EMMET COUNTY, MI - Just outside of Petoskey, on the shores of Little Traverse Bay, is an upscale community with hundreds of Victorian-era cottages, most decades old, and a unique form of self-governance.

Under an 1889 state law, the cottagers' association can appoint a board of assessors, deputize its own marshal and maintain streets and buildings on collectively owned land.

The association requires owners to have good moral character.

But its requirement that owners be practicing Christians - ideally, members of the United Methodist Church - is what has come under fire.

"This is not a neighborhood association where they cut the bushes and mow the lawns," Northville attorney Sarah Prescott told MLive and The Grand Rapids Press.

Prescott filed a federal lawsuit on behalf of Bay View Chautauqua Inclusiveness Group against the Bay View Association of the United Methodist Church, alleging religious discrimination under the First Amendment and violations of the federal Fair Housing Act, the state's Constitution and civil rights laws.

The Bay View Association in 1959 did away with a requirement that owners be Caucasian. But religion restrictions -- one including a quota on Catholics, the attorney said -- remain, and have upset some cottages owners and prospective buyers. Sometimes, owners cannot leave their cottages to a surviving spouse or children because of their religion, Prescott said.

The association was only recently notified of the lawsuit and has not yet responded, but Executive Director Mike Spencer said in a statement he is confident in its legal position.

He said that the association --named one of the 12 "Prettiest Painted Places" in the U.S. for its colorful, well-kept "gingerbread" cottages -- welcomes everyone, including renters and the greater community, to many events and programs held at the campus.

"Like most private associations, there are specific requirements for membership. Our membership requirements have been part of our history and we understand that some of our members or the general public may disagree with them," the statement said.

"The Bay View Association of the United Methodist Church is an ecumenical, private, voluntary membership, organization," the statement said.

"Unlike many other private properties and private associations, Bay View welcomes the public to our grounds and to experience our programming. We are not a gated community and anyone, regardless of age, income, race, gender, national origin, or religion is welcome on our campus and to attend our events."

Spencer said he had not heard of the inclusiveness group until it filed the lawsuit challenging association bylaws.

He does not know who filed suit, but said that "it is unfortunate that they would first not identify themselves so that we could sit down and discuss their concerns. Our organization believes in working though disagreements concerning our bylaws outside of the court system."

The site became a gathering place for Michigan Methodists in the late 1800s. It was accessible by rail and steamboat.

The "preaching stand," now in the Bay View Historical Museum, was its first building. Cottages, streets, parks, a chapel and hotel followed. Religious and educational programs grew. So did recreation and performing arts.

Well-known leaders and entertainers have appeared. A Summer Assembly Program continues.

"Recreation and sports have not been forgotten at Bay View," its website states. "Tennis, swimming and sailing are enjoyed by all ages. An active program of clubs, games, athletics, crafts, camping, hiking and music for children of all ages is carried on under full-time leadership. A social program for Junior and Senior High young people under trained leadership, is centered in the 'Rec Club' building on the beach."

The 337-acre property consists of 444 cottages, two privately owned inns, a bed and breakfast, administrative buildings and a wooded area known as "Bay View Woods."

There is a library, along with the museum, among over 30 public buildings. Stafford's Bay View Inn provides a stunning view of the bay.

The association owns the land, leasing it to cottage owners.

Prescott, the attorney, said she represents cottage owners whose children and grandchildren cannot inherit cottages. One of her clients, who eventually would have inherited her parents' fourth-generation cottage, was denied membership and the right to be a co-owner because she had converted to Judaism.

Because cottagers cannot sell on the open market, they are left with only a "small segment of willing buyers," she said.

She said that Bay View, founded in 1875, was later recognized under the 1889 Summer Resort Act that gives such associations significant governmental power, including deputizing a marshal to enforce bylaws and even make arrests.

The original articles for membership and cottage ownership called for a membership fee, for an applicant to be of "good moral character" and have reached the age of 21.

Articles of Association of Bay View Campground Association of the Methodist-Episcopal Church filed in 1890. (Document filed in U.S. District Court)

"However, over time, Bay View has aligned itself with and endorsed and promoted the Christian religion, even as it maintains and uses State-delegated police power," Prescott wrote in the lawsuit.

"Hence, while Jews and other non-religious families once owned homes in Bay View, in or around 1942, the Bay View board adopted a resolution rolling back almost 70 years of tolerance of religious diversity and stating: '... no person shall be accepted as a member of this association or be allowed to rent or lease property or a room, for longer than a period of one day, unless such person is of the white race and a Christian ... ," Prescott wrote.

The race requirement was removed in 1959 but the religion test remained, with "further restrictions on the precise sect of Christian owners" from the 1960s to 1980s, the lawsuit said.

During that period, Roman Catholics could only comprise 10 percent of ownership, the lawsuit said.

A bylaw change in 1986 required prospective buyers to provide a reference letter from a pastor, the lawsuit said.

Prescott said that the state rejected Bay View's efforts to be an "ecclesiastic corporation" with the United Methodist Church controlling its affairs.

Bay View, she said, had previously argued in a tax case that it "solely or chiefly organized to provide religious programming and education, charitable works and support for community needs."

The state Court of Appeals said in a 2015 opinion noted that membership in the association is "restricted to practicing Christians."

"While the numerous charitable and benevolent activities (Bay View) engages in are certainly admirable, it appears (Bay View's) primary purpose is to provide an exclusive summer vacation community to those who meet its restrictive membership requirements and have the financial means to purchase a summer cottage."

The lawsuit asks a judge to change the association's bylaws, including requirements that members be practicing Christians and that the majority of association trustees be members of the West Michigan Conference of the United Method Church.

In response, the association said: "There is a simple process that members of the Association can follow to initiate bylaw amendments to change the membership requirements. Prior bylaw amendments proposals to change the membership requirements have been voted down by our members. They simply have not had enough votes in the past, so it appears that this group is now seeking to change our membership requirements through a court decision."