Manzanita property owner hit with $1.8 million in fines settles

Sandra Peterson is suing Manzanita over $1.8 million in fines incurred from allegedly renting her home without a license.

MANZANITA — A property owner will no longer have to pay $1.8 million in vacation rental fines after reaching a tentative settlement with Manzanita.

Sandra Petersen, a co-trustee of the Kingwood Trust, which owns the home that has been used as a rental, will only pay “a modest amount” of the city’s attorney fees, said Kevin O’Connell, an attorney for Petersen.

In exchange, Petersen will drop a federal lawsuit that alleged the city’s enforcement of its vacation rental ordinance was unconstitutional.

In the lawsuit filed in federal court in Portland in June, Petersen tried to block Manzanita from enforcing the citations, claiming the $1.8 million penalty was a violation of the Eighth Amendment, which protects against excessive fines.

“The goal was to not pay $1.8 million,” O’Connell said. “We got the result we wanted. We’re very happy.”

The legal fight generated attention up and down the Oregon Coast, where many cities are struggling to regulate vacation rentals.

Manzanita City Manager Jerry Taylor declined to comment until the settlement is finalized and approved by both parties. The City Council will need to approve the agreement, he said.

Petersen, who lives in Washington state, said she was fined by the city for operating a vacation rental without a license and for not paying the lodging tax. But she claimed she was not notified of the citations until last October — nearly two years after the first alleged violation in January 2015.

Petersen believed she was not violating Manzanita’s vacation rental ordinance because she only allowed family, friends and current and former trustees to stay at her home on Edmund Lane, according to a court filing. The trust took guest donations of about $50 to $65 a night for upkeep, supplies and repairs, not for a profit.

“It was my belief that the use of the property by our extended family members did not constitute an event that generated either registration or a tax,” Petersen said in a court filing.

But Manzanita warned Petersen as far back as 2009 that the home appeared to be a vacation rental.

“Your home must be registered as a short-term rental in order for you to legally accept money for the use of the house, even if you merely intend to use the money towards taxes and maintenance on the house,” a letter from the city stated.

While not part of the settlement, O’Connell said he believes “it’s been made clear” to Petersen to not take donations. Petersen does not plan to apply for a vacation rental permit either, as the city has a waitlist. If the city becomes aware of any future issues, they must be brought back to federal court, where a judge will decide if the violation is deliberate.

“We don’t anticipate any future issues with the city on this,” O’Connell said. “(Petersen) doesn’t want any trouble. It’s not going to be used like it has been.”

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