Following the denial of two special use permit applications, an affiliate of Greensboro-based developer The Carroll Companies is suing New Hanover County and the New Hanover County Board of Commissioners.

The lawsuit, filed in New Hanover Superior Court earlier this month, centers around the board’s Sept. 2 denial of special use permits for the proposed Bayshore Townhomes development. Planned for the 8100 block of Market Street in Ogden, the project would include 242 row-style dwelling units, 62 multifamily units and 1,800 square feet of commercial space.

Petitioner Bayshore Townhomes LLC is an affiliate of The Carroll Companies, a real estate development firm that’s also developing The Avenue, a luxury mixed-use project in the works near Mayfaire.

The lawsuit alleges that county commissioners violated the developers’ due process rights during the quasi-judicial special use permit process by failing to remain impartial, disregarding the petitioners’ sworn testimony and not following procedures outlined in the county’s Unified Development Ordinance (UDO).

During the quasi-judicial process, county commissioners can only consider testimony and evidence from participants who have proved their standing in relation to the application. According to New Hanover County, a special use permit can only be approved if an applicant provides “substantial evidence” that the proposed use won’t materially endanger public health or safety, meets all required conditions of the zoning ordinance, won’t substantially injure the value of adjoining property and the location and character of the use will be in harmony with the area.

Following the quasi-judicial hearing on Sept. 2, the New Hanover County Board of Commissioners voted unanimously to deny both special use permits, citing the creation of unsafe transportation conditions and a lack of harmony with the surrounding area.

New Hanover County government officials and several commissioners declined to comment on the lawsuit this week, citing its pending nature. Four of the five commissioners – LeAnn Pierce, Dane Scalise, Stephanie Walker and Rob Zapple – are mentioned in the complaint.

“As this involves pending litigation, New Hanover County has no additional comment to provide on the situation,” Alex Riley, the county’s communications coordinator, wrote in an email to the Business Journal.

According to the filing, Bee Safe Porters Neck LLC, an entity managed by The Carroll Companies CEO Roy Carroll, owns a 3.2-acre tract along Market Street, which is zoned B-2 for business development. Herbert Parham owns an adjacent 30-acre tract zoned R-15 for low-density residential development. The Carroll Companies affiliate, Bayshore Townhomes LLC, is under contract to purchase Parham’s property.

Bayshore Townhomes LLC pursued two special-use permits to develop the project. One permit is for the proposed 62-unit multifamily project with 1,800 square feet of commercial space slated for the 3-acre tract. The other is an additional dwelling allowance for the 242 row-style dwelling units on the 30-acre tract.

This isn’t the first time The Caroll Companies have attempted to develop the site. Rezoning applications to develop 348 row-style dwelling units on the two tracts were submitted to New Hanover County in 2023 but were later withdrawn.  

The lawsuit notes that, leading up to the commissioners’ consideration of the special use permits, the board unanimously approved a text amendment in August that changed the approval process for additional dwelling allowances from quasi-judicial to legislative.

“During consideration of the text amendment, County Commissioners voiced their bias against the Special Use Permit process contained in the UDO for an Additional Dwelling Allowance, and provided fixed opinions against the Additional Density Allowance sought by the Petitioners on the R-15 tract,” the lawsuit states.

The filing alleges that the change in process came, at least in part, in response to the Bayshore Townhomes special use permit applications. It also cites statements from the commissioners that petitioners allege indicate bias against the special use permit process, including that it “ties the hands of the public.”

Ahead of the special use permit consideration on Sept. 2, the lawsuit alleges that the president of the Marsh Oaks Homeowners Association asked residents and the public to write to members of the county commission to voice their opposition to the special use permit applications and provided them with a template to do so.

Concerns cited in the template letter included traffic congestion, a strain on emergency services and the power grid, stormwater and flooding risks, school overcrowding and harm to the quality of life for existing residents. County staff provided commissioners with over 200 pages of notes and emails from the public objecting to the applications, according to the lawsuit. The filing takes issue with that.

“Ex parte communications between an applicant or an affected party and a member of the body holding the hearing on the application is prohibited and must be disclosed during the hearing if it occurs,” the lawsuit states.

The filing also alleges that during a public hearing on another rezoning request at its Sept. 2 meeting, commissioners stated their opposition to increasing density on parcels zoned R-15.

“Prior to the start of the quasi-judicial hearing on the Petitioners’ (special use permit) applications, the County Commissioners had advocated the position of those that opposed the Petitioners' (special use permit) applications – that there be no increased density in New Hanover County,” the filing states.

The lawsuit also alleges that the commissioners did not take the time to review the affidavits and reports prepared by the petitioners’ experts. It adds that the Marsh Oaks Homeowners Association, represented during the hearing by attorney Grady Richardson, did not show that members would suffer “any special damages distinct from the public at large as a result of the grant of the special use permit applications.”

In a news release announcing the lawsuit, Carroll stated the project’s denial will contribute to an ongoing housing shortage in the Cape Fear region.

“We regret the Commissioners’ decision to deny our housing development,” he wrote. “This denial, which only aggravates the county’s housing shortage and will ultimately drive up the cost of housing for everyone, leaves us no choice but to pursue legal remedies.”

Attorney Gary Shipman stated in the release that the filing seeks to “uphold the rule of law and mandates that a court or courts closely examine what occurred here.”

“My client is firmly committed to bringing a quality development to this property,” he added, “however long that takes.”

Locally, developers have appealed the denial of a handful of special-use permits in recent years. 

In 2021, for example, the N.C. Court of Appeals overturned the 2019 denial of a special use permit for a mixed-use development near the intersection of Market Street and Lendire Road, sending the project back to New Hanover County leaders for consideration.