The state’s second-highest court Tuesday upheld a property owner’s challenge to $5,000 in fines imposed by Wilmington. In its ruling, the N.C. Court of Appeals agreed with a lower court that the city’s requirement that an owner occupy a garage apartment was unconstitutional.

On July 21, 2004, Broadus Hill applied for a building permit for a garage apartment on property he owned on McMillan Avenue in Wilmington. A year later, after the unit was complete, Hill was notified by the city that the property was in violation of Wilmington’s Land Development Code. Section 18-285(g) of the code required that the owner of a garage apartment must live in either the main residence or the garage apartment.

On Aug. 23, 2005, the city began fining Hill $200 a day for the violation. Two weeks later, the city’s planning commission rejected Hill’s request that the code requirement mandating owner occupancy be dropped. Finally, on Sept. 27, 2005, Hill informed the city that he was moving into the property, thus establishing owner occupancy. Still, the city sought to fine him $5,400 for 27 days of violation.

After Hill refused to pay, the city obtained a judgment against him for $5,000 in small claims court. Hill challenged this, and at trial District Judge Rebecca Blackmore found the city’s ownership restriction to be unconstitutional. The city brought the case before the state’s second highest court.

Before the Court of Appeals, Wilmington cited cases from two other states in support of it position that it could regulate ownership of garage apartments, In Anderson v. Provo City Corp., the Utah Supreme Court held in 2005: “We reject the proposition that placing an owner occupancy condition on a supplementary accessory dwelling use constitutes an impermissible regulation of ‘ownership.’” A New York court reached the same conclusion in the 1988 case, Kasper v. Town of Brookhaven.

The Court of Appeals, however, was not swayed by these decisions.

“As these cases do not constitute binding authority and their reasoning is at odds with Graham Court Associates, we disagree with plaintiff’s reliance upon them,” Judge Barbara Jackson wrote for the appeals court.

The Court of Appeals found a different case to be of great significance. Graham Court Associates v. Town of Chapel Hill is a 1981 case decided by the N.C. Court of Appeals that the appeals court found to be on point and a controlling interpretation of North Carolina law.

In Graham Court Associates, a Chapel Hill apartment complex owner applied for a special-use permit to convert an apartment building into condominiums. In either case, the building qualified as a multifamily residential use, which was allowed in the zoning district in which the building was situated. Chapel Hill refused to issue the permit and the landowner sued.

The Court of Appeals found for the apartment building owner: “If a use is permitted, as here, it is beyond the power of the municipality to regulate the manner of ownership of the legal estate.”

It also cited with approval a 1962 case called Beers v. Board of Adjustment of Wayne Township, in which a New Jersey appellate court held that municipal “[d]efendants do not even suggest, nor do we believe they properly could, that owner-occupation of a dwelling is a different use of the property in a zoning sense from tenant-occupation, the actual occupancy of the residence in either case being by a single family.”

Applying Graham Court Associates to the facts in Wilmington’s appeal, the Court of Appeals noted that Hill’s property was in a zoning district in which garage apartments are permitted as an accessory use, incidental and subordinate to the principal use as a single-family residence.

Based upon this, it rejected Wilmington’s argument that the city could regulate who owned the garage apartment.

“Plaintiff only is entitled to regulate the use of defendant’s single-family residence with the accessory use of a garage apartment, not the ownership,” Jackson wrote.

N.C. Court of Appeals decisions are binding interpretations of state law unless over-ruled by the N.C. Supreme Court. Wilmington can ask the Supreme Court to review the appeals court’s ruling, but because the decision by the three-judge panel was unanimous, the high court is not required to hear the case.

The case is City of Wilmington v. Hill, (07-11).