Portsmouth Church is suing City Council, claiming its actions derailed the housing project and the church has filed for bankruptcy

PORTSMOUTH, Va. (WAVY) – A Portsmouth church is suing the city and city council, claiming a change in land use designation on property for which the church had a permit to redevelop into multi-family dwellings has resulted in the loss of project funding and church bankruptcy filing.

New Bethel Development LLC, an entity created by New Bethel Baptist Church, has filed a complaint with the Portsmouth Circuit Court alleging that the land use change of the property in 2018:

• created an unsecured liability for the bank
• caused an astronomical drop in the market and in the financing value
• forced the property into foreclosure
• forced the involuntary sale of the property at a significant loss
• created an environment where bankruptcy was inevitable and a necessary protection option.

Additionally, as a result of the church filing for bankruptcy and foreclosure of the property, the city council approved a request from another developer to put a 280-unit multi-family apartment complex on the same property.

The lawsuit seeks $ 5 million in compensatory damages and $ 350,000 in punitive damages.

The city declined to comment because it had not received a lawsuit on Tuesday.

Mark Whitaker, a member of the Portsmouth council, is one of four children born to New Bethel Baptist Church pastor, James M. Bishop. He serves as an assistant pastor.

According to the complaint, New Bethel Development purchased the property at 4358 Greenwood Drive in the Cavalier Manor neighborhood in 2005 using a $ 1.8 million loan from Bank of America, which was then refinanced with the Bank of the Commonwealth. for an amount of $ 2.6 million. The church, which adjoined the property, was the guarantor of the loan.

At the time of purchase, the property was zoned for residential use under the urban multi-family residential designation. It housed a rental complex of 103 apartments built in 1960.

The property was purchased for redevelopment. It was riddled with crime and ravaged at the time, according to the complaint. In 2010, the city deemed the property derelict by the Codes and Compliance Department. The city ordered its demolition in 2013.

However, the church said the economic and real estate crises of 2009, along with “marginal neighborhood conditions, random and illegal landfills,” made it difficult to maintain and develop the property.

Also in 2009, New Bethel Development applied for a housing use permit for the construction of six three-storey apartment buildings. The complex would be named The Evergreens of Bethel and would contain 234 units, averaging about 16.9 housing units per acre.

The plan was submitted to the city’s Planning Commission and included a parking lot, community clubhouse, fitness center, theater, game room, business center conference room, a swimming pool and offices.

According to the complaint, the development plan was compatible with density and other zoning standards. The Planning Commission and staff supported the request at that time. Portsmouth City Council granted the housing permit for the 234 units in March 2009. The permit was to be active until March 2011, when it would expire for any part of the project for which building permits were not granted. been issued.

Days after city council approved the housing permit, the Virginia General Assembly extended housing use permit approvals until July 2014 in an effort to address the housing crisis. The General Assembly in 2012 granted another extension of the housing use permit until July 2017, then again in 2018 to extend it until July 2020. It was again extended and is now active until July 2020. as of July 1, 2022.

In 2018, the city decided to change the land use designation of the Greenwood Drive property on the future land use map of the City’s Comprehensive Plan. It changed the designation from urban multi-family residence to “single-family”.

This was done despite the fact that the previously approved housing use permit was still active for the plot. The complaint claims that no other property has been “targeted by the city council”.

The Planning Commission did not recommend the change. The type of project proposed by New Bethel Development was consistent with other developments surrounding it.

New Bethel Development said the change in ownership by city council from multi-family to single-family property had a negative impact on the property’s value. The new property value – $ 1.3 million, according to Southern Bank and Trust, compared to $ 2.2 million for a multi-family complex – was based on the assumption that the property would be changed to reflect the land use. single family homes, but the rezoning was never done.

A foreclosure on the property was slated for September 24, 2019. On that day, the New Bethel Baptist Church also filed for Chapter 11 bankruptcy, which suspended the foreclosure.

In March 2021, the church returned to Southern Bank with a new payment plan, but it was declined. The property was then sold for $ 400,000.

Also in March, another development submitted a proposal for a 280-unit multi-family and mixed-use development comprising seven four-story apartment buildings and a restaurant in a clubhouse.

The city council approved this request.

The church said that as a result of the city council’s actions, the plaintiffs had suffered $ 5 million in “damages and damages.”

The complaint demands a jury trial.