shutterstock_252155278The Town Board of the Town of East Hampton (“Town Board”) is considering progressive new legislation that will require advanced nitrogen-reducing sanitary systems for all new commercial and residential construction and major renovation projects.  This law, loosely modeled after a similar law adopted by the Town of Brookhaven for projects located within the environmentally-sensitive Carmans River watershed, imposes regulations designed to supplement those required by the Suffolk County Department of Health Services (“SCDHS”), pursuant to Article 6 of the Suffolk County Sanitary Code.  At the February 7, 2017, Town Board work session, Supervisor Larry Cantwell justified the need for the law by declaring that “we need to find a way to replace these antiquated cesspools and septic systems that are clearly a threat to the quality of life and the quality of life that we have in the town.”

Under the proposed law, a new, low-nitrogen sanitary system will be mandated in one of three circumstances.  The first is where a proposal involves new commercial or residential construction.  The second is where there is an existing sanitary system, but there is evidence that it is failing. The third circumstance involves the substantial expansion of an existing structure.  Pursuant to East Hampton Town Code § 255-1-20(A), “substantial expansion” occurs where a building addition increases its gross floor area by 50% or more or where the cost of an addition, reconstruction, rehabilitation or other improvement to a structure equals or exceeds 50% of the market value of the structure prior to making or undertaking the addition, reconstruction, rehabilitation or other improvement.

At the outset, a qualifying “Low-Nitrogen Sanitary System” will be defined as one that is approved by the SCDHS and proven to reduce nitrogen levels in wastewater to 19 milligrams or less per liter.  However, the law contemplates that as technology advances and new systems are approved by the SCDHS that reduce nitrogen levels even further, future systems will be required to reduce nitrogen levels to 10 milligrams or less per liter.  By comparison, conventional systems release about 50 milligrams per liter of nitrogen into groundwater.

Since low-nitrogen systems, by design, need ongoing monitoring and maintenance in order to function properly, the law will require that owners of these systems maintain them in accordance with the manufacturer’s recommendations.  The Town will also require inspections of these systems at least once every three years by qualified persons employed by or for the Town, or at anytime the Town’s Sanitation Inspector has reason to believe that a system is malfunctioning, has been illegally modified or expanded, or is being operated beyond its design limits.

In order to encourage the use of low-nitrogen sanitary systems, the Town Board is also considering a companion law entitled “Low-Nitrogen Sanitary System Rebate Program,” which creates a multi-tiered system of rebates to incentivize qualifying homeowners to voluntarily replace their aging cesspools and conventional septic systems with new sanitary systems that reduce nitrogen emissions.  The rebates would be paid from the Community Preservation Fund (“CPF”), a portion of which is available for water quality improvement projects.  The CPF, which is funded by a 2 percent tax on real estate transactions, is anticipated to have between $4 and $5 million available to fund the rebate program each year.

The largest rebate, covering 100% of the replacement cost of the system up to $15,000, would be offered to all homeowners in a Town Water Protection District, where shallow groundwater tables and proximity to tidal water bodies causes nitrogen in wastewater to quickly reach surface waters.  Homeowners with cesspool systems who are not located in a Water Protection District will be eligible for a 50% rebate, up to $10,000, and if their household income meets the Town’s threshold to qualify for affordable housing, the rebate increases to 75 percent.  Homeowners who are not eligible for either a cesspool or Water Protection District rebate, but wish to replace existing sanitary systems with new, advanced technology systems are eligible for rebates of 25% of the cost, up to a maximum of $5,000.  In order to qualify for the rebate program, the property owners must have an annual household income below the State’s STAR exemption threshold of $500,000.

At the conclusion of the February 7, 2017 Town Board work session meeting, Supervisor Cantwell indicated that both laws are likely to be discussed at a subsequent Town Board work session meeting prior to scheduling a public hearing on the legislation.

shutterstock_527190727In an effort to generate revenue without raising taxes, many municipalities on Long Island, and elsewhere in New York State, are turning to the use of various forms of land development fees to meet their fiscal challenges. In many cases, these fees can be legally and morally justified, such as when they offset the actual administrative costs of processing a land use application, or when a municipality must incur costs to provide additional public infrastructure and services to accommodate a new development. However, in their zeal to raise revenue, some local governments have ignored statutory and judicial authority that establish a narrow framework for collecting and using these fees, which may leave them exposed to a legal challenge.

In this post, which will be presented in multiple segments, we will highlight the various ways that local governments are using impact, administrative review and recording fees as a revenue-generating measure. We will review the propriety of these fees and discuss the potential impact that these fees can have on development, which is typically a good barometer of a community’s economic prosperity.  We will also discuss who ultimately pays these fees that translate into higher housing and other costs.

Local Impact Fees

Impact fees are one-time payments required by local governments in connection with new developments for the purpose of defraying some of the cost of constructing or improving the public infrastructure needed to serve them. Where authorized, such fees are used to shift the financial burden for additional capital improvements and services from taxpayers to private developers who are the beneficiaries of those improvements and services.

To be valid, there must be a “rational nexus” between the impact fee imposed and the infrastructure needs created by the new development. To satisfy the nexus test, the development must create a need for the new infrastructure; and the fee amount must be based on the extent to which the development benefits from the infrastructure. In other words, an impact fee cannot exceed the pro rata or proportionate share of the anticipated costs of providing the new development with the necessary infrastructure.

Roughly half the states have enacted enabling legislation authorizing the imposition of impact fees. New York, however, is not among them. In fact, a number of decisions by New York Courts cast serious doubt on whether municipalities can enact local impact fee legislation pursuant to home rule powers, or otherwise impose such fees on developers.

In the only impact fee case to reach New York’s highest court, the Court of Appeals in 1989 invalidated the Town of Guilderland’s attempt to fund roadway and other transportation improvements under its Transportation Impact Fee Law (“TIFL”) in Albany Area Builder’s Association v. Town of Guilderland . While the Court did not actually rule on the validity of local impact fees, it concluded that the TIFL was impliedly preempted by the State Legislature’s uniform scheme to regulate highway funding set forth in the Town Law and Highway Law. This decision precludes the use of local impact fees to cover costs associated with roads, sewer, water hook-ups and other infrastructure for which State law already provides a comprehensive regulatory scheme for the financing of these improvements.

Notwithstanding the legal precedents, there are local governments on Long Island that continue to impose what amount to significant, but questionable, impact fees on developers. One such fee is the Town of Brookhaven’s Land Use Intensification Mitigation Fee.  The stated purpose is to mitigate any land use intensification associated with the approval of a change of zoning classification from a more restrictive to a less restrictive use through the acquisition of open space. Depending on the existing and proposed zoning classifications and the size of the site, the law has the potential for imposing significant fees on developers and other landowners within the Town.

While the stated goals of this fee law are undoubtedly laudable, the absence of specific enabling legislation authorizing this fee makes Brookhaven’s law susceptible to legal challenge. A Court could find that the fees charged are not commensurate with the potential demand for additional open space created by the less restrictive zoning and, therefore, fails the “rational nexus” test. A Court may also find that the Town Law provisions authorizing a municipality to require that a parkland be set aside, or impose a fee in lieu of parkland, in connection with site plan and subdivision applications impliedly preempts the Town’s fee law. Of course, it is also possible that a Court could uphold this fee, and Brookhaven’s law may become a model for future local impact fees in New York State.

To date, these fees have not been challenged by developers, who instead are simply paying the fees and capitalize them into the land value. However, depending on the nature of the development, these fees are being passed along by developers to new owners and renters of residential, commercial, industrial, office and retail space, and also to consumers who must ultimately pay more for retail goods and services. While these fees make it easier for a municipality to balance its budget, this short-term benefit pales in comparison to the significant negative impact that these fees can have by driving up the cost of living on Long Island and frustrating the market’s ability to deliver much-needed affordable housing.

In the next segment of this post, we will look at administrative review fees, which are another revenue-generating device used by local governments related to the processing of land use applications that are being assessed on developers, often without regard to the legal limitations on such fees.

hour-glassUnder New York State law, zoning boards and planning boards are authorized to impose reasonable and appropriate conditions  and restrictions on the grant of a variance or special permit, provided that they are directly related to, and incidental to, the proposed use of the property.  Such conditions shall be consistent with the spirit and intent of the zoning ordinance and shall be imposed for the purpose of minimizing any adverse impact such variance or special permit may have on the neighborhood community.  As a further limitation on the imposition of conditions, said conditions must also be authorized by the zoning ordinance.

In Matter of Ronald Citrin v. Board of Zoning and Appeals of Town of North Hempstead, 2016 NY Slip Op 06827 (2d Dept., October 19, 2016), the Town of North Hempstead Zoning Board of Appeals granted Petitioners’ application, brought pursuant to Town Code § 70-225(E), for a special permit.  The special permit sought to continue the use of a parking lot that was located adjacent to its restaurant and extended into the residentially-zoned portion of the Petitioner’s split-zoned lot.  The Zoning Board granted the Petitioner’s application to continue the use of the parking lot in the residence district, but imposed a five-year durational limit on the grant.

The Petitioners commenced a CPLR Article 78 proceeding, seeking to annul the five-year durational limit. After the Supreme Court denied the petition and dismissed the proceeding, the Appellate Division, Second Department, reversed and annulled the portion of the Zoning Board determination that imposed the five-year duration limit.  The appellate court found that the Zoning Board did not have the authority to impose a duration limit on the special permit because Town Code § 70-225(E) does not explicitly provide the Board with the authority to impose durational limits upon permits granted pursuant to that section.  Accordingly, it was improper for the Board to include a five-year durational limit on a special permit granted pursuant to that provision.

Oklahoma-City-Vacant-House-BuyerThe Towns of Babylon and Hempstead have recently enacted legislation designed to combat the blight associated with “zombie” homes and other vacant and abandoned properties. Both laws create a registry and require the payment of fees to offset the costs associated with monitoring and inspecting properties that are required to register.

Town of Babylon

The Town of Babylon’s law, known as the “Mortgage-in-Default Registry” law, requires banks and other lenders to register with the Town within ten days after a home mortgage goes into default. The law, which is based on similar legislation enacted in Jacksonville, Florida, sets forth certain maintenance and security requirements for the property and requires lenders to inspect the property monthly while it is in default. Lenders are obligated to report each time a mortgage changes hands, and the new lender must register with the Town as well.

Under the new legislation, lenders are required to pay an annual registration fee of $200 per property to a company hired by the Town to manage the registry. Failure to register and pay the fee or to comply with the new law’s property maintenance and security requirements will subject first-time violators to a fine of $250 to $1,000 and up to 15 days in jail.

Town of Hempstead

The Town of Hempstead’s new registry law, known as the “Maintenance of Vacant Buildings” law, goes beyond the measure adopted in Babylon in that it applies to all vacant residential and commercial properties, regardless of whether they are in default or in the foreclosure process. The Town’s new law requires landlords to register with the Town within 30 days of a building becoming vacant, pay an annual fee to cover the Town’s administrative costs to maintain the registry, and monitor and inspect properties.

Hempstead’s annual fees start at $500 and increase each year by $500 until a maximum annual fee of $3,000 is reached. The registry fees are in addition to the $25,000-$35,000 deposit that lenders of properties in foreclosure must post under the Town’s anti-zombie legislation adopted in May.

Landlords are also required to submit a plan to either demolish the building, keep the property secured and properly maintained, or detail how the structure will be rehabilitated within a year.

According to Town Supervisor Anthony Santino, the new measure is not intended to be punitive, but rather is designed to create a financial incentive for landlords to get their vacant buildings occupied and back to productive use as soon as possible.

The measures adopted in Babylon and Hempstead are the latest attempts by Long Island municipalities to tackle the problems associated with vacant and abandoned properties. These laws come on the heels of New York State’s anti-zombie property legislation known as the Abandoned Property Neighborhood Relief Act of 2016 that was signed into law by Governor Andrew Cuomo in June, which, among other things, created a statewide registry of abandoned properties.

DADPIC1On June 23, 2016, Governor Andrew Cuomo signed the Abandoned Property Neighborhood Relief Act of 2016, a bill to combat the blight that vacant, neglected and abandoned properties – referred to as “zombie properties” – have on New York communities.  See, pg. 27, Part Q.   The sweeping legislation includes several measures designed to reduce the number of foreclosures, assist homeowners who are facing foreclosure, and protect property values by ensuring that properties in foreclosure are properly maintained during the foreclosure process.  Specifically, the new legislation:                       

  • Imposes a pre-foreclosure duty on banks and other lenders to maintain a residential property during the foreclosure process.
  • Creates a toll-free hotline for people to report potentially vacant or abandoned sites, and an electronic database to provide streamlined access to information for affected communities.
  • Provides for an expedited foreclosure process for vacant and abandoned properties and requires the foreclosing party to move to auction within 90 days of obtaining a foreclosure judgment.
  • Establishes a Consumer Bill of Rights to inform property owners of their rights in foreclosure proceedings and protect them from predatory and deceptive foreclosure practices.
  • Creates a Community Restoration Fund that will allow the State of New York Mortgage Agency (SONYMA) to purchase defaulted mortgage notes and offer partial loan forgiveness to help families afford and keep their homes.

“Zombie Properties”

Zombie properties are properties that have been abandoned by their owners – often after they have received a foreclosure notice – which then languish, unmaintained, until the foreclosure process has been completed.  These vacant properties create a blight on the neighborhood because they sit neglected for years on end while the lengthy foreclosure process runs its course.  During this time, many of these properties fall into significant disrepair, which then drags down the values and appearance of other properties in the neighborhood.  Last year, New York Attorney General Eric Schneiderman estimated that there were as many as 16,700 zombie properties in New York.

New Lender Obligations

To curb the threat that zombie properties pose to communities, the law imposes a pre-foreclosure duty on those who hold a mortgage on a vacant or abandoned residential property to maintain and secure it during the foreclosure process.  This obligation is triggered when the mortgagee becomes aware of the vacancy, or there is a reasonable basis for the lender to believe the property is vacant and abandoned.  Lenders that fail to properly maintain and secure a property face civil penalties up to $500 per violation, per property, per day.  Prior to the legislation, there was no legal obligation to maintain a property in foreclosure until there was a judgment of foreclosure and sale.

Town of Hempstead’s Approach

In the wake of the State’s zombie properties law, the Town Board of the Town of Hempstead recently adopted Local Law No. 46-2016 – modeled after similar laws adopted in several upstate New York communities – that will ensure that banks and other lenders will fulfill their maintenance obligations under the new State law.  The Town’s law requires mortgagees to post a $25,000 security deposit each time a house in the Town of Hempstead goes into foreclosure.  This money can be used by the Town for lawn care, graffiti removal, snow removal and other home maintenance in the event that the lender fails to maintain the property.

After years of tolerating the scourge of zombie properties, State and local governments have acted to give regulators and law enforcement the tools they need to tackle the problems associated with vacant and abandoned properties.  These measures should help revitalize communities that have suffered the consequences of zombie properties by improving conditions, both aesthetically and economically.

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A recent ruling by the New York Court of Appeals strictly limits a developer’s right to appeal a positive declaration under the State Environmental Quality Review Act (“SEQRA”).  A “positive declaration” triggers the need for a draft environmental impact statement (“DEIS”) because there is a finding that the project has the potential to result in one or more significant adverse environmental impacts.

On March 31, 2016, the New York Court of Appeals issued its decision in Matter of Ranco Sand and Stone Corp. v. Vecchio2016 N.Y. Slip Op. 02477 (March 31, 2016).  In Ranco, the Court clarified its 2003 ruling in Matter of Gordon v. Rush, 100 N.Y.2d 236 (2003), which permitted an aggrieved developer to immediately challenge a town board’s positive declaration under SEQRA without first having to prepare a DEIS and complete the SEQRA environmental review process.

The Gordon decision caused some confusion among the lower courts, prompting the Court of Appeals to revisit the issue in Ranco and clarify its prior ruling.  As explained in Ranco, a positive declaration cannot be immediately challenged in an Article 78 proceeding unless the developer can establish at least one of the following:

1) that a positive declaration appears to be unauthorized;

2) the agency issuing the positive declaration is unauthorized; or

3) the action is not subject to SEQRA.

The Ranco decision is discussed in greater detail in my May 25, 2016 NYLJ article entitled Court Limits Judicial Review of SEQRA Positive Declaration.

The Ranco Facts

The Ranco case arose after Ranco Sand and Stone Corp. applied to the Smithtown Town Board to rezone, from residential to heavy industrial use, one of two contiguous parcels Ranco owns.  After the Town’s Planning Board and Planning Department recommended approval of the application, the Town Board, acting as lead agency under SEQRA, adopted a resolution issuing a positive declaration that rezoning the parcel “may have a significant effect on the environment”, which required Ranco to prepare a DEIS.  Rather than endure the time and expense of preparing a DEIS – estimated to cost between $75,000 and $150,000 – Ranco promptly commenced an Article 78 proceeding against the Town Board.  Ranco sought to annul the positive declaration as “arbitrary, capricious, and unauthorized” and requested an order directing the Town Board to process the rezoning application without a DEIS.

The Town Board moved to dismiss the petition for failure to state a cause of action.  The Supreme Court, Suffolk County, granted the motion, finding that the matter was not ripe for judicial review.  The Appellate Division, Second Department, affirmed.  It concluded that the positive declaration was the initial step in the decision-making process rather than a final administrative determination and, therefore, did not give rise to a justiciable controversy.  The Court of Appeals granted leave to appeal.

Two Requirements for Judicial Review

In referencing Gordon, the Court found that immediate judicial review of a determination was warranted when two requirements were satisfied:

1)  The town board’s action had to “impose an obligation, deny a right or fix some legal relationship as a consummation of the administrative process.” This threshold requirement consisted of “a pragmatic evaluation . . . of whether the decisionmaker has arrived at a definitive position on the issue that inflicts an actual, concrete injury.”

2) The apparent harm inflicted by the action “may not be prevented or significantly ameliorated by further administrative action or by steps available to the complaining party.”

The Court concluded in Gordon that the Board’s action was ripe for judicial review because both the above requirements were met.  The Town’s positive declaration imposed an obligation on the developer to prepare and submit a DEIS after they had already been through the coordinated review process and a negative declaration had been issued by the DEC as lead agency.  Moreover, it found that further proceedings would not remedy the injury caused by the unnecessary and unauthorized expenditures associated with conducting a DEIS.

In Ranco, the Court agreed that the Town Board’s positive declaration imposed an obligation on Ranco that satisfied the first requirement of the ripeness-for-review analysis.  The Court failed, however, to find that the second requirement was met notwithstanding that the Court acknowledged Ranco could not recoup the costs and time incurred in preparing a DEIS, even if its application is ultimately successful.

In apparent recognition of its seemingly inconsistent application of the two-part test, the Court stated that when a positive declaration appears to be unauthorized, such as when a proposed action is not subject to SEQRA or when an administrative agency is not empowered to serve as lead agency, it might be ripe for judicial review.  The Court concluded that because Ranco did not claim the positive declaration was unauthorized or that the action was not subject to SEQRA, and because it had not presented any other basis to find that the Town Board had acted outside the scope of its authority, its petition for judicial review was denied as being not ripe for judicial review.

In the Ranco decision, the Court of Appeals referenced its ruling in Gordon, wherein it found that a positive declaration was ripe for judicial review when two requirements were satisfied. First, the agency’s action had to “impose an obligation, deny a right or fix some legal relationship as a consummation of the administrative process.” This threshold requirement, the Gordon Court said, consisted of “a pragmatic evaluation . . . of whether the decisionmaker has arrived at a definitive position on the issue that inflicts an actual, concrete injury.”  To satisfy the second requirement, there had to be a finding that the apparent harm inflicted by the action “may not be prevented or significantly ameliorated by further administrative action or by steps available to the complaining party.”

In Gordon, the Court concluded that the Board’s action was ripe for judicial review.  The Town’s SEQRA declaration imposed an obligation on the petitioners to prepare and submit a DEIS after they “had already been through the coordinated review process and a negative declaration had been issued by the DEC as lead agency.”  No apparent further proceedings would remedy the injury caused by the unnecessary and unauthorized expenditures associated with conducting a DEIS.

The Ranco Court Clarifies and Limits its Prior Ruling

The Court in Ranco agreed that the Town Board’s positive declaration imposed an obligation on Ranco that satisfied the first requirement of the ripeness-for-review analysis.  It failed, however, to find that the second requirement was met, despite the fact that the Court acknowledged that Ranco could not recoup the costs incurred and time spent on preparing a DEIS, even if its application is ultimately successful.

In apparent recognition of its seemingly inconsistent decisions and to avoid any further confusion, the Court specifically limited Gordon.  It held that Gordon stands for the proposition that an immediate challenge to a positive declaration may be ripe for judicial review only where the positive declaration appears unauthorized, such as when the administrative agency is not empowered to serve as lead agency or a prior negative declaration obviates the need for a DEIS, or when the proposed action is not subject to SEQRA.  The Ranco Court concluded that because Ranco did not claim the positive declaration was unauthorized or that the action was not subject to SEQRA, and because it had not presented any other basis to find that the Town Board had acted outside the scope of its authority, its petition was deemed not ripe for judicial review.

The Chilling Effects of Ranco

The Ranco decision significantly limits the situations in which an aggrieved party can commence an immediate challenge to the issuance of a positive declaration.  Given the large financial expense and the considerable amount of work and time involved in preparing a DEIS, the Court’s ruling is likely to mean, in many instances, that a positive declaration will be the death knell of a project.

Perhaps more disturbing is the fact that aggrieved developers who believe their projects have been wrongly made the subject of a positive declaration must first pay tens or even hundreds of thousands of dollars for the right to bring an Article 78 challenge and will not have the ability to recoup those costs, even if they ultimately prevail in their claim.

Without any financial accountability for their actions, decision-makers who are critical of a development project can now use a positive declaration to advance an anti-development agenda under the guise that they are merely being diligent stewards of the environment.

Crown Point neighborhood signsUsing Airbnb and similar web-based short-term rental services that enable homeowners to rent out their homes has become popular with budget-conscious travelers.  However, a growing number of municipalities believe that such transient rentals threaten the residential character and quality of life in the neighborhoods in which they occur and have adopted laws to regulate short-term rentals in their communities.

For instance, in August 2015, the Town of Southold adopted a local law banning “transient rental properties,” which are defined as dwellings that are rented out for a period of less than 14 nights at a time.  Under the law, rentals are presumed illegal if they are advertised on websites such as Airbnb, HomeAway and VBRO.  This presumption can be rebutted by presenting evidence to the Town’s Code Enforcement Officer demonstrating that the residence is not a transient rental property.  Violators face fines from $1,500 to $8,000 for a first offense, and from $3,000 to $15,000 for conviction of a second or subsequent offense within 18 months.

Proponents of Southold’s law claimed that homeowners who were offering their homes for short-term rental were essentially operating commercial businesses in residential neighborhoods that created quality of life issues for other residents.  Some residents also claimed these short-term rentals enjoyed a competitive advantage over local hotels and bed-and-breakfasts, which are subject to regulations that short-term rentals are not.  Opponents of the law argued that the Town Board failed to recognize the importance of short-term rentals, not only to North Fork homeowners who rely on the additional income, but also to the area’s tourism industry, which they claim suffers from a lack of traditional lodging.

In the first challenges to the law, an attorney representing a number of homeowners who had been advertising their homes for short-term rentals is claiming that his clients’ actions are “grandfathered” under the Town Code’s provisions which deal with “non-conforming uses” – uses that legally existed prior to the passage of the new legislation.  On March 25, 2016, two applications were filed with the Town’s zoning board of appeals seeking relief from the law.

While all sides will be monitoring these challenges closely, it is unlikely that the law’s validity will be decided at the zoning board of appeals level because the board’s decisions are likely to be challenged in a court of law.

Stay tuned, because as this year’s summer vacation season rapidly approaches, this East End hot-button topic will undoubtedly get hotter.

imagesOn February 23, 2016, the Glen Cove City Council voted to approve a local law allowing the City’s Board of Zoning Appeals to issue its decisions in summary format.  Summary decisions would set forth the Board’s decision and any conditions imposed, without enumerating detailed findings which form the basis of the Board’s decision.  The law’s objective is to expedite the issuance of decisions, which can take significantly longer to draft in the standard format with lengthy explanations of the Board’s findings and justifications.  These longer decisions can delay applicants’ projects by several months.  The Glen Cove measure gives the Board the option of issuing a summary decision, but mandates that the Board issue a statement of findings if an “aggrieved party ” makes a written demand for it within 30 days after the summary decision is filed with the City Clerk.

Many zoning boards, particularly those that process large numbers of applications each month, advise applicants of their decisions in summary or letter format.  In Matter of Jonas v. Stackler, the Appellate Division, Second Department, tacitly approved the use of zoning board decisions which do not contain factual findings by allowing a board’s decision to be justified by affidavits submitted in a subsequent Article 78 proceeding.

Although Courts will allow a zoning board to articulate the basis for its decision in affidavits submitted in a judicial proceeding, litigation will undoubtedly create far more cost and delay for an applicant, as well as the Board, than would a standard decision.  Accordingly, zoning boards should limit the use of summary decisions only to those applications that are either unopposed or otherwise not likely to be challenged.

downloadIn Matter of Ranco Sand & Stone Corp. v. Vecchio, 124 A.D.3d 73 (2nd Dept. 2014), the Appellate Division, Second Department, recently held that the issuance of a positive declaration under the New York State Environmental Quality Review Act (“SEQRA”) did not constitute a matter ripe for judicial review, but rather was merely a preliminary step in the decision-making process.  This decision appears to conflict with the Court of Appeals’ decision in Matter of Gordon v. Rush, 100 N.Y.2d 236 (2003), which held that a lead agency’s issuance of a positive declaration requiring a property owner to  prepare and submit a draft environmental impact statement (“DEIS”) can immediately be challenged in court as arbitrary or capricious before a final determination on the underlying application is made.

In Rush, the Court ruled that an Article 78 proceeding challenging a lead agency’s issuance of a positive declaration was ripe for judicial consideration because that determination represented the agency’s “definitive position on the issue” that inflicted “an actual, concrete injury.” The Court added that a ripeness determination also required a finding that the apparent harm inflicted by the action could not be “prevented or significantly ameliorated by further administrative action or by steps available to the complaining party.”

Applying this test, the Court of Appeals found that the issuance of a positive declaration was ripe for judicial review because that determination imposed an obligation on the property owner to prepare and submit a DEIS, which was deemed to be an “actual, concrete injury” because the preparation of a DEIS is likely to cause the petitioner to incur “considerable time and expense.”  Moreover, the Court found that this injury could not be prevented or ameliorated by further administrative action.

In Ranco, the Appellate Division made the very same findings, but concluded that neither was determinative.  Instead, the Court highlighted a number of factors that it found distinguished this case from Rush, such as that Ranco had not already been subject to a coordinated SEQRA review process and a negative declaration indicating that a DEIS is not warranted had not previously been issued.  In light of these distinguishing factors, the Court concluded that the issue of whether a positive declaration is a final determination that is ripe for review must be determined on a case-by-case basis.

Despite the Appellate Division’s attempts to distinguish the two cases, the Ranco decision seems to fly in the face of the Court of Appeals’ rationale in Rush.  Moreover, unless the Second Department itself, or the Court of Appeals, ultimately rejects Ranco, it places applicants who believe that the issuance of a positive declaration is unwarranted in the unfortunate position of having to first incur the cost of preparing a DEIS, which can cost $100,000 or more, before they can challenge the positive declaration itself.  The practical effect of Ranco is that due process to challenge certain SEQRA wrongs may now come with a significant price tag.

The Appellate Division, Second Department, recently held that developers who incurred substantial expenses in furtherance of a particular development do not acquire a common-law vested right to proceed under prior zoning laws, where they failed to comply with the conditions of a prior approval before new zoning regulations were adopted.  It also held that a claim of common-law vesting to complete a project may not be grounded upon a developer’s expenditures and actions taken in reliance upon the issuance of limited permits authorizing work that was not necessarily related to the proposed development.

In Matter of Exeter Building Corp. v. Town of Newburgh, 2014 NY Slip Op. 00996 (February 13, 2014), the Appellate Court reversed a decision of the Orange County Supreme Court which annulled the Town of Newburgh Zoning Board of Appeals’ determination that the developers did not have a vested right to develop their property in accordance with prior zoning regulations, notwithstanding their expenditure of several hundred thousand dollars in engineering and review costs in furtherance of their plan to construct a 136 townhouse units.

After purchasing the property, the developers applied to the Newburgh Zoning Board for site plan approval to construct the townhouse development and subdivision approval to the Town’s Planning Board in order to adjust a boundary line.  At the same time, the Town was engaged in a rezoning effort that ultimately included the developers’ property.  The developers were aware that proposed zoning scheme was more restrictive than the existing zoning and precluded the proposed development and, therefore, were proceeding at their own risk.

Following the Town’s adoption of the new zoning regulations, the developers commenced an action against the Town seeking to invalidate the new zoning law, and a declaration that they had both common-law and statutory vested rights to develop their property under the old zoning.  The claim of statutory vested rights was based on the protections of Town Law § 265-a, which provides subdividers with a 3-year exemption from the rezoning of their property.  The Court invalidated the new zoning, but also declared that the developers did not have vested rights.  All parties appealed.

While the appeals were pending, the developers received site plan approval, subject to numerous conditions, including 11 that were required to be met before the Planning Board chairperson could sign the plans.  At this point in the process the developers had already incurred nearly $359,000 in engineering and processing costs.

Shortly thereafter, the Appellate Court upheld the new zoning law and found that the developers did not have common-law vested rights, but that they were exempt from the new zoning law for a period of 3 years measured from the date of subdivision approval.  It also found that the developers were entitled to proceed with the approval process during the remaining 10 months of the 3-year period in order to establish a common-law vested right to build their development.

By the time that the 3-year exemption period expired, the developers had obtained permits to remove a single-family home and water tanks that existed on the property, erect signs advertising the new townhouses and clear and grade portions of the property, and they completed all of the permitted work.  The developers also installed 170 feet of underground pipe for which no permit had been issued.  During the 3-year period, the developers incurred an additional $182,000 in engineering, review and construction costs, but had not complied with the required conditions.

The developers then sought to amend their site plan, but the request was denied by the Planning Board because the new zoning regulations prohibited the townhouse development.  The developers unsuccessfully appealed the Planning Board’s determination to the Zoning Board.  The Zoning Board concluded that the developers had not established a common-law vested right under the old zoning because they did not satisfy the required conditions and, therefore, they were not entitled to have the plans signed or a building permit issued.  The Zoning Board also rejected the claim that the permits issued with respect to demolition, the erection of signs and clearing and grading could, even in the absence of a building permit, satisfy the first prerequisite for a claim of common-law vesting.

The developers commenced a second proceeding against the Town seeking a judgment annulling the Zoning Board’s determination and declaring that they have a common-law vested right to construct the townhouse development under the prior zoning scheme.  The Supreme Court granted the petition.  On appeal from the Town, the Appellate Division, Second Department, reversed.

At the outset of its decision, the Court noted that the common-law doctrine of vested rights was “one of the most troublesome areas of land use regulation.”  It then stated that “[i]n New York, a vested right can be acquired when, pursuant to a legally issued permit, the landowner demonstrates a commitment to the purpose for which the permit was granted by effecting substantial changes and incurring substantial expenses to further the development.”  It also made clear that to establish a vested right the landowner’s reliance on a valid permit must be so substantial that the municipal action renders the improvements essentially valueless.

Here, the Court found that not only was a valid building permit not issued, but that the developers never received final site plan approval because they failed to comply with the required conditions.  It also concluded that the limited permits that were issued to them were insufficient to confer a common-law vested right because none of those permits amounted to an approval of the project itself.  According to the Court, the permits authorized only the work described in the permits, which it found was equally beneficial to future development under the newly adopted zoning.

While this decision presents an interesting set of facts, it does not create new vested rights law.  However, it makes clear that, regardless of the scope of the work performed or amount of money expended toward completion of a project, common-law vesting cannot occur in the absence of a legally issued permit for the project itself – which the Court pointed out may not take the form of a conditional site plan approval or secondary permits for limited work.  It also underscores that, even where a landowner relies on a proper approval, the improvements must not only be substantial, but specific to the proposed development.  If the site improvements are generic in nature, such that they are not rendered valueless by the effects of the new zoning regulations, a common-law vested rights claim based on such improvements is likely to fail.