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Thursday, April 28, 2022

Annexation Agreement Binds Successor Owner of Part of Property

An Illinois appellate court recently issued an opinion about enforcement of an annexation agreement against a successor owner that will be of interest to Illinois municipalities. Village of Kirkland v. Kirkland Properties Holdings Co.

In 2003, the Village entered into an annexation agreement with the owner at the time of about 115 acres of land that was unincorporated. The agreement was for a 20 year term, and stated that it was binding on the "successor owners of record of the land which is the subject of the agreement." The agreement provided for the annexation of the property into the Village and future residential development. The agreement required the owner to construct certain public improvements on the property, including roadways, and to provide the Village with a letter of credit to secure construction of the public improvements. 

In 2011, the owner sold 41 of the 82 platted lots to Plank. In 2017, Plank sold 34 lots to KPHC (the defendant). In 2019, the Village sent letters to KPHC requesting that it deposit a letter of credit in an amount proportionate to the number of lots it owned in the development in order to secure the completion of the roadways. When KPHC did not provide the security, the Village sued, arguing that KPHC was in breach of the annexation agreement. KPHC filed a motion to dismiss, arguing that because it did not own the entirety of the property that was subject to the annexation agreement, it was not responsible for the obligations under that agreement. The trial court ruled in KPHC's favor and dismissed the Village's lawsuit, holding that the obligations did not "run" to a successor owner unless that successor owner purchased the entire subdivision. The trial court also awarded fees to KPHC under a fee-shifting provision in the annexation agreement.

The Village appealed, and the appellate court reversed the dismissal of the Village's case against KPHC. First, the appellate court noted that the agreement itself makes it clear that the agreement "runs with the land" and is binding on successor owners. The appellate court rejected KPHC's argument that because the agreement didn't specify that it was binding on subsequent owners who only purchase a portion of the property, that it didn't extend to KPHC. The court found the Village's use of a "proportionate responsibility" analysis for apportioning responsibility for construction of public improvements and the provision of security for those improvements to be a common and workable scenario and consistent with the language in the annexation agreement that contemplated phasing of the development. 

In sum, the appellate court reversed the dismissal of the Village's case against KPHC and remanded it back for further proceedings. 


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