Zoning Estoppel

Perlbinder then applied to DOB to erect a new support structure and double-sided sign. DOB granted the application for the support structure, but denied the application for the sign, objecting that the proposed replacement sign was different from the grandfathered sign in two respects: It was double-sided, and it was 25 feet lower than the original.

When Perlbinder sought reconsideration of its application, the Manhattan Borough Building Commissioner overruled DOB's objections and approved the new sign permit. DOB then issued a permit for installation of the new sign, and Perlbinder erected the sign. Subsequently, in 2010, DOB revoked the permits for installation of the sign and the structure, concluding that the prior approval was improperly granted. The Board of Standards and Appeals (BSA) upheld DOB's determination, concluding that the sign violated the zoning ordinance and could not be maintained as a non-conforming use because two years had elapsed between demolition of the old sign and construction of the new one. The BSA also concluded that the developer's good-faith reliance on DOB's approval could not estop the agency from enforcing the ordinance

Perlbinder then brought an article 78 proceeding to challenge the BSA's determination. Supreme Court denied the petition and dismissed the proceeding. The Appellate Division reversed and remanded to BSA for consideration of a variance, instructing BSA to consider Perlbinder's “good faith reliance” along with the variance factors specified in the City Charter. Perlbinder appealed.

The Court of Appeals modified to deny the petition in its entirety. In an opinion by Judge Eugene Pigott, the court first held that a landowner cannot obtain vested rights by making expenditures in reliance on an invalid permit. The court then concluded that because Perlbinder had not sought a variance, the Appellate Division should not have remanded to BSA with instructions to consider granting a variance under section 666(7) of the City Charter, a general provision giving BSA general authority to vary or modify a wide range or rules and regulations. In holding that the Appellate Division had erred, the court noted that if Perlbinder did seek a variance, the appropriate City Charter provision was section 666(5), which applies to variances of a zoning regulation.

Reaffirmation of Prior Law

The court's opinion in Perlbinder represents a reaffirmation of prior law, especially as developed in Matter of Parkview Assoc. v. City of New York, 71 NY2d 274. In Parkview, DOB had issued a building permit for a 31-story building based on an erroneous interpretation of the city zoning map. In reliance on the permit, the developer started construction of the building. DOB later revoked the permit when it discovered that for most of the width of developer's building, the ordinance permitted a maximum height of 19 stories. The Court of Appeals rejected the developer's estoppel claim, emphasizing that “reasonable diligence would have readily uncovered” the correct zoning limitation, if developer were, in good faith, trying to discover the correct designation.

The message from Parkview and Perlbinder is that a developer who is not absolutely certain that the project complies with the zoning ordinance must act with reasonable diligence to assure that the project complies. Obtaining a building permit is not enough. But what is enough? Suppose, for instance, that Perlbinder had sought an interpretation of the ordinance from BSA, and BSA had determined that the proposed sign was “grandfathered” because the prior sign had never been abandoned. If Perlbinder then erected the new sign, could BSA then say, “oops, we goofed,” and order revocation of the permit? At some point, the “no estoppel against the government” principle collides with principles of finality: developer is entitled to a final decision from some government body about whether the proposed project will be in compliance with the zoning ordinance. The court's opinions in Parkview and Perlbinder never indicate where the court would draw that line.

The Variance Alternative

In both Parkview and Perlbinder, the Court of Appeals has suggested that the remedy for the developer who has relied on an erroneously granted permit is to seek a variance from BSA. The problem with that alternative is that in at least some cases, the developer will be unable to establish all of the requirements for obtaining a variance. For instance, section 72-21 of the New York City Zoning Ordinance requires findings of uniqueness and hardship (among others) before BSA authorizes a variance. A landowner who has erected a sign (or 12 additional stories) in reliance on an erroneously issued permit might find it difficult to establish one or more of the requirements. As a result, Parkview and Perlbinder counsel the utmost caution in beginning construction while there is uncertainty about what the zoning resolution permit.

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