East Bay Charter Township continues to be a battleground in northern Michigan’s ongoing debate about short-term rentals (STRs). Less than four years after adopting its first-ever ordinance to regulate STRs, East Bay Township is nearing finalization of a rewrite that would add numerous rules to the ordinance while also tightening up some of the old ones. Meanwhile, though, a contingent of about 20 STR owners in the township are arguing that the revised ordinance would significantly hamper their livelihoods – and are even threatening legal action should the township move ahead with some of the more restrictive rules.

Conversation about STRs took up the lion’s share of a three-and-a-half-hour meeting of the East Bay Township Board of Trustees on Monday evening. While the meeting agenda did not call for a vote or even a public hearing on the STR ordinance – which is still a work in progress after months of discussion – it did trigger renewed debate about STRs in the township.

One of the key developments of Monday’s meeting was the decision of multiple East Bay Township STR owners to band together as one. That group, which consists of 23 STR proprietors, emailed The Ticker on Monday to share the news that it was “coming together to fight the current draft ordinance amendment” and had hired legal representation to speak on its behalf at Monday’s meeting and in subsequent proceedings. “We are hoping to work with the township on an amendment that is fair for all involved, but if the township continues their overreaction and overreach, we will have to consider legal action,” the email concluded.

The draft of the STR ordinance reviewed by East Bay trustees on Monday evening included 12 proposed changes to the existing STR regulation, which the township adopted in July 2019. While the existing ordinance requires that a homeowner have an STR license in order to operate a vacation rental in East Bay Township, it doesn’t specifically regulate numbers or distribution of STRs throughout the township. The new ordinance would add several notable restrictions, including a cap of 145 total STR licenses in the township (representing 2.5 of East Bay’s housing stock) and a buffer that would require STRs to be at least 1,000 feet apart from one another. The draft ordinance also stipulates that rentals can only be turned over “a maximum of once every seven days” (the previous restriction was once every four days), requires more rigorous septic system inspections, demands that the holder of an STR license be an individual rather than a corporate entity, and more.

In a letter to the township, local STR operators claimed the amendments would “inflict tremendous financial harm on our families.”

“Most us were renting our homes long before the township decided to regulate STRs,” the letter states. “Our financial decisions to purchase our homes were based on our ability to fully rent our properties. These financial investments, for most of us, were made years ago. We are locked into mortgages that were calculated as affordable when we knew we could fully book our properties, and to be able to sell them when necessary.”

In particular, the STR owners take issue with the township’s proposed requirement that properties only be rented once per week. “Would you tell a regular business in East Bay Township that they can only sell 50 percent of their products each week?” the group asked. “By restricting our ability to rent for less than seven days, you force many of us to leave up to 40 percent of our days empty… By allowing only one booking per week, you are forcing many of us into financial crisis. As a result, many of us will face mortgages that can’t be paid, taxes that will pile up, repairs that can’t be afforded, family cottages that must be sold.”

Mark Clark, an attorney with Traverse Legal, was on hand at Monday evening’s township board meeting to speak on behalf of the STR owners. Clark – who said we was “in the process of being retained” by the STR group – spoke at length about the key issues his clients have with both the existing ordinance and the proposed amendments. For instance, Clark suggested that by requiring each STR have an individual license holder, the township would be running contrary to Michigan LLC law, which is designed to limit business owner liability. Clark also criticized the existing ordinance for a section that prohibits the transfer of STR licenses when rental properties are bought and sold. That statute would actually be relaxed in the amended ordinance, which would permit STR license transfers in cases where a property changes hands between immediate family members. Still, Clark suggested that the license transfer restriction reduces the resale value of his clients’ homes and therefore constitutes “a regulatory taking of the property, for which the township can be held monetarily liable.”

While trustees did ultimately tweak the language around several items in the draft ordinance – including occupancy caps and parking requirements for STRs – they did not revise or eliminate any of the proposed rules that Clark cited as his clients’ biggest concerns. For instance, Jacob Witte – the attorney helping the township with the ordinance rewrite – defended the requirement that all STRs in the township have an individual license holder rather than an LLC license holder.

“The intent behind [that rule] was to prevent an LLC from being transferred as a way of transferring a license,” Witte explained. “Because I think the concern is that that sort of workaround would allow LLCs to freely transfer their licenses when the property is sold, whereas family-held STRs could not really be transferred in that manner.” Witte also argued that, since the STR itself could still be owned by an LLC, having the license held by an individual would not “impose any greater liability on [the owners], it’s just also not going to give them any additional flexibility that they would not be able to enjoy as an individual license holder.”

East Bay Township staff will now revise the STR ordinance once more to reflect the revisions made Monday night. The township board will then revisit the ordinance again next month, at which point trustees could cast a final vote on the matter.