Traverse City Record-Eagle

September 1, 2013

Leelanau Co. looks to resolve property dispute

BY GLENN PUIT gpuit@record-eagle.com
Traverse City Record-Eagle

---- — LELAND — A real estate crash, a questionable land contract, a failed development and lots of lost taxpayer dollars.

All are at the center of a lengthy dispute expected to be resolved this week when Leelanau County officials consider resuming complete control of their old courthouse property in Leland.

County Administrator Chet Janik said the county’s Brownfield Authority is expected to vote at 9 a.m. Thursday on a negotiated settlement with onetime property developers Varley-Kelly Properties. The settlement will clear all titles and liens to the property, allowing the county to finally sell the troubled, two-acre-plus parcel.

“I think we’ll eventually be made whole, assuming we sell the property,” Janik said.

The tangled story dates to 2007, when the county built its new headquarters off M-204. That move prompted the county’s Brownfield Authority to sell its old county headquarters in Leland to developers Varley-Kelly Properties II LLC for $2.4 million.

The county sold the property on a land contract with a payment schedule over four years to allow the developers more time to get the project up and running. The proposed residential development on the old county property also involved a $1.2 million loan from the Michigan Department of Environmental Quality to pay for site cleanup and demolition.

About $600,000 of the loan was used to clear the property.

But a national real estate crash threw the development and the property’s value into a tizzy. The developer completed only one duplex, defaulted on the loan and the county went back to court to take much of the land back, minus a duplex and two lots that stayed in the developer’s possession.

The county then put its portion of the property back on the market last year and received an offer for $1.4 million – a million less than the original sale price. That offer couldn’t be processed, though, because of its terms and what Janik described as “ a dispute or disagreement between the county and Varley-Kelly about who owned what parcels.”

“We’ve had numerous interested parties express interest in the purchase of the property,” Janik said. “Obviously, the issue of cleared title had to be resolved.”

Janik said he’s spent the last six months negotiating a legal settlement to the property that will allow the county to regain control of all the property with no liens or title issues. He would not discuss specific details of the settlement until after it’s presented to the Brownfield Authority, and said it was hammered out and discussed in a closed session with the county Board of Commissioners.

The developers did not respond to requests for comment on this story.

“I was not involved in this originally, but I think the county would have great concerns about entering into this type of transaction in the future,” Janik said.