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Stop Work Order Issued by Michigan City a Compensable Regulatory Taking

On September 20, the Michigan Court of Appeals in Kalkman v. City of Village of Douglas affirmed a trial court’s ruling that found a city liable for a compensatory taking when it issued a stop work order on a project that had already been approved by the City’s zoning administrator despite a non-conforming front yard setback.

In July 2007, the City of Douglas Village (“the City”) ordered plaintiff Kalkman to stop construction on a residential home he was building on his property. The City alleged that Kalkman was violating the City’s zoning ordinances for front yard setbacks, although he had obtained zoning approval for the proposed setback from the City’s zoning administrator before he began construction. At the point the City issued its stop work order, Kalkman had already spent $65,000 on the construction.

The following month, despite the fact that Kalkman had not requested a zoning variance from the City, the City’s Zoning Board of Appeals (“ZBA”) determined that he required a variance and then voted to deny the variance.

In June 2008, Kalkman filed suit, alleging the City’s stop work order constituted a regulatory taking. The trial court agreed, concluding that Kalkman obtained a vested right to build based on the substantial amount of money he expended on the project in reliance on the approved permit. Accordingly, the City’s later decision to issue a stop work order amounted to a compensatory taking. The court then conducted a bench trial on damages and awarded Kalkman $178,900.

On appeal, the Michigan Court of Appeals rejected the City’s argument that Kalkman’s circuit court challenge was improper because he failed to first exhaust his administrative remedies when he did not seek a variance from the ZBA. The court noted that a property owner is not required to exhaust his administrative remedies when it is obvious that further proceeding would be futile. Moreover, while the City’s zoning ordinance generally requires a variance when a project does not meet the City’s setback requirement, there is an exception when other buildings also do not conform with the setback requirement. In that case, a new building must merely conform with the setback of the existing building. This exception applied with respect to Kalkman’s construction project, and thus he did not need to seek a variance. Further, even if he was required to obtain a variance, the zoning board’s actions demonstrated that any attempt to do so would surely be futile.

While the Court of Appeals upheld the trial court’s decision regarding the compensatory taking, it found that the trial court had miscalculated its damage award when it incorrectly determined when the City’s taking ended, and remanded to properly determine the amount of damages. The court erred in ruling that the taking ended 21 days after the final judgment was entered; rather, it ended when the trial court granted Kalkman’s motion for partial summary disposition and enjoined the City from further enforcing its stop work order.

The attorneys at Dalton Tomich, PLC have extensive experience litigating land use disputes throughout the state of Michigan and across the country. If you believe you have been unfairly treated by a municipality with respect to a land use decision, please do not hesitate to contact us.

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