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Monday, October 3, 2011

Developer had Vested Right to Develop Residential Subdivision

In a recent decision, an Illinois appellate court upheld a trial court’s ruling that a developer had a vested right to develop a 20-lot residential subdivision and ordered the City to approve the development plans.  Reserve at Woodstock, LLC v. City of Woodstock, et al..  The court also invalidated the City's rezoning and disconnection ordinances, finding that the City violated its duty of good faith and fair dealing under the annexation agreement.
The annexation agreement in question had been approved in 1993, with a 20 year term.  No development occurred on the property for a period of 10 years.  In 2003, the plaintiff (Reserve) submitted plans for approval of a 26-lot subdivision.  The Plan Commission recommended denial because the annexation agreement only allowed the development of 20 lots.  Three years later, Reserve submitted plans for a 20-lot subdivision.  The Plan Commission recommended approval of the revised plans but the City Council denied Reserve's application. 
Reserve filed suit against the City in October of 2006.  One month later, the City rezoned the property to the agricultural zoning district, and disconnected the property in September of 2007.  The trial court ruled in favor of Reserve on all of its claims.
The appellate court determined that Reserve’s case turned on an interpretation of two somewhat conflicting provisions in the annexation agreement.  The first provision prohibited the municipality from rezoning the property during the life of the agreement.  The second provision provided that if the property was not developed within 5 years of annexation, the municipality had the right to rezone and disconnect the property.  The City claimed that it had an absolute right to rezone and disconnect the property under the second provision.  Reserve claimed that the City’s right to rezone was restricted by its contractual duty of “good faith and fair dealing."
The appellate court agreed with Reserve, finding that the City violated its duty of good faith and fair dealing where it waited to rezone and disconnect the property until more than 7 years after the "right to rezone and disconnect" provision of the annexation agreement had been triggered and only after Reserve had submitted development plans for approval.  The court also found that Reserve had a vested right to the approval of its plans for a 20-lot subdivision, based on the substantial expenditures it made in good faith reliance on the zoning and annexation agreement. 


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