A recent ruling from the Illinois Supreme Court has important implications for municipalities and developers that enter into annexation agreements and for those who purchase a portion of the property that was subject to the annexation agreement.
In Village of Kirkland v. Kirkland Properties Holdings Co, LLC I, 2023 IL 128612, the Village of Kirkland entered into an annexation agreement in 2003 with the then-owners of 115 acres of unincorporated land. The agreement required the landowners to construct certain public improvements on the property, including roadways, and to provide the Village with a letter of credit to secure the construction of the public improvements.
In 2011, the original landowners sold half (41 of the 82) of the platted lots to a Plank Road. In 2017, the developer sold 34 lots to Kirkland Properties Holdings Company (“KPHC”). Two years later, the Village sent letters to KPCH requesting that it deposit a letter of credit in an amount proportionate to the number of lots it owned in the development to secure the completion of the roadways. When KPHC did not provide the security, the Village sued, arguing that KPHC breached the annexation agreement.
KPHC filed a motion to dismiss, arguing that it was not responsible for the obligations under the annexation agreement because it did not own the entirety of the property that was subject to the annexation agreement. The trial court ruled in KPHC’s favor and dismissed the Village’s lawsuit.
The Village appealed, and the appellate court reversed the dismissal of the Village’s case against KPHC, holding that the annexation agreement was binding on KPHC even though it did not own the entirety of the property that was subject to the agreement. The Court reasoned that the agreement itself makes clear that it is binding on “the successor owners of record of the land which is the subject of the agreement.” The Court further supported its decision by citing language from Section 11-15.1-4 of the Illinois Municipal Code:
“Any annexation agreement executed pursuant to this Division 15.1, or in conformity with Section 11-15.1-5 hereof, shall be binding upon the successor owners of record of the land which is the subject of the agreement and upon successor municipal authorities of the municipality and successor municipalities. Any party to such agreement may by civil action, mandamus, injunction or other proceeding, enforce and compel performance of the agreement.”
65 ILCS 5/11-15.1-4
The Supreme Court’s decision makes clear that municipalities can enforce annexation agreements against successor owners, even if those owners do not own the entirety of the property that was subject to the agreement.
The decision also has implications for the interpretation of annexation agreements. Specifically, courts will look to the terms of the agreement itself and the Illinois Municipal Code in determining whether an annexation agreement is binding on successor owners. Developers and municipalities should carefully draft clear annexation agreements to ensure that they are unambiguous and developers who purchase property that is subject to an annexation agreement should carefully review the terms of the agreement before making the purchase.