Real Assets - Real Value

A Landmark Change in Illinois Zoning Law: The Klaeren Case

In October 2002, the Illinois Supreme Court sent shock waves through the development community and municipal governments in overturning long-standing Illinois land use law concerning the nature of special use permit decisions. In People ex rel. Klaeren v. Village of Lisle, 202 Ill.2d 164 (2002), the Court made two rulings that are worth noting: (1) decisions by municipal governments on special use permits are quasi-judicial decisions and not legislative decisions; and (2) parties interested in such proceedings cannot be denied the right to present evidence and cross-examine witnesses appearing at public hearings. For all those working in real estate, it is important to understand the Supreme Court's ruling in Klaeren and the implications for the future.

Historical Background

Prior to the Klaeren decision, Illinois law treated all decisions made by city councils and village boards as legislative decisions regardless of whether or not the corporate authorities were actually passing legislation. This practice, as it related to decisions affecting existing property rights such as special use applications, was contrary to the "clear weight of authority in the United States [which] holds that a legislative body acts administratively when it rules on applications for special use permits." City of Chicago Heights v. Living Word Outreach Full Gospel Church & Ministries, Inc., 196 Ill. 2d 1 (2001).

In Living Word, a case decided by the Supreme Court a year before Klaeren, the Court clearly signaled that it was concerned by the practice of treating decisions on special use applications as legislative decisions. To many, treating special use permit decisions as legislative decisions is the preferred approach because it facilitates the deal-making on applications that Illinois is known for. However, for many the practice was disconcerting because it ignored the fact that the municipality was adjudicating property rights in determining whether to issue permits allowing for the use of land. As the Court acknowledged in Klaeren, a municipality "acts in a fact-finding capacity to decide disputed adjudicative facts based upon evidence adduced at the hearing and ultimately determines the relative rights of the interested parties" when it considers a special use permit application. Thus, rather than acting legislatively, a municipality was in fact acting administratively (also referred to as quasi-judicially) in making decisions on special use applications.

Second, by treating decisions on special use permits as legislative acts, the practice protected municipal action on such permits from legal challenge. Although municipalities ultimately pass an ordinance granting or denying a special use permit, the reality is that the passing of this type of ordinance is not really a legislative function - such as when a municipality adopts legislation. Nevertheless, as long as the decision was treated as a legislative act, it was very difficult to challenge decisions on special use permits because a legislative body's decision is reviewed for arbitrariness as set forth in La Salle National Bank v. County of Cook, 12 Ill. 2d 40, 145 N.E.2d 65 (1957). Courts will not interfere with legislative acts unless shown to be arbitrary, capricious or unrelated to the public health, safety and morals.

Thus, the Illinois Supreme Court put all on notice in the Living Word case that it was becoming uncomfortable with the fact that Illinois treated all decisions by village boards and city councils on special use applications as legislative decisions. However, it was not until the Klaeren case a year later that the Court acted to overrule long standing Illinois law.

The Klaeren Decision

At issue in Klaeren was a joint hearing on a special use permit conducted before the Village Board, Plan Commission and Zoning Board of Appeals of the Village of...