Kipp v. City of Astoria

"Petitioner has not established that the hearings officer's vested rights decision "violates a provision of applicable law and is prohibited as a matter of law." For reasons explained above, we remand the vested rights determination."

Petitioner appealed a hearings officer's decision verifying the use of an apartment building as a nonconforming short-term rental (STR). The subject property in Astoria is zoned General Commercial (C-3) and is located on Exchange Street. It contains a fourplex apartment building and two cottages constructed in 1920, 1930, and 1955. The intervenors purchased the property in 2015, when the fourplex units were rented to long-term tenants.

Effective January 1, 2019, the city amended the Astoria Development Code to regulate transient lodging using the C-3 zone. The amendment allowed motel, hotel, and similar lodging uses but prohibited structures that were originally constructed or used as residential dwelling units after January 1, 2019 from being used as motels or hotels, with limited exceptions. After that amendment took effect, the intervenors began advertising the four fourplex units for short-term rental use (STR) on Airbnb. The first STR use occurred in December 2021, with other units beginning STR use in March and April 2022. Until the units were advertised for STR use, the intervenors continued renting them to tenants under six-month or one-year leases.

In October 2021, a tenant filed a complaint with the city alleging that the landlords were violating the lease and operating non-compliant Airbnb rentals on the property. The city initiated an enforcement action and, in January 2022, issued an order concluding that the two cottages could continue operating as STRs as nonconforming uses but that the four fourplex units could not lawfully be used for STRs.

The intervenors then applied for verification of a nonconforming use for six STR units on the property. In June 2023, the city planning department approved the application and verified all six units as nonconforming transient lodging uses. The petitioner appealed that decision, challenging the approval of the four fourplex units. After a public hearing in November 2023, the hearings officer issued a decision allowing a transient lodging facility in the fourplex. The petitioner appealed the hearings officer’s decision to the city council. In February 2024, the council voted on a motion to overturn the hearings officer’s decision, but the vote resulted in a 2–2 tie. Because the appellant had the burden of proof and a majority vote was required to reverse the hearings officer, the appeal was denied and the hearings officer’s decision was upheld.

First assignment of Error

The fourplex units are addressed as 1555, 1557, 1559, and 1561 Exchange Street. Intervenors submitted testimony from their attorney describing actions taken before and after January 1, 2019, arguing that they showed an ongoing effort to convert the fourplex units to STRs. The hearings officer adopted the attorney’s letter and found that there were no gaps of more than 12 months in pursuing STR use. The adopted findings noted several pre-2019 activities, including flooring refinishing, creation of off-street parking, interior renovations, and other improvements to the units. The petitioner did not dispute that those activities occurred.

The petitioner argued that the city misapplied the definition of “nonconforming use,” contending that a nonconforming use can exist only if the actual STR use began before the January 1, 2019 ordinance change. The hearings officer rejected that argument, relying on definitions in the Astoria Development Code for “use” and “use, start of.” Because “use, start of” states that a use begins when a property owner has physically begun preparing the site for operation and does not require the business to actually be open to the public, the hearings officer concluded that intervenors did not need to rent the units as STRs before the ordinance change for the use to have “first occurred.”

On appeal, the petitioner argued that this interpretation misconstrued the code. LUBA explained that it reviews a hearings officer’s interpretation of local code for legal correctness without deference. Applying standard statutory interpretation principles, it concluded that the term “occurred” in the definition of “nonconforming use” means that the use must actually exist. The purpose statement of the nonconforming use regulations, which refers to regulating “existing” uses, further supports that interpretation. The decision also concluded that the hearings officer improperly relied on the definition of “use, start of,” because that definition states that a use may be considered begun even if the use has not yet occurred, making it inconsistent with the requirement that a nonconforming use must have already occurred.

LUBA agreed with the petitioner that the hearings officer misconstrued the nonconforming use provisions by treating preparation for STR use as sufficient. Because that interpretation was incorrect, the matter was remanded for the hearings officer to reconsider the evidence and arguments under the correct interpretation. As a result, LUBA did not reach several of the petitioner’s additional arguments regarding discontinuance, conversion to a conforming use, or the adequacy of the hearings officer’s findings.

Third Assignment in Part

The hearings officer determined, as an alternative basis for approval, that the intervenors had a vested right to continue developing the fourplex for short-term rental (STR) use. A vested right allows a property owner to complete development toward a use that later becomes prohibited, based on substantial development efforts made before the law changed. Unlike a nonconforming use, a vested right does not require the use to already exist but instead depends on the extent of development toward the intended use. However, because a vested right is considered an inchoate nonconforming use, it can also be discontinued or abandoned under the city’s code.

The petitioner argued that the hearings officer’s conclusion that the intervenors had a vested right to operate the fourplex as STRs was unsupported by adequate findings and substantial evidence. The reviewing body agreed. It explained that the vested-rights analysis must address two questions: whether the intervenors had a vested right on January 1, 2019, when the new regulation took effect, and if so, whether that right was later abandoned. Determining vesting requires applying the Holmes factors, which examine issues such as the property owner’s good faith, notice of potential zoning changes, reliance on prior zoning, the relationship between expenditures and the intended nonconforming use, the extent of development beyond mere preparation, and the ratio of expenditures to total project cost.

The hearings officer relied heavily on the intervenors’ development of off-street parking as evidence of a vested right. Although the record showed that the intervenors built a parking area in 2017 and intended it to support STR activity, LUBA concluded that there was not substantial evidence that sufficient parking existed before January 1, 2019 to support STR use of all four fourplex units. City code required one off-street parking space per bedroom for transient lodging, meaning eight spaces were required for the fourplex. The evidence showed that the parking improvements created only enough additional spaces to support a small portion of that requirement. The parking plan in the record did not even depict the fourplex and appeared to relate primarily to the cottages. Third-party testimony also failed to establish that the parking built before 2019 met the code’s requirements for STR use of the fourplex. Because vesting requires development that would have been lawful under the prior code, the insufficient parking undermined the claim that the project had progressed far enough to vest rights for all four units.

The hearings officer also relied on investments in higher-end finishes and furnishings to support the conclusion that the intervenors were preparing the units for STR use rather than long-term rental. While some pre-2019 renovations could reasonably be interpreted as steps toward STR use, the reviewing body concluded that the hearings officer improperly relied on furnishings and other expenditures made after January 1, 2019. Post-ordinance expenditures may be relevant to abandonment of a vested right but cannot establish that a vested right already existed when the regulation changed.

Finally, the hearings officer relied in part on city staff emails from 2020 indicating that staff initially believed the STR use could continue. The reviewing body concluded that those communications might show the intervenors acted in good faith when continuing to invest in STR development, but they did not demonstrate that a vested right existed on January 1, 2019.

Because the hearings officer’s vested-rights determination relied on insufficient evidence regarding parking and improperly considered actions and expenditures occurring after the regulatory change, the decision lacked adequate findings and substantial evidence. Therefore, the petitioners argument t was sustained and remanded. On remand, the hearings officer must determine whether the intervenors had a vested right to establish STR use of all four fourplex units as of January 1, 2019 based solely on pre-2019 development and expenditures, and if so, whether that right was later abandoned.

Second Assignment of Error

In the second assignment of error, the petitioner argued that the hearings officer misapplied the law of vested rights and issued a decision lacking adequate findings and substantial evidence when concluding that the intervenors had a vested right to operate the fourplex as short-term rentals (STRs), effectively granting them greater rights than would be allowed under the city’s nonconforming use provisions.

Regarding preservation, the intervenors argued that the petitioner failed to properly identify where the issue had been raised earlier in the proceedings. Although the preservation statement lacked specific citations, the reviewing body concluded that the issue was sufficiently preserved because the petitioner referenced portions of the hearings officer’s decision discussing the relevant legal standards and arguments concerning the relationship between vested rights and nonconforming use law.

On the merits, the reviewing body agreed with the petitioner that the hearings officer misconstrued the law by failing to apply the city’s nonconforming use provisions, particularly ADC 3.180(B) and (C), to the vested rights analysis. Those provisions state that a nonconforming use is lost if it is discontinued for more than one year and that once a property is converted to a conforming use it cannot later return to a nonconforming use. The reviewing body explained that vested rights are rooted in common law but are still subject to local regulations governing discontinuance of nonconforming uses. Therefore, the hearings officer erred by not analyzing whether the intervenors lost any vested right by discontinuing development for more than one year or by operating the property as long-term rentals.

The reviewing body also concluded that the decision lacked adequate findings and substantial evidence regarding whether any vested right had been lost under these provisions. The hearings officer adopted statements from the intervenors’ attorney asserting that there were no gaps of more than twelve months in efforts to prepare the units for STR use. However, many of the activities cited in support of that conclusion occurred after January 1, 2019, and the findings did not clearly explain how the evidence demonstrated continuous development of the STR use without a one-year interruption.

In addition, the findings did not sufficiently address whether renting the units to long-term tenants constituted a change to a conforming residential use that would terminate any vested right to STR use under the code. Although the hearings officer reasoned that long-term rentals were economically rational while preparing the property for STR use, the decision did not explain how that reasoning complied with the code provision prohibiting a return to a nonconforming use after conversion to a conforming one.

Because the findings did not adequately address whether any vested right was lost due to discontinuance or conversion to a conforming use, and because the hearings officer failed to properly apply the relevant code provisions, LUBA sustained the second assignment of error.

Disposition

After resolving the first assignment of error, the reviewing body agreed with the petitioner that the hearings officer misinterpreted the city’s definition of a nonconforming use and the purpose of the city’s nonconforming use regulations. The intervenors acknowledged that the fourplex units were not used as short-term rentals (STRs) before or on January 1, 2019, when that use became nonconforming. This could suggest that recognition of a nonconforming use is legally impossible. However, the hearings officer also concluded, in the alternative, that the intervenors had a vested right to continue developing the property for STR use even if a nonconforming use had not been established.

The reviewing body then considered whether the proper remedy was reversal or remand. It explained that reversal is appropriate when a decision violates applicable law and cannot be corrected without submitting a new or amended development application. Remand is appropriate when the error involves an improper interpretation of the law that could be corrected through additional findings or evidence. The determination depends on whether the problem lies with the decision itself or with the proposed development.

Because the petitioner did not demonstrate that the vested rights determination was legally prohibited as a matter of law, the reviewing body concluded that the error could potentially be corrected through further analysis and findings. 

As a result, the entire decision was remanded for further proceedings.