MI conditional land transfer agreement improperly included contract zoning provisions

by Gary Taylor and Hannah Dankbar

Teridee LLC and Koetje Trust v. Charter Township of Haring and Township of Clam Lake
Michigan Court of Appeals, December 8, 2015

Teridee LLC and the Koetje-Trusts own 140 acres of vacant land in Clam Lake Township. They intended to create a mixed-use development on the land. The land was zoned by Wexford County, but because the County could not provide public water and sewer systems the landowners petitioned for the land to be annexed by the City of Cadillac. Charter Township of Haring and Township of Clam Lake opposed this petition.

For the purpose of economic development projects, two local governments are permitted to transfer property for the purpose of economic development projects by written agreement through a Conditional Land Transfer Agreement (aka a 425 agreement (1984 PA 425, MCL 124.21 Act 425). In 2011 the Townships used a 425 agreement to conditionally transfer several properties to the City of Cadillac, which included all of the plaintiffs’ property. When a 425 agreement is in effect, annexation cannot occur (MCL124.29). The landowners brought an action before circuit court challenging the agreement, but it was dismissed because the State Boundary Commission (SBC) had jurisdiction. SBC determined that the 425 agreement was invalid because it was not executed for economic development purposes, but rather to block Cadillac’s annexation attempt.  For other reasons, the SBC also did not approve of the landowners’ annexation petition.

The Townships entered into a new Act 425 agreement and the landowners submitted a new annexation petition. The landowners also filed this action seeking relief on two counts. The landowners asked a trial court to (1) declare the Act 425 agreement invalid because it was not for economic development purposes; and (2) declare the Act 425 agreement void against public policy because it binds the current and future zoning boards of Haring Charter Township to rezone the transferred area to the rezoning requirements assigned in the agreement, which strips the body of legislative authority.

The first count was dismissed, because SBC had primary jurisdiction. The second count required, (1) the Townships to carry out the agreement in a way that did not divest the township of its legislative zoning authority, and (2) to answer whether the Townships could sever the allegedly invalid rezoning provisions of the agreement to make the balance of the agreement enforceable.

The court found that the agreement did strip Haring of their legislative authority and made the agreement void. The Townships appealed.

On appeal the court concluded that the plain language of the agreement strips Haring’s zoning authority over the undeveloped property by determining in the agreement how the property must be zoned. This is evident in the language of the concurring resolutions the Townships passed.

The Townships argued that Act 425 allows for contract zoning, and therefore the zoning requirements in the 425 agreement were authorized by statute.  This argument did not stand up in court. Act 425 permits a 425 agreement to contain language concerning “the adoption of ordinances and their enforcement by or with the assistance of the participating local units.”  This language is not sufficiently specific to permit an interpretation that would allow for contract zoning.

The lower court decision was affirmed.

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