I'm in Michigan as well. I would agree with others that you first need to spend a few bucks with a local lawyer who specializes in Real Estate zoning. Though all he can do is give you an "educated opinion" (as John T. would say) on your legal position. I employed one in a matter before the BZA and he thought it was a slam dunk, but I lost.
You're dealing with people on BZA and Planning Commissions who may have little or no training or background in Real Estate Law and who are on the boards simply because they were appointed by the Board of Trustees. As I mentioned above, I've dealt with them in my township and it's astounding what they base some of their decisions on. Logic, law and common sense do not even enter the discussions.
My gut feel is that your home would be grandfathered in as a "non-complying" structure, so they can't make you fill in your basement just out of the blue. You got LEGAL document (permit) at the time of construction. I don't believe they can deny a building permint just because you have a non-compliant structure that you're working on. Let's say you wanted to upgrade your electrical service from 100Amp to 200Amp and the electrician goes to pull a permit. I don't think they could deny the permit (again this is IMHO). Now, if you wanted to put a basement under your additions, that would be a different story. In any case, that doesn't mean the permit won't be denied. It can be denied for any reason and it's up to you to go to the BZA for relief and then potentially to court if you don't agree with their ruling.
Also, get a copy of your Township's ordinances. Many of these are online. Many of them in Michigan have also been adopted from other townships and modified/amended by the various townships so they are not always identical yet share a lot of the same language. In reading them regarding permits, non-complying structures, etc. you will probably find that the ordinance doesn't address your situation directly. I reviewed my township's ordinance and how it would apply to your situation and found NO direct answer. I live just outside of a 100 yr flood plain and there ARE issues regarding flood insurance, etc that affect mortgage applications.
I wouldn't "be scared to ask for a permit", as you put it, since worst they could do is deny it. You are already on their radar screen so just going ahead and building WITHOUT a permit.... not a good idea. And rest assured, they will find out if you proceed. The eco-nazis at Michigan's DNR/DEQ must justify their jobs. If the township is supportive of your position that helps a lot. Good luck and post back on future updates to your situation.
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