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.