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An apartment project proposed for the Kirkland waterfront by a Tibetan monk-turned-developer must include fewer than half of the units initially proposed, after a ruling this week by the state Court of Appeals.

The decision by the three-judge panel reverses an earlier ruling that allowed Lobsang Dargey to build Potala Village, according to Kirkland zoning standards in place when the shoreline-development permit was submitted in February 2011. At the time, there was no limit on how many apartment units could be built within a structure in a neighborhood business zone. In addition to 143 apartment or condo units, initial plans for the four-story building included 316 underground parking spaces and 6,200 square feet for retail on the first floor.

The decision comes as several cities in the area are debating how to handle dense, residential developments, many of which include even tighter quarters than the proposed Potala Village.

City policies for Dargey’s Kirkland property were confusing when shoreline permits were first submitted. While the comprehensive city plan suggested a store or small mixed-use project, the shoreline master plan envisioned high-density mixed uses.

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It was not known Wednesday whether Dargey would appeal.

“We’re disappointed in the decision that was made and are currently evaluating our options as we move forward,” said Matt Haba, real-estate development director at Path America, a company Dargey owns.

Hundreds of Kirkland residents complained about the size of the project and extra traffic that would pour onto Lake Washington Boulevard Northeast.

The Kirkland City Council did not ignore them. In November 2011, the council approved a moratorium on development in neighborhood business zones. In 2012, the council passed more restrictive standards that now allow only 48 units per acre.

City of Kirkland attorneys argued that because Dargey had not applied for a building permit before the zoning standards changed, the complex should be subject to current zoning. Dargey will now be allowed to build up to 59 units for Potala Village unless he appeals the decision and wins.

Potala Village crews are not authorized to conduct any construction activity on the property until new building permits are submitted and approved, said Kirkland City Manager Kurt Triplett.

Previous structures on the property Dargey bought have been leveled. The only other work that crews have done on the site so far is removing contaminated soil left behind by a gas station that once operated on the property.

Triplett said that when Potala Village permit applications were submitted to the city, Dargey had already reduced the number of units to 88 and retail space to 4,802 square feet, but the public outcry continued. Triplett said traffic studies showed that Potala Village would not have had a significant impact on Lake Washington Boulevard Northeast and that the underground parking provided more than enough spaces for those living in the building.

“I think the traffic concerns were probably overblown, but it’s hard to know what would have happened,” said Triplett. “Another one of the main concerns people had were the size and scale of the building, but that’s not going to be changing much.”

Alexa Vaughn: 206-464-2515 or On Twitter @AlexaVaughn.

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