One of the more bizarre arguments in support of the bill is that local government regulation of community appearance (“design”) is, except with respect to the situations noted above, statutorily unauthorized. In other words some argue that the activity proposed to be banned has been illegal all along. Is that so? If it is not so, what tips can be provided to those local governments who wish to proceed with such regulations?

Opponents of “design controls” would say that the complexion of the debate about whether such standards are legal has changed since the North Carolina Supreme Court case of Lanvale Properties, LLC v. County of Cabarrus, __N.C.__, 731 S.E.2d 800 (2012), was handed down last summer. In that case our state’s highest court ruled that the “adequate public facilities (APF)” provisions of the Cabarrus County Unified Development Ordinance, as applied to public schools, were invalid. A critical element of the program was the payment by developers of “voluntary mitigation fees (VMF)” as a means of ameliorating the lack of capacity in schools that would serve the new development. The court compared VMF with school impact fees, which had been ruled invalid in an earlier case involving Durham County. Among other things, the Lanvale court concluded that the North Carolina zoning enabling statutes clearly failed to authorize APF programs with VMF components.

The court in Lanvale first noted that G.S. 153A-340(a), which lists the types of zoning standards that may be used to achieve zoning purposes (e.g., standards affecting the percentage of lots that may be occupied; those affecting the height, location, and use of buildings, structures, and land) did not expressly authorize the county’s APF and VMF provisions. Likewise G.S. 153A-341, which describes the permissible purposes of zoning (e.g., preventing “the overcrowding of land,” “avoiding undue concentration of population,” “conserving the value of buildings and encouraging the most appropriate use of land”) also did not provide express authorization.

The court then concluded that G.S. 153A-4 did not apply either. That statute calls for county statutes to be “broadly construed” and grants of power “construed to include any powers that are reasonably expedient to the exercise of that power.” According to the court, G.S. 153A-4 applies only when statutes are ambiguous, and the referenced zoning statutes were not ambiguous. Furthermore, the court concluded that APF provisions were not a “reasonably expedient” method of ensuring that school facilities were adequate. (Apparently the court viewed the fees charged either as being unreasonably high, or, perhaps, simply an unreasonable fee-based means for achieving the otherwise allowable purpose of facilitating the efficient and adequate provision of schools.)

How, then, does this case relate to community appearance issues? The zoning enabling statutes for cities are virtually identical in relevant respects to the county statutes interpreted in Lanvale. The words “appearance,” “aesthetics,” and “design” are not mentioned in the zoning statutes. Yet a moderate number of municipalities in North Carolina have adopted “neighborhood conservation districts,“ zoning districts that do not qualify as historic districts, but in which residential appearance standards apply to new development and alterations to existing development. Other cities have adopted more unconventional design standards that apply in districts where traditional lot-related standards and use standards have given way to form-based standards. These may include aesthetic standards regarding architectural style, exterior materials, and color that seek to ensure that a development project conforms to the purposes of the community’s comprehensive plan. Does Lanvale imply that all of these community appearance standards that apply to buildings other than historic properties or manufactured housing units are legally impermissible?

Not necessarily. Below are a few reasons why that conclusion is unwarranted.

The law in North Carolina has long held that reasonable regulation based on aesthetic considerations alone may constitute a valid basis for the exercise of government’s regulatory power. In State v. Jones, 305 N.C. 520, 290 S.E.2d 675 (1982), the North Carolina Supreme Court upheld an ordinance which required owners of junkyards and auto graveyards in certain areas to screen their premises over objections that the purpose of the ordinance and the means for achieving it were not legally justifiable. Since then, a number of North Carolina courts have upheld or applied zoning measures based on community appearance considerations in particular situations involving signs, telecommunications towers, resource conservation districts, accessory buildings and structures, historic preservation, fences, and manufactured housing. Our courts have held that these measures may be used to protect property values, promote tourism, and preserve the character of the community. G.S. 160A-383 provides that zoning regulations shall be made “with a view to conserving the value of buildings and encouraging the most appropriate use of land throughout the city.” The use of appearance and design standards is an obvious way to achieve these ends.

If a local government is interested in proceeding with community appearance standards , what should the community keep in mind?

First, appearance standards and design controls, particularly those affecting buildings should be carefully conceived and developed with an eye to how they affect the property owners subject to them. The Jones case reminds us that any diminution in value of an individual’s property must be balanced against the corresponding gain to the public from the regulation. Appearance standards that are applied to buildings have the potential for affecting values more than appearance standards that may apply to incidental commercial signs or landscaping.

Second, the design controls and appearance standards for buildings that work best are those that are based on the context of the affected structures. The standards are based on an inventory of the features and elements of the area or neighborhood in which the regulated property is located that provide its character. Design controls and appearance standards allow new development to fit into those existing areas that give the standards and elements context. The suitability of regulatory standards must, then, reflect both a prior identification of visual themes for the area and be consistent with future plans for the area. If this sounds like it is similar to the process for planning, developing, and applying historic district and landmark standards and guidelines, it is.

Third, it is probably unwise to establish a design review board or similar organization to administer appearance standards or design controls that apply to properties other than historic properties. Boards of this type are generally established in order to exercise permitting authority and discretion in the process of approving development projects. But this can be a legal problem in circumstances where there is no express enabling authority for the board to make such decisions. Community appearance commissions (see G.S. 160A-452) have been authorized for decades, but they are not allowed to make final decisions regarding permits and approvals. Indeed, the court in the Jones case warned that “(w)e feel compelled to caution local legislative bodies charged with the responsibility for and the exercise of the police power in the promulgation of regulations based solely upon aesthetic considerations that this is a matter which should not be delegated by them to subordinate groups or organizations which are not authorized to exercise the police power by the General Assembly.”  (305 N.C. at 531).  This delegation-of-power problem is potent in part because the role North Carolina historic preservation commissions play in issuing certificates of appropriateness is spelled out in the general statutes in considerable detail.

Fourth, appearance standards and design controls that apply to properties that are not parts of historic preservation efforts need to be concrete and specific. Regulation of appearance and design is plagued by the perceived notion that those regulated are subject to the whims and arbitrariness of regulators with wide-ranging discretion and that decisions are based on highly subjective notions of good taste and beauty. Making standards specific and spelling them out in an ordinance is one way to curtail the risk of arbitrariness that comes with discretion. Doing so also provides some assurance that the standards will not be found to be impermissibly vague. Well-conceived standards can be administered by staff if they are concrete and specific enough.

Fifth, even the court in Lanvale declared that local governments “enjoy flexibility” in developing and applying zoning regulations and have “considerable latitude” in exercising their zoning power. Some of the most important concepts in urban planning today, such as form-based development and traditional neighborhood development, include strong aesthetic and appearance themes. Courts are influenced by emerging ideas and trends that affect their disposition of cases, even as they interpret legislative intent. Courts do not want to seem oblivious to the changing complexion of planning and zoning. It is in the interest of local governments to develop programs that enable that tendency.

House Bill 150, which curtails certain appearance standards and design controls, is on its merry way and may be adopted by this General Assembly in 2013. If adopted, any uncertainty about the application of design standards to single-family residential development would be resolved by the prohibition. The considerations and suggestions noted above, however, would still be important with respect to the use of design standards for multi-family residential development and nonresidential development. In any event, to suggest that the use of community appearance standards for non-historic development projects is at the moment categorically invalid and unauthorized is to miss the mark.

It is elementary that building permits are not good forever. They do expire under certain circumstances. Permit holders must make progress in performing the work authorized by the permits. In this regard permit holders must use ‘em or lose ‘em. That is true not only for construction permits but for the entire set of permits for work that is subject to the North Carolina State Building Code (SBC), including plumbing permits, mechanical permits, electrical permits, and the like.  Several statutes, G.S. 160A-418 and G.S. 153A-358, both over 40 years old, govern. G.S. 160A-418 provides as follows:

A permit issued pursuant to G.S. 160 A-417 shall expire by limitation six months, or any lesser time fixed by ordinance of the city council, after the date of issuance if the work authorized by the permit has not been commenced. If after commencement the work is discontinued for a period of 12 months, the permit therefor shall immediately expire. No work authorized by any permit that has expired shall thereafter be performed until a new permit has been secured.

“Commencing” work and “discontinuing” work raise important questions of interpretation.

Determining whether a permit has expired

Suppose that our friend Jones started the job several years ago. Now it looks like he has abandoned his plans. The neighbors want the building inspector to visit the site and to declare the permit expired. But a building inspector would rather tend to other matters and wait for Jones to call him and request an inspection. If a year passes and Jones does not request an inspection, doesn’t that prove that work has been discontinued for at least twelve months? Not necessarily. A variety of minor construction tasks can easily be performed within the course of a year without the need for a Code-required new inspection. At best the failure of a permit holder to call for the next inspection (or even the initial inspection) can be viewed as a rebuttable presumption that the permit has expired for lack of progress. A crafty permit holder can nurse a project along for years by doing a small amount of work on a regular basis.

Local authority to shorten expiration periods

What if a city or county wished to discourage slow-as-molasses, do-it-yourself construction projects? Is a city or county legally authorized, for example, to reduce the time period that triggers permit expiration from one year to a lesser period of time? Quite likely not. It is worth noting that the statutes above expressly allow cities and counties certain flexibility with regard to the time by which work under a permit must be commenced. A city or county may, by ordinance, reduce the six-month expiration period to “any lesser time.” However, no such language has been added to the sentence providing for permit expiration if work is discontinued for a year. As a result, that option with respect to work already begun is probably not available.

Work as encompassing more than visible construction work

For those folks eager to see timely initiation of construction and timely construction progress, the news gets worse. The little-noticed North Carolina Supreme Court case of Morris Communications Corp. v. City of Bessemer City Zoning Board of Adjustment, 365 N.C. 153, 712 S.E.2d 868 (2011), surprised many by expanding what constitutes the “work” that must be done to keep a permit alive. This case concerned a provision in the Bessemer City zoning ordinance that caused a sign permit to expire if work under the permit was not begun within six months after the permit was issued. The city took the view that the term “work” referred only to those visible activities related to on-site construction. Instead the high court ruled that the term work encompassed a broad range of activities necessary to complete a sign relocation, including negotiations with another permitting authority (the North Carolina Department of Transportation), negotiations with the landowner on whose land the sign was situated, and the activity involved in securing another applicable permit. These activities extend far beyond on-site construction work and would not typically be visible or known to a code-enforcement official unless brought to his/her attention. The court tried to distinguish its ruling by declaring that the holding was limited to the unusual facts of the case. It noted that it was interpreting a “vague ordinance” that happened to apply to zoning permits, not building permits. But the case appears to have implications for the interpretation of G.S. 160A-418 and G.S. 153-358. The effect is to make it even more unlikely that code-enforcement officials will be able to justify a determination that a building or zoning permit has expired for lack of progress.

The impact of the state’s permit extension legislation

One further consideration is the gradual inapplicability of North Carolina’s permit extension laws. (See a summary of these laws here.) First adopted in 2008, these permit extension laws suspended the expiration of a substantial number of land use, utility, public health, and environmental permits issued by agencies and departments of the State of North Carolina and by local governments, including building permits. For most permits the period of suspension began on January 1, 2008, and ended on December 31, 2011. On January 1, 2012, the expiration periods for most permits resumed, including the permit expiration periods established by G.S. 160A-418 and G.S. 153A-358 for building permits (no more than six months to commence work; no discontinuance of work for over twelve months). The result of the permit extension laws has been to provide permit holders with far more time to initiate their projects and to show progress than would otherwise have been the case. By now, the construction first authorized by most of the permits in 2007, 2008, 2009, 2010, 2011, and 2012 has either been completed or the projects abandoned. But as the construction industry continues its revival, more and more new permits are outstanding. Code-enforcement officials and permit holders will have more occasions to consider whether a permit has expired for lack of progress.

The consequences of permit expiration

What happens if a building permit does expire? The statutes provide a quick answer. They say that no work authorized by any permit that has expired shall thereafter be performed until a new permit has been secured. O.K., so the former permit holder must get a new one. But there are other consequences. First, the former permit holder must pay a new round of permit fees. Second, if there have been changes in the SBC since the original building permit was issued, the applicant must comply with the new requirements. Finally, building permits are issued only if the applicant can demonstrate compliance with “any other State and local laws applicable to the work.” Thus the building permit requires, indeed compels, coordination with other regulatory laws, ordinances, and programs. For example, a building permit might have been issued only if the applicant showed that a zoning permit, a driveway permit, a stormwater permit, and a septic tank improvement permit had already been issued. If the building permit later expires, does that mean that all of these other permits are also necessarily void and that the applicant must apply for them all over again?  Not necessarily.   These other permits may have expiration terms and conditions of their own.  In some cases a new permit of one of these types might be required. But the mere fact that the building permit has expired does not automatically mean that prerequisite permits have also expired.

One exception to this rule is particularly important.  It concerns certain zoning vested rights.  The issuance of a building permit creates a statutorily recognized  vested right for the permit holder with respect to the zoning that applied when the permit was issued (G.S. 160A-385(b); G.S. 153A-344(b)).  However, that vested right may be lost if the permit expires.  Thus if the building permit expires, the zoning approval that preceded it effectively expires as well, at least to the extent that zoning requirements have changed during the interim.

Pre-construction permits and nuisance actions

What if the neighbors decide to bring a private nuisance action against someone like Jones or to convince the local government to bring a public nuisance action under G.S. 160A-193 or G.S. 153A-140? Could it be that a construction project for which there is an outstanding building permit and otherwise complies with the law can qualify as a public or private nuisance? We lack case law on point, but it seems rather unlikely. A public nuisance generally involves an unreasonable use of land. Construction activity on a site often produces undesirable side effects on neighbors and neighboring properties. Some of these effects can be mitigated through compliance with other pre-construction laws (e.g., soil erosion and sedimentation control regulations).   Other impacts (e.g., noise)  are often either unavoidable or avoidable only at unreasonable expense. In addition, it is generally assumed that these undesirable impacts will eventually disappear. A construction site may for practical purposes be a nuisance, but not one under the law.

Let’s once again consider the situation of Jones, the do-it-yourselfer, who is nursing along a building permit. It is probably in his self-interest to prevent his building permit from expiring. Neighbors will find that there is relatively little they can do to speed up or halt such a project. But they can hope that eventually when the remodeling job is completed it will enhance the neighborhood and that Jones will have the same interests at heart that they do.

A very brief history is in order. In 2006 the North Carolina General Assembly banned video poker and other forms of electronic gambling. Since then promoters of gaming software have developed systems intended to skirt gambling restrictions by combining otherwise legal sweepstakes activities with video games that simulate a gambling environment. The purpose has been to rid this activity of the betting element associated with gambling. Originally, the software used simulations of poker or classic slot machine play to reveal the game results, but that practice was banned in 2008. In reaction to this legislation, promoters modified their systems to simulate a broad range of new games so that the action did not simulate poker or slot machine play. G.S. 14-306.4 became effective on December 1, 2010, and made it illegal to operate an electronic device to be used by a sweepstakes entrant involving any kind of an “entertaining display.”

As a result of a suit brought by software developers and promoters, the North Carolina Court of Appeals ruled earlier in 2012 that both the announcement of the sweepstakes result and the video games themselves were protected speech under the First Amendment. In a 2 to 1 decision it held that because the definition of an “entertaining display” was virtually unlimited, the sweep of the law was unconstitutionally overbroad.

On December 14, 2012, the North Carolina Supreme Court reversed, ruling that G.S. 14-306.4 primarily regulates non-communicative conduct rather than protected speech. The court noted that operating an electronic machine involves conduct, not speech. Promoters are free to provide video games to their patrons and their patrons are free to play them, thus enjoying whatever message is communicated by the video game, but only so long as the games are not linked to a payoff associated with gambling.

Interestingly enough, the court chose not to rest its decision on claims that the sweepstakes operations were a mere pretext for gambling in disguise. It noted that there was no evidence in this case that Internet time and telephone calling cards sold by sweepstakes establishments to trigger play were not actually used by customers. Such evidence might have supported the idea that their sale was a mere pretext for initiating the gambling scheme to follow.

The effect of the decision is to vindicate G.S. 14-306.4, which first became effective in 2010. What, then, are the ramifications of the decision for local governments that have been subjecting sweepstakes sponsors to zoning requirements in the recent past?

(1)    First, zoning cannot make legal that which the state makes illegal. Now that the statute has been upheld and injunctions against its enforcement dissolved, zoning no longer applies to video sweepstakes operations that are subject to G.S. 14-306.4, which are now unlawful. This result stems from the preemption rule provided for in G.S. 160A-174(b)(3) that an ordinance is inconsistent with North Carolina law (and thus preempted) if it makes lawful an act, omission, or condition which is expressly made unlawful by State or federal law. If enforced, a zoning ordinance that allows sweepstakes operations under express circumstances set forth in the ordinance could be viewed as intending to make such operations lawful despite the fact that G.S. 14-306(b)(4) makes them unlawful. Such a zoning ordinance regulation would thus be inconsistent with G.S. 14-306.4 and be invalid. As noted below, however, it seems likely that the industry will try once again to alter its methods of operation so that establishments are not subject to the criminal sanctions of G.S. 14-306.4. If they succeed in coming up with a new lawful form of entertainment, then zoning may once again apply.

(2)    In order to avoid the preemption problem described in (1) above, local zoning officials should leave enforcement matters to state and local law-enforcement officials to determine when and how to proceed to enforce the criminal law. This is particularly true in light of the possibility of a further appeal by the plaintiffs and another injunction prohibiting the statute’s enforcement. There is no need for zoning officials to revoke outstanding certificates of occupancy held by existing video sweepstakes operators. However, if a sponsor is in the midst of the approval process for a new video sweepstakes operation subject to G.S. 14-306.4, no further development permissions, approvals, or reviews should be granted.

(3)    Should a local government amend its zoning ordinance in light of the Hest Technologies decision? A number of larger local governments have adopted standards and zoning requirements tailored to video sweepstakes and “Internet cafes.” Some localities use definitions and standards that directly refer to G.S. 14-306.4 or use much the same language as the statute. If so, a city may simply delete the relevant portions of the ordinance that are tied directly to G.S. 14-306.4 by repealing them. Or, as a less attractive option, it may also simply leave the regulations in place, but avoid enforcing them. In other instances, however, ordinance definitions and standards may not be tied much to the criminal statute. If an ordinance treats a video sweepstakes operation as an “arcade,” or an “amusement center,” or some other more general class of land use, then a local government may continue to rely largely on the ordinance’s existing terminology. In this latter instance a locality might add language restricting arcades or amusement center or other similar uses to those uses that are “otherwise lawful.” Because it is expected that the industry will try to alter its operations to develop a harbor safe from the criminal law, the use of broad zoning categories to classify these entertainment uses has its advantages.

(4)    Some may suppose that the Hest Technologies decision finally clarifies once and for all that the operation of video sweepstakes is unlawful and that simulated gambling will fade away. But history has proven how creative and persistent the promoters have become in devising new ways to circumvent the law. For example, the industry may now try to develop a routine that avoids “an entertaining display.” (Of course, as my colleague Chris McLaughlin has pointed out, it is unclear why anyone would pay good money for displays and routines that are not entertaining.) In any event the attraction of gambling and lotteries in the future may grow. Local government leaders, planners, attorneys, and zoning officials will be called on to respond again. For now we may have come to the end of a chapter in this saga, but it is unlikely that we have seen the end of the story.

So, you may want to forego buying a relative or friend a gift card at your local video sweepstakes parlor this holiday season. But who knows what future seasons may bring.

Quasi-Judicial, Judicial, and Legislative Hearings

As you might expect, the evidentiary rules concerning these three types of hearings differ. First, there are legislative decisions such as rezoning decisions. These hearings are not evidentiary hearings. Decision-makers are free to take opinions and assertions as well as facts into account. Participants in rezoning hearings are free to offer their personal, non-expert opinions, and the local governing board is under no obligation to adopt findings of fact and conclusions of law to justify their decision.

In contrast, the rules of evidence that apply to state administrative agencies and local zoning boards acting in a quasi-judicial capacity are similar to but generally not always as strict as those that apply in a courtroom. One of the key comparisons concerns the treatment of testimony offered by lay and expert witnesses. To the dismay of some zoning boards of adjustment, governing boards, and planning boards, the relatively strict rules of evidence that apply in court concerning property-value evidence and expert testimony also apply to quasi-judicial zoning decisions.

Competent Evidence

Local boards making quasi-judicial zoning decisions must base their decisions on material, substantial, and competent evidence. Competent evidence is simply evidence that is admissible before the local board or court that is making a zoning decision. Opinion evidence is generally inadmissible when the witness is unqualified to express an opinion because he lacks the necessary experience or factual knowledge to form the proper basis for it. In certain instances lay opinion about property values can qualify as competent evidence, but in many more cases it will not.

Effect of Zoning Restriction upon Value of One’s Own Property

Obviously zoning regulations and decisions may affect one’s own property. In North Carolina an owner of real property is generally competent to testify as to the value of her own property even though her knowledge on the subject would not qualify her as a witness were she not the owner. For example, in Responsible Citizens v. City of Asheville, 308 N.C. 255, 302 S.E.3d 204 (1983),  the North Carolina Supreme Court held that it was an error for the trial court to exclude the testimony of three property owners concerning the damaging effect of a flood hazard ordnance on the value of their respective properties.  This rule applies unless it appears that the owner clearly does not know the market value of her own property. An owner is generally expected to know what price the owner paid for the property and the uses to which the property may be put and to have a reasonably good idea of what it is worth. It is understood, of course, that the owner’s opinion of the value of her own property may be subject to bias depending on whether it is in her interest to claim an appreciated value or depreciated value.

Testifying about the effect of a zoning decision on the value of one’s own property is authorized when an owner is challenging the validity of zoning that applies to her own land in court. Moreover, statements by the owner can be competent evidence in a quasi-judicial proceeding such as, for example, one in which the owner has applied for a zoning variance.

However, the ability of a property owner to provide competent evidence about how a development proposal affects the value of other property is far different.

The Effect of a Zoning Decision with Respect to Property A on the Value of Property B

Suppose that the local development ordinance requires that the sponsor of a particular type of development project obtain a special-use permit in order to proceed. One of the ordinance standards requires that in order to qualify for the permit, the applicant must demonstrate that the project as proposed “will not substantially diminish the value of adjoining property.” A neighbor, who owns property that adjoins the subject site, wishes to offer his opinion that the project would, in fact, diminish the value of his property by a certain amount. Would the neighbor’s testimony qualify as competent evidence? No, not unless the neighbor qualified as an expert for purposes of ascertaining the effect of the project (and the existing zoning) on the neighbor’s land. G.S. 160A-393 (k)(3)a. (made applicable to counties by G.S. 153A-349) provides that “competent evidence” is deemed to exclude “the opinion testimony of lay witnesses” as to how the “use of property in a particular way would affect the value of other property.” The statute, adopted in 2009, appears to be consistent with prior law.

If lay testimony is not competent evidence, then what sort of expertise is required to qualify as an expert when it comes to estimating future changes in property values? An expert witness must first establish that he is in fact an expert.  Then the expert must establish an adequate basis upon which his opinions are provided.  Generally an expert witness is one qualified by knowledge, skill, experience, training, or education to provide specialized knowledge to help with the understanding of evidence or the determination of facts. In a court of law whether someone qualifies as an expert is largely a question of fact to be determined by the trial court judge. Whether someone qualifies as an expert in a proceeding before a local quasi-judicial board may be determined by the board acting through its chair. An expert witness does not need to be a specialist, to be engaged in a particular profession, or to be licensed by a North Carolina licensing board. Appraisers, realtors, real estate brokers, and general contractors have all offered expert testimony concerning the impact on other properties of proposed development projects in cases that have reached our appellate courts. But experts from certain professions do not enjoy categorically favored status. In the North Carolina Court of Appeals case of Mann Media, Inc. v. Randolph County Planning Board, the court accepted the testimony of a real estate appraiser as substantial and competent, but rejected the testimony of a realtor and a building contractor who testified for opponents. The appeals court ruled the appraiser’s testimony competent “because petitioners’ appraiser is a professional appraiser whose skill was acknowledged even by the opponent realtor described above.” The North Carolina Supreme Court rejected this reasoning, ruling that the appraiser failed to conduct the analysis necessary to support his opinions; therefore his evidence was not competent.

Substantial Evidence Based on Adequate Analysis

In a remarkable number of North Carolina appellate court cases involving local quasi-judicial zoning decisions the issue has not been whether a particular individual was qualified to provide an expert opinion. Instead the issue has concerned whether the expert witness had conducted adequate studies and analysis to establish the basis for his opinion and whether they proved or disproved the ordinance standard concerning property values. In Mann Media none of the experts addressed the impact of a proposed telecommunication tower on “the value of adjoining or abutting property” as required by the ordinance because they failed to review any actual comparable property sales in that area. In Sun Suites Holdings, LLC v. Board of Aldermen of Garner, two witnesses failed to present “any factual data or background, such as certified appraisals or market studies, supporting their naked opinions.” In yet another North Carolina Court of Appeals case, Humane Society of Moore County, Inc. v. Town of Southern Pines, an appraiser retained by opponents undertook seven case studies and surveys to try to isolate the impact of a proposed animal training facility/shelter on the values of abutting and adjoining property; all were found by the court to be immaterial or insubstantial. Finally, in Weaverville Partners, LLC v. Town of Weaverville Board of Adjustment, an ordinance standard for a special-use permit for multi-family residential complexes required that property values in the “neighborhood” not be “substantially diminished.” The Court of Appeals held that a realtor’s study of single-family residential values near existing multi-family projects failed to demonstrate that the values were substantially diminished by their close proximity to existing complexes.

Certain conclusions seem clear. Ordinance standards requiring proof that a project will not substantially diminish the value of adjacent or adjoining properties are more demanding than many planners and attorneys seem to assume. It is also possible that the time and effort required to establish an adequate analytical basis for expert testimony in this arena may be more costly than many have thought. Finally, many North Carolina zoning ordinances that use the “no-substantial-diminution-in-the-value-of-adjoining properties” standard for special-use permits put the initial burden of proof on the applicant. If the applicant fails to provide substantial, material, and competent evidence addressing the “no-substantial-diminution” standard, thus initially establishing a prima-facie case, then the zoning board must deny the permit. That is true regardless of whether opponents present any evidence on point or not.

It is ironic that neighborhood groups and those who advocate for third-party intervention in zoning disputes have tended to view the prohibition in G.S. 160A-393(k) a. on certain kinds of lay testimony as a substantial obstacle to their efforts. Given the apparent difficulty that real estate professionals have in conducting the proper analytical studies that can serve as bases for their expert opinions, those lay persons who might be emboldened to try their hand at estimating the impact of someone else’s development project on the value of their own property may not realize how fortunate they are that G.S. 160A-393(k) a. discourages them from trying.

So, yes, the way many zoning ordinances are worded, it is the opinions of experts that really count in typical quasi-judicial zoning hearings. If this is to change, either the standards governing special-use permits need to be rewritten or development project opponents need to become adept at pointing out the flaws in the expert opinions of others.

Well, what do you think? Can a city protect a stand of trees from development or from clear-cutting?

In recent years certain North Carolina local governments have become more interested in using their regulatory powers to protect trees and other vegetation from destruction during the development process. In some communities traditional landscaping requirements have proven to be ineffective. Since landowners typically comply with landscaping requirements by planting new vegetation after the site is cleared, a small but growing number of cities have begun more targeted tree protection programs to accomplish their objectives. Prior to 2005, a few local governments, concerned with clear-cutting practices, took more drastic steps to attempt to curb forestry activities within their jurisdictions. Owners of timber land in turn became alarmed at the prospect of local ordinances affecting their forestry practices and began to press for legislation that would restrict local power in this regard. The situation was complicated because some local governments sought to answer nagging questions about their regulatory authority by obtaining local acts specifically allowing them to undertake narrowly prescribed regulatory activities.

The 2005 Legislation

In 2005 many of the questions concerning local government authority were resolved by the adoption of S.L. 2005 – 447 (S 681). That act added to the statutes G.S. 160A-458.5 (applying to municipalities) and G.S. 153A-452 (applying to counties). The act clarified local authority over certain forestry activities in a way that recognized tree protection as an adjunct of land development regulation, but restricted local authority in certain other respects. The legislation generally prohibits local governments from interfering with legitimate forestry and timbering activity, but provides exceptions for five major areas of regulation within which local governments are allowed to operate. Several of these regulatory areas within which local governments may operate are discussed below.

The General Prohibition on Local Regulation of Forestry

The 2005 legislation generally prohibits cities (G.S. 160A-458.5(b)) and counties (G.S. 153A-452(b)) from enforcing any regulation affecting forestry activity on forest land that is (i) assessed at its present-use value for purposes of local property taxes or (ii) is subject to a forest management plan. Properties actually used for forestry activities typically qualify for present-use value. Such properties are often found in rural areas, but are also not uncommon in urban fringe areas as well. The law also generally prevents ordinances from being applied to forestry activity conducted in accordance with a forest management plan. In the case of cities the forest management plan must be prepared by a registered forester in order for the prohibition to apply. In contrast county regulations may generally not be applied to activity conducted in accordance with a forest management plan regardless of who prepares the plan.

One practical effect of these subsections is to prevent cities and counties from using their general police power (regulatory power) to target forestry activity that qualifies for preferential assessment under state law or is subject to a forestry management plan. General prohibitions against clear-cutting adopted by local governments can be vulnerable, particularly since clear-cutting can be an element of certain forestry management plans. (Ordinances adopted under a local government’s planning and land development authority, including zoning, may or may not be exempted from this prohibition, as discussed below.)

The Exception for Land Development Regulations

There are, however, certain express exceptions to the two types of prohibitions mentioned above. First and perhaps most important, tree protection regulations that are adopted under a local government’s planning and development regulatory authority are generally exempt from the prohibition. This means that cities and counties may enforce tree regulations to the extent that they are already allowed to do so under a zoning or land subdivision ordinance.

There are several important implications of allowing tree protection standards to be governed by zoning and land subdivision ordinances. This allowance means little to counties because counties may not apply county zoning to bona-fide farm activities. For some time G.S. 153A-340, the applicable statute, did not mention forestry as being encompassed within the bona-fide farm exemption. However, in 2006 the General Assembly clarified that the expanded definition of agricultural products adopted in 2005 in G.S. 106-581.1 applies to the farming exemption under county zoning. This definition includes not only production and harvesting of crops and livestock, but also horticulture, aquaculture, and the planting and production of timber. If a forestry management plan applies to the property, or the land is subject to present-use-value property taxation, these facts constitute sufficient evidence that the land is being used for a bona-fide farm purpose. Furthermore, in 2011 the bona-fide farm zoning exemption was extended to property within municipal extraterritorial planning jurisdictions. As a result, counties may not apply county zoning to timbering and forestry operations, and neither may municipalities in the ETPJ area. In contrast, however, municipal zoning does apply to such activities inside city limits since the relevant statutes include no express exemption for forestry and timbering. That is true even if the property is subject to a forestry management plan or is subject to present-use-value taxation.

The Exception for Regulations Affecting the Conversion of Forestland to Non-forest Use

A critical exception concerns the timing of the conversion of forestland to non-forest use. The owner of land on the urban fringe may wish to harvest an old stand of timber (like Junior Jones wants to do) before selling the land to a developer. Or a development company that has invested in land may wish to harvest the timber either simply to enjoy the cash flow or to avoid having to comply with the land development and tree protection standards that would apply were a development application to be submitted. Before the 2005 legislation was adopted, very few local governments attempted to apply tree protection regulations to properties for which no development application had been submitted.

G.S. 160A-458.5(a)(1) and G.S. 153A-451(a)(1) both define “development” as “activity, including timber harvesting, that is associated with the conversion of forestland to nonforest use.” The statutes then go on to provide that the statutes “shall not be construed to limit, expand, or otherwise alter the authority of a (city)(county) to . . . (r)egulate activity associated with development.” This language clearly recognizes that such authority to regulate the conversion of forestland to non-forest use exists. The statutes go on to provide a local government remedy for clearing land “in anticipation of development.” A city or county may deny a building permit or withhold site or subdivision approval for a period of up to three years after the completion of a “timber harvest” if it results in the removal of “all or substantially all of the trees that were protected” under development regulations that apply (or would have applied) to the tract of land. If the harvest is a “willful violation” of local government regulations, development approvals may be withheld for a period of five years after the clearing. In any event the language of G.S. 160A-458.5(c)(1) and G.S. 153A-452(c)(1) implies that local governments may regulate “development” (the conversion of forestland to non-forest use) whether or not zoning or land subdivision regulations are the tools for doing so and may make it an ordinance violation for a landowner’s land conversion to be conducted in a manner that is not in accordance with tree protection standards. The remedy of withholding development approvals may not be the sole remedy for such an ordinance violation; the usual ordinance violation remedies of G.S. 160A-175 and G.S. 153A-123 (injunction, civil penalties, orders of abatement) also appear to be available.

Despite the fact that land-clearing in anticipation of development is now within the scope of local regulatory authority, there has been little movement by cities to exercise it. Such authority can appear to be beyond the reach of traditional zoning (and land subdivision) power, and it is unclear to many local governments just how to use it. A general prohibition against a particular practice (e.g., clear-cutting) when converting forest land to non-forest use is probably inadequate. A better approach focuses on what trees merit protection. A local government must be prepared to demonstrate just how their tree-protection standards would apply (or would have applied) to a site development proposal that has not (yet) been submitted. Ordinances that feature numerical standards (e.g., buffer-yard protection areas and setbacks, tree canopy areas related in size to the acreage of the tract) may work better in this regard than standards that depend on the particular features of a specific site plan and tree inventories. In any event, sooner or later it seems likely that at least some cities will find a way to use this power effectively.

So, if the Jones family selects Papa’s approach, the town may be able to apply ordinance tree protection standards to the developer’s plans when they are submitted. If the logic of Junior Jones carries the day, then only a specially-tailored ordinance standard to regulate clearing “in anticipation of development” will apply. In any event only by adopting a sound tree protection program will a municipality be able to protect private stands of trees when, as Arlene Jones fears, property owners and developers choose not to do so.

Other aspects of tree protection will be discussed in a future blog.

I. Building Setbacks on Plats as Deed Restrictions

One explanation for building setbacks being shown on the plat is that they reflect the setback requirements in the private restrictive covenants that apply to the subdivision. Most such covenants require buildings (and sometimes other structures) to comply with setback limitations and restrictions. The applicable setback (e.g., 35 feet from the street right-of-way line) is typically spelled out in the text of the covenants. A developer may show the setback on the plat simply to illustrate that the covenants requirements are being met.

Nonetheless a building setback line of this sort that is depicted on the plat itself may be interpreted in a variety of ways. If the setback line is viewed as simply part of the local government’s platting requirements or a part of the explanatory and informational notes that a surveyor adds to the plat, then such a setback line may be changed or eliminated when a correction plat of the subdivision is prepared. Consent of subdivision lot owners or a neighborhood association may be unnecessary. Government approval of a correction plat should be a straight-forward process.

If, however, the plat setback is interpreted to be a deed restriction in and of itself, then any change in the setback shown on the plat may require approval by the lot owners or association according to the rules set forth in the covenants. Such an approval typically requires at least a super-majority of the relevant lot owners.

Furthermore, it is possible that the setback shown on a plat might be like a common recreational area or a street shown on the plat that is treated as part of the inducement to potential lot purchasers to buy lots. In that case the principles of estoppel and reliance might hold that any lot owner might be disadvantaged by a change in the setback requirements and could block a change to the plat.

Should a local government encourage deed restriction information to be included on a recorded plat to avoid potential confusion about the nature of the setback? Probably not. Local government officials are not in a position to consider the nature of covenant-based building setbacks in determining whether or not to approve a subdivision under the terms of the applicable ordinance.

II. Building Setbacks on Plats as Required Zoning Setbacks

An alternative explanation of a building setback line on a subdivision plat is that it simply reflects the applicable building setback established by the zoning ordinance in effect at the time of platting and recording. Some land subdivision ordinances require such setbacks to be shown, often incorporating the applicable setback from the zoning regulations. Occasionally a surveyor will indicate an ordinance setback even though the terms of the ordinance do not insist upon it. The difficulty with adding zoning setbacks in this manner is that the building setback standards that apply in particular zoning districts may change. Lot owners, surveyors, and attorneys may be misled by plats that show zoning setbacks that have been superseded. For that matter there are those who will mistakenly believe that owners of undeveloped lots simply need not comply with the later-adopted zoning setback requirements and are only required to comply with the zoning setback originally depicted on a plat. (See L.M. Everhart Construction, Inc. v. Jefferson County Planning Comm’n, 2 F.3d 48 (4th Cir. 1993) (subdivider assumed that building setbacks in zoning ordinance adopted after subdivision approved would not apply to approved but undeveloped subdivision lots). For these reasons it is better if the ordinance does not require that zoning setback information be shown on a subdivision plat submitted for approval.

III. Building Setbacks on Plats as Proposed Development Features

A third situation is more complex. Suppose that it appears to a subdivider that the applicable public setback standards (whether in the zoning ordinance or the subdivision ordinance) are likely to be made more stringent in the future. Is there anything the subdivider can do to establish a vested right with respect to the setback standards so that the lot purchasers will not have to comply with newer higher standards? Normally, vested rights with respect to building setbacks on undeveloped individual building lots are recognized only upon the issuance of at least a zoning compliance permit or building permit or approval of a site-specific development plan. However, if a subdivider is thinking not only of selling lots but also marketing houses, then the vested right question becomes more complicated. A subdivider that is developing an architecturally integrated residential or mixed-use development may want to establish a vested right to develop as much of the entire project as possible under the existing development standards. In order to establish such a vested right the developer should provide as much plan detail as feasible in the development approval process. The developer may not be prepared to provide construction plans and building elevations when a subdivision is submitted for approval. But the developer may wish to show setbacks on the plat to indicate where the houses (or other buildings) ought to be located by the builder. The building envelope can be viewed as part of the package of features that defines the developer‘s plans upon which a vested right is based.

The North Carolina statutes authorizing local governments to recognize vested rights under a zoning ordinance upon the approval of a site-specific development plan (G.S. 160A-385.1; G.S. 153A-344.1) may arguably support this approach. A site-specific development plan may be defined by ordnance to include, among other things, a subdivision plat. The question is this: What specific development features are implicated when zoning vested rights are based on approval of a mere subdivision plat? Well, quite likely, lot area, width, and access features and perhaps building footprint locations or proposed setbacks. It may be that showing required building setbacks on a plat can be used to help define possible building sites on the lot. It is possible that such an approach may be used with respect to a development approved under the statutes above. Or it could be used with respect to an ordinary subdivision plat that does not happen to be approved as a site-specific development plan, but which may qualify for a common-law vested right. In appropriate circumstances a building setback line shown on a subdivision plat might prevent future lot owners from having to meet a more stringent future zoning setback requirement.

Treating a setback line as a feature of a proposed development can, however, work against the interest of a developer or lot owners. If an actual building setback shown on a plat (or a site plan) exceeds the standards called for in the applicable ordinance and the local government has the discretion to approve a specific development plan, then the developer may be held to a higher standard. If, for example, a developer proceeds with a development, sells off lots, and arranges for the construction of some of the buildings shown on the plat or plan, the developer may be bound by and unable to modify the setback or other feature shown on the plat or plan. That is true even though the current zoning setback may be less demanding than that proposed under the approved plan. (See River Birch Assoc. v. City of Raleigh, 326 N.C. 100, 388 S.E.2d 538 (1990)(developer may not subdivide area on plat shown as open space after dwelling units constructed and sold even though amount of open space shown on approved plat exceeded that required by ordinance).

Where does this leave us? One rule of thumb for local governments is simply to avoid requiring building setback lines on subdivision plats at all. A second rule of thumb is that if a subdivider wishes to include a setback on the plat anyway, ensure that the plat (or applicable regulations) clarify just what the setback line represents. Is it an attempt to refer to the setback required by the current zoning regulations? Or does it refer to private deed restrictions that the subdivider wishes to establish? Or does it represent a feature of the proposed development that the developer wishes to include in order to establish a zoning vested right or otherwise voluntarily restrict the nature of future development? One thing that does seem clear is that plats will continue to become more complicated, will likely display more detailed development features and notes, and will likely be used more and more as a vehicle for disclosing information useful to a variety of audiences (including the local government authority and future lot purchasers.

Well, the North Carolina Supreme Court seemed to think so in a recent decision, Wally v. Town of Kannapolis. In that case the high court reversed a decision of the North Carolina Court of Appeals and held that a Kannapolis zoning amendment was invalid. Why? Because when the governing board adopted the amendment, it failed to approve a separate statement describing why the action was or was not consistent with any controlling comprehensive plan and explaining why the action was reasonable and in the public interest. Where does this requirement come from? The first paragraph of G.S. 160A-383 (cities) provides as follows:

Zoning regulations shall be made in accordance with a comprehensive plan. When adopting or rejecting any zoning amendment, the governing board shall also approve a statement describing whether its action is consistent with an adopted comprehensive plan and any other officially adopted plan that is applicable, and briefly explaining why the board considers the action taken to be reasonable and in the public interest. That statement is not subject to judicial review.

The town governing board had reviewed the statement originally authored by staff and had the statement before it when it adopted the rezoning. According to the town, the council thus approved the statement regarding consistency and reasonableness by implication. The court found this argument unpersuasive, insisting on strict compliance with the statute.

Legislative History
In this regard it is worth noting that the consistency-statement language of G.S. 160A-383 was first adopted in 2005 and became effective January 1, 2006. It originally provided that the statement was to be “adopted” by the governing board, and the adoption was to occur “(p)rior to” the adoption of the zoning amendment. The language was changed in 2006 (effective August 23, 2006) to require only that the board “approve” such a statement and that such approval occur “when” the action on the zoning amendment occurred. (The corresponding county statute (G.S. 153A-341) was not amended in 2006 and retains the original “(p)rior to” and “adopt” language.) The municipal changes were designed to provide governing boards with more flexibility and to make compliance with the statute easier. But these good intentions were inadequate the save the Town of Kannapolis.

In Wally v. Town of Kannapolis, the town pointed out that the statute provides that the consistency/reasonableness statement “is not subject to judicial review.” How, then, could the court hear the case? The court’s response was that while the adequacy of such a statement was not subject to such review, whether or not such a statement was actually approved (the issue in this case) was subject to review.

Strict Compliance

Inn most respects the decision should come as no surprise. Our courts have long insisted on strict compliance with the procedural requirements that apply to the adoption of zoning amendments. For example, failure to advertise the governing board’s public hearing the requisite number of days before the hearing is sufficient to invalidate an adopted amendment. We should expect the same result if a governing board fails to comply with a statutory requirement requiring approval of a plan consistency statement contemporaneously with a zoning amendment action.

Do Over?

When a zoning amendment is invalidated or is challenged by opponents, one reaction of a governing board may simply be to repeat the process (a “do-over”), but the next time to do it right. Zoning amendment opponents may succeed in delaying a rezoning such as this one, but in the longer run they may not be able to prevent it. Chances are that there are North Carolina cities and counties that have adopted zoning amendments without complying with the consistency-statement requirements of the statutes. Should such a local government initiate a do-over? The statutes of limitations (SOL) (G.S. 160A-364.1; G.S. 153A-348) for challenging zoning amendment decisions were changed last summer. Challenges to zoning map amendments must still be brought within two months of adoption, but challenges to zoning text amendments may be brought up to three years after adoption. Local governments that are only now reminded of the plan-consistency statement requirement by this blog may need to ponder whether it is better to conduct a do-over or to hunker down and wait out the SOL period as it applies to a particular zoning amendment action.

What is Plan Consistency?

Determining whether a particular zoning amendment proposal is or is not consistent with the fetures of an “officially – adopted plan” can be an uncertain undertaking.  One view of plan consistency emphasizes the process used by local governments in making zoning decisions. The procedures used for reviewing zoning amendment proposals emphasize gathering and analyzing relevant economic, social, and environmental information, assessing the political implications of the decision, determining what the long-run future impacts of the decision will be, and making the decision in a careful deliberate fashion. These considerations help to form the policy choices that allow rational land-use regulation. These steps are also related to determining the reasonableness of the proposal. (See the Dave Owens blog “What if a Proposed Rezoning is Inconsistent with Our Comprehensive Plan?”)

Plan consistency statements can also emphasis the substance of what relevant planning documents say and display. This emphasis was bolstered by the 2006 amendment to G.S. 160-383 that refers not only to consistency with an “adopted comprehensive plan” but also consistency “with any other officially adopted plan that is applicable.” These references encourage elected officials to consider whether specific legislative zoning decisions are compatible with written community planning policies that may come from a variety of sources. Planning documents are clearly important. The composition, format, use, method for adoption and amendment, and legal significance of comprehensive plans (and land-use plans) is not defined in North Carolina law, except in connection with the Coastal Area Management Act. As a result, plans vary considerably. Some plans are largely reports. Others include a series of policy statements. Others emphasize goal-setting. Few try to reconcile internal inconsistencies between competing policy statements or goals. Also, it is not common for plans to spell out carefully the timing of plan implementation or the progression of conditions from the time the plan is adopted until the plan target year. For example, the plan may offer little guidance about just when it is appropriate for a particular area to be rezoned to enable the type and intensity of development indicated in a land-use plan. Finally, there is the matter of scale. Policy statements and plan-related maps are broad, general, and often lacking in precision; zoning amendment proposals are relatively specific and “fine-grained,” applying to specific parcels of land. Fortunately our courts have not insisted on close matches between plan documents and rezoning proposals. For example, in Coucoulas/Knight Properties v. the Town of Hillsborough, the North Carolina Court of Appeals upheld the denial of a rezoning even though the consistency statement indicated that that the rezoning proposal was consistent with the town’s plan. (See  my blog “Just Say No: The Denial of a Rezoning Petition”).

 The Town of Kannapolis case has little to say about just how consistency statements may be used to ensure sound zoning amendment decisions. It leaves for the future resolution significant questions about how they may be used effectively. But the case does make it clear that local governments may not be too cavalier about taking a simple procedural step to acknowledge that plan consistency counts.

Let’s begin with the 1967 North Carolina Supreme Court case of Dale v. City of Morganton, 270 N.C. 567, 155 S.E.2d 136 (1967). In that case the tenant of a house in “terribly run down condition” (according to a Morganton housing official) moved out and the electricity was turned off. When a new tenant moved in and applied for a reconnection of the power, Morganton (the electric power provider) refused to provide service. Apparently it did so both because the house was structurally dilapidated, failing to meet the standards of the city’s minimum housing ordinance, and because the electrical system was unsafe. The Supreme Court ruled that the city could withhold power for the second reason but not the first. According to the court, the city, operating in its capacity as a proprietary utility, could refuse electric service if there were evidence that the wiring was in dangerous condition. The justification offered was that the city would be liable for damages caused by such a condition if it proceeded with the connection. However, the city was unauthorized to refuse to allow the reconnection of electric service simply because the house was in violation of the housing code. The court referred to the enforcement of the housing code as a “matter collateral to the duty of the city to supply electric power. . . “

The Dale case applied to the reconnection of electrical power and was decided almost 45 years ago on the basis of North Carolina common law. Does it imply that the initial provision of electrical service to a building must be accomplished without regard to the compliance of the property with other parts of the North Carolina State Building Code or without regard to applicable zoning and environmental health regulations? It well may.

G.S. 143-143.2 reflects the holding in Dale in part by making it unlawful for an electricity provider (e.g., investor-owned power company, electric membership cooperative, or electric city) to turn on or initially furnish electric current for a building unless the building is first inspected by a certified electrical inspector and an electrical certificate issued “approving the wiring of such building.” The statute also states that electric wiring “shall conform to the requirements of the State Building Code, which includes the National Electric Code and any amendments and supplements thereto as adopted and approved by the State Building Code Council, and any other applicable State and local laws.” A careful look at this language suggests that “any other applicable State and local laws” in this context likely refers just to laws concerning electric systems and not to the other systems of the building or to various other non-building-code-related laws and regulations. This statute and Dale also imply that a local inspection department must authorize a utility provider to allow initial connection to its electricity distribution system without regard to whether a building under construction is currently in compliance with the other features of the SBC or other development-related requirements such as zoning and environmental health regulations.

In contrast (and as discussed in the December blog) a local government certificate of occupancy may be withheld until there is evidence that a building (or portion of it) complies not only with the various technical and administrative codes that make up the North Carolina State Building Code (SBC), but also with the local zoning ordinance and, in some cases, with a variety of other applicable State and local regulations and laws.

The distinction between the initiation of electric power and building occupancy is complicated by the fact that time (and timing) is of the essence in many construction projects. There may exist some very practical incentives for contractors and owners to move in inventory or otherwise occupy a building before the CO is issued. This is particularly true once some or all of the electrical system of a building is energized. Since electricity is inevitably required during construction and not simply after construction, and portable generating equipment can be costly, the incentive to connect the power before a building is found to comply in all respects with the SBC can be substantial.

Both the 2008 version of the North Carolina Electrical Code and the 2011 version (originally to become effective September 1, 2011, but now being reviewed by the General Assembly) provide for “temporary power” (TP). Local governments now routinely authorize investor-owned electric utilities, electric membership cooperatives, and electric cities to provide temporary power during the construction process for project upfits, for tenant changeovers after the power has been turned off with respect to the prior occupant, and for buildings during initial construction. Temporary power is intended to allow contractors to test heating and air-conditioning systems, water heaters, certain electrical appliances, and, in some cases, to allow heating or air-conditioning systems to be used to keep areas at room temperature while certain moldings, floorings, and the like are allowed to set. The Electrical Code provides room for local governments to establish procedures for authorizing power providers to provide temporary power.

An electrical inspection by the code-enforcement authority is typically required in advance of the TP authorization. The electrical system in the building space (which may involve only a portion of a building) must meet many, but not all, of the standards that apply before a final electrical certificate of compliance authorizing permanent power is provided. The responsible party for the building space must secure the space, notify other sub-contractors that the space has been energized, and, in some cases, secure their permission. Some local governments even require evidence that subcontractors have waived the right to sue for damages that grow out of the use of temporary power. In addition, application forms for temporary power are replete with warnings to contractors and property owners that temporary power does not authorize the occupancy of the premises and that only an overall certificate of compliance or certificate of occupancy will do so. Moving inventory, equipment, or furniture into the premises before such a certificate is issued is prohibited. Local governments sometimes limit the duration of temporary power; periods may range from a few weeks to several months. Local governments also may notify the service provider if the terms of temporary service are violated, and the provider may disconnect service when the terms of the agreement between the utility and the customer provide for such. (For more on a utility’s right to disconnect service for nonpayment see Kara Millonzi’s blog of August 9, 2009.)

Because temporary power is generally easy to arrange, there is less pressure on contractors and owners to obtain permanent power, which is commonly in the name of the property owner. In order to qualify for permanent power the premises must pass a final electrical inspection and an electrical certificate of compliance must be issued.

So, in summary, a provider of electric power must provide service to those with electric systems and wiring that meets code standards without regard to “collateral” construction and development regulations that may not have been met. Electrical inspectors probably lack the authority to delay notifying utilities that a particular property qualifies to be “cut in” to the grid. Local governments must acknowledge that as a rule electrical service cannot be directly used as a lever to induce compliance with other regulations. Nonetheless because of the prevalence of “temporary power” arrangements, local governments do have some ability to ensure that the “energizing” of a building is coordinated in some way with the proper completion of its construction and the installation of other building service systems and that a building is not occupied prematurely.

To qualify for one in North Carolina, the owner and contractor may be required not only to show that the project complies with the North Carolina State Building Code (SBC), but also with other laws and regulations that are unrelated to the SBC but that apply to the development project. In addition, the CO has significance not only for the local government; it is important to the variety of private parties such as contractors, subcontractors, design professionals, lenders, realtors, utility service providers, and others who have an interest in knowing exactly when a building project has been properly completed and can be occupied and when various obligations provided for in private construction contracts have been discharged.

Most government officials and members of the development community believe they understand the way the certificate of occupancy works. Yet despite the apparent widespread use of the certificate of occupancy process, there are various ambiguities in the law that have resisted resolution. The result is that there is more variation in the administration of certificates of occupancy among North Carolina local governments than might be expected.

Certificates of compliance as certificates of occupancy

The North Carolina building, inspection, and development statutes do not refer to a certificate of occupancy at all. Instead the statutes refer to “certificates of compliance.” G.S. 160A-423 and G.S. 153A-363 (Certificates of compliance) provide as follows:

At the conclusion of all work done under a permit, the appropriate inspector shall make a final inspection, and if he finds that the completed work complies with all applicable State and local laws and with the terms of the permits, he shall issue a certificate of compliance. No new building or part thereof may be occupied, and no addition or enlargement of an existing building may be occupied, until the inspection department has issued a certificate of compliance. A temporary certificate of compliance may be issued permitting occupancy for a stated period of specified portions of the building that the inspector finds may safely be occupied prior to final completion of the entire building. Violations of this section shall constitute a misdemeanor.

If the word “occupancy” were substituted in the statute set forth above in each instance that the term “compliance” is used, then G.S. 160A-423 and G.S. 153A-363 might clearly serve as authority for the use of certificates of occupancy. Furthermore, requiring that “completed work complies with all applicable State and local laws” suggests that the authorizing certificate take into account conformity with not only the State Building Code (SBC) but other applicable state laws and regulations as well.

The idea that a certificate of compliance and a certificate of occupancy are essentially the same thing was reinforced 26 years ago in the case of First American Federal Savings and Loan Association v. Royall, 77 N.C. App. 131, 334 S.E.2d 792 (1985). The court referred to the certificate of compliance statute (G.S. 160A-423) in upholding the right of the City of Raleigh to withhold issuance of a certificate of occupancy for a building on a subdivision lot because the subdivider had not complied in all respects with the terms of its subdivision plat approval. The developer had failed to complete a required water line extension to several other lots within the subdivision. The court ruled that the city could withhold the certificate of occupancy for the building even though the water line was not necessary to provide service to the lot upon which the building was located. The decision appeared to allow an expansive reading of the certificate of compliance statutes.

Certificates of compliance distinguished from certificates of occupancy

In early 1990s, however, the SBC was amended in such a way as to recognize the certificate of compliance as being something different from the certificate of occupancy. Since then the SBC has viewed the certificate of compliance as evidence of compliance with a particular volume of the Code or the regulations that apply to a particular trade. The inspection department may issue multiple certificates of compliance indicating conformity of the work with the various technical codes that make up the SBC. These certificates could be called “building system certificates of compliance,” because they signal compliance of a particular building system (e.g, HVAC) with a particular technical code (i.e., the mechanical code) that is part of the SBC. This approach is consistent with the fact that the certificate of compliance statute refers to compliance with regulations applicable to “work done under a permit.” One may expect that a complex development project will require various individual permits. Finally, to distinguish a certificate of compliance from a certificate of occupancy, section 204.8.2 of the 2009 North Carolina Administrative Code and Policies (part of the North Carolina State Building Code) provides in part that “(t)he certificate of compliance shall not be construed to grant authority to occupy a building.”

To complicate matters still further, some local governments issue a blanket, overall certificate of compliance indicating conformity with all of the technical codes and related regulations of the SBC. In these circumstances a building may not be occupied prior to the issuance of this overall certificate of compliance. That use of a certificate of compliance is also authorized by the administrative code (sec. 204.8.1).

Where does all of this leave the certificate of occupancy? Without referring to any general statute, section 204.8.4.1 of the 2009 Administrative Code provides:

Upon satisfactory completion of a building and after the final inspection, the inspection department may issue a certificate of occupancy. The certificate of occupancy shall state the occupancy may be safely occupied.

This code provision does suggest that those who adopted and drafted the SBC were aware of something known as a certificate of occupancy, even if they were not prepared to define it or establish its scope.

This is not to say that there are not North Carolina statutes that expressly mention the use of certificates of occupancy. There are. They must be based on the assumption that authority for the use of COs exists. For example, G.S. 115C-521(c1) prevents a local board of education from applying for a CO for any new middle or high school building until the plans for the science laboratory and related areas are reviewed and approved by the State Board of Education. Likewise, G.S. 160A-374 prohibits a city from requiring the dedication of water system facilities as a condition of land subdivision plat approval unless a public entity that operates water systems agrees to begin operation and maintenance of the dedicated water system facilities within one year of the time of the issuance of a CO for the first unit of housing in the subdivision. Similarly, G.S. 105-277.1D(a) allows a residential builder to qualify for a property tax break on a property that is part of the builder’s residential inventory only if the residence is unoccupied but “a certificate of occupancy authorized by law” for it has been issued.

An eminently practical question, then, is: What is the authority for, scope of, and reach of a local government certificate of occupancy program? What development-related permissions and approvals does it (or may it) apply to? In some local governments the certificate of occupancy indicates compliance with the SBC and, very likely, zoning. In other jurisdictions the CO might not be issued until compliance with community water system requirements is demonstrated or until deceleration lanes are built to serve a major traffic generator. What about compliance with septic tank regulations, the land subdivision ordinance, the Coastal Area Management Act, applicable state or local driveway regulations, or soil erosion and sedimentation control requirements?

It remains unclear whether a local government is compelled or even authorized to withhold a certificate of occupancy pending a demonstration of compliance with non-SBC laws and regulations or whether a local government must administer a CO program at all. The Royall case cited above and the long tradition of certificates of occupancy still provides comfort for those who rely on them today. A local development ordinance can certainly provide guidance and elaboration. However, until improvements are made to the statutes and building code provisions affecting certificates of occupancy, local governments are left to resolve some of the questions above on their own and to risk exceeding their authority or to risk failing to make use of a very effective permit coordination technique.

Until then, the circumstances under which certificates of occupancy allow building occupation will continue to be a subject worthy of preoccupation.

Next time, part II of this blog will take up the use of temporary certificates of occupancy and the relationship of certificates of occupancy to the connection of permanent electrical power to a building.

Should such an incident possibly occur in the calm political confines of North Carolina, we now know that stealing, defacing, vandalizing, or unlawfully removing a political sign that has been lawfully located is, under our law, a class 3 misdemeanor. So says Session Law 2011- 408 (S 315), adopted in this year’s General Assembly session.

The new law amends G.S. 136-32 to establish for the first time a regulatory framework for dealing with the placement of “political” signs within the rights-of-way of public streets and highways. The amended statute spells out standards for North Carolina Department of Transportation (NCDOT) highways, and it also serves as enabling legislation for municipalities to prohibit or regulate these signs as well. In particular, a municipality may adopt and enforce its own ordinance prohibiting or regulating the placement of the campaign signs along city streets. (We know from the United States Supreme Court case of Members of the City Council of the City of Los Angeles v. Taxpayers for Vincent, 466 U.S. 789 (1984), that if alternative modes of communication are available, it is not a violation of the First Amendment for a local government to ban campaign signs from public rights-of-way entirely).

A municipality may also apply its sign standards to those State highways inside city limits that are wholly maintained by a city under a maintenance contract with NCDOT. If a city has already adopted campaign sign regulations before the effective date of the new law (October 1, 2011), the city regulations continue to apply, but only inside city limits. Such regulations may no longer apply within a city’s extraterritorial planning jurisdiction. Even if the regulations are adopted after the law’s effective date, city-adopted regulations apparently displace the State standards set forth in G.S. 136-32(d), but only inside municipal limits. If a town or city fails to adopt campaign sign regulations of its own, then the State standards apply inside city limits, but only to state roads and highways. In any event, the new statutory standards apply to all those State roads and highways located in the unincorporated areas of North Carolina.

Several standards set forth in G.S. 136-32(d) are particularly notable. Signs may only be displayed during the period from the 30th day before the beginning of “one-stop” early voting and the 10th day after the primary or election day. These “pre-election” and “post-election” intervals may seem reasonable enough, but one has to wonder whether the First Amendment will be satisfied. Where restrictions on signs displayed near an election are concerned, courts in various parts of the country have invalidated restrictions looser than North Carolina’s. (See my earlier blog for more details.)

Another standard in G.S. 136-62(d) has also raised some eyebrows. The new law requires the party erecting the sign to obtain the permission of the owner of any residence, business, or religious property that fronts the right-of-way where the sign is erected. It is worth noting that most streets and highways in North Carolina are based on easement interests. The owner of property abutting a street may or may not own the land to the center line of the street or road. Requiring permission of the abutting owner seems clearly to recognize the fact that many property owners consider the area behind the curb, shoulder, or ditch to be theirs regardless of the nature of the property interest they may or may not possess. Determining whether property owner permission is required will be most difficult for signs intended to be posted at intersections and in the medians of multi-lane highways, parkways, boulevards, and avenues. It may be that the law requiring a property owner’s permission will be honored more in its breach than in its observance. But before candidates become too cavalier about obtaining the permission of property owners, they should keep in mind that stealing, removing, or defacing such a sign is against the law only if the sign is lawfully erected in the first place. If it is not, it may be treated as either a private or a public nuisance and summarily abated.

One peculiarity of the new law is that the title of the law refers to “campaign signs.” However, the body of the law refers to the placement of a “political sign,” defined as “any sign that advocates for political action.” Does the law apply to the more controversial form of signs that involve messages directed at particular groups, individuals, and causes? Apparently the law does apply if such a sign is proposed for erection in a street or road right-of-way. However, the new law does not apply to political signs erected on private property behind the right-of-way line. A recent case heard in federal court here in North Carolina illustrates the distinction.

The case of Bowden v. Town of Cary, 754 F. Supp. 2d 794 (2010), appeal filed, No. 11 – 1480 (4th Cir. May 6, 2011), involved a dispute between a property owner and the town in which the property owner claimed that water runoff from a town street had caused major damage to his house. When the problem was not resolved, Bowden painted a protest sign occupying about 48 square feet on the front of his white house. The sign, in large fluorescent orange and pink letters, read: “Screwed by the Town of Cary.” Remarkably enough, Cary’s development ordinance included comprehensive provisions devoted to the kinds of signs that could be displayed in residential zoning districts. Although “political signs” were authorized in residential districts, those signs along with various other types of signs could not exceed 720 square inches in area or 42 inches in height. The regulations were obviously oriented to campaign or election signs rather than to more full-blown political statements.

 Rather than tackle the sensitive question of what kind of sign standards legitimately could apply to signs displaying more elaborate forms of political speech, the federal court judge ruled in favor of Bowden by invalidating the ordinance as applied to him. According to the court, the ordinance impermissibly exempted from regulation holiday decorations, public art, temporary signs erected as part of a town-recognized event, and government signs. By doing so, the ordinance made distinctions based on the content of the sign’s message that could not be adequately justified under the First Amendment, particularly since highly protected political messages were highly restricted. The court therefore enjoined the town from enforcing its ordinance against the infamous sign. The case is now on appeal to the federal Fourth Circuit Court of Appeals.

Session Law 2011 – 408 (S 315) allows North Carolina municipalities and NCDOT to enforce standards governing one special form of political signs – campaign or election signs – that are located within road rights-of-way although questions about the new law remain. What is less clear (as the Cary case illustrates) is how governments may best address the more unusual situation of property owners attempting to make political statements by displaying signs on their own property, particularly when the regulating body is also a target of inflammatory comment. These signs of the times will likely require more attention if we see more political discord in the days ahead.