Sorting Out Vested Rights and Non-Conforming Uses

Pre-existing non-conforming use doctrine and “vested rights” doctrine are two different, but related, mechanisms for protecting landowners from the impact of a newly enacted zoning ordinance. Both are state law doctrines with constitutional underpinnings: they both operate to obviate the need for landowners to raise, and courts to consider, claims that a newly enacted ordinance works a “taking.” In Global Aggregates LLC v. Town of Yorkshire (NYLJ 2/19/2010, p. 41., col. 3), the Court of Appeals decided a case in which the landowner raised both doctrines.

The Case

Glacial was formed to engage in sand and gravel mining in Western New York. In 1996, for a total price of $250,000, Glacial purchased or acquired options on a promising 375-acre site in an area without any zoning law. Glacial then sought a permit from the New York State Department of Environmental Conservation, expending about $500,000 to create plans for the mining operation and to conduct the studies necessary to comply with SEQRA. In 1998, the town board enacted a moratorium on gravel mining, but when, in September 1999, DEC issued a five-year mining permit, the town board lifted the moratorium. Glacial then excavated 40 truckloads of gravel over a two-year period, and did some exploratory digging. Glacial did not finish a bridge or haul road required by DEC.

In 2001, the town enacted its first zoning law, which required a special-use permit for gravel mining. The ordinance expressly permitted continuation of pre-existing non-conforming uses. In June 2004, at the request of a bank planning to lend Glacial $2.9 million to begin full-scale mining operations, the town supervisor wrote a letter confirming that Glacial had the right to operate the mine so long as it began operation within five years from the date of the DEC permit. Four days later, however, the town board passed a motion authorizing the supervisor to send a new letter reversing his initial position and informing the bank that Glacial'fs currently inactive mining sites were subject to the 2001 zoning ordinance.

Glacial then brought an action seeking a judgment declaring that it was entitled to operate a sand and gravel mine on the site without seeking a special permit. Glacial amended its complaint to allege a prior nonconforming use and deprivation of vested rights. A jury concluded that Glacial had a prior nonconforming use and a vested right. When the town appealed, the Appellate Division reversed, holding that Glacial had not, at trial, established that it was making a nonconforming use at the time the ordinance was enacted in 2001, and holding that because almost all of Glacial'fs expenditures had been made before the DEC permit was issued, not in reliance on that permit. Glacial appealed, and a unanimous Court of Appeals reversed.

The Nonconforming Use Claim

In holding that the evidence was sufficient for a jury to conclude that Glacial had been engaged in a prior nonconforming use at the time the ordinance was enacted, the court relied on the mining permit itself as evidence of an intent to use the parcel for mining purposes. In doing so, however, the court relied on two of its earlier cases in which the issue was how much of the landowner'fs parcel qualified for nonconforming use status. Matter of Syracuse Aggregate Corp. v. Weise, 51 NY2d 278, Buffalo Crushed Stone, Inc. v. Town of Cheektowaga, 13 NY3d 88. In those cases, there was no question that the landowner was engaged in active mining operations; the question was whether the landowner could extend those operations to areas of the site that had not previously been mined. The court emphasized the uniqueness of the industry, and the common practice of leaving portions of the land as mineral reserves to be excavated in the future, to support its conclusion that if the landowner had an intention to extend quarrying to the boundaries of the property, the non-conforming use should extend to those boundaries, even if actual quarrying had not begin in the specific area of controversy. Buffalo Crushed Stone, 13 NY3d at 98-99, supra.

By contrast, in Glacial Aggregates, the landowner had not engaged in any significant mining operation at the time the new ordinance was enacted. In that circumstance, the court'fs focus on the landowner'fs intentions seems at odds with language in prior cases suggesting that the landowner claiming a nonconforming use must “demonstrate that the property was indeed used for the nonconforming purpose, as distinguished from a mere contemplated use.” Syracuse Aggregate, 51 NY2d at 284, supra. Whether and to what extent Glacial'fs nonconforming use holding extends past mining operations remains to be seen.

The Vested Rights Claim

Typically, a landowner advances a vested rights claim in cases where landowner cannot establish the existence of a prior non-conforming use ” particularly in those cases where the landowner is in the process of building at the time the municipality enacts a new ordinance. In Town of Orangetown v. Magee, 88 NY2d 41, the Court of Appeals held that a landowner had acquired vested rights to complete its proposed industrial building by building a temporary construction building and making other improvements in reliance on a lawfully issued building permit. In the course of its opinion, the court indicated that neither the permit alone, nor the construction alone, but rather the landowner'fs substantial actions in reliance on the building permit that would give rise to vested rights.

In Glacial Aggregates, the Appellate Division had applied that principle in dismissing the vested rights claim, reasoning that because virtually all of Glacial'fs expenditures had been made before issuance of the DEC permit, those expenditures could not have been made in reliance on the permit. The Court of Appeals, however, saw the case differently. In the court'fs view, the critical fact was that the Town of Yorkshire had no zoning ordinance at the time Glacial acquired its property. The court indicated that because the town had subjected Glacial to no restrictions at all at the time Glacial acquired its parcel, the situation was identical to a situation in which the town had granted Glacial a permit. As Judge Susan P. Read'fs opinion put it, the issue is “whether Glacial acquired a vested right by way of the unqualified Town permission it once enjoyed to mine its property.”

The court ignored the fact that Glacial'fs right could not have “vested” in the ordinary sense of that word until DEC granted its permit. If DEC had not granted the permit, all of Glacial'fs prior investments (most of which were made in the course of applying for the DEC permit) would have been for naught, and Glacial would have received no compensation for those investments. The court'fs use of “vested rights” terminology, therefore, appears peculiar.

Perhaps what underlies the court'fs holding is a belief that when Glacial spent $500,000 in the process of obtaining the DEC permit, it assumed the risk that DEC would reject its application, but not the risk that the Town would enact a zoning ordinance. As an economic matter, such an approach to vested rights doctrine is appealing; it limits the uncertainty facing a developer when deciding whether to expend money applying for a permit. At the same time, however, the court'fs decision leaves considerable uncertainty about the scope of vested rights doctrine for the future.

Stewart E. Sterk, Mack Professor of Law at Benjamin N. Cardozo School of Law, is Editor-in-Chief of this newsletter.

Pre-existing non-conforming use doctrine and “vested rights” doctrine are two different, but related, mechanisms for protecting landowners from the impact of a newly enacted zoning ordinance. Both are state law doctrines with constitutional underpinnings: they both operate to obviate the need for landowners to raise, and courts to consider, claims that a newly enacted ordinance works a “taking.” In Global Aggregates LLC v. Town of Yorkshire (NYLJ 2/19/2010, p. 41., col. 3), the Court of Appeals decided a case in which the landowner raised both doctrines.

The Case

Glacial was formed to engage in sand and gravel mining in Western New York. In 1996, for a total price of $250,000, Glacial purchased or acquired options on a promising 375-acre site in an area without any zoning law. Glacial then sought a permit from the New York State Department of Environmental Conservation, expending about $500,000 to create plans for the mining operation and to conduct the studies necessary to comply with SEQRA. In 1998, the town board enacted a moratorium on gravel mining, but when, in September 1999, DEC issued a five-year mining permit, the town board lifted the moratorium. Glacial then excavated 40 truckloads of gravel over a two-year period, and did some exploratory digging. Glacial did not finish a bridge or haul road required by DEC.

In 2001, the town enacted its first zoning law, which required a special-use permit for gravel mining. The ordinance expressly permitted continuation of pre-existing non-conforming uses. In June 2004, at the request of a bank planning to lend Glacial $2.9 million to begin full-scale mining operations, the town supervisor wrote a letter confirming that Glacial had the right to operate the mine so long as it began operation within five years from the date of the DEC permit. Four days later, however, the town board passed a motion authorizing the supervisor to send a new letter reversing his initial position and informing the bank that Glacial'fs currently inactive mining sites were subject to the 2001 zoning ordinance.

Glacial then brought an action seeking a judgment declaring that it was entitled to operate a sand and gravel mine on the site without seeking a special permit. Glacial amended its complaint to allege a prior nonconforming use and deprivation of vested rights. A jury concluded that Glacial had a prior nonconforming use and a vested right. When the town appealed, the Appellate Division reversed, holding that Glacial had not, at trial, established that it was making a nonconforming use at the time the ordinance was enacted in 2001, and holding that because almost all of Glacial'fs expenditures had been made before the DEC permit was issued, not in reliance on that permit. Glacial appealed, and a unanimous Court of Appeals reversed.

The Nonconforming Use Claim

In holding that the evidence was sufficient for a jury to conclude that Glacial had been engaged in a prior nonconforming use at the time the ordinance was enacted, the court relied on the mining permit itself as evidence of an intent to use the parcel for mining purposes. In doing so, however, the court relied on two of its earlier cases in which the issue was how much of the landowner'fs parcel qualified for nonconforming use status. Matter of Syracuse Aggregate Corp. v. Weise , 51 NY2d 278, Buffalo Crushed Stone, Inc. v. Town of Cheektowaga , 13 NY3d 88. In those cases, there was no question that the landowner was engaged in active mining operations; the question was whether the landowner could extend those operations to areas of the site that had not previously been mined. The court emphasized the uniqueness of the industry, and the common practice of leaving portions of the land as mineral reserves to be excavated in the future, to support its conclusion that if the landowner had an intention to extend quarrying to the boundaries of the property, the non-conforming use should extend to those boundaries, even if actual quarrying had not begin in the specific area of controversy. Buffalo Crushed Stone, 13 NY3d at 98-99, supra.

By contrast, in Glacial Aggregates, the landowner had not engaged in any significant mining operation at the time the new ordinance was enacted. In that circumstance, the court'fs focus on the landowner'fs intentions seems at odds with language in prior cases suggesting that the landowner claiming a nonconforming use must “demonstrate that the property was indeed used for the nonconforming purpose, as distinguished from a mere contemplated use.” Syracuse Aggregate, 51 NY2d at 284, supra. Whether and to what extent Glacial'fs nonconforming use holding extends past mining operations remains to be seen.

The Vested Rights Claim

Typically, a landowner advances a vested rights claim in cases where landowner cannot establish the existence of a prior non-conforming use ” particularly in those cases where the landowner is in the process of building at the time the municipality enacts a new ordinance. In Town of Orangetown v. Magee , 88 NY2d 41, the Court of Appeals held that a landowner had acquired vested rights to complete its proposed industrial building by building a temporary construction building and making other improvements in reliance on a lawfully issued building permit. In the course of its opinion, the court indicated that neither the permit alone, nor the construction alone, but rather the landowner'fs substantial actions in reliance on the building permit that would give rise to vested rights.

In Glacial Aggregates, the Appellate Division had applied that principle in dismissing the vested rights claim, reasoning that because virtually all of Glacial'fs expenditures had been made before issuance of the DEC permit, those expenditures could not have been made in reliance on the permit. The Court of Appeals, however, saw the case differently. In the court'fs view, the critical fact was that the Town of Yorkshire had no zoning ordinance at the time Glacial acquired its property. The court indicated that because the town had subjected Glacial to no restrictions at all at the time Glacial acquired its parcel, the situation was identical to a situation in which the town had granted Glacial a permit. As Judge Susan P. Read'fs opinion put it, the issue is “whether Glacial acquired a vested right by way of the unqualified Town permission it once enjoyed to mine its property.”

The court ignored the fact that Glacial'fs right could not have “vested” in the ordinary sense of that word until DEC granted its permit. If DEC had not granted the permit, all of Glacial'fs prior investments (most of which were made in the course of applying for the DEC permit) would have been for naught, and Glacial would have received no compensation for those investments. The court'fs use of “vested rights” terminology, therefore, appears peculiar.

Perhaps what underlies the court'fs holding is a belief that when Glacial spent $500,000 in the process of obtaining the DEC permit, it assumed the risk that DEC would reject its application, but not the risk that the Town would enact a zoning ordinance. As an economic matter, such an approach to vested rights doctrine is appealing; it limits the uncertainty facing a developer when deciding whether to expend money applying for a permit. At the same time, however, the court'fs decision leaves considerable uncertainty about the scope of vested rights doctrine for the future.

Stewart E. Sterk, Mack Professor of Law at Benjamin N. Cardozo School of Law, is Editor-in-Chief of this newsletter.