Local Government Law Bulletin November 7, 2014 Ross A. Leisman

Court of Appeals Affirms Change in Zoning During Litigation

It is no secret that developers often purchase land that is zoned in a way which will not permit the development intended by the developer. The developer, however, will still purchase the property and then through application, litigation or otherwise attempt to change the zoning. In a case recently decided by the court of appeals, a developer did just that, purchasing agriculturally zoned property which, according to its own arguments and expert testimony, could not be built into an economically viable development unless the zoning was changed. The case, entitled Grand/Sakwa of Northfield LLC v Northfield Twp, is a textbook example of steps a municipality can legally take in the event it is challenged by a developer in such a situation.

In the Northfield Twp case, the developer executed an agreement to purchase 220 acres, which at that time was zoned AR (Agriculture District) and had been farmed for over 100 years. The developer applied to rezone the property from AR to SR-1 (Single Family Residential District 1), which allowed up to four dwellings per acre with sewer or one dwelling per acre without sewer. The township board approved the rezoning, limited to 450 homes. Following that approval, the township residents organized a successful referendum that overruled the board’s decision, thereby leaving the property zoned AR. The developer filed a lawsuit alleging that any zoning classification more restrictive than the SR-1 was unconstitutional.

A new board took office shortly after the lawsuit had been filed. A majority of the new board’s members were supporters of the referendum that overruled the rezoning to SR-1. The new board voted to amend the zoning ordinance and rezone the property from AR to LR (Low Density Residential). The LR classification itself was amended to allow only one home per two acres, instead of the previously allowed one home per acre. The difference in density was 450 homes under SR-1 as opposed to 80 homes under the LR.

The circuit court held that although the property was zoned AR when the lawsuit was filed, it would apply the LR zoning which was in effect at the time the trial was held. The developer strenuously disagreed, arguing that the new zoning ordinance was done solely to improve the municipality’s litigation posture, and as such was improper.

The court of appeals agreed with the township, and held that a court should not void a municipality’s rezoning action simply because it serves to strengthen its litigation position. The factual determination that must control is whether the predominant motivation for the ordinance change was improvement of the municipality’s litigation position, and since the circuit court held in the Northfield Twp case that the LR zoning was not done solely to improve the defendant’s position in trial, it was proper for the court to apply the new zoning to the case.

The court of appeals went on to hold that the question in a constitutional challenge to zoning is not simply whether the preferred zoning results in an increase in the value of the land. As the court noted, if the standard was maximizing profits virtually every zoning regulation could be successfully challenged. Accordingly, the court of appeals upheld the trial court’s finding that there was no regulatory taking or violation of due process or equal protection. As the court noted, “A claimant who purchases land that is subject to zoning limitations with the intent to seek a modification of those limitations accepts the business risk that the limitations will remain in place or only be partially modified.”

The Northfield Twp case is a good reminder for a municipality to continually review and update the zoning classifications for any particular parcel of property to make sure the zoning remains reasonable. The case also confirms, however, that even if caught in a situation where the zoning might be open to challenge, it is not too late for the township to reasonably rezone the property, even if the effect of the zoning is to improve the municipality’s litigation position.

Let’s start a partnership worth keeping.