City commissioners vote to fight Harris Act claims over diminution of value of three ‘hotel houses’ on Lido Key

City Attorney Fournier says he has not seen such proposed legal action in any other area of state

This house standing at 209 Garfield Drive is one focus of the claims. The photo was included in the appraisal materials. Image courtesy City of Sarasota

On a unanimous vote this week, the Sarasota city commissioners agreed to fight claims that three owners of Lido Key “hotel houses” plan to file under the guidelines of a state law, contending that city regulations limiting the number of guests they can host have led to a diminution of the value of their properties.

“Think about the loss of value of the properties of the neighborhood that [these property owners] move into,” Mayor Kyle Battie pointed out during the discussion. Who would want to buy a house next door to a vacation rental home, he asked. “I’m of a mind of defending [against the claims].”

In the meantime, by consensus, the board members also authorized City Attorney Robert Fournier to propose a settlement offer that potentially could lead to the city’s winning attorneys’ fees if it were to prevail in the litigation.

Although Fournier explained that he already had made a settlement attempt, the commissioners proposed a different one that was less flexible. Fournier told them that the goal is to prove to the judge who will preside over the litigation that the commissioners tried to come up with an offer that was reasonable.

As Fournier explained both during the commission’s regular meeting on Oct. 2, and in his Agenda Request Form for the item, the owners of the vacation rental homes standing at 234 Grant Drive, 209 Garfield Drive and 24 N. Polk Drive have suffered financial losses as a result of the city ordinance that went into effect on June 1, 2022. The regulations allow a maximum occupancy of 10 persons in vacation rental houses in single-family home neighborhoods and 12 in such facilities located in multi-family zoning districts.

Florida’s Bert J. Harris Private Property Rights Protection Act allows the owner of property to file a claim in writing to a governmental entity “that adopted an ordinance or regulation that allegedly resulted in a diminution in value to the owner’s real property,” as Fournier pointed out in the Agenda Request Form. He added in that form, “Under the Harris Act, if a plaintiff can show that a specific action of a governmental entity has ‘inordinately burdened’ an existing use of property or a vested right to a specific use of property, the property owner may be awarded compensation for the difference between the actual fair market value of the property before the regulation was applied to the property and the actual fair market value of the property after application of the Regulation.”

In response to comments from Commissioner Jen Ahearn-Koch during the Oct. 2 discussion, Fournier said, “This is not an issue, to the best of my knowledge, that has been litigated before [under the Harris Act].”

She had told him she found it confusing that each of the property owners would pursue such a claim, contending they were renting their houses to 16 people at a time before the city’s vacation rental ordinance — which applies only to the barrier islands — went into effect. “It seems real theoretical,” Ahearn-Koch pointed out of their assertion.

That is another potential factor for him and his staff to research, Fournier indicated, if the claims are filed.

These are the two portions of a chart in the appraisal for the house standing at 24 N. Polk Drive. Image courtesy City of Sarasota

He explained at the outset that, under the guidelines of the state law, a property owner first has to file notice with the affected local government that litigation is planned, prior to undertaking the formal filing.

If the city settled, Commissioner Erik Arroyo asked Fournier if he thought “we would be inviting more people to file claims?”

“Yes,” Fournier replied.

“I think we should fight [the litigation],” Arroyo responded.

Since the commission adopted the ordinance in May 2021, Fournier said, “It seems logical to follow through [with trying to keep it in effect].”

However, Fournier added, the decision to fight or to try to settle the claims is “up to the commission.”

Commissioner Debbie Trice indicated that she was having trouble trying to understand why the property owners were using a model in their market value calculations that appeared to have been created for commercial uses, when their claims involve residential property “in … residential [neighborhoods].”

Why is the commercial value model a viable one, she asked Fournier.

“That may well be an issue [that the city could use in fighting the claims],” he replied. “It’s just the valuation they have asserted; it doesn’t mean the city has to accept the way it was done.”

“We also have to pay attorneys’ fees if we don’t prevail on this,” Arroyo, who is an attorney, pointed out.

In his reply to that comment, Fournier took the opportunity to emphasize that the presiding judge would have to believe that the offer was reasonable.

Although he did not believe any local government body ever had been able to recover attorneys’ fees after winning litigation over a Harris Act claim, Fournier continued, “Theoretically, it is possible.”

This is a photo of the house located at 234 Grant Drive, as shown in the appraisal document. Image courtesy City of Sarasota

“I do think it’s a significant risk,” Vice Mayor Liz Alpert stressed of having to pay the claimants’ attorneys’ fees. (She, too, is an attorney.) She noted the copies of the appraisals for the three vacation rental homes that Fournier had included in the agenda packet, which showed a diminution in value for each home since the city ordinance went into effect 16 months ago.

“They’re not small numbers,” she stressed.

Fournier noted in the Agenda Request Form that the owner of the Grant Drive property alleged a loss in value of $1,394,000. The figure for the Garfield Drive house was $1,336,000, while the owner of the Polk Drive property alleged a loss of $1,832,000. Those add up to $4,562,000.

“I just don’t buy the numbers they’re advocating,” Commissioner Trice said.
“We can’t guarantee success [in fighting the claims],” Fournier told the commissioners, “but we certainly will do the best that we can do.”
In response to another question from Arroyo, Fournier said his office would hire outside counsel to defend the city.

Arroyo concurred with Alpert, “It’s a significant risk to the city.” Nonetheless, Arroyo continued, he, like Ahearn-Koch and Trice, disputed “the validity of how they’re calculating their loss in valuation.”

Could the city argue that none of the properties had suffered a loss of value, he asked Fournier.

“I think, practically, you could,” Fournier replied.

“OK,” Arroyo said. “Let’s go [ahead with fighting the claims].”

“These [vacation rentals] make so much money, it’s ridiculous,” Mayor Battie added.

Earlier, the only member of the public to address the board members during the discussion — 20-year Lido resident Carl Shoffstall — urged them to fight the claims. He added that hotel houses had “ruined Lido.” Nine new ones are under construction, Shoffstall said, and he had just learned that two more properties had been sold, with the implication that vacation rental homes would be built on those parcels, as well.

Arroyo ended up making the motion to fight the claims, and Ahearn-Koch seconded it.

The initial and the revised settlement offers

The initial settlement proposal that he made, Fournier explained, called for a phasing-in of the occupancy limits for each of the three vacation rental houses. “We really didn’t talk about the number of years.”

However, he told the board members, one option would be to allow a maximum of 16 guests per house for three years and then reduce the number to 14 for two years before the city ordinance limits would apply. “The owners did not want to do that,” he added. “They felt that 16 was reasonable.”

City Attorney Robert Fournier. File photo

They also want to have up to 16 guests on a permanent basis, he pointed out, and they do not want children under age 2 counted in the calculations of guests.

(The city ordinance says children under the age of 6 are not counted toward the total number.)

In exchange for those concessions, he continued, the property owners would comply with specific performance standards that exceed those in the city ordinance. For example, Fournier noted, they would use noise-monitoring devices and commit to having someone personally greet the guests. They also would “maintain a policy requiring that the Properties may not be rented to persons under the age of 25 who are unaccompanied by responsible adults at a ratio of four (4) young adults to one (1) adult age 25 or older,” as the draft settlement in the back-up agenda material said.

The property owners further proposed that they would ensure that their leases made a violation of that provision a cause for immediate eviction, the document added.

During the Oct. 2 discussion, after Fournier proposed a five-year path to compliance with the ordinance occupancy limits, he told the board members, “I see Commissioner Trice frowning.”

The board members then debated timeline options. Finally, Mayor Battie proposed a three-year process for each property owner to come into compliance with the city ordinance, and Vice Mayor Alpert recommended keeping the higher performance standards in that settlement proposal.

Fournier told the commissioners that no vote was needed on that recommendation, as he had their consensus.