Hearing Officer's Decision - Irey citation appeal
In the Matter of the Notice of Zoning Violationsand Citation
dated May20, 2016, issued by the City of Shorewoodto
Quentin and Rebecca Irey
regarding Zoning and Rental Housing Code Violations
at the property located at 26040 Wild Rose Lane
FINDINGS OFFACT, CONCLUSIONS AND
DECISION OF THE HEARING OFFICER
FINDINGS OF FACT
History
1.Quentin and Rebecca Irey (the “Ireys”) are the owners of the property located at 26040
Wild Rose Lane (the “Property”) in the City of Shorewood, Minnesota(“City”) and at one
time resided at the Property.
2.Sometime prior to the fall of 2015, the Ireys relocated to Hutto, Texas, where they are now
permanent residents.
3.On October25, 2015, the Ireys entered into a rental agreement with Scott and Jennifer
Owens (the “Owens”) with respect to the Property.
4.The rental agreementprovides, in part:
That the Owens will rent the Property from the Ireys on a continuous basis for a
minimum of $1.00 per month.
That the Owens will sublet the Property for certain periods of time, and pay the Ireys
rent for those periods of time based on net bookings above a basis rent, with the total
rental amount above the basis rent to be split on a 50/50 basis between the Ireys and
Owens.
That sales tax willbe deducted from rental amounts and accounted for and paid by
Owens.
That cleaning fees willbe deducted from rental amounts.
That Owens will be responsible for all marketing and advertising expenses, including
website listing, additional advertising, maintaining relationships with third-party
booking sites, telephone and email answering and response, etc.
5.Sometime between October and December of 2015, the Owens began advertising the
Property for short-term rental on several internet sites, including Airbnb.
6.Advertisements included in ExhibitDidentifiedthe Property as a large space for “your
family reunion, event, seminar, conference, training, retreat,” and that the Property has a
meeting room which can “easily fit 20-28”and “can be arranged for dining service.”
7.Sometime between October and December of 2015, Owens began subletting the Property
for rental periods as short as two (2) days.
8.Owens’ correspondence with subtenants and the short-term rental agreement between
Owens and subtenants encourages subtenants to think of Owens as “the front desk of a
hotel,” and provides for:
booking of the Property;
payment by subtenants of sales and hospitality taxes, and cleaning and linen fees;
commencement of the short-term rental agreement at 4:00p.m. on the “Check-In
Date,” and termination of the short-term rental agreement at 10:00a.m. on the
“Checkout Date”; and
recommends that renters purchase “travel insurance.”
9.Between December 2015 and August 2016, Owens rented the Property to at least thirty-
one (31) groups for rental periods as follows:
Six (6) rentals for two (2) days;
Twelve (12) rentals for three (3) days;
Seven (7) rentals for four (4) days;
Two (2) rentals for five (5) days;
Two (2) rentals for six (6) days;
One (1) rental for seven (7) days; and
One (1) rental for nine (9) days.
10.As evidenced by internet comments included in ExhibitD, and acknowledged by
Mr.Owens during his testimony,a number of these rentals were for business meetings and
retreats.
11.On or about December18, 2015, the Ireys,or their representative,applied for a rental
dwelling license for the Property. On or about December18, 2015, Joe Pazandak, City
Inspector, inspected the Property for the purpose of issuing a rental dwelling license.
Mr.Pazandak’s report identified a number of rental licensing inspection items to be
addressed. No rental dwelling license was issued at this time.
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12.On or about March14, 2016, Mr.Pazandak, at the request of Mr.Owens, conducted a
follow-up inspection of the Property. Mr.Pazandak’s Inspection Noticefrom this
inspection (ExhibitF) identified a number of rental licensing inspection items to be
addressed,and concluded: “Correct items listed above and arrange re-inspection.” No
rental license was issued at this time.
13.On or about August17, 2016, Mr.Pazandak conducted a third inspection of the Property.
Mr.Pazandak’s Inspection Notice from this inspection (ExhibitH) identifies rental
licensing inspection items to be addressed,and concludes: “Correct items listed above and
arrange re-inspection.”
14.As of the date of the Hearing,and on May20, 2016, no rental license had been issued for
the Property.
15.As of the date of the Hearing,and on May20, 2016, the rental agreement between the Ireys,
as owner, and Owens, as tenant, remainedin effect.
16.As of the date of the Hearing, and on May20, 2016, advertising of the Property for short-
term rentals, and rental of the Property for short-term stays,continued.
17.On May20, 2016, the City addressed a Notice of Zoning Violations and Citation
(“Notice”) to the Ireys at the Property. (ExhibitA) The Notice imposed a $300
Administrative Penalty for the following Zoning and Rental Housing Code violations:
(1)Commercial Use of the Property; and
(2)Rental of the Property without a Rental License.
18.On June2, 2016, the City received an Administrative Enforcement Appeal signed by
Quentin Ireyappealing the Notice.(ExhibitB)
19.By agreement of the parties, an Administrative Hearing (“Hearing”) on the Appeal was
scheduled and held at Shorewood City Hall beginning on August10, 2016, and continuing
on August23, 2016.
20.During the Hearing, the following exhibits were offered, and accepted, into evidence:
ExhibitA:Noticeof Zoning Violations and Citation, including Certified Mail Receipt and
photos of the Property.
ExhibitB:Administrative Enforcement Appeal, including letter dated May29, 2016, from
Quentin Irey.
ExhibitC:Consisting of a collection of emails, correspondence and pictures received from
residents in the neighborhood of the Property.
ExhibitD:Acollection of pages from the internet which referencethe Propertyand which
were printed and submitted by the City.
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ExhibitE: Excerpts from Chapter 1201 and Chapter 1004 of the City Code of Ordinances,
and the Zoning Map for the City.
ExhibitF: Copy of an Inspection Notice dated March14, 2016, with respect to the
Property, along with a South Lake Minnetonka Police Department Incident Report dated
June4, 2016, and emails from the South Lake Minnetonka Police Department dated June4
and June7, 2016.
ExhibitG: Copy of June4, 2016, South Lake Minnetonka Police Department Incident
Report and June13, 2016, South Lake Minnetonka Police Department Incident Report.
ExhibitH: Copy of August17, 2016, Inspection Notice with respect to the Property,
including August23, 2016, response to this Inspection Notice, with attachments.
21.Following the Hearing, the following additional documents were submitted on behalf of
the Ireys and have been accepted into evidence:
(1)Rental Agreement between the Ireys and Jennifer Owens;
(2)The Standard Lease Agreement between the Owens and the subtenants of the
Property; and
(3)A list of the dates on which the Property has been rented to subtenants.
22.During the Hearing, testimony was received from the following witnesses:
(1)Brad Nielsen, Planning Director of the City.
(2)Bruce Johnson, the neighbor who lives on the west side of the Property.
(3)Joe Pazandak, City Inspector.
(4)Scott Owens, on behalf of the Ireys.
(5)Quentin Irey, ownerof the Property.
23.Following the Hearing, the Hearing Officerreceived a Letter Memorandum from counsel
for the City with attached proposed Findings of Fact, Conclusions of Law and Decision;
and a Closing Argument Letter from counsel for the Ireys.
CONCLUSIONS OF LAW
Jurisdiction
1.The City is authorized by City Code Sections1201.08, 1004.06, 104.02and 104.03 to
enforce the City Zoning and Rental Housing Ordinances, and to issue administrative
notices and citations for violations of those ordinances.
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2.The May20, 2016, Notice of Zoning Violations and Citation was properly issued by the
Citypursuant to City Code Section 104.03, Subd.2.
3.The Notice is dated May20, 2016. The Ireys’ Appeal from the Notice is required by City
Code Section 104.03, Subd.3(a) to be postmarked within ten (10) days of May20, 2016,
or by May30, 2016.
4.The Administrative Enforcement Appeal was received by the City on June2, 2016.
5.Because there is no evidence as to the date the Administrative Enforcement Appeal was
postmarked, and the City has not objected to the timeliness of the Appeal, the Appeal is
determined to be timely and in compliance with the requirements of Section104.03
6.Because the Appeal is determined to be timely and in compliance with the Code
requirements, the matter is properly before the Hearing Officer. The issues to be decided
by the Hearing Officerare:
whether the Property hadbeen used for commercial purposeson or before May20,
2016; and
whether the Property hadbeen operated as a rental dwelling on or before May20, 2016,
without first having obtained a license to do so.
7.The Ireys have asked the Hearing Officerto order the City to issue the Ireys a rental housing
license if the Ireys meet the housing license requirements. The Hearing Officerconcludes
that this request is beyond the scope of the Notice and that the Hearing Officeris without
jurisdiction to grant the request. The Hearing Officers’ role isto determine if the City Code
provisions regarding rental licensing and use of the Property were complied with as of the
date of the Notice, May20, 2016.
8.The Hearing Officerdoes note, however, that Section1004.03,Subd.2, of the City Code
providesthat no rental license shall be issued or renewed unless the rental dwelling and its
premises conform to the Ordinances of the City and the laws of the state.
Failure to Obtain Rental Housing License
9.Section1004.03, Subd.1 of the City Code provides, in part: “No person shall operate a
rental dwelling without first having obtained a license to do so from the City Council as
hereinafter provided.”
10.The Property has operated as a rental dwelling since October25, 2015, and continued to
operate as a rental dwelling as of the date of the May20, 2016, Notice.
11.No rental dwelling license had been issued for the Property as of the date of the May20,
2016, Notice.
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12.The Hearing Officerconcludes that, as of the date of the May20, 2016, Notice, the Property
was beingoperated as a rental dwelling without first having obtained a license to do soin
violation of City Code Section 1004.03, Subd.1.
Commercial Use
13.The Property is located in the R-1A Zoning District of the City.
14.Section1201.10,Subd.2, of the Zoning Ordinance identifies the permitted uses in the
R-1A Zoning District, which include single-family detached dwellings.
15.Section1201.01,Subd.6, of the Zoning Ordinance provides, in part: “Whenever in any
Zoning District a use is neither specifically permitted nor denied, the use shall be
considered prohibited.”
16.The Notice cites the Ireys for commercial use of the Property in the R-1A Single-Family
Residential Zoning District.
17.Section1201.02 of the Zoning Ordinance defines “commercial use” as: “The principal use
of land or buildings for the sale, lease, rental or trade of products, goods and services.”
18.The Hearing Officerconcludes, for the reasons set forth in the attached Memorandum, that
the use of the Property for continuous short-term rentals of as little as two (2) days for
events, seminars, conferences, training, retreats, or even wedding groups and family
reunions, is not a single-family residential use and constitutes the principal use of the land
or buildings for the sale, lease, rental or trade of products, goods and services.
19.TheHearing Officerconcludes that, as of the date of the May20, 2016, Notice, the Property
was being used for a commercial usein violation of Chapter1201 of the Zoning Ordinance.
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DECISION
Based on ExhibitsA-H received intoevidence at the Hearing,the additional exhibits
submitted by the Ireys following the hearing, the testimony taken on August10 and August23,
2016,the applicable provisions of Chapters1004 and 1201, and Section104.03, of the City of
Shorewood Code of Ordinances, and the arguments made and submitted by the parties, the Hearing
Officer determines that as of May20, 2016, the Property was being used for a commercial use and
operated as a rental dwelling without first having obtained a license to do so, inviolation of the
City of Shorewood Zoning and Rental Housing Ordinances.
Therefore, the Hearing Officer upholds the May20, 2016, Citation and the $300 civil
penalty impose by the Citation.
Peter K. Beck, Administrative Hearing Officer
Pursuant to appointment of the Shorewood City Council
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In the Matter of the Notice of Zoning Violations and Citation
dated May20, 2016, issued by the Cityof Shorewood to
Quentin and Rebecca Irey
regarding Zoning and Rental Housing Code Violations
at the property located at 26040 Wild Rose Lane
MEMORANDUM
The issues before the Hearing Officerin this matter are:
whether the Property was being put a commercial useon or before May20, 2016; and
whether the Property was being operated as a rental dwelling without first having
obtained a license to do so on or before May20, 2016.
The Hearing Officer’s responsibility is to resolve these issues based on application of the
applicable City Code provisions to the evidence received at the Hearing. All of the evidence
received, including exhibits accepted and testimony given, is only relevant, and has only been
considered,to the extent it goes to these two issues.
Counsel for the Ireys has expressed concern that evidence introducedby the City regarding
neighborhood complaints was offered to put political pressure on the Hearing Officer.However,
the Hearing Officeris not beholden to any resident of the City. The Hearing Officeris not a
resident or official of the City, and has been engaged solely to hear the Ireys’ Appeal from the
Notice.Testimony from neighboring residents, and exhibits received which incorporate
neighborhood comments, was allowed because it could go to the issue of whether the Property is
being put to a commercial, rather than a permitted single-family, use,and whether the Property
was being operated as a rental dwelling. This evidence was considered, like all of the other
evidencereceived, only to the extent that it goes to those two issues.
With respect to the rental license violation, there is no dispute that the Property has been
rented by the Ireys to Owens since October25, 2015, and sublet to numerous subtenants between
that time and the date of the Notice. There is also no dispute that the Ireys and Owens were aware
of the rental license requirement at least by December 2015, and continued to rent the Property
without a license. The Ireys argue that theirassumption that a rental license was issued, because
of the City’s acceptance of a check,was reasonable, and request the Hearing Officerto hold
issuance of the citation in abeyance while the Ireys complete the rental housing license application.
However, the Ireys and Owens were aware of the rental license requirement before they issued a
check for a rental license to the City and continued to rent the Property. Furthermore, the Hearing
Officeris without jurisdiction to hold the citation in abeyance. The Hearing Officer’s
responsibility is to determine if, on or before May20, 2016, the Property was being operated as a
rental dwelling without first having obtained a license to do so.It was, and the citation must be
upheld.
With respect to the Citation for commercial use of the Property in the Single-Family
Residential Zoning District, the Ireys argue that the Code allows the rental of single-family
residences and “does not regulate in any way the length of a lease” or the amount of rent. That
much is true, but it doesnot go to the issue of whether rental of the Property, as opposed to use as
asingle-family residence,has become the principal use of the Property. Based on the evidence
received in this matter, the Hearing Officerconcludes that it has.
The Owens arein the business of renting this and other properties for short-term rentals.
The Owens advertise and rent the Property as a large space for “your family reunion, event,
seminar, conference, training, retreat” with a meeting room which can “easily fit 20-28people”
and can be “arranged for dining service.”Subtenants “book” their stay beginning at 4:00p.m. on
their “Check-In Date” andending at 10:00a.m. on their “Checkout Date.” Subtenants pay sales
and hospitality taxesand are encouraged to purchase “travel insurance.”Nearly 60% of the rentals
have been for two or three days.
The Ireys argue that,“the tenants are using the Property to reside on the Property like any
other homeowner,”and that subtenants “live in it as a home.” However, the evidence is that neither
the Ireys nor the Owens, much less the subtenants who sublet the Property for from two to seven
days, consider the Property to be their single-family residence or live in it as a home. Whether the
subtenants are individuals or businesses, they are checking in and checking out of the Property and
using it as they would a hotel, not as they would their single-family residence. In fact, the Owens
encourage subtenants to think of them as “the front desk of a hotel.”
The rental agreement between the Ireys and the Owens states that it “is not a property
management agreement.” Whether it is or is not is beyond the scope of this proceeding. However,
it is an agreement pursuant to which the Owens advertise the Property for short-term rental, book
reservations, check subtenants in and out, act as the front desk of a hotel, collect rents, pay sales
taxes, and pay the Ireys a percentage of the revenues received from rental of the Property.This is
using the Property for commercial, not single-family residential, purposes.
The Ireys argue further that short-term rentalof the Property to subtenants is not a
commercial use because the act of renting the Property to a subtenant is not a service. However,
the rental of property, be it personal propertyor real property such as hotel rooms, has long been
considered a retail service.For example, Section1201.22,Subd.2 of the City’s Zoning Ordinance,
identifies the permitted uses in the C-1 Zoning District, which include:
a. Trade and services. Retail stores, personal service or business service
establishments, including the following and other similar uses:
* * *
(51) Motels, motor hotels and hotels, provided that the lot contains not
less than 500 square feet of lot area per unit.
This language,which identifies the rental of hotel and motel rooms as a service use, does
not convert every real estate lease into a commercial use. Nor does the determination that the
Property has become a commercial use convert every lease of a single-family home into a
commercial use. It merely confirms thatwhen a property, be it a single-family home or a hotel
room, is rented to subtenants for short-term stays,the principal use of the Property can become for
commercial, not single-family residential, purposes.
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Finally, the Ireys argue that the fact the City Planning Commission is considering
amending the Code to prohibit short-term stays is evidence that the Code does not prohibitedshort-
term leasesbecause otherwise the amendment would not be necessary. The Hearing Officerdoes
not accept this logic. Section1201.01,Subd.6,of the Zoning Ordinance provides that if a use is
considered prohibited because it is neither specifically permitted nor denied, the City Council may
conduct a study to determine if the use is acceptable and, if so, what Zoning District would be
most appropriate and whatconditions and standards should be adopted relating to the development
of theuse.
In this instance, the City has determined, pursuant to Section1201.01,Subd.6, that the
short-term rental of this single-family residential property is a commercial use that is prohibited in
the Single-Family Residential Zone and, pursuant to that same section, hasproceeded to conduct
a studyto determine if the use could be acceptable and, if so, what conditions and standards would
make it acceptable. Initiation of this study is not evidence that the Code does not prohibit the use,
but is evidence that the use is considered prohibited and the City is considering the conditions and
standards pursuant to which it might be allowed.
The evidence establishes that the principal use of the Property is not as a permitted single-
family residence, but a commercial use. The Citation must be upheld.
Peter K. Beck, Administrative Hearing Officer
Pursuant to appointment of the Shorewood City Council
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