Eminent domain proceedings approved by University of Michigan regents likely to succeed

The University of Michigan’s move toward pursuing eminent domain proceedings for two houses located on South Division Street could mean a court fight before construction begins on a new residence hall.

Construction for the new residence hall was approved at Thursday’s regents meeting.

According to university spokesman Rick Fitzgerald, U-M offered to buy the two properties owned by David Copi at 541 and 543 S. Division St., in December, around the same time the property leased by Blimpy Burger was purchased by the university.

“It was determined at that point that the parties were so far apart that an agreement simply could not be reached right then,” he said.

The Board of Regents voted Thursday to direct officers and staff of the university to acquire the two parcels for “just compensation,” noting they should exercise the right of eminent domain if necessary.

The two properties that could be purchased by the university are both under the management of Copi Properties. According to Sam Copi, David Copi’s son and manager of Copi Properties, 541 S. Division St. is a six-bedroom house under lease through May 2014. The property at 543 S. Division St. contains a six-bedroom and a three-bedroom unit, both under lease through September 2014.

If Copi decides not to sell the properties after an official offer is made, U-M can file condemnation actions on the properties, likely in Washtenaw County Circuit Court.

“The owners of the property will then receive an official summons and complaint for condemnation for the property,” eminent domain attorney H. Adam Cohen said.

Fitzgerald said as of Friday, the university had not filed a condemnation action. If an action is filed, Copi could attempt to prove there is either a lack of public use or public necessity for the proposed project.

“If either one of those is disproved, that would be sufficient to defeat taking the property,” Cohen, an attorney with the Birmingham-based Steinhardt, Pesick and Cohen, said.

In order to determine public use, a court would look at whether use of the property would be for the benefit or use of the public. In the case of the university, Cohen said the “public” also can be defined as the students.

Cohen said it is important that the university be the one building and operating the future dormitory. The Michigan Supreme Court ruled in 2004 that it is unconstitutional for a public entity to claim property through eminent domain and then sell it to a private company or entity.

The second half of the equation, public necessity, refers to how necessary these particular parcels are to the project.

“Necessity is more along the lines of ‘does the government or entity really need this property as opposed to another property down the street?’ or ‘do they really need all of my property as opposed to just part of it?’” Cohen said.

He added that the fact that the building replacing the houses will be a residence hall puts the university on solid footing.

“A residence hall is a classic university use,” he said. “This university is a public university, which enjoys the power of eminent domain. And, I would suggest, even though I am an advocate for owners rights, that a dormitory or residence hall is a typical university function and typical public use.”

If Copi declines to contest whether the property is eligible for eminent domain, the court’s attention would turn to what “just compensation” is for the property. The University paid South Division Street Properties, LLC, a company registered to former athletic director William Martin, $3.17 million for four properties in the area.

According to Ann Arbor city tax records, the four property’s assessed value was $845,200, giving them an approximate market value of $1.69 million. The two properties owned by Copi have a combined assessed value of $366,200 giving them an approximate market value of $732,400.

Sam Copi said he and his father declined to comment on the situation. Mike Martin, William Martin’s son, also declined comment and said his father is unreachable for the time being.

Fitzgerald said the university does not have a timeline for the acquisition of the property, but the vote by the regents was necessary before any eminent domain proceedings could occur.

“Those are the remaining pieces of the puzzle for an important location for redevelopment for central campus,” he said.

Ben Freed covers business for AnnArbor.com. You can sign up here to receive Business Review updates every week. Reach out to Ben at 734-623-2528 or email him at benfreed@annarbor.com. Follow him on twitter @BFreedinA2