Owners may be compensated if cities change property use rules

Cities that change rules about how property can be used can be forced to compensate the owners, the Arizona Court of Appeals has ruled. In a unanimous ruling, the judges said the new restriction enacted by Sedona is essentially a "taking" of the property, or at least reducing its value. And they said a 2006 voter-approved initiative mandates that owners be paid for the reduced value of the property. They said there is an exception in cases where a new regulation is adopted for public health or safety purposes. But the judges said the city presented no such evidence. According to court records, the city's development code has prohibited short-term rentals of residential property since 1995. This case involves Sedona Grant which was used an "option agreement" as a sales tool to facilitate the sale of its units. That grants the buyer the right to "inspect the property" for a set period of time. City officials responded in 2007 that violates the ban on short-term rentals. In early 2008, the council adopted a new ordinance that makes the rental of residential property for less than 30 days a crime, punishable by six months in jail and a $2,500 fine. Sedona Grand responded with a claim that the new law will result in financial losses by reducing its previously existing rights to use, lease and sell the property. But a trial judge ruled in favor of the city.

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