How Much Deference Do Zoning Ordinances Deserve?

To what extent can a municipality's zoning ordinance distinguish among commercial enterprises, and what evidence must a municipality produce to justify distinctions among commercial enterprises? Those are the issues the Court of Appeals confronted in Sunrise Check Cashing and Payroll Services, Inc. v. Town of Hempstead (NYLJ 2/15/13, p. 23, col. 1). In striking down an ordinance prohibiting check-cashing ordinances in most zoning districts, the court implicitly suggested that a municipality's classifications are entitled only to limited deference.

The Facts and the Opinions

In 2006, the Town of Hempstead enacted an ordinance prohibiting check-cashing ordinances in all but industrial and light manufacturing districts. On the date of the public hearing on the ordinance, the town attorney prepared a memorandum indicating that the ordinance would encourage “young people and those of lower incomes to establish savings and checking accounts” and would eliminate “predatory and exploitative finance enterprises from commercial areas, which is beneficial because these enterprises tend to keep a neighborhood down.” The memorandum analogized check-cashing establishments to pawn shops and strip clubs. When the ordinance was enacted, several check-cashing establishments brought a declaratory judgment action.

Supreme Court granted a declaratory judgment to the town. The Appellate Division reversed, holding that the ordinance was pre-empted by article IX-A of the state Banking Law and related regulations. The town appealed.

In affirming, the Court of Appeals did not reach the pre-emption issue, holding instead that the ordinance exceeded the town's zoning power under Town Law section 261. In an opinion by Judge Robert S. Smith, the court emphasized that the zoning power is not a general police power, but merely a power to regulate land use. In particular, the court emphasized that the town had power to regulate use, but not the person who owns or occupies land. The court held that the Hempstead ordinance violated that principle, and went on to observe that the town could not invoke a public safety justification, based on the alleged frequency of armed robberies of check-cashing establishments, because the record included no evidence that the ordinance was enacted as a public safety measure.

Regulating Uses and Users

The Court of Appeals had previously articulated the principle relied on in Sunrise Check Cashing ' zoning may regulate only land uses, not land users. The court has invoked the principle to invalidate zoning provisions that regulate the form of ownership or that provide special benefits to a current owner. FGL & L Property Corp. v. City of Rye, 66 N.Y.2d 111, illustrates the invalidity of a restriction on the form of ownership. The Court of Appeals invalidated a zoning provision requiring condominium ownership of the only parcel located in a particular zoning district. The city had concluded that condominium ownership was the best way to preserve an existing historic building, but the court held that the state's zoning enabling act did not expressly or impliedly authorize the city to require condominium ownership.

Matter of Dexter v. Town Bd. of Town of Gates, 36 N.Y.2d 102, illustrates the invalidity of a zoning provision providing special benefit to a single owner. In Dexter, the Court of Appeals invalidated a zoning change that authorized the applicant to build a supermarket but provided that in the event that the applicant left the site, the zoning would revert to the previous classification. Id. at 105-106. The court held that the arrangement constituted an invalid municipal regulation of the user, not the use, of land.

Until Sunrise Check Cashing, however, the Court of Appeals had not held that a prohibition of a particular type of business constitutes a regulation of user rather than use. Indeed, a number of Appellate Division cases have upheld prohibitions of particular businesses, such as fast food establishments. For instance, in Mead Square Commons v. Village of Victor, 2012 N.Y. Slip. Op. 05471, the Fourth Department held that an ordinance that prohibited all fast food restaurants in a particular district was a valid regulation of use because all property owners in the district were prohibited from operating fast food restaurants. Id. Similarly, in Axinn v. Town of Newburgh Zoning Board of Appeals, 233 A.D.2d 500, the Second Department upheld a denial of a variance to a fast-food establishment that would have been in violation of an ordinance prohibiting clustering of fast-food establishments. If a distinction between fast-food establishments and other restaurants were not within the municipality's zoning power, the applicant would not have needed a variance, and there would have been no basis for the court to uphold the variance denial. (See also Matter of McDonald's v. Board of Board of Trustees, 233 A.D.2d 773 (Third Department upholds special permit denial where fast-food restaurant would have violated anti-clustering provision)).

Conclusion

The decision by the Court of Appeals in Sunrise Check Cashing to invalidate the ban on check-cashing establishments casts doubt on the holdings in these cases. Of course, fast-food restaurants may present problems with litter and traffic different from those generated by check-cashing establishments, but the courts in cases like Mead Square, Axinn, and Matter of McDonald's did not suggest that the municipality bears the
burden of justifying its classifications at the time it enacts an ordinance. Instead, the courts in those cases deferred to the municipal classification without discussing the municipality's contemporaneous justification of its ordinance. Judge Smith's opinion in Sunrise Check Cashing, by contrast, acknowledged the town's argument that the prohibition on check-cashing was rational because the ordinance protected against the dangers of armed robbery ' a purpose different from the one stated in the memorandum produced at the time of enactment. After articulating the town's contention that an ordinance should be sustained “if any valid purpose for the enactment can be imagined,” the court rejected it, concluding that “[d]eference to legislative enactments, at least where the issue is abuse of the zoning power, does not go as far as the Town would have us go.”

Whether Sunrise Check Cashing heralds a sea change in the court's zoning jurisprudence remains to be seen.

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Stewart E. Sterk, Mack Professor of Law at Benjamin N. Cardozo School of Law, is Editor-in-Chief of this newsletter. The author wishes to acknowledge Christopher Tao, Cardozo '13, who assisted in preparation of this article.

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To what extent can a municipality's zoning ordinance distinguish among commercial enterprises, and what evidence must a municipality produce to justify distinctions among commercial enterprises? Those are the issues the Court of Appeals confronted in Sunrise Check Cashing and Payroll Services, Inc. v. Town of Hempstead (NYLJ 2/15/13, p. 23, col. 1). In striking down an ordinance prohibiting check-cashing ordinances in most zoning districts, the court implicitly suggested that a municipality's classifications are entitled only to limited deference.

The Facts and the Opinions

In 2006, the Town of Hempstead enacted an ordinance prohibiting check-cashing ordinances in all but industrial and light manufacturing districts. On the date of the public hearing on the ordinance, the town attorney prepared a memorandum indicating that the ordinance would encourage “young people and those of lower incomes to establish savings and checking accounts” and would eliminate “predatory and exploitative finance enterprises from commercial areas, which is beneficial because these enterprises tend to keep a neighborhood down.” The memorandum analogized check-cashing establishments to pawn shops and strip clubs. When the ordinance was enacted, several check-cashing establishments brought a declaratory judgment action.

Supreme Court granted a declaratory judgment to the town. The Appellate Division reversed, holding that the ordinance was pre-empted by article IX-A of the state Banking Law and related regulations. The town appealed.

In affirming, the Court of Appeals did not reach the pre-emption issue, holding instead that the ordinance exceeded the town's zoning power under Town Law section 261. In an opinion by Judge Robert S. Smith, the court emphasized that the zoning power is not a general police power, but merely a power to regulate land use. In particular, the court emphasized that the town had power to regulate use, but not the person who owns or occupies land. The court held that the Hempstead ordinance violated that principle, and went on to observe that the town could not invoke a public safety justification, based on the alleged frequency of armed robberies of check-cashing establishments, because the record included no evidence that the ordinance was enacted as a public safety measure.

Regulating Uses and Users

The Court of Appeals had previously articulated the principle relied on in Sunrise Check Cashing ' zoning may regulate only land uses, not land users. The court has invoked the principle to invalidate zoning provisions that regulate the form of ownership or that provide special benefits to a current owner. FGL & L Property Corp. v. City of Rye , 66 N.Y.2d 111, illustrates the invalidity of a restriction on the form of ownership. The Court of Appeals invalidated a zoning provision requiring condominium ownership of the only parcel located in a particular zoning district. The city had concluded that condominium ownership was the best way to preserve an existing historic building, but the court held that the state's zoning enabling act did not expressly or impliedly authorize the city to require condominium ownership.

Matter of Dexter v. Town Bd. of Town of Gates , 36 N.Y.2d 102, illustrates the invalidity of a zoning provision providing special benefit to a single owner. In Dexter, the Court of Appeals invalidated a zoning change that authorized the applicant to build a supermarket but provided that in the event that the applicant left the site, the zoning would revert to the previous classification. Id. at 105-106. The court held that the arrangement constituted an invalid municipal regulation of the user, not the use, of land.

Until Sunrise Check Cashing, however, the Court of Appeals had not held that a prohibition of a particular type of business constitutes a regulation of user rather than use. Indeed, a number of Appellate Division cases have upheld prohibitions of particular businesses, such as fast food establishments. For instance, in Mead Square Commons v. Village of Victor , 2012 N.Y. Slip. Op. 05471, the Fourth Department held that an ordinance that prohibited all fast food restaurants in a particular district was a valid regulation of use because all property owners in the district were prohibited from operating fast food restaurants. Id. Similarly, in Axinn v. Town of Newburgh Zoning Board of Appeals , 233 A.D.2d 500, the Second Department upheld a denial of a variance to a fast-food establishment that would have been in violation of an ordinance prohibiting clustering of fast-food establishments. If a distinction between fast-food establishments and other restaurants were not within the municipality's zoning power, the applicant would not have needed a variance, and there would have been no basis for the court to uphold the variance denial. ( See also Matter of McDonald's v. Board of Board of Trustees , 233 A.D.2d 773 (Third Department upholds special permit denial where fast-food restaurant would have violated anti-clustering provision)).

Conclusion

The decision by the Court of Appeals in Sunrise Check Cashing to invalidate the ban on check-cashing establishments casts doubt on the holdings in these cases. Of course, fast-food restaurants may present problems with litter and traffic different from those generated by check-cashing establishments, but the courts in cases like Mead Square, Axinn, and Matter of McDonald's did not suggest that the municipality bears the
burden of justifying its classifications at the time it enacts an ordinance. Instead, the courts in those cases deferred to the municipal classification without discussing the municipality's contemporaneous justification of its ordinance. Judge Smith's opinion in Sunrise Check Cashing, by contrast, acknowledged the town's argument that the prohibition on check-cashing was rational because the ordinance protected against the dangers of armed robbery ' a purpose different from the one stated in the memorandum produced at the time of enactment. After articulating the town's contention that an ordinance should be sustained “if any valid purpose for the enactment can be imagined,” the court rejected it, concluding that “[d]eference to legislative enactments, at least where the issue is abuse of the zoning power, does not go as far as the Town would have us go.”

Whether Sunrise Check Cashing heralds a sea change in the court's zoning jurisprudence remains to be seen.

'

'

Stewart E. Sterk, Mack Professor of Law at Benjamin N. Cardozo School of Law, is Editor-in-Chief of this newsletter. The author wishes to acknowledge Christopher Tao, Cardozo '13, who assisted in preparation of this article.

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