The Town of Southampton recently held several public hearings to consider a local law requiring an updated certificate of occupancy prior to all property transfers. Specifically, the local law proposed amending Town Code §123-16, Certificate of Occupancy, to state that “upon any change in ownership of a property, an updated certificate of occupancy shall be obtained.” After consideration at several meetings, starting in December of 2016 and ending in March of 2017, the Town Board determined not to proceed with the amendment.

Many East End villages already require an updated certificate of occupancy prior to transfers of property, [1] however East Hampton, Southampton and Southold towns do not. During its public hearing process, the Town Board of the Town of Southampton waded through the many issues raised with regard to the impacts of requiring an updated certificate of occupancy upon both property owners and the Town Building Department. The Town considered allowing exceptions for those transfers conducted for estate purposes only and those transfers between individuals and corporations, limited liability companies, trusts or other entities where the majority shareholder would be the same as the prior fee title owners. Additionally, the Town was asked to consider those properties that cannot obtain an updated certificate of occupancy upon transfer due to over-clearing where compliance requires significant re-vegetation of the property and in certain circumstances Planning or Conservation Board approvals. Obviously re-vegetation cannot occur during the winter months and there is no temporary certificate of occupancy provision in the Town of Southampton’s code potentially putting property owners in a hurry to sell in a difficult situation.

The Appellate Division, Second Department, addressed an updated certificate of occupancy code provision in Lazy S Group I, v. Gomez, et al., 60 A.D. 3d 999, 876 N.Y.S.2d 473 (2d Dept. 2009). This case involved an action for specific performance of a contract for the sale of real property in the City of Peekskill where the contract required the seller to deliver a valid certificate of occupancy authorizing the use of the premises as a four-family dwelling. At closing, the parties learned that the certificate of occupancy for the premises permitted its use as a “three-plus” family dwelling but not as a four family dwelling and title did not close. Litigation followed and during that time period the City of Peekskill enacted a new provision of the Code of the City of Peekskill requiring that an updated certificate of occupancy be obtained before any improved real property that is transferred may be used or occupied. The code imposed the burden of obtaining the certificate of occupancy upon the seller “unless the parties agree otherwise in their contract of sale.” (Peekskill City Code §300-48A(3)). The Supreme Court granted the seller’s motion for summary judgment dismissing the complaint and directing the delivery of the down payment to the seller as liquidated damages. The Appellate Division reversed noting that while the City Code imposed the burden of obtaining an updated certificate of occupancy on the Seller unless the contract stated otherwise, the contract in this case was silent with respect to which party must obtain the updated certificate of occupancy. Thus, the Court found that triable issues of fact existed as to whether the communications between the parties and conduct of the parties at closing constituted any agreement with regard to the updated certificate of occupancy and whether there was a breach and if so, which party was in breach of contract. This case illustrates issues that arise when updated certificates of occupancy are required by municipalities and further illustrates the benefit of addressing such matters with specificity in the contract of sale. Indeed, most real estate attorneys require updated certificates of occupancy in their riders to the contract and are successful in obtaining same unless the property is being sold “as is” or there are existing illegal structures that would take a significant amount of time and village/town approvals to cure (as in the case of those over-cleared properties that require costly re-vegetation and further town approvals).

Requiring updated certificates of occupancy for real property transfers burdens homeowners with legalizing all structures on their property and necessarily can delay real estate transactions to the chagrin of real estate brokers. However, the law would obviate any need for protracted and often difficult negotiations regarding properties that do not comply with the law or have existing, illegal structures and would therefore be welcomed by most attorneys. Regardless, for real property transfers in the East End towns, attorneys must continue to resolve such matters through contract negotiations.

[1] See Village of Quogue; Village of Sag Harbor Code §300-17.3(B); Village of Southampton Code §A119-8(A); Village of North Haven Code §55-7(A); Village of Westhampton Beach Code §197-64(C); & Village of East Hampton Code §104-11(A), among others.

Municipalities on Long Island are struggling to control rental properties. In Southampton, rental properties are governed by Chapter 270 of the Southampton Town Code (the “Code”). Section 270-3 of the Code establishes that an owner of a residential property shall not permit or allow its use or occupancy as a rental without first obtaining a permit. If an owner does rent without a permit, section 270-13(a) of the Code prohibits the owner’s collection of rent.

In Schwartz v. Torrenzano, 49 Misc.3d 943, 16 N.Y.S.3d 697, (Suffolk Co. 2015), the Supreme Court held that Southampton’s rental permit law creates a private cause of action allowing, in certain circumstances, a tenant to recoup rent paid to its landlord. The trial court’s holding in Schwartz was recently cited with approval by the Appellate Division, Second Department in Ader v. Guzman, 135 A.D.3d 671, 23 N.Y.S.3d 292 (2d Dept. 2016).

In Ader, tenants demanded the return of their rent after discovering that their summer rental lacked a permit. The Appellate Division, relying in part upon Schwartz, affirmed the Supreme Court’s holding that the Code affords tenants an implied private right of action and that the Ader lease was unenforceable. The Appellate Division held that because Southampton’s rental permit law is intended to protect the public health and prevent fraud, enforcing the illegal lease and permitting the landlord to keep the tenants’ rent violates public policy.

In a companion case, Ader v. Guzman & Corcoran Realty Group, LLC, et al., 135 A.D.3d 668, 22 N.Y.S.3d 576 (2d Dept. 2016), the Appellate Division held that Real Property Law §443(4)(b) does not impose a duty upon real estate brokers to investigate whether a rental property is properly permitted. Despite the Court’s holding, the New York State Department of State, in a guidance letter dated April 19, 2016, cautioned that “notwithstanding the decision in Guzman, a broker who fails to demonstrate a working knowledge of the property being marketed, fails to demonstrate the level of competency required to transact business as a licensee in violation of Real Property Law §§441 and 441-c.” The Department further warned that a broker’s commission “premised upon an unlawful agreement is ‘unearned’ in violation of Real Property Law §441-c.”

It is clear that from the Department’s perspective that brokers must make reasonable efforts to verify the legal status of the properties they offer and that, where a broker has actual knowledge that a property lacks a permit or is otherwise illegal, such information must be affirmatively disclosed.

 

Jointly responsible for enforcing the federal Fair Housing Act (“FHA”), the U.S. Departments of Justice and Housing and Urban Development (“the Departments”) have issued numerous guidance documents and policy statements to help the public and state and local governments fully understand the FHA.  In November 2016, the Departments issued a new guidance document (“guidance document”) addressing FHA compliance in connection with state and local land use laws and practices.  The FHA prohibits discrimination in housing on the basis of race, color, religion, sex disability, family status or national origin. 42 U.S.C. §§ 3601-19. The updated guidance document addresses the following issues, among others:

  • How the FHA applies to state and local land use and zoning;
  • When land use/zoning practices can constitute intentional discrimination;
  • How state and local land use laws can violate the FHA by unintentional discrimination;
  • How state and local governments that consider the fears or prejudices of community members when enacting their land use laws on housing can violate the FHA;
  • Who qualifies as a person with a disability under the FHA
  • What are group homes within the meaning of the FHA and the application of the FHA to group homes;
  • Reasonable accommodation under the FHA;
  • Whether a state and local government can impose health and safety regulations on group home operators;
  • Spacing requirements;
  • How a local government can violate the FHA by failing to grant a request for a reasonable accommodation;
  • How the Supreme Court Olmstead Ruling regarding the Americans with Disabilities Act is consistent with the FHA.  (Persons with disabilities have the option to live and receive services in the most integrated setting appropriate to their needs).

Long Island municipalities seeking to regulate multifamily or group housing through their zoning powers must carefully consider the FHA in both their enactment of local laws and treatment of such facilities. Not only does it violate the FHA to yield to community opposition based on fear of, or prejudice towards, such establishments, but governments must be ready to make “reasonable accommodations” to those with disabilities. The guidance document shows how local governments can violate the FHA when they refuse to “grant a reasonable accommodation to its zoning or land use ordinance when such accommodation may be necessary to afford persons with disabilities an equal opportunity to use and enjoy a dwelling.” (See guidance document, page 8).  Many municipalities limit the number of unrelated persons who can live together in residential zoning districts as part of their definition of a family. These laws are typically valid, provided they are reasonable and do not discriminate on the basis of disability or protected class. However, the guidance document states that such laws, if enacted for the purpose of limiting the number of persons with disabilities who may live in a group home, or exclude or limit group homes in certain zoning districts, can have an unjustified discriminatory effect and may violate the FHA. (See guidance document, page 11). Finally, the guidance document states “…a group home that provides housing for a number of persons with disabilities that exceeds the number allowed under the family definition has the right to seek an exception or waiver. If the criteria for a reasonable accommodation are met, the permit must be given in that instance, but the ordinance would not be invalid.” Id.

Understanding the nuances of the Fair Housing Act as it is applied to state and local land use laws is essential for municipalities enacting and enforcing such laws, a task made easier by the Departments’ comprehensive guidance on the matter.

 

Canoe Place Inn, Hampton Bays
Canoe Place Inn, Hampton Bays, photo credit: www.27east.com

The Town of Southampton re-zoned three properties located in Hampton Bays adjacent or close to the Shinnecock Canal by amending the Town’s Zoning Code to add section 330-248(V), creating the Canoe Place Inn, Canal and Eastern District Maritime Planned Development District. This local law, adopted on January 13, 2015, provides for the rehabilitation of the Canoe Place Inn for use as an inn, catering facility, and restaurant. The law also provides for the development of a 37-unit luxury, waterfront town-house community and associated wastewater treatment facility on the Shinnecock Canal.   Four individual property owners/taxpayers formed an unincorporated community group called Shinnecock Neighbors to oppose the zoning changes and to challenge the local law via a hybrid Article 78 proceeding and declaratory action. In the case, entitled Shinnecock Neighbors, et al. v. Town of Southampton, R Squared Development LLC et al., 3 NYS3d 679 [Sup. Ct. Suffolk Co. 2016], the Shinnecock Neighbors allege, in part, that the local law should be deemed null and void because the Town Board failed to comply with the New York State Environmental Quality Review Act (“SEQRA”) and take the requisite hard look at the potential environmental impacts of the proposed development. Several of the respondents moved to dismiss the petition and complaint on the grounds that the petitioners lacked standing. In an order dated August 30, 2016, the Hon. William B. Rebolini, Justice of the Supreme Court, Suffolk County, dismissed the motion and held that the four petitioners and their unincorporated community group, Shinnecock Neighbors, had the requisite standing to bring the proceeding/action.

As noted in the decision, in order to establish standing in a land use matter, a party “must suffer direct harm (i.e., injury-in-fact) that is in some way different from that of the public at large and, further, that the claimed harm is within the zone of interests protected by the statute or statutes alleged to have been violated.” Shinnecock Neighbors v. Town of Southampton, 3 NYS3d at 683. An organization or association such as Shinnecock Neighbors has standing when one or more of its members has standing to sue, the association demonstrates that the interests it asserts are germane to its purpose, and it is evident that neither the asserted claim nor relief requires the participation of its individual members. (See Society of the Plastics Industry, Inc. v. County of Suffolk, 77 NY2d 761, 570 NYS2d 778 [1991]; Matter of Dental Society of State of NY v. Carey, 61 NY2d 330, 474 NYS2d 262 [1984]).

Three of the four individual petitioners owned residential properties within 500 feet of the proposed wastewater treatment facility. As a result, the Court found that these three individuals had standing and stated, “[a]s it is alleged that each of them resides in close proximity to the proposed development, there arises a presumption that each will be adversely affected in a manner different from the public at large.” Shinnecock Neighbors v. Town of Southampton, 3 NYS3d at 684. Additionally, the Court found that their allegations of harm, including increased traffic, increased noise and air pollution, and degradation of the community from the proximity of the wastewater treatment facility were within the zone of interests protected by SEQRA and the Town’s zoning code. Id. at 684.

Interestingly, the fourth individually-named petitioner asserted a different rationale for standing. Although this petitioner lived about one mile from the canal and was not within the zone of interests protected by the statute, she claimed to be an environmental activist, professional artist and “art activist” who required access to the canal as it was a significant source of her creative inspiration and that the proposed development would have a profound negative effect on her work. The Court found that this fourth petitioner had standing and stated: “…her use and enjoyment of the area is more intense than that of the general public and, therefore, that she may be directly harmed in a way different in kind and degree from others…like claims of specific environmental injury, injury to a petitioner’s aesthetic and environmental well-being, activities, pastimes or desire to use and observe natural resources may also be found to state cognizable interests for purposes of standing.” Id. at 684. As each of the four petitioners had standing, the Court determined that the Shinnecock Neighbors also had the requisite standing. The underlying proceeding/action is still pending before the Court.

Back on September 6, 2016, this blog commented on the case of Matter of Long Island Pine Barrens Society, Inc. v Central Pine Barrens Joint Planning & Policy Commission, 138 AD3d 996 [2d Dept 2016]. In that case, none of the individual petitioners lived within the zone of interests. Nevertheless, the Appellate Division found that the Society had standing because one of the petitioners, the Society’s Executive Director, used and enjoyed the Pine Barrens to a greater degree than most members of the public. Thus, based on the holdings in the Shinnecock Neighbors v. Town of Southampton and Matter of Long Island Pine Barrens Society, Inc. v Central Pine Barrens Joint Planning & Policy Commission cases, an organization may have standing even though all its members reside outside the zone of protected interests if at least one member can articulate a rationale that shows he or she has an interest that is different from the general public, and that interest may be adversely impacted by the proposed action.

 

welcome_bayville_signIn a determination dated June 30, 2016, the Honorable Jerome C. Murphy, Supreme Court, Nassau County, annulled and vacated the Village of Bayville’s local laws amending its zoning code based on the Village’s failure to comply with the New York State Environmental Quality Review Act (“SEQRA”).  See Save Bayville Now, Inc., v Incorporated Village of Bayville.  The challenged local laws, adopted on June 22, 2015, authorized the occupancy of ground floor units with residential apartments in business districts, reduced the required setback from 250 feet to 50 feet for the distance that a combined business/residential use could be from a residentially-zoned parcel and defined a “residential building” as containing five units or more. Previously, residential apartments in this zoning district were only permitted on the second floor, and this type of combined business/residential use was not permitted within 250 feet of residentially-zoned property.

Petitioner, a civic association with at least two of its members residing within 100 and 150 feet of the business district, challenged the adoption of the local laws pursuant to SEQRA. The Court first explained standing in zoning cases. Relying on Matter of Sun-Brite Car Wash v Board of Zoning and Appeals of Town of N. Hempstead, 69 NY2d 406 [1987], which held that “standing principles, which are in the end matters of policy, should not be heavy-handed; in zoning litigation in particular, it is desirable that land use disputes be resolved on their own merits rather than by preclusive, restrictive standing rules.” The Bayville Court first determined that Petitioner had the requisite standing to bring the proceeding, and then went on to determine that SEQRA had not been complied with by the Village when it enacted the local laws.

The Court noted that SEQRA requires local governments to consider environmental impacts of the adoption of local laws by identifying the environmental impacts reasonably anticipated from the proposed action, taking a “hard look” at those areas of environmental concern and providing a reasoned elaboration in connection with the basis of its determination. The civic association alleged that the Village failed to sufficiently review potential impacts from the zoning amendments including traffic and parking issues, septic issues, flooding and flood plain issues, population concentration and the impact on the value of surrounding properties. The Village adopted a negative declaration in connection with the adopted local laws and determined that it would conduct specific SEQRA review in the future upon the application of specific sites within the district. Petitioner argued that this constituted segmentation of the SEQRA process and was unlawful. Segmentation is defined as the “division of the environmental review of an action such that various activities or stages are addressed under this Part as though they were independent, unrelated activities, needing individual determinations of significance.” 6 NYCRR Part 617.2(ag). SEQRA states the following with regard to segmentation:

Considering only a part or segment of an action is contrary to the intent of SEQRA. If a lead agency believes that circumstances warrant a segmented review, it must clearly state in its determination of significance, and any subsequent EIS, the supporting reasons and must demonstrate that such review is clearly no less protective of the environment. Related action should be identified and discussed to the fullest extent possible. 6 NYCRR Part 617.3(g)(1). Id.

The Court determined that the Village acknowledged the potential for “environmental damage” but failed to prepare an Environmental Impact Statement (“EIS”). An EIS provides “a means for agencies, project sponsors, and the public to systematically consider significant adverse environmental impacts, alternatives and mitigation.” 6 NYCRR Part 617.2(n). An EIS is required when the lead agency (in this case the Village) determines that “the action may include the potential for at least one significant adverse environmental impact.” 6 NYCRR Part 617.7(a)(1) (emphasis added). As a result, the Court found that “the Village’s deferred consideration of recognized potential environmental damage” rendered the Village’s adoption of the local laws amending the zoning ordinance “arbitrary, capricious, and not undertaken with regard to the applicable provisions of SEQRA.” The Court annulled and vacated the local laws.

Although not cited by the Court, it bears reminding that courts have long determined the threshold for requiring an EIS is low. See, H.O.M.E.S. v New York State Urban Dev. Corp., 69 AD2d 222, 232 [4th Dept. 1979]; Barrett v Dutchess County Legislature, 38 AD3d 651[2d Dept. 2007].) Therefore, once the Village identified “environmental damage” in connection with the proposed local laws, the preparation of an EIS was required pursuant to SEQRA.

This ruling is consistent with other recent SEQRA segmentation cases involving the adoption of local laws. In Citizens Concerned for Harlem Valley Environment v Town Board of Town of Amenia, 264 AD2d 394 [2d Dept. 1999], leave to appeal denied, 94 NY2d 759 [2000], local laws rezoning property were annulled based upon segmented SEQRA review. In that case, the appellate court determined that “the rezoning at issue was an integral part of a mining proposal that would have obvious potential environmental impacts. The Town Board was obligated to consider these environmental concerns at the time of the rezoning and it failed to do so.” See also, Scenic Hudson, Inc. v Town of Fishkill Town Bd., 258 AD2d 654 [2d Dept. 1999].

Located in the hamlet of Bridgehampton, Town of Southampton, a sand mine operation owned by Sand Land Corporation and run by Wainscott Sand & Gravel Corporation (“Sand Land”) had its zoning changed by the Town in 1972 from G-Industrial to CR Country Residence, now CR200, constituting five-acre residential zoning. Upon the zone change, the sand mine became a pre-existing nonconforming use. But now, this sand mine finds itself located in an affluent residential neighborhood with assessed values ranging from $1.5 million to $3.8 million.  The sand mine also abuts the posh Golf at the Bridge, (now known as The Bridge Golf Club), a private golf and country club. Naturally, the activity at the sand mine creates truck traffic, noise, dust and odors normally associated with such businesses, which is at odds with the residential and private golf club uses nearby.  However, the expansion of Sand Land’s business activities to include a mulching operation and concrete processing facility incited the neighbors to challenge the pre-existing use.

Sand Land v Southampton Town Zoning Board of Appeals

Mining effectively became prohibited in the Town of Southampton on March 27, 1981. See Huntington Ready Mix Concrete v. Town of Southampton et al. Therefore, there is no other location in the Town where Sand Land could move and legally operate its mining operation.

In 2005, the neighbors (funded in part by the Golf Club owners) brought a Town Law §268(2) action to enjoin Sand Land from certain uses of its property. While the action was still pending, Sand Land sought a pre-existing certificate of occupancy from the Town Chief Building Inspector. In 2011, the Chief Building Inspector issued a pre-existing certificate of occupancy for (i) the operation of a sand mine, (ii) the receipt and processing of trees, brush, stumps, leaves and other clearing debris into topsoil or mulch and (iii) the storage, sale, and delivery of sand, mulch, topsoil, and wood chips.  The Chief Building Inspector denied that Sand Land had a pre-existing use to receive and process concrete, asphalt, pavement, brick, rock and stone into concrete blend. The neighbors appealed the Chief Building Inspector’s determination to the Zoning Board of Appeals.

The Zoning Board found that Sand Land was entitled to the pre-existing sand mine use including the storage, sale and delivery of sand and receiving trees, brush, stumps, leaves, and other clearing debris as a pre-existing accessory use to the mining operation.  However, the ZBA found Sand Land was not entitled to a pre-existing certificate of occupancy for (i) the processing of trees, brush, stumps, leaves and other clearing debris into topsoil or mulch, and (ii) the storage, sale and delivery of mulch, topsoil, and wood chips. The Zoning Board found those uses to be new and an impermissible expansion of the nonconforming mining operation, stating, “there is no case law or holding to date that finds the processing of trees, brush, stumps, leaves and other clearing debris into topsoil or mulch and the storage, sale and delivery of mulch, topsoil and wood chips to be a part of, or a natural outgrowth of, sand mining” citing, McDonald v. Zoning Board of Appeals of the Town of Islip, 31 A.D.3d 642 (2d Dept. 2006).

Southampton Town Zoning Board Prevails

Sand Land sued the Zoning Board. In a decision dated February 18, 2014, the trial court overruled the Zoning Board and re-instated the decision of the Chief Building Inspector. Sand Land Corp. v Zoning Board of Appeals, 43 Misc. 3d 1202 (Sup. Ct. Suffolk Co. 2014). The Zoning Board and the neighbors appealed.  A few weeks ago, the Appellate Division found “it was reasonable for the ZBA to conclude, in effect, that these “new uses” constituted a “significant change” from the nonconforming sand mine operation and the accessory receipt of various yard debris.  Accordingly, the Supreme Court erred in annulling the ZBA’s determination.” In the Matter of Sand Land Corp. v Zoning Board of Appeals, 2016 Slip Op. 02372 (Appellate Division, 2d Dept March 30, 2016).

Is this Truly a Win for the Town and its Residents?

The ZBA can celebrate its reasoned determination being upheld, but the result of its determination created a practical difficulty within the Town. Sand Land may choose not to accept delivery of trees/brush, stumps, leaves, and clearing debris, since it is not permitted to process and sell it. Numerous East End businesses used Sand Land as the site where they brought their refuse. According to the ZBA determination, even the Town of Southampton itself used to bring debris to the site.  This forces local landscaping and other businesses in the Town to travel farther to find a permitted receiving area to dispose of their refuse.  Indeed, Newsday reported Supervisor Jay Schneiderman stating, in response to the Appellate Division’s decision, “there is clearly a need to process yard waste” and that “he is trying to find ways to expand the capacity of the town’s three disposal sites to accommodate the waste.”

This is a perfect example of the difficulty with certain preexisting nonconforming uses. Although considered a nuisance by neighbors, they can be invaluable to a different faction of the community; in this case the landscaping business community, which plays an important role in keeping the Hamptons beautiful!