Municipal Authority to Enforce Commercial Landlord Licensing and Tenant Registration Requirements

Introduction

Lathfield Investments, LLC et al. (“Lathfield”) purchased three commercial buildings in Lathrup Village, Michigan. The City of Lathrup Village and its Downtown Development Authority (collectively, “the City”) require all commercial landlords to obtain a landlord rental license and to disclose each tenant’s name and principal business before leasing any space. When Lathfield submitted its licensing application without tenant disclosures, the City denied both the landlord license and its tenants’ general business licenses. Lathfield sued, raising claims under municipal code, state and federal constitutional provisions, and tort law. The Sixth Circuit affirmed summary judgment for the City on all nine claims, clarifying the scope of municipal licensing powers, declaratory relief doctrines, municipal estoppel, procedural due process, equal protection, the Contracts Clause, inverse condemnation, and civil conspiracy.

Summary of the Judgment

On April 28, 2025, the Sixth Circuit affirmed the district court’s grant of summary judgment in favor of the City on these principal points:

Lathfield’s request for a declaration that it was not subject to site plan approval was moot because it had already completed and obtained approval of its site plan.
The municipal code’s broad definition of “conducting business” includes leasing commercial property, so Lathfield was required to obtain a general business license.
The City may condition tenant business licenses on a landlord’s compliance with landlord rental licensing requirements, including tenant name and business disclosures.
The Property did not qualify as a preexisting nonconforming use under state or local zoning law; and equitable estoppel and laches did not bar the City’s enforcement of building, zoning, and licensing requirements.
The municipal adoption of the Michigan Building Code (2006 version) did not implicate procedural due process; and Lathfield had no protected property interest in prior code adoption or zoning classifications to support a due process challenge to inspection findings.
No “class‐of‐one” equal protection violation was shown—Lathfield failed to identify any similarly situated landlord treated differently.
Contracts Clause claims failed because § 1983 does not support Contracts Clause enforcement and the challenged ordinance predated Lathfield’s tenant contracts.
No Fifth Amendment inverse condemnation: Lathfield offered no evidence tying the City’s enforcement to a special decline in value and its enforcement fell within valid police power.
No civil conspiracy claim: Lathfield alleged no actionable tort or concerted unlawful act by the City and its inspector.

Analysis

1. Declaratory Relief & Mootness

Under Article III, courts can only resolve live “cases or controversies.” Lathfield sought a declaration that it was never subject to site plan review. The Sixth Circuit held that, because Lathfield had already obtained site plan approval, any declaration would not change its legal interests. The claim was moot. The court emphasized that declaratory relief must address a live dispute capable of affecting the parties’ rights; absent such an effect, federal courts lack jurisdiction.

2. General Business License Requirement

The City Code requires any person “conducting business” to obtain a general business license, defined broadly to include “all other kinds of vocations, occupations, enterprises…not included in…merchant.” Leasing commercial space for profit falls squarely within the catch‐all definition of “performing a trade.” Lathfield’s continuous, profit‐driven leasing activities trigger the license requirement. The Sixth Circuit declined Lathfield’s attempt to exclude its licensee arrangements by labeling them “licenses” rather than “leases,” because the municipal code’s definition of “leasing” encompasses any provision of property for remuneration.

3. Tenant Business Licenses & Landlord Licensing

The City Code prohibits occupancy of any rental unit without a landlord rental license and requires landlords to disclose tenant names and principal businesses. Tenant business licenses may only be issued when the landlord has obtained and complied with the landlord license provisions. Lathfield argued this conditional scheme was unclear or inapplicable to licensees. The Court held the text is unambiguous: no tenant business license if the landlord fails to register tenants under § 18-33(a).

4. Nonconforming Use, Estoppel & Laches

Michigan’s doctrine of preexisting nonconforming use protects only uses that were lawful before a zoning change. Lathfield presented no evidence that its current retail‐store use complied with zoning as of December 1, 2010. Moreover, nonconforming use does not excuse non‐zoning health and safety violations or licensing requirements. Equitable estoppel and laches rarely bar municipal enforcement absent clear, long‐standing assurances from the municipality. Here the City’s repeated notices, lawsuit against the prior owner, settlement orders, and enforcement citations demonstrated active intent to enforce. Lathfield could not show that the City negligently or intentionally induced reliance or delayed unreasonably.

5. Procedural Due Process

Lathfield claimed the City’s building inspector applied a later version of the Michigan Building Code than the 2006 update adopted by ordinance, and that it was denied a meaningful appeal from the inspection findings. The Court first noted that Lathfield identified no protected property or liberty interest—the Due Process Clause does not secure procedural compliance with state adoption statutes alone. Second, the adoption of generally applicable legislative building codes does not trigger procedural due process notice or hearing requirements under Bi-Metallic. And Lathfield lacked any vested interest in a prior zoning classification or building permit process to ground a procedural due process violation.

6. Equal Protection (Class-of-One)

Under a “class‐of‐one” theory, a plaintiff must identify similarly situated parties treated differently without any rational basis. Lathfield offered no examples of other landlords who violated tenant‐disclosure and licensing rules yet faced no enforcement. Its bare assertion of unequal treatment failed the threshold requirement for an equal protection claim.

7. Contracts Clause

The Contracts Clause prohibits state laws impairing existing contractual obligations. The Sixth Circuit reaffirmed that § 1983 does not provide a remedy for Contracts Clause claims. Even assuming such a remedy existed, the tenant‐disclosure requirement was enacted in 1999—years before Lathfield’s tenant contracts. A Contracts Clause challenge cannot lie against a law that antedates the contract.

8. Inverse Condemnation

To prove inverse condemnation under Michigan law, a property owner must show (1) government action substantially caused a decline in value, and (2) affirmative abuse of power directed at the property. Lathfield submitted no evidence tying the City’s licensing and enforcement to a special diminution of value; nor did it show any unique, special injury. Enforcement of valid police powers does not constitute a taking. The inverse condemnation claim therefore failed.

9. Civil Conspiracy

A civil conspiracy claim requires (a) a separate, actionable wrong and (b) proof of concerted planning or agreement. Lathfield alleged no tort separate from its other claims and provided no evidence of any unlawful agreement between the City and its inspector. Conclusory assertions of conspiracy do not survive summary judgment.

Complex Concepts Simplified

Mootness: A court cannot decide issues that no longer affect the parties’ legal rights.
“Conducting Business” in Licensing Codes: Defined broadly to capture all ongoing profit‐making activities, including leasing property.
Nonconforming Use: Protects only uses lawful before a zoning change; it does not excuse new safety, building code, or licensing violations.
Procedural Due Process & Legislative Acts: General laws like building codes do not require individual notice or hearings.
Class-of-One Equal Protection: You must show someone in your exact situation was treated better for no good reason.
Contracts Clause in § 1983: § 1983 does not cover Contracts Clause claims; and the law must come after the contract to impair it.
Inverse Condemnation: A taking claim where government action (not eminent domain) hurts property value—but you must show a unique loss and direct abuse of power.
Civil Conspiracy: You need proof of an underlying illegal act plus a concerted agreement to commit it.

Conclusion

The Sixth Circuit’s decision in Lathfield Investments, LLC v. City of Lathrup Village confirms municipal authority to condition tenant business licenses on landlord compliance with rental licensing and tenant‐registration requirements. It underscores strict limits on declaratory relief, the nonconforming use doctrine, equitable estoppel, laches defenses, constitutional due process and equal protection claims, Contracts Clause actions under § 1983, inverse condemnation, and civil conspiracy in the municipal enforcement context. Landlords must heed local code provisions, fully disclose tenant information, and remedy building and zoning violations to secure both landlord and tenant licenses. This ruling provides clear guidance to property owners and municipalities about licensing prerequisites and enforcement boundaries under federal and state law.