Court Rejects Neighboring Property Owners’ Due Process Claim to Prevent ‘Wolf Point’ Construction in River North Area (Chicago)

I thought I was gonna have to dust off my 18,000-pound crimson-covered Laurence Tribe Constitutional Law book from 1993 Fall semester for this one.   

Seriously though, when I see a case that discusses substantive and procedural due process issues refers to Federal and State Constitutional amendments, my PTSD flashbacks to 1L are triggered.  

In Residences at Riverbend Condominium Association v. City of Chicago, 2013 WL 6080685 (N.D.Ill. 2013), the Northern District dismissed the plaintiff condominium association’s lawsuit to prevent the City from enforcing a zoning ordinance change that would allow a large-scale construction project to commence in Chicago’s River North neighborhood. 

The basis for the Rule 12(b)(6) dismissal: plaintiff failed to allege a protectable due process property interest in preventing the construction project.

Facts: The lawsuit involves Wolf Point – land on the north bank of the Chicago river near the Merchandise Mart which has been vacant for about 40 years. 

In 2013, the City approved a zoning variance that allows the site’s owners to construct a three-building mixed use development on the site.  The plaintiffs, adjoining land owners, sued to bar the development; citing increased pedestrian and vehicular traffic in the area, plus the project’s unbearable strain on city infrastructure.

The plaintiffs also claimed they weren’t properly notified of the zoning change or given a meaningful chance to oppose it as required under the law.  The Court granted defendant’s motion to dismiss with prejudice.

Rules/Reasoning:

A due process claimant must establish a legitimate property interest.  U.S. Const. Amend XIV; Ill. Const. of 1970, art. I, s. 2 (and cases interpreting them).  

He must show he was deprived of life, liberty or property without sufficient procedural or substantive government safeguards. 

A due process clause property interest means an entitlement or benefit that the state can’t tamper with or remove.  *2-3.  A mere expectation or hope, though, doesn’t rise to the level of a due process property right.  *4.

The Court held that the plaintiffs lacked a property interest in Wolf Point.  They don’t own the land and any interest they have in receiving statutory notice of the zoning change isn’t a right of constitutional dimension.

The Court also found that zoning challenges based on a state’s failure to follow its own notice procedures should be brought in state not Federal Court.  *4.

The Northern District also noted that under Illinois law, a property owner’s rights to light, air, or certain property values – while certainly desirable – still don’t merit constitutional protection. property interest. *4. 

And since the plaintiffs don’t own the Wolf Point property and at most, only alleged a right to statutory zoning change notice, the plaintiffs failed to allege a colorable right to prevent the City from enforcing the amended zoning rule.

Take-away: A valid constitutional due process claim must go beyond speculation or unilateral expectation.  Instead, the interest being sued on must constitute an entitlement or benefit that the government has no discretion to remove or reduce.  

But all may not be lost for the plaintiffs: the Riverbend court suggests that plaintiffs may be able to seek administrative review in the Circuit Court to overturn the amended zoning ordinance.

 

 

The Landlord’s Duty to Mitigate Damages

 

image

When a commercial tenant defaults under a multi-year lease, say by abandoning the premises with several years left on the lease, the law requires the landlord to mitigate its damages.  So, if retail tenant skips out on a 10-year lease after year 2,  the landlord cannot sit idly by for 8 years and then recover 8 years’ worth of rent damages from the tenant.  Instead, the landlord must make measurable efforts to try to relet the property and reduce its monetary loss.

Section 9-213.1 of the Illinois eviction statute codifies the landlord’s duty to mitigate: “a landlord or his or her agent shall take reasonable measures to mitigate the damages recoverable against a defaulting lessee.” 735 ILCS 5/9-213.1.

Whether a landlord has met its duty to mitigate damages is a fact question for the judge or jury.  If a landlord tries to relet commercial property at a higher rate than was being paid by the breaching tenant, it might raise a red flag and result in a failure to mitigate.

What steps should a landlord take then when a tenant to breaches a multi-year lease?  There is no litmus test but Illinois state and Federal courts do provide some guidance.

One Illinois court found that the landlord mitigated its damages when it (1) engaged a building manager to market the site; (2) erected signage on the premises; (3) placed calls to real estate brokers and developers; (4) ran newspaper ads; and (5) offered trial witness testimony that placing advertisements and erecting signs constitute reasonable steps toward reletting the premises. MXL Industries, Inc. v. Mulder, 252 Ill.App.3d 18 (2d Dist. 1993).  (Note: now, in the computer age, a landlord should also list the property on Costar, Loopnet or similar sites.)

By contrast, the Seventh Circuit Appeals Court found a failure to mitigate where the suing landlord (1) waited five months to hire a broker to relet the property; (2) refused to improve the property; (3) attempted to re-rent the premises at a higher rental rate (than the defaulting tenant paid); and (4) didn’t rent the site for 2.5 years after the tenant abandoned. Kallman v. Radioshack Corp., 315 F.3d 731 (7th Cir. 2003).

A landlord should also be careful not to impose too harsh lease terms when dealing with a new tenant.  In Danada Square, LLC v. KFC National Management Co., 392 Ill.App.3d 598 (2d Dist. 2009), the court found that the landlord failed to mitigate when it offered a lease to the tenant with a 60-day “kick-out clause” – the landlord can terminate lease for any reason upon 60 days’ notice.

The take-away from all this is the landlord should promptly take steps to market a property once a tenant breaches a lease.  The landlord should also document its reletting efforts so it can prove in court that it mitigated its damages.