The recent approval of a small retail project in Lakeville has touched off threats of legal action from a neighboring business claiming that the new building — an auto-parts store — falls short of an upscale restaurant promised for the site.

The disgruntled business owners are Dave Malmberg, who owns the building at 17850 Kenwood Trail, and his son Eric, who operates RE/MAX Advantage Plus, the business in the building.

They bought the land for their building from United Properties in 2004 and say they were told by the city and the developer that the site next to theirs was destined for a sit-down restaurant.

Instead, plans approved earlier this month by the city call for an Advance Auto Parts outlet. The Malmbergs tried blocking the new project and now say they may pursue legal action against the city and Bloomington-based United.

City officials and the developer both deny that any promises were made.

"It was not on our radar screen that they would be upset by this," said Keith Ulstad, senior vice president of retail development for United. He said his company learned of the Malmbergs' objections several months ago at a meeting with them to discuss changes in outdoor signage.

Ulstad said the new building is a retail structure, not an auto service business with a garage or service bays. "It's a retail building. It just happens to sell auto parts," he said.

The Malmbergs and their attorney, David McGee, met with Lakeville officials last week to discuss the dispute. "We're trying to make the best of a bad situation," McGee said in an interview.

"The Malmbergs and their attorney verbally expressed their concerns to myself and the City Attorney," said Planning Director Daryl Morey after the meeting. He said city staff will try to have a follow-up meeting with the Malmbergs and United.

Although it may be too late to stop the development, McGee said his clients are hopeful that some aspects of it could be adjusted, like the way the new building will be positioned. In a letter to the city last month, McGee said the value of the Malmbergs' property could be hurt because it will face the back of the Advance Auto Parts building.

The Malmbergs also believe that an auto-parts store could create problems with parking, because the new business — unlike an upscale restaurant — would have daytime hours similar to RE/MAX.

The Malmbergs claim that they originally tried to buy the site where the auto-parts business is planned but were told by United that a sit-down restaurant was planned for the parcel. At a Planning Commission meeting in April, Dave Malmberg said he also was assured of the plans for a restaurant at a 2004 lunch meeting with former City Administrator Bob Erickson and Economic Development Director Dave Olson.

In an interview, Olson said he has "no recollection" of that conversation. The city also says there's no written record of the meeting or any assurances of specified uses for the site.

The new building will be constructed on half of a parcel that is part of a larger piece of land United bought in 2004. In addition to the parcel with the Malmbergs' building, there are two parcels that have been developed and now have a Culver's restaurant and NTB, a tire store.

Ulstad said his company has tried marketing the vacant site to a variety of users, including restaurants. But there has been little interest over the last several years due to the economic downturn.

"This is not a bailout," he said. "We're just trying to complete a development that we thought would take two years and now has taken eight."