The developer behind the proposed Potala Village project on Lake Washington Boulevard followed through with its threats, filing a motion against the City of Kirkland over a building moratorium on Business Neighborhood-zoned properties.

The Kirkland City Council approved the extension of a six-month moratorium on May 1, originally imposed on November 15, 2011, on BN-zoned properties. The action was taken to give the city’s Planning Commission time to work on the conflicts between the city’s Master Plan and the zoning requirements, which allowed for unlimited density for the BN-zoned property.

The controversial project has also stirred many community members, who contend the city’s Master Plan and zoning code for the property are in direct conflict.

The lawsuit, filed in King County Superior Court on Thursday by Lobsang and Tamara Dargey’s Bellevue attorney Duana T. Kolouskova, on behalf of Potala Village Kirkland, LLC, claims that the moratorium was imposed on the property illegally and seeks an injunction against the building moratorium. The suit also asks for attorney fees and costs from the city.

“We are evaluating it and we will be filing an answer with King County Superior Court,” said Kirkland City Attorney Robin Jenkinson, who received notice of the filing late Thursday afternoon.

The lawsuit asks for the proposed four-story development to be approved under the zoning codes in effect at the time of application. It further states that any changes to zoning codes during the building moratorium cannot be legally imposed on the Potala Village project, which would be located at the southeast corner of 10th Avenue South and Lake Street South.

Potala Village Kirkland, LLC, claims that the ordinances for the building moratorium did not meet the legal requirements, such as an emergency or imminent threat to public health or safety, it overlapped for two weeks in direct violation to state law and “no developed work plan exists and no findings of fact justify the renewal.”

The lawsuit also claims that the city did not adhere to its own work plan between January and May and did not complete the third step in the process, which was to be completed by Feb. 23.

The development originally called for 181 units under the unlimited density provision of the zoning code. It was reduced to 164 units and revised down to 150 units, which would provide a greater mix of two-bedroom units, after developers met with city staff in December 2010 and reviewed the design.

The lawsuit asserts that no concerns or issues were raised with the respect to density. It was again revised down to 143 units to “allow for higher ceilings and larger courtyards than most city standards in the region require,” according to court documents.

On Feb. 23, 2011 Potala Village submitted an application for Shoreline Substantial Development permit (SPD) based on the 143-unit design and a 6,000-square-foot commercial space on the ground floor. The court documents state that under Washington State law the permit holds vested rights.

Potala claims that a State Environmental Policy Act review showed no significant environmental impacts as the city issued a Determination of Non-Siginificance (DNS) that warranted further study.

But the lawsuit goes on to assert that under further public pressure for review, the city rescinded the DNS and informed the developers that an Environmental Impact Statement (EIS) would be required.

But the Dargey’s acquiesced to the request, stating that the EIS is a “costly and time-consuming process,” according to the court filing.

Potala managers also submitted a transportation concurrency analysis showing that the project met all of the city’s requirements. The city approved the traffic analysis, according to the court documents.

The city’s Planning Commission was in the process of reviewing all of the BN-zoned properties in the city when the Potala Village issue began.

“For us, this was always about the neighborhood business family of zones and not Potala,” said Jon Pascal, Planning Commission vice chair elect. “What we started is much bigger and broader than this one issue. We have been charged to evaluate all commercially zoned properties in the City’s neighborhoods such as BN, BNA, BC, and BCX zones and we will continue the process so council can lift the moratorium on the BN zones.”

There are only two BN-zoned properties in the city – one in the Bridle Trails neighborhood and one on Lake Washington Boulevard.

Pascal said that he is not aware of how the lawsuit will affect the commission’s work on BN-zoned properties.