A group of displeased property owners are insisting Franklin County rezone their waterfront condominiums.

During discussion of the planning and zoning consent agenda at the Aug. 16 meeting a group of property owners asked county commissioners to rezone the Bungalows by The Bay development, at 3186 US 98 in St. James Island, from Commercial Business (C-2) to Multi-Family Residential (R-5).

Commissioners voted unanimously to table the discussion until the Sept. 2 meeting.

Bungalows by the Bay was originally permitted as a “condominium hotel” similar to Water Street Hotel in Apalachicola. Condominium hotels allow investors to buy individual units to use as short-term rental properties, however under county law; owners of such properties are not permitted to reside in them, even for brief visits.

At their August 9 meeting, the county planning and zoning board recommended 3-2 that the request for rezoning to residential units be denied.

The property owners at the meeting were represented by attorney Jeremy Anderson of the Anderson Givens firm in Tallahassee. Anderson spoke very little during the meeting, because the property owners were vocal in their protests and demands.

Former County Planner Alan Pierce said the dispute over zoning “has been a problem with the structure since it was built.”

The condominiums were constructed in 2007 at the height of the local real estate boom. Most were never sold and when the developer went into bankruptcy, the units were purchased by Liberty Bankers Insurance Group of Dallas, Texas, which listed the individual units through TLG Realty, commercial property specialists in Tallahassee.

Most of the 37 units sold in 2014 when prices ranged from $99,000 for one bedroom/ one bath units to upwards of $200,000 for three bedroom/ three bath units.

County Attorney Michael Shuler said Liberty Bankers and their attorneys and real estate agents were informed of the zoning of the property and the restrictions on residency prior to marketing of the units.

He said he has substantial concerns that if the county rezones the property, it could be sued under the state’s Bert Harris Act in the event the property is damaged by a storm or other catastrophic event.

Shuler asked that the matter be tabled until he could review the details and consult with county legal advisor David Theriaque. But commissioners allowed Anderson and his clients to speak.

“This is a hard situation because you are looking at a denial. If the board takes action today it could be a denial,” Commissioner Cheryl Sanders told Anderson.

She said the zoning of Bungalows by the Bay dates back to a request in 2005 and is unique in the county. She said the development was permitted just prior to a change in state rules and could not be permitted today. She warned the protesting property owners to be patient.

First to speak was Kelly Peed Sowell of Tallahassee. She said some investors responded to radio ads describing the units as a perfect weekend getaway. She said she and her husband found the property while on a Sunday drive and signed a contract within an hour of touring a sample unit.

Sowell said the real estate agent informed them the property was zoned commercial but said the only zoning stipulation was the unit could not be homesteaded.

Sowell said the P&Z board questioned why she and her husband had not done more research before signing a contract.

“This wasn’t just one person that misunderstood this,” she said. “This was all these people. We’re intelligent people. We’re financial managers. We’re attorneys. We’re engineers. We’re judges. We’re not coming in dumb to these things.”

She said P&Z advised the property owners to take legal action against the seller.

“That won’t get us anywhere. It will get us a whole lot more attorney fees. It won’t get us to where we can stay in your county and enjoy what we have found here,” Sowell said.

She said the group of investors understands that the development is nonconforming and could not be rebuilt if it were damaged.

Property owners at Bungalows by the Bay want to be good citizens, maintain their property and participate in the community, Sowell said.

Dan Ausley of TLG Real Estate Services of Tallahassee is listed as agent on 11 of the sales at Bungalows by the Bay. In a telephone interview, he said he was involved in about one-third of the 37 sales and that there were multiple real estate agents involved in marketing the condominiums for Liberty Bankers, including real estate agents who worked directly for Liberty Bankers.

“I assure you that any realtor who worked with me disclosed that it was zoned commercial. The buyers signed a form saying they understood that at closing,” he said.

He said the waiver forms were not standard and declined to produce a copy of the form.

Ausley said he did not know what the other real estate agents involved in sales at the development told buyers.

“I’d like to see the county help them work it out because it makes sense,” he said. “Those units brought 37 new owners into the county who spend money. If they can use the units more, they can spend more.”

Another owner, Greg Preble of Port St. Joe, who disclosed that his engineering firm Preble Rish is a county contractor, said the situation is a case of “Buyer got blindsided.”

He said he didn’t believe it was the intent of the Franklin County commissioners who set the zoning for Bungalows by the Bay to deny owners the right to occupy their units. He said he could find nothing in records of meetings involving the development that stipulated owners could not occupy them.

“You can’t wait until 37 families have spent hundreds of thousands of dollars each to buy a unit and then put this kind of restriction on it,” Preble said. “It costs me $23,000 a year to own my unit. If I am forced to rent it out there is no way I can make enough money renting it to even cover that much.

“If all I can do is drive by and look at it, it’s worthless to me and worthless to anybody who might want to try and buy it. That diminishment of value will reduce your tax base,” he said.

Three of the units currently listed on Vacation Rentals By Owner average $126, $109 and $92 per night, which could generate between $20,000 and $40,000 annually.

One two-bedroom/ three-bath unit sold in June for $185,000, earning the seller a profit of $20,000 after two years of ownership.

During an interview after the meeting, County Planner Mark Curenton said, “The bank definitely knew (about the restrictions). Whenever anyone would contact us we would tell them ‘You can’t live there.’”

He said the development is also non compliant with current parking requirements. “When it was built we only required one space for every unit. Now we require one for every sleeping room,” he said.

Shuler said C-2 zoning clearly states there is no residential use. He said the density of the development exceeds all county zoning including C-5. He suggested the property owners could purchase five acres on the north side of US 98 to comply with density requirements.

In answer to Preble’s statement that there is nothing in the records about owner occupancy, he said, “I went through and read the minutes and listened to hours of audio tapes. (I can’t) find even one request for the allowance for residential use and occupation on this property.

“No one ever asked ‘Can the unit owner stay here for 30 days or 20 days or five days.” That request was never made to the county commission; the county commission never addressed that issue. That’s why there’s nothing in the record one way or the other,” Shuler said.

He said he had concerns that even if current owners accept that the units could not be rebuilt if damaged, people who buy units from these owners might not accept the situation.

Shuler said he would try to find a solution. He said he was not sure it was possible to circumvent the county comprehensive plan’s prohibition on high-density uses in a high-risk coastal area.

Curenton said a portion of the property the development sits on is in a high-risk area but the building itself is not.

Sanders said she wanted the situation to be resolved within a month once the county moves forward with the problem.

 “It seems a little harsh not to have any use by the owners,” Pierce said. “It was a bad business policy. If we don’t allow some occupancy the owners may walk away and it will be a problem because it won’t be kept up.”

Commissioner Smokey Parrish said, “If we work together and make it work that’s fine. We have to make this work for everybody. We have to protect the county but it can’t be one-sided.

“The county didn’t make this situation but we are being asked to fix it,” he said.