Thursday, August 22, 2013

Get a Room

In re Beliveau NOV, 2013 VT 41

One of the pleasures of practicing law is the opportunity to argue for what we like to call a “good faith extension of the law.”  In practice, this occasionally translates to “weasel out of it however you can, even if all you’ve got is a misshapen club legal foot to stand on.”  Today’s homeowner-petitioner to the SCOV may not have more than a spider’s filament on which to rest his argument, but I’d give him a high five for creativity.

Beginning in 2008, homeowner began renting out rooms in his home in Fairfax, where he lived, for a flexible monthly fee.  The Town of Fairfax caught wind in May of 2008, and issued a citation to homeowner for converting his single-family home to a rooming-and-boarding house without a permit.  The Town gave him a choice: get a permit and Town approval, or quit it.  He chose Option C: ignore them.

The Fairfax Zoning Bylaws define a boarding house with a one-two-three test: 1) a home occupied by the owner; 2) where people are provided with and charged for meals and/or sleeping accommodations; and 3) for a fixed period of time.

The Zoning Administrator turned the citation into a formal notice of violation (or “NOV”).  Homeowner appealed to the Fairfax Development Review Board.  The Board found homeowner had changed the use of his home to a boarding house, without a permit.  Homeowner appealed to the environmental court.

Meanwhile, the Town filed an enforcement action in the environmental court.  The court granted judgment in favor of the Town, and slapped a $23,000 penalty on homeowner.  Homeowner appealed to the SCOV.

In an unpublished memorandum decision, the SCOV reversed the environmental court and remanded to determine whether homeowner resided in the home while he was renting it, and whether he rented rooms for a “fixed period of time.”  The Town and homeowner did some additional discovery, then each filed cross-motions for summary judgment.  The environmental court found again in favor of the Town, slapped a nearly-tripled $63,000 penalty on homeowner, and told him to stop it already.  Homeowner appealed to the SCOV a second time.

On Appeal, the Court considers three questions raised by homeowner: 1) whether the environmental court got it right in concluding he was operating a boarding house without a permit; 2) whether the Zoning Bylaw was unconstitutionally vague; and 3) whether the court calculated the penalty wrong.

Homeowner’s first challenge is to the trial court’s conclusion about whether his arrangement was for a “fixed period of time,” and is based on several unique facts of his boarding arrangements.  All agreements with individuals renting rooms in his house were oral, and for a period of one month at a time, though homeowner allowed tenants to remain past the end of the month without payment, and sometimes bartered repairs and other services in exchange for rent.  Homeowner did acknowledge that he was required to give notice to tenants according to law before kicking them out.

Homeowner argued that, rather than creating a month-to-month tenancy, he created an “at-will tenancy,” a peculiar and ancient form of occupancy characterized by an oral agreement for use of land for an indefinite length of time.  The problem with this is two-fold.  First, at-will tenancies are a very old idea that really only made sense when farmers were renting fields for dozens of years at a time.  Second, Vermont’s residential tenancy laws convert all at-will tenancies where rent is collected into periodic tenancies for a “fixed period of time,” such as month-to-month or however long the period is defined (hint: it’s usually when you pay your rent).  In homeowner’s case, he rented to people on a more or less month-to-month basis, albeit with flexible terms.

The SCOV rejects this argument out of hand noting that homeowner’s position would lead to an “absurd result.”  If all rental arrangements such as his were at-will, lacking a definite end date, periodic tenancies would be read out of the statutes.  In light of this, the SCOV finds the environmental court’s interpretation of the Zoning Bylaws reasonable, and it affirms.

Homeowner’s second argument was that the Bylaw is impermissibly vague.  As a result, it doesn’t give property owners appropriate notice of what is and what is not a boarding house, and gives the Fairfax zoning officials too much discretion in deciding when owners are in violation of the Bylaw. 

In furtherance of this argument homeowner argued that the definition of “family” in the Zoning Bylaws is vague, and that enforcement requires zoning officials to peek into the private, everyday activities of a household, single-family or boarding house, to determine whether they act like a family unit (e.g., do they eat together, watch TV together, share bathrooms, and share a food budget). 

But this information is easily obtained by way of a questionnaire—as the Town used here—and the distinction in the Bylaws is clear enough that the Town doesn’t have “unfettered discretion” to call an arrangement a family unit or not.  The environmental court was presented with nothing indicating that homeowner’s renters acted as a family or household unit, and concluded that they did not.  A reasonable conclusion, says the SCOV.

Going further, though, the SCOV notes that the interest the homeowner is asking the SCOV to protect is economic, not constitutional.  Where an economic interest is involved, an owner can as easily resort to the administrative body trying to enforce the law for clarification and can participate in the process to amend the laws to be more clear. 

The fact that homeowner had the opportunity to ask the Town to explain its definition of boarding house, but chose to ignore it and continue renting while carrying on his numerous appeals, is the nail in the coffin.  The SCOV doesn’t take kindly to those who flaunt the law to their advantage, and only cry unconstitutional when it is convenient.  Homeowner loses on his second argument.

Homeowner’s last argument seems appealing, if only for the fact that by the time the case got up to the SCOV on the final appeal the fines the Town requested had jumped up to nearly $100,000.  Here, homeowner splits hairs in a creative attempt to avoid paying an arm-and-a-leg for renting to whomever he wants.

The statute governing fines for violating a zoning bylaw sets a cap of $100 per violation each day, with the trial court having the discretion to set the amount of the fine under that amount.  The court has to balance the weight of the continuing violation against the cost of compliance, and the cost of enforcement.

Here, the environmental court weighed the benefit of homeowner’s violation for four years against the attorney’s fees and costs the Town incurred to make him comply and the fact that homeowner could at any time have stopped renting to boarders, without regard for homeowner’s costs of maintaining his home (he would have had to pay taxes, utilities, repairs, etc., regardless).  The environmental court arrived at a reasonable $56.48 per day for the violation.

Homeowner argues that, under SCOV case law, a property owner need not “disgorge all profits” earned while he was out of compliance if there was no association between the owner’s misconduct and the “economic advantage gained from the misconduct,” (higher profit margins or increased market share).  The only “economic benefit” homeowner gained compared to his competitors, he argues, was the cost of the permit to operate as a boarding house.

But here again, homeowner’s argument falls on deaf ears.  The same case that homeowner relies on noted that this approach doesn’t apply where the violation is starting a business without a permit.  The Vermont Legislature also clarified a month after homeowner started renting that “economic benefit” includes not just “competitive advantage gained” but “any gain, advantage, wrongful profit, or delayed avoided cost,” resulting from violation. 

Considering that the environmental court set the fine at less than the statutory cap, and that homeowner could have converted his house back to a single-family dwelling at any time, rather than continuing to profit from boarders, the SCOV finds the penalty reasonable.

Poor homeowner—he has to pay $93,000 in fines, and get a permit to continue renting.  Kudos to him for his attempts at creativity, but one suspects that this decision is likely to put the kibosh on other homeowners eyeing the potential boarding house market. 

Woe to the mysterious lodgers of Fairfax, Vermont!

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