Development

Right to Build Vested

Matter of Menachem Realty Inc. v. Srinivasan

NYLJ 3/23/09, p. 31., col. 4

AppDiv, Second Dept.

(memorandum opinion)

In landowner's article 78 proceeding challenging denial of an application to renew a building permit, the New York City Board of Standards and Appeals (BSA) appealed from the Supreme Court's grant of the petition. The Appellate Division affirmed, holding that the Board was bound by its own past practices and that landowner's right to build had vested.

Landowner sought and obtained a building permit to construct a six-story condominium building. During construction, the Department of Buildings (DOB) audited the project and issued a notice to revoke because the work was not being done in compliance with landowner's professionally certified plans. Shortly thereafter, the city rezoned the area, which caused the permit to lapse. DOB then issued a stop work order and revoked the permit for failure to cure DOB's objections. Landowner then appealed to the BSA for a renewal of the permit, but BSA denied the application. BSA concluded that landowner had not cured the objections to the construction by the effective date of the rezoning, and that its permit application did not therefore include “complete plans and specifications.” As a result, the BSA determined that the application was invalid. Finally, BSA determined that because landowner lacked a valid permit as of the effective date of the rezoning, section 11-331 of the New York City Zoning Resolution prohibited renewal of the permit. Landowner then brought this article 78 proceeding, and the Supreme Court granted the petition. BSA appealed.

In affirming, the Appellate Division started with the premise that the determination of an administrative agency which does not adhere to its own prior precedent or indicate a reason for a different result is arbitrary and capricious. In this case, the court concluded that BSA had not adequately distinguished its prior determinations on which it had found permits valid on the same facts. The court also held that landowner had acquired vested rights under the common law. As a result, the court held that the Supreme Court had properly directed BSA to reissue the permit and to grant landowner a six-month extension to complete construction.

COMMENT

Under New York law, when a newly enacted zoning ordinance renders a landowner's previously permitted project nonconforming, the landowner acquires a vested right to complete the project only if he has undertaken substantial construction or expenditures prior to the amendment. Thus, in Town of Orangetown v. Magee, 88 NY2d 41, the Court of Appeals held that landowner had acquired vested rights to complete an industrial building when landowner, after obtaining a building permit and before a zoning amendment precluded construction of commercial buildings on the premises, spent more than $4 million on improvements to the site. The court indicated that whether landowner had done enough prior to revocation was a question of fact, and deferred to the determination of the courts below on that issue, a determination that was, according to the court “supported by evidence in the record.” Id. at 48. Even when landowner has satisfied the substantial construction requirement, however, New York courts have held that a landowner has not established vested rights if he or she relies on an invalidly granted permit, i.e., a permit that does not comply with existing zoning requirements. In Parkview Associates v. New York, 71 N.Y.2d 274 (1988), the Department of Buildings issued a permit to construct a 31-story building 100 feet back from Park Avenue despite a provision in the zoning ordinance which required a 150 foot-setback in order to exceed 19 stories. After landowner built 31 stories high, the DOB revoked the building permit to the extent that the building exceeded 19 stories. The Court of Appeals held that the DOB had acted properly, rejecting landowner's claim that he had acquired a vested right to complete the 31-story building. The Court of Appeals explained that vested rights are not available when a good-faith inquirer would have discovered the bureaucratic error.

Nor do rights vest when the landowner substantially completes a building that is inconsistent with both the zoning ordinance and the building permit. In Perotta v. New York, 107 A.D.2d 320, aff'd 66 N.Y.2d 859 (1985), the landowner substantially constructed a three-story residence despite a permit to build a two-story residence, and the city revoked the permit for failure to comply with the permit requirements. The court held that even if the initial permit was valid (it was invalid in this case), the landowner's rights did not vest despite substantial construction because the building was significantly different from the building plans submitted to the city for the initial permit approval.

New York courts will reinstate landowner's permit, providing an opportunity to acquire vested rights, when a municipality illegally prevents substantial construction prior to a zoning amendment, or negligently allows neighbors to interfere with substantial construction. In Faymor Development Co. v. Board of Standards & Appeals, 45 N.Y.2d 560 (1978), the city granted landowner a permit to construct a six-story building, but neighbors prevented substantial construction by physically blocking construction trucks from entering the site. Public officials and the police, fire and traffic departments failed to provide requested assistance and the city rezoned the property, causing automatic revocation of the permit. The court held (in equity) that the public officials' neglect required annulment of the permit revocation despite the landowner's failure to complete substantial construction prior to the zoning amendment.

Examine the court's vested rights determination. If a landowner starts construction without a valid permit, do rights vest? What if landowner has a valid permit, but builds structures that are inconsistent with that permit. Do rights vest? (Note that the issue is whether rights have vested before the municipality amends the zoning ordinance in a way that would not permit the same building to be built.)

Revocation of Compliance Certificate Without Hearing Constituted Due Process Violation

G.I. Home Developing Corp. v. Weis

NYLJ 4/14/09, p. 32., col. 1

U.S. Dist. Ct., EDNY

(Hurley, J.)

In an action brought by landowner against the town and town officials for depriving landowner of property without due process, the municipal defendants moved to dismiss. The court denied the motion, holding that landowner had stated a claim for relief based on the town's revocation, without a hearing, of landowner's certificate of zoning compliance.

In 1982, landowner's predecessor applied for and received a certificate of zoning compliance for use of the premises as a public garage. Although the area has been rezoned for partial residential and partial business use, the property has continuously been used as an auto repair and service shop. In 2007, the town building inspector sent a letter to landowner revoking the certificate of compliance for unspecified violations. Other than the letter, the town provided no notice and no hearing prior to revoking the certificate. Landowner then brought this action pursuant to 42 USC section 1983, contending that the town's action denied landowner property without due process of law. The municipal defendants moved to dismiss.

In denying the motion to dismiss, the court first held that the certificate of compliance was a constitutionally protected property interest. The court then rejected the town's argument that the town did not deprive landowner of that interest because the zoning inspector's revocation of landowner's certificate of compliance was of no legal effect. Even if the zoning code did not give zoning inspectors the power to revoke certificates, the letter sent by that inspector had the indicia of official correspondence of the town. The court noted that errant actions by public officials often serve as the foundation for section 1983 actions. Finally, the court held that in order to deprive landowner of the certificate of compliance, the town was obligated to provide notice and a pre-deprivation hearing. The court concluded that it would not be unduly burdensome to provide such a hearing. As a result, landowner properly pled a violation of its due process rights.

Right to Build Vested

Matter of Menachem Realty Inc. v. Srinivasan

NYLJ 3/23/09, p. 31., col. 4

AppDiv, Second Dept.

(memorandum opinion)

In landowner's article 78 proceeding challenging denial of an application to renew a building permit, the New York City Board of Standards and Appeals (BSA) appealed from the Supreme Court's grant of the petition. The Appellate Division affirmed, holding that the Board was bound by its own past practices and that landowner's right to build had vested.

Landowner sought and obtained a building permit to construct a six-story condominium building. During construction, the Department of Buildings (DOB) audited the project and issued a notice to revoke because the work was not being done in compliance with landowner's professionally certified plans. Shortly thereafter, the city rezoned the area, which caused the permit to lapse. DOB then issued a stop work order and revoked the permit for failure to cure DOB's objections. Landowner then appealed to the BSA for a renewal of the permit, but BSA denied the application. BSA concluded that landowner had not cured the objections to the construction by the effective date of the rezoning, and that its permit application did not therefore include “complete plans and specifications.” As a result, the BSA determined that the application was invalid. Finally, BSA determined that because landowner lacked a valid permit as of the effective date of the rezoning, section 11-331 of the New York City Zoning Resolution prohibited renewal of the permit. Landowner then brought this article 78 proceeding, and the Supreme Court granted the petition. BSA appealed.

In affirming, the Appellate Division started with the premise that the determination of an administrative agency which does not adhere to its own prior precedent or indicate a reason for a different result is arbitrary and capricious. In this case, the court concluded that BSA had not adequately distinguished its prior determinations on which it had found permits valid on the same facts. The court also held that landowner had acquired vested rights under the common law. As a result, the court held that the Supreme Court had properly directed BSA to reissue the permit and to grant landowner a six-month extension to complete construction.

COMMENT

Under New York law, when a newly enacted zoning ordinance renders a landowner's previously permitted project nonconforming, the landowner acquires a vested right to complete the project only if he has undertaken substantial construction or expenditures prior to the amendment. Thus, in Town of Orangetown v. Magee, 88 NY2d 41, the Court of Appeals held that landowner had acquired vested rights to complete an industrial building when landowner, after obtaining a building permit and before a zoning amendment precluded construction of commercial buildings on the premises, spent more than $4 million on improvements to the site. The court indicated that whether landowner had done enough prior to revocation was a question of fact, and deferred to the determination of the courts below on that issue, a determination that was, according to the court “supported by evidence in the record.” Id. at 48. Even when landowner has satisfied the substantial construction requirement, however, New York courts have held that a landowner has not established vested rights if he or she relies on an invalidly granted permit, i.e., a permit that does not comply with existing zoning requirements. In Parkview Associates v. New York, 71 N.Y.2d 274 (1988), the Department of Buildings issued a permit to construct a 31-story building 100 feet back from Park Avenue despite a provision in the zoning ordinance which required a 150 foot-setback in order to exceed 19 stories. After landowner built 31 stories high, the DOB revoked the building permit to the extent that the building exceeded 19 stories. The Court of Appeals held that the DOB had acted properly, rejecting landowner's claim that he had acquired a vested right to complete the 31-story building. The Court of Appeals explained that vested rights are not available when a good-faith inquirer would have discovered the bureaucratic error.

Nor do rights vest when the landowner substantially completes a building that is inconsistent with both the zoning ordinance and the building permit. In Perotta v. New York, 107 A.D.2d 320, aff'd 66 N.Y.2d 859 (1985), the landowner substantially constructed a three-story residence despite a permit to build a two-story residence, and the city revoked the permit for failure to comply with the permit requirements. The court held that even if the initial permit was valid (it was invalid in this case), the landowner's rights did not vest despite substantial construction because the building was significantly different from the building plans submitted to the city for the initial permit approval.

New York courts will reinstate landowner's permit, providing an opportunity to acquire vested rights, when a municipality illegally prevents substantial construction prior to a zoning amendment, or negligently allows neighbors to interfere with substantial construction. In Faymor Development Co. v. Board of Standards & Appeals, 45 N.Y.2d 560 (1978), the city granted landowner a permit to construct a six-story building, but neighbors prevented substantial construction by physically blocking construction trucks from entering the site. Public officials and the police, fire and traffic departments failed to provide requested assistance and the city rezoned the property, causing automatic revocation of the permit. The court held (in equity) that the public officials' neglect required annulment of the permit revocation despite the landowner's failure to complete substantial construction prior to the zoning amendment.

Examine the court's vested rights determination. If a landowner starts construction without a valid permit, do rights vest? What if landowner has a valid permit, but builds structures that are inconsistent with that permit. Do rights vest? (Note that the issue is whether rights have vested before the municipality amends the zoning ordinance in a way that would not permit the same building to be built.)

Revocation of Compliance Certificate Without Hearing Constituted Due Process Violation

G.I. Home Developing Corp. v. Weis

NYLJ 4/14/09, p. 32., col. 1

U.S. Dist. Ct., EDNY

(Hurley, J.)

In an action brought by landowner against the town and town officials for depriving landowner of property without due process, the municipal defendants moved to dismiss. The court denied the motion, holding that landowner had stated a claim for relief based on the town's revocation, without a hearing, of landowner's certificate of zoning compliance.

In 1982, landowner's predecessor applied for and received a certificate of zoning compliance for use of the premises as a public garage. Although the area has been rezoned for partial residential and partial business use, the property has continuously been used as an auto repair and service shop. In 2007, the town building inspector sent a letter to landowner revoking the certificate of compliance for unspecified violations. Other than the letter, the town provided no notice and no hearing prior to revoking the certificate. Landowner then brought this action pursuant to 42 USC section 1983, contending that the town's action denied landowner property without due process of law. The municipal defendants moved to dismiss.

In denying the motion to dismiss, the court first held that the certificate of compliance was a constitutionally protected property interest. The court then rejected the town's argument that the town did not deprive landowner of that interest because the zoning inspector's revocation of landowner's certificate of compliance was of no legal effect. Even if the zoning code did not give zoning inspectors the power to revoke certificates, the letter sent by that inspector had the indicia of official correspondence of the town. The court noted that errant actions by public officials often serve as the foundation for section 1983 actions. Finally, the court held that in order to deprive landowner of the certificate of compliance, the town was obligated to provide notice and a pre-deprivation hearing. The court concluded that it would not be unduly burdensome to provide such a hearing. As a result, landowner properly pled a violation of its due process rights.