LEWISTON — New lots formed out of a city deal with Franklin Property Trust may end up creating properties that either intentionally break city zoning rules or won’t be able to qualify for home financing, councilors learned Tuesday.

City staff said councilors will need to decide if they want to make the new lots legal and nonconforming, risking the wrath of other downtown property owners.

“If we make an exception down there, I fully expect property owners along the tree streets will want the same treatment,” City Planner David Hediger said. “We can make an exception here, but it’s going to set a precedent for other areas.”

At issue are roughly 98 privately owned structures that sit on 51 acres of Franklin Property Trust land. The building owners have month-to-month leases on the land under their homes. Councilors approved a plan in December to let Franklin subdivide those parcels, selling some to willing homeowners.

Planning and Code Enforcement Director Gil Arsenault said the company’s land assessor is still working on figuring out fair property lines for the individual properties, as well as estimated values. Those will be presented to the City Council and Planning Board when the assessor wraps up.

Tuesday night’s meeting was to warn councilors of a potential controversy.

Many of the lots that can logically be drawn are much smaller than the city’s zoning codes allow, he said.

“We are talking about carving out lots that don’t meet the standards,” Arsenault said. “For the most part, we don’t think most of the lots on Franklin land will meet today’s standards. Either there won’t be enough frontage or enough lot size or setbacks will be an issue.”

The deal concerns at least eight Franklin-owned properties that contain multiple housing units, all owned by individual renters.

The practice began as a benefit for mill employees, allowing them to build affordable, modest homes for less money. Many have been passed down, generation to generation.

Local banks and credit unions regularly loaned money for home improvements and mortgages on the homes until the recession in 2008. Without those loans, homeowners had a more difficult time affording major repairs and at least 16 of the properties have deteriorated to the point that they’ve landed on the city’s demolition list.

Now the city and trust have worked out a deal, letting the trust divide the eight lots around the downtown, a total of 51 acres valued by the city at $958,310. The city and the trust will split the cost of demolishing the 16 condemned properties.

Based on letters sent to Franklin’s tenants, they’ll each get the opportunity to buy the land under and around their buildings from the trust. A trust-hired land appraiser is looking at the properties now, and is expected to report on their values this spring.

Arsenault said Monday that the city staff favors making the lots nonconforming. That would mean they would be allowed to continue with their structures in place, even though they don’t fit in with city codes. They would not be allowed to rebuild if the home were destroyed, however.

Councilor Don D’Auteuil balked at that. That would mean those homes would never qualify for home financing, he said.

“They’d never be able to be rebuilt, and that’s not the way we went into this,” D’Auteuil said. “Now you have other problems. We were dealing with financing problems before, and if they are not rebuildable, nobody will finance it.”

The other option would be making these lots an exception to city zoning. Hediger noted that landlord Phyllis St. Laurent faced a similar situation trying to rebuild her 29 units of downtown apartments burned in a May 2013 fire. The city required her to purchase four more nearby lots before they would let her rebuild and replace the units she lost.

Councilors said they needed more information, with Councilor Shane Bouchard saying the deal is still a better deal for the potential landowners.

“No matter what we do, they will be in a better situation owning the land than they are now,” Bouchard said. “They will still have a choice, if they don’t want to buy.”

staylor@sunjournal.com