The Effect of Zoning Amendments on Pending Applications

Decided recently by Westchester Supreme Court, Mamaroneck Beach & Yacht Club, Inc. v. Fraioli raises a much litigated issue in New York: When can a municipality apply a newly enacted ordinance to a pending application by a developer?

The Court of Appeals has recognized that when an application for development rights is reviewed by municipal authorities or a court, the reviewing body must generally apply the law in effect at the time of review. Thus, if a zoning ordinance is amended while an application is under review, the amended ordinance is controlling. For example, in Matter of Alscot Investing Corp. v. Village of Rockville Centre, 64 N.Y.2d 921, the court refused to permit construction of a roof sign because, although such roof signs were allowed at the time petitioner filed his application, a subsequent zoning ordinance amendment prohibited these signs. The court held that the amended Code applied and dismissed landowner's article 78 proceeding.

Courts and boards apply amended ordinances to pending development applications because development rights do not vest until the developer has made substantial expenditures and undertaken substantial construction. As the Court of Appeals explained in Matter of Ellington Constr. Corp. v. Zoning Bd. of Appeals, 77 N.Y.2d 114, 'where a more restrictive zoning ordinance is enacted, an owner will be permitted to complete a structure or a development which an amendment has rendered nonconforming only where the owner has undertaken substantial construction and made substantial expenditures prior to the effective date of the amendment.' (In Ellington itself, the court construed what is now Village Law section 7-709 to permit a developer to acquire vested rights in an approved subdivision when, during the statutory exemption period, the developer completed the substantial construction with respect to some, but not all, of the lots in the subdivision). Matter of Smith v. M. Spiegel & Sons, Inc., 31 A.D.2d 819, aff'd 24 N.Y.2d 920, illustrates application of the general rule on vesting of rights. There, the court held that landowner had acquired no vested rights even though landowner had purchased land with the intention of constructing a gasoline service station, had demolished existing structures on the site, and had retained the services of an architect to prepare plans for the service station. As a result, the court held that a subsequently enacted zoning ordinance banning gasoline service stations was applicable to landowner's parcel, as the landowner's preparatory work was not 'work of a substantial character.'

In many cases, however, review of an application is delayed while municipal officials enact a new and more restrictive zoning ordinance. Typically, courts faced with this scenario uphold the general rule that the ordinance as amended is controlling. Thus in Alscot Investing, supra, the amended zoning ordinance was applied even though municipal authorities failed to act on petitioner's application for 6 weeks because the Village had imposed a moratorium on issuance of sign permits prior to petitioner's application.

'Special Facts'

However, courts have also recognized a 'special facts' exception to the general rule, and have required review of an application under the pre-existing zoning ordinance when landowner would have acquired vested rights but for the bad-faith delay by municipal officials in acting on the application. Thus, in Matter of Pokoik v. Silsdorf, 40 N.Y.2d 769, a divided Court of Appeals annulled a determination denying a building permit for addition of two bedrooms to a four-bedroom house on Fire Island when village officials had delayed review of the permit application to give the Village Board time to enact a zoning amendment that limited the number of bedrooms in a single-family house. In holding the amended ordinance inapplicable to the permit application, the court's majority emphasized that landowner was 'entitled to the permit as a matter of right by full compliance with the requirements at the time of the application and that proper action upon the permit would have given him time to acquire a vested right.'

The Court of Appeals has applied the 'special facts' exception in cases where the developer had an absolute right to develop under the existing ordinance. Thus, in Matter of Faymor Development Co., Inc. v. Bd. Of Standards and Appeals, 45 N.Y.2d 560, the court held that the Board improperly revoked a building permit in reliance on a newly enacted zoning ordinance when the landowner had begun as-of-right construction based on the permit, but had not completed the foundation and acquired a vested right to complete the project because the city officials had stood by and allowed an illegal mob to prevent completion of the foundation. Similarly, in Matter of Temkin v. Karagheuzoff, 34 N.Y.2d 324, the curt upheld the right of a developer to continue building pursuant to a validly issued building permit when the city, without statutory authority, had enacted a stop-gap ordinance that prevented developer from continuing work to a point at which developer's rights would have vested. The court held that the city could not rely on a subsequently enacted zoning ordinance because the city's unauthorized action had interfered with vesting of landowner's rights. In both Faymor and Temkin, landowner had a right to develop under the previously-issued permit; under the law in effect at the time construction began, no municipal official had discretion to reject or modify landowner's project.

By contrast, in cases where the municipal officials have more discretion in approving petitioner's application, the reasons for applying the special facts exception are less compelling. Where the developer is entitled to approval of his application as a matter of right, but municipal authorities wrongfully delay their review of the application while enacting restrictive zoning ordinance amendments, the improper stalling by these officials is directly responsible for the failure of petitioner's rights to vest. Where the approval of developer's application is discretionary, however, inappropriate delay by city officials may be just one of many reasons why petitioner's development rights fail to vest. Because the reviewing body, in its discretion, could have denied or modified landowner's application, there is no guarantee that the developer's rights would have vested at all.

Case Law

This difference between as-of-right development and discretionary appro-vals is reflected in the Appellate Division and Supreme Court case law. When a municipality delays in evaluating a building permit to which a landowner is entitled as a matter of right, courts typically apply the special facts exception to preclude application of a subsequently enacted ordinance. Thus, in Matter of Greco v. Trincellito, 206 AD2d 779, the court held that the town was obligated to grant a building permit because '[h]ad the Town acted promptly on Roadway's application ' the permit would have predated the enactment of the zoning ordinance by nearly one year, giving Roadway plenty of time to complete construction or perform sufficient construction to acquire vested rights.' See also Matter of Harris v. Coffey, 14 Misc2d 916, holding that landowner would be entitled to a building permit wrongfully withheld 'only if it appears that prompt action on his application would have enabled him to commence such operations under it as would result in the creation of a vested right before the amendment of the Zoning Ordinance became effective.' A few courts have extended the special facts exception to applications for special permits, where the discretion of the board is limited: the board is generally required to issue the permit if it complies with the existing ordinance. See Mattre of Gardiner v. LoGrande, 83 AD2d 614; Matter of Triangle Inn v. LoGrande, 124 AD2d 737. On the other hand, when the terms of the zoning ordinance make the special permit more discretionary, courts have been reluctant to apply the special facts exception. See King Road Materials, Inc. v. Garafolo, 173 AD2d 931 (noting, on special permit application, that 'petitioner has failed to demonstrate that proper action upon the permit would have given it time to acquire a vested right').

By contrast, when an applicant seeks site plan review, which involves the exercise of considerable discretion by municipal officials, courts have generally declined to apply the special facts exception, and have held that the newly enacted and more restrictive ordinance governs landowner's application. See Matter of Magee v. Rocco, 158 AD2d 53 (declining to apply special facts exception when, after landowner applied for site plan approval, town adopted moratorium against appro-val of plans which had not received preliminary approval, and then enacted more restrictive zoning ordinance); Matter of Cleary v. Bibbo, 241 AD2d 887 (declining to apply special facts exception when town board enacted new ordinance after landowner had sought subdivision approval); and Matter of Bibeau v. Village of Tuxedo Park, 145 AD2d 478 (applying ordinance enacted after landowner had sought site plan review, and rejecting application of special facts exception). These cases are consistent with the rationale for the special facts exception, because in cases where the application was subject to discretionary review, prompt review of the application would not necessarily have resulted in a vesting of rights. There is, however, some authority to the contrary. In Matter of Hatcher v. Planning Board, 111 AD2d 812, the court remitted for a hearing on bad faith when landowner sought to avoid application of a newly-enacted ordinance to a pre-existing application for site plan review. See also Matter of Klein Enters. v. Braatz, 51 AD2d 1021. In neither Hatcher nor Klein, however, did the Appellate Division actually require approval of landowner's application; in each cases the Appellate Division reversed a Supreme Court determination in landowner's favor, and remanded for reconsideration in light of the newly-enacted ordinance and the landowner's allegations of bad faith.

Stewart E. Sterk is the Editor-in-Chief of this newsletter. Cara Marie Koss is a second-year student at the Benjamin N. Cardozo School of Law.

Decided recently by Westchester Supreme Court, Mamaroneck Beach & Yacht Club, Inc. v. Fraioli raises a much litigated issue in New York: When can a municipality apply a newly enacted ordinance to a pending application by a developer?

The Court of Appeals has recognized that when an application for development rights is reviewed by municipal authorities or a court, the reviewing body must generally apply the law in effect at the time of review. Thus, if a zoning ordinance is amended while an application is under review, the amended ordinance is controlling. For example, in Matter of Alscot Investing Corp. v. Village of Rockville Centre , 64 N.Y.2d 921, the court refused to permit construction of a roof sign because, although such roof signs were allowed at the time petitioner filed his application, a subsequent zoning ordinance amendment prohibited these signs. The court held that the amended Code applied and dismissed landowner's article 78 proceeding.

Courts and boards apply amended ordinances to pending development applications because development rights do not vest until the developer has made substantial expenditures and undertaken substantial construction. As the Court of Appeals explained in Matter of Ellington Constr. Corp. v. Zoning Bd. of Appeals , 77 N.Y.2d 114, 'where a more restrictive zoning ordinance is enacted, an owner will be permitted to complete a structure or a development which an amendment has rendered nonconforming only where the owner has undertaken substantial construction and made substantial expenditures prior to the effective date of the amendment.' (In Ellington itself, the court construed what is now Village Law section 7-709 to permit a developer to acquire vested rights in an approved subdivision when, during the statutory exemption period, the developer completed the substantial construction with respect to some, but not all, of the lots in the subdivision). Matter of Smith v. M. Spiegel & Sons, Inc ., 31 A.D.2d 819, aff'd 24 N.Y.2d 920, illustrates application of the general rule on vesting of rights. There, the court held that landowner had acquired no vested rights even though landowner had purchased land with the intention of constructing a gasoline service station, had demolished existing structures on the site, and had retained the services of an architect to prepare plans for the service station. As a result, the court held that a subsequently enacted zoning ordinance banning gasoline service stations was applicable to landowner's parcel, as the landowner's preparatory work was not 'work of a substantial character.'

In many cases, however, review of an application is delayed while municipal officials enact a new and more restrictive zoning ordinance. Typically, courts faced with this scenario uphold the general rule that the ordinance as amended is controlling. Thus in Alscot Investing, supra, the amended zoning ordinance was applied even though municipal authorities failed to act on petitioner's application for 6 weeks because the Village had imposed a moratorium on issuance of sign permits prior to petitioner's application.

'Special Facts'

However, courts have also recognized a 'special facts' exception to the general rule, and have required review of an application under the pre-existing zoning ordinance when landowner would have acquired vested rights but for the bad-faith delay by municipal officials in acting on the application. Thus, in Matter of Pokoik v. Silsdorf , 40 N.Y.2d 769, a divided Court of Appeals annulled a determination denying a building permit for addition of two bedrooms to a four-bedroom house on Fire Island when village officials had delayed review of the permit application to give the Village Board time to enact a zoning amendment that limited the number of bedrooms in a single-family house. In holding the amended ordinance inapplicable to the permit application, the court's majority emphasized that landowner was 'entitled to the permit as a matter of right by full compliance with the requirements at the time of the application and that proper action upon the permit would have given him time to acquire a vested right.'

The Court of Appeals has applied the 'special facts' exception in cases where the developer had an absolute right to develop under the existing ordinance. Thus, in Matter of Faymor Development Co., Inc. v. Bd. Of Standards and Appeals , 45 N.Y.2d 560, the court held that the Board improperly revoked a building permit in reliance on a newly enacted zoning ordinance when the landowner had begun as-of-right construction based on the permit, but had not completed the foundation and acquired a vested right to complete the project because the city officials had stood by and allowed an illegal mob to prevent completion of the foundation. Similarly, in Matter of Temkin v. Karagheuzoff , 34 N.Y.2d 324, the curt upheld the right of a developer to continue building pursuant to a validly issued building permit when the city, without statutory authority, had enacted a stop-gap ordinance that prevented developer from continuing work to a point at which developer's rights would have vested. The court held that the city could not rely on a subsequently enacted zoning ordinance because the city's unauthorized action had interfered with vesting of landowner's rights. In both Faymor and Temkin, landowner had a right to develop under the previously-issued permit; under the law in effect at the time construction began, no municipal official had discretion to reject or modify landowner's project.

By contrast, in cases where the municipal officials have more discretion in approving petitioner's application, the reasons for applying the special facts exception are less compelling. Where the developer is entitled to approval of his application as a matter of right, but municipal authorities wrongfully delay their review of the application while enacting restrictive zoning ordinance amendments, the improper stalling by these officials is directly responsible for the failure of petitioner's rights to vest. Where the approval of developer's application is discretionary, however, inappropriate delay by city officials may be just one of many reasons why petitioner's development rights fail to vest. Because the reviewing body, in its discretion, could have denied or modified landowner's application, there is no guarantee that the developer's rights would have vested at all.

Case Law

This difference between as-of-right development and discretionary appro-vals is reflected in the Appellate Division and Supreme Court case law. When a municipality delays in evaluating a building permit to which a landowner is entitled as a matter of right, courts typically apply the special facts exception to preclude application of a subsequently enacted ordinance. Thus, in Matter of Greco v. Trincellito , 206 AD2d 779, the court held that the town was obligated to grant a building permit because '[h]ad the Town acted promptly on Roadway's application ' the permit would have predated the enactment of the zoning ordinance by nearly one year, giving Roadway plenty of time to complete construction or perform sufficient construction to acquire vested rights.' See also Matter of Harris v. Coffey , 14 Misc2d 916, holding that landowner would be entitled to a building permit wrongfully withheld 'only if it appears that prompt action on his application would have enabled him to commence such operations under it as would result in the creation of a vested right before the amendment of the Zoning Ordinance became effective.' A few courts have extended the special facts exception to applications for special permits, where the discretion of the board is limited: the board is generally required to issue the permit if it complies with the existing ordinance. See Mattre of Gardiner v. LoGrande , 83 AD2d 614; Matter of Triangle Inn v. LoGrande , 124 AD2d 737. On the other hand, when the terms of the zoning ordinance make the special permit more discretionary, courts have been reluctant to apply the special facts exception. See King Road Materials, Inc. v. Garafolo , 173 AD2d 931 (noting, on special permit application, that 'petitioner has failed to demonstrate that proper action upon the permit would have given it time to acquire a vested right').

By contrast, when an applicant seeks site plan review, which involves the exercise of considerable discretion by municipal officials, courts have generally declined to apply the special facts exception, and have held that the newly enacted and more restrictive ordinance governs landowner's application. See Matter of Magee v. Rocco , 158 AD2d 53 (declining to apply special facts exception when, after landowner applied for site plan approval, town adopted moratorium against appro-val of plans which had not received preliminary approval, and then enacted more restrictive zoning ordinance); Matter of Cleary v. Bibbo , 241 AD2d 887 (declining to apply special facts exception when town board enacted new ordinance after landowner had sought subdivision approval); and Matter of Bibeau v. Village of Tuxedo Park , 145 AD2d 478 (applying ordinance enacted after landowner had sought site plan review, and rejecting application of special facts exception). These cases are consistent with the rationale for the special facts exception, because in cases where the application was subject to discretionary review, prompt review of the application would not necessarily have resulted in a vesting of rights. There is, however, some authority to the contrary. In Matter of Hatcher v. Planning Board , 111 AD2d 812, the court remitted for a hearing on bad faith when landowner sought to avoid application of a newly-enacted ordinance to a pre-existing application for site plan review. See also Matter of Klein Enters. v. Braatz , 51 AD2d 1021. In neither Hatcher nor Klein, however, did the Appellate Division actually require approval of landowner's application; in each cases the Appellate Division reversed a Supreme Court determination in landowner's favor, and remanded for reconsideration in light of the newly-enacted ordinance and the landowner's allegations of bad faith.

Stewart E. Sterk is the Editor-in-Chief of this newsletter. Cara Marie Koss is a second-year student at the Benjamin N. Cardozo School of Law.