take the position that subdivision review was mandated. Note: 2011 Legislative change – “townhome” and “townhouses” are now subject to the use of this exemption.

15. Exemptions subject to survey – cont’d • Relocation of common boundaries outside of platted subdivisions. 1. As you review the following certificates of survey, please remember: a. “Tract of record” – 76-3-103(16) means an identifiable individual parcel.

22. Exemptions subject to survey – cont’d c. Family transfer. d. Agreeing to covenants that restrict to ag uses. e. Within a platted subdivision, relocation of common boundaries for 5 or fewer parcels.

23. Exemptions subject to survey requirements and zoning regulations – 76-3-207, MCA • Relocation of a common boundary line within a platted subdivision with adjoining land outside of a subdivision. g. Aggregation of parcels. 1. When reviewing this particular exemption recall that the applicant should also follow the requirements of 76-3-103(16), MCA. Please peruse the Gallatin County and Lewis and Clark County exemption regulations posted on the web site as you may find them helpful.

24. Two interesting zoning issues confronting counties • The county zoning protest provisions found in §76-2-205, MCA. (Note: SB 379 was branded, castrated and otherwise vetoed) • Whether an owner legitimately has a prior nonconforming use under §76-2-208, MCA.

25. Protests §76-2-205(6), MCA provides: Within 30 days after the expiration of the protest period, the board of county commissioners may in its discretion adopt the resolution creating the zoning district or establishing the zoning regulations for the district. However, if 40% of the real property owners within the district whose names appear on the last-completed assessment roll or if real property owners representing 50% of the titled property ownership whose property is taxed for agricultural purposes under 15-7-202 or whose property is taxed a s forest land under Title 15, chapter 44, part 1, have protested the establishment of the district or adoption of the regulations, the board of county commissioners may not adopt the resolution and a further zoning resolution may not be proposed for the district for a period of 1 year.

26. Protests Issues presented by the statute: • Does the protest provision create an unlawful delegation of legislative power, or, put differently, an unlawful application of police power. • Does the protest provision disenfranchise persons in violation of Equal Protection Clauses or Montana’s enumerated constitutional rights. • How do you decide whether the 50% protest threshold has been met.

27. Protest • Unlawful delegation. Review Shannon v. City of Forsyth, 205 Mont. 111, 666 P.2d 750 (1983); Pet. to Transfer Territory v. Lame Deer High School Dist., 2000 MT 342, 303 Mont. 204, 15 P.3d 447; Cary v. City of Rapid City, 559 N.W.2d 891 (S.D. 1997); Seattle Title Trust Co. v. Roberge, 278 U.S. 116, 49 S.Ct. 50, 73 L.Ed 210 (1928).. To summarize, the argument will be made that §76-2-205(6), MCA provides no standards to judge or guide the exercise of discretion of those given the consent or veto power.

28. Protest b. Equal protection and suffrage – Finke v. McGrath, 2003 MT 48, 314 Mont. 314, 65 P.3d 576. Building code enforcement affects all persons within the district, not just record owners of real property. Building codes are enforced by general purpose governmental entities, not special or single purpose entities overseeing one particular function with great impact upon real property owners.

29. Protest Farrier v. Teachers Retirement Board of Montana, 2005 MT 229, 328 Mont. 375, 120 P.3d 390. First, determine what classifications or classes are established. Second, determine the level of the Court’s scrutiny of the statute’s impact upon those classes. Three levels: strict scrutiny, middle-tier scrutiny, and the rational basis test. Strict Scrutiny applies if a statute implicates a suspect class or fundamental right. Middle-tier scrutiny applies if the law or policy affects a right conferred by the Montana Constitution, but is not found in the Constitution’s Declaration of Rights. The third level is the rational basis test: the law or policy must be rationally related to a legitimate government interest.

30. Protest Ag as a legitimate governmental interest: 76-2-901. Agricultural activities – legislative finding and purpose. (1) The legislature finds that agricultural lands and the ability and right of farmers and ranchers to produce a safe, abundant, and secure food and fiber supply have been the basis of economic growth and development of all sectors of Montana’s economy. In order to sustain Montana’s valuable farm economy and land bases associated with it, farmers and ranchers must be encouraged and have the right to stay in farming.   (2) It is therefore the intent of the legislature to protect agricultural activities from governmental zoning and nuisance ordinances.

31. Protest How to determine the 50% threshold. Compare and contrast the opinion of County Attorney Mike Salvagni with the opinion of Attorney General Joe Mazurek, 46 Op.AttyGen. 22 (1996). I am in agreement with County Attorney Salvagni’s opinion that the 50% requirement should apply to 50% of the agriculture-taxed or forest-taxed property, and not to 50% of the entirety of the property in a proposed zoning district. Briefing on the constitutional issues can be found on the SC web site, Gateway Opencut Mining Action Group v. Gallatin County, 2011 MT 198.

32. Nonconforming use 76-2-208. Continuation of non-conforming uses. Any lawful use which is made of land or buildings at the time any zoning regulation is adopted by the board of county commissioners may be continued although such use does not conform to the provisions of such resolution. Other states have described with greater precision the point at which rights may vest. See, e.g., states that treat the filing of a proper application as time of vesting (Colo. Rev. Stat. Ann. §24-68-102.5 (West 2007); Conn. Gen. Stat. Ann. §8-2h (West 2007)); or states that treat approval of some form of application as the time of vesting (Ariz. Rev. Stat. Ann. §§9-1102, 11-1202 (2007); Cal. Gov’t Code §§66498.1 to 66498.9 (West 2007).

33. Nonconforming use Russell v. Flathead County, 2003 MT 8, 314 Mont. 26, 67 P.3d 183. In Russell the landowner clearly changed use of the land after the County enacted a zoning ordinance. The District Court found that the use the property was put to was “substantially different” than the prior non-conforming use, and held that §76-2-208 did not give Plaintiff a vested right in his proposed use of the property. The Supreme Court affirmed. Id. at ¶¶ 41-44. Is change or expansion of a prior non-conforming use an issue? Kensmoe v. City of Missoula (1971), 156 Mont. 401, 480 P.2d 835. In 1941, before Missoula enacted zoning codes dealing with prior non-conforming uses, the plaintiff placed a trailer home on certain property. Id. at 402. Plaintiff lived in the same trailer home until 1965, when the old trailer home was replaced by another trailer home. The City attempted to prevent plaintiff’s use of the newer trailer home, arguing that its non-conforming use regulation was inapplicable as Plaintiff’s “replacement of the deteriorated trailer with a newer one constitute[ed] a structural alteration of a nonconforming building subjecting it to existing zoning regulations . . .” Id. at 404-5. The Supreme Court held against the City, ruling that plaintiff had a vested right to use the property in the manner in which she had been using it, and that the zone code non-conforming use section of Missoula’s zone code preserved plaintiff’s vested right.

34. Nonconforming use So what if there was no actual use, merely the planned or contemplated future use, of the property. “The actual use that is nonconforming must be apparent and manifested by a tangible change in the land, as opposed to intended or contemplated change by the property owner. Heath Twp. [v. Sall, 442 Mich. 434, 502 N.W.2d 627] supra at 440, 502 N.W.2d 627. Thus, to constitute a legally cognizable nonconforming use, work of substantial nature beyond mere preparation must materially and objectively change the land itself.” Belvidere Township v. Heinze, 615 N.W.2d 250, 254 ((Mich.App. 2000)

35. Nonconforming use “[w]here no substantial nonconforming use is made of property, even though such use is contemplated, and money has been expended in preliminary work to that end, a property owner acquires no vested right to such use and is deprived of none by the operation of a valid zoning ordinance denying the right to proceed with his intended use of the property.” (citations omitted) City of Wooster v. Entertainment One, Inc., 814 N.E.2d 521, 536 (Ohio.App. 2004).

36. Nonconforming use There are cases which set forth a different approach to the vested rights issue, cases which are arguably more favorable to a property owner seeking to benefit from §76-2-208, MCA. Such an approach is a case-by-case view of whether a nonconforming use is a vested right, and is exemplified by H.R.D.E., Inc., v. Zoning Officer of City of Romney, 430 S.E.2d 341 (W.Va. 1993).

37. Nonconforming use “Furthermore, we like the following factors established by the Supreme Court of Oregon in Clackamas County v. Holmes, 265 Or. 193, 508 P.2d 190, 192-3 (1973): The test of whether a landowner . . . has acquired a vested right . . . should not be based solely on the ratio of expenditures incurred to the total cost of the project. . . Other factors which should be taken into consideration are the good faith of the landowner, whether or not he had notice of any proposed zoning or amendatory zoning before starting his improvements, the type of expenditures, i.e., whether the expenditures have any relation to the completed project or could apply to various other uses of the land, the kind of project, the location and ultimate cost. Also, the acts of the landowner should rise beyond mere contemplated use or preparation, such as leveling of land, boring test holes, or preliminary negotiations with contractors or architects.” H.R.D.E., Inc., v. City of Romney, 430 S.E.2d 341 (W.Va. 1993).

38. Nonconforming use – related topic – protected property interest Did the owner have a constitutionally protected property interest : The guarantees of the Fifth and Fourteenth Amendments “apply only when a constitutionally protected . . . property interest is at stake.” (citation omitted) . . . Additionally, ‘even if government action might otherwise constitute a taking of property, it will not if it is shown that what the government prohibits does not amount to a private property right in the first place. Said another way, an owner cannot maintain an action for loss of a property right that it . . . [never had].”(citation omitted) (emphasis added) Seven Up Pete Venture v. State, 2005 MT 146, ¶26, 327 Mont. 306, 114 P.3d 1009. See also Roe v. City of Missoula, 2009 MT 417, ¶¶42-43, 354 Mont. 1, 221 P.3d 1200.