Fire Island is a 32-mile long, slender barrier sand bar island located between the Atlantic Ocean and the South Shore of Long Island.  The island, which varies in width from as little as about 550 feet to not more than about 1,760 feet, divides the Great South Bay and the westerly end of Moriches Bay from the Atlantic Ocean.  In a letter report prepared by the Department of the Interior in 1963 for the Senate Committee on Interior and Insular Affairs, Fire Island was described as containing “an impressive array of seashore resources,” including beaches that are “wide, clean, and gently sloping” and dunes that are “imposing and usually well stabilized by beach grass, bayberry, other vegetation, and some lowlying pitch pine.”  See, 1964 U.S.Code Cong. & Adm. News, p. 3714.  The report referred to the sunken forest in the western half of the island as “a gem of its kind,” dominated by several hundred year-old American holly trees.

In apparent concern for the potential destruction of Fire Island’s unique environmental resources, Congress passed the Fire Island National Seashore Act, 16 U.S.C. § 459e et seq. (“Act”) on September 11, 1964, which established the “Fire Island National Seashore” (“Seashore”).  The stated purpose of the Act was to conserve and preserve the Seashore’s “relatively unspoiled and undeveloped beaches, dunes, and other natural features.”

To achieve this objective, Congress provided the Secretary of the Interior (“Secretary”) with broad authority to condemn unimproved, privately-owned properties, and in limited situations, private properties that are being used in a manner that is inconsistent with any applicable standard contained in regulations promulgated under the Act.  The regulations, codified at 36 CFR Part 28, also set forth Federal standards to which local zoning ordinances must conform, articulating limitations on use, location, and size of structures on public and private property within the boundaries of the Seashore in order to reconcile the population density of the Seashore with the protection of its natural resources.

The Federal standards divide the Seashore into three distinct land use districts – the Community Development District, the Seashore District and the Dune District.  The Community Development District generally permits construction or expansion of existing residential units, religious institutions, schools and commercial units in existence before 1964.  The Seashore District permits alterations of existing improved properties, but prohibits new construction.  The Dune District prohibits all construction after 1978, except for dune crossing structures deemed necessary for public access to the beach.

Despite the Federal oversight, the Act does not preempt the four municipalities within the Seashore – the towns of Brookhaven and Islip, and the villages of Ocean Beach and Saltaire – from enacting and enforcing their own zoning regulations or granting variances and other zoning approvals.  Instead, the Act directs the Secretary to establish guidelines for local zoning authorities to use in developing local zoning regulations that conform to the Federal standards, as well as a process by which the Superintendent of the Fire Island National Seashore (“Superintendent”) shall receive copies of all applications for variances, exceptions, special permits, and permits for commercial and industrial uses, notices of all public hearings concerning said applications, and notices of the final action taken on such applications from the local zoning authorities.

The Secretary is charged with reviewing local zoning regulations to ensure that they are consistent with the Act and its implementing regulations.  The Secretary must disapprove any zoning ordinance or amendment thereof that he considers adverse to the protection and development of the Seashore, or which fails to include requirements that the Secretary receive notice of certain land use approvals and permits granted by the local zoning authority.  Properties that are developed in accordance with an approved ordinance, or which are the subject of variances and other land use approvals that result in such property being used in a manner that conforms to the Federal standards are protected from condemnation under the Act.  By 1985, the Secretary had approved compliance with Federal standards for the four zoning jurisdictions within the Seashore.

As a result, applicants seeking to construct new or expanded structures within the Seashore must now comply with both the federal zoning standards and the applicable zoning regulations of the local zoning authority.  In recognition of the concurrent Federal jurisdiction within the Seashore, the codes of the towns of Brookhaven and Islip have regulations that specifically pertain to properties within the Seashore.  See, Brookhaven Town Code, Ch. 85, Art. XVIII; Islip Town Code, Ch. 68, Art. XXXVIII.  Similarly, the Village of Ocean Beach has adopted regulations that largely mirror the Federal regulations that require that the Superintendent be provided with notice of applications for building permits and certain zoning applications, as well as notice of final actions taken on said applications.  See, Ocean Beach Village Code § 164-4.

To protect their property from the risk of future condemnation, applicants seeking to construct, reconstruct or alter structures within the Seashore, and their consultants, should take the time to carefully review the Federal standards, as well as the local zoning regulations.  They should also closely monitor the processing of their application to ensure that the local zoning authority has properly referred the building permit or zoning application to the Superintendent of the Seashore.

Owners of property within the Seashore who have questions about the process should visit https://www.nps.gov/fiis/learn/management/federal-review-building-zoning-permits.htm or contact the local National Park Service office at (631) 687-4750.

In this post, which is the third and final segment of a three-part series, we look at real property recording and related fees, which have increased significantly in Nassau and Suffolk Counties in recent years. Like illegal impact fees and excessive administrative review fees, fees related to the recording of legal instruments are being used by both Nassau and Suffolk Counties as another revenue-generating measure to help balance their budgets. Since many of these ever-increasing fees appear to have no correlation to the cost of the services being performed to record the documents, they are viewed by many as being tantamount to another unauthorized and illegal tax.

Document Recording Process

Documents that relate to interests in real property in New York, such as deeds, leases, easements, restrictive covenants, mortgages and subdivision plats, are typically recorded in order to provide the public with constructive notice of these interests and to assist in determining ownership rights and other claims. In most cases, these documents are recorded in the county where the property is located and maintained by the county clerk.

Prior to recording, each document is generally proofread to ensure that the important details of the instrument are correct. Each document is then given book and page numbers, or in the case of subdivision plats a map number, which are useful to individuals who want to look up or research the recorded documents. Thereafter, each document is electronically imaged and the original is returned to the party indicated on the document.

Document Recording and Related Fees

The document recording process is an important county clerk function requiring a large staff and equipment that are not without cost. To offset the cost of the document recording process, county clerks typically charge a base fee for the recording service, as well as a per page fee to record a particular document. In recent years, the total cost to record a document has increased dramatically, while the process for doing so has remained largely static.

For instance, a person wishing to record a real estate document in Suffolk County must first now pay a Real Property Tax Service Verification Fee of $200 for each tax lot that the instrument is to be recorded against, plus a $20 handling fee, a $5 per page fee, a $5 Commissioner of Education Fee and a $15 Cultural Education Fund fee. Effective January 1, 2017, persons wishing to record a mortgage in Suffolk County must also pay a $300 Mortgage Verification Fee.

In Nassau County, in order to a record a real estate document, a person must pay a $300 block recording fee, a base recording fee of $40, and a $5 per page fee. In 2009, the block recording fee was just $10. However, within just one year the block recording fee was increased by 1,400% to $150. It doubled again in 2015 to its current amount. In Nassau County these same fees apply to a person who wishes to record a satisfaction of mortgage. In addition to these fees, the Nassau County Department of Assessment implemented a Tax Map Certification requirement in 2015 for all deeds, mortgages, satisfactions, assignments and consolidations. This process requires that each document have its Nassau County Tax Map Number verified with the Department of Assessment before it can be presented for recording in the Clerk’s office. Documents presented without the Department of Assessment certification page cannot be accepted for recording. The charge for this service was originally $75, but within just a few short years was increased by nearly 400% to the current fee of $355 per tax map verification letter (“TMVL”).

According to a Newsday report written at about the same time when the new real estate fees and fee increases went into effect, these fees were estimated to generate $35.6 million in revenue for the County government, but will make Nassau’s closing costs among the highest in the State. These new and increased fees often add thousands of dollars to the cost of buying and selling a property in Nassau County, particularly where a mortgage is involved. And, if there are any errors in the recorded documents that need to be corrected, the County requires payment of recording fee for a second time.

Nassau County Legislator Howard Kopel, a critic of the fee increases, and the only legislator to vote against the increases, argued that they were not justified because fees are supposed to correlate to the County’s cost to provide the service. Some lawmakers who voted in favor of the increases shifted the blame for the increased fees to the Nassau County Interim Finance Authority (NIFA), which allegedly demanded that the County budget include additional revenue.

Since the law does not require a deed or other instrument to be recorded, those who cannot afford the exorbitant recording fees may be forced to forego the recording process altogether. They may also choose not to take action to correct known defects or errors in recorded documents. The failure to record original and corrected documents will compromise the integrity of the county recording systems by making the information they maintain less reliable. This will undoubtedly lead to disputes over property ownership and other interests in real property and cause rightful owners to lose their property interests to bona fide purchasers who did not have constructive notice of the rightful owner’s interest. Thus, the excessive recording fees being charged may actually lead to the very problems that our recording systems are designed to avoid.

Regardless of who is responsible for the increased real estate fees, the steep trajectory of the increases makes it highly unlikely that the recording fees being charged in both Nassau and Suffolk counties are commensurate with the actual cost of recording a document. Moreover, because the recording fees are actually generating revenue in both counties, those who claim such fees are actually an illegal tax appear to be justified in their position.

 

In Matter of Avella v. City of New York, 2017 NY Slip Op 04383 (June 6, 2017), the New York Court of Appeals reviewed a decision by the City of New York approving a proposal by Queens Development Group, LLC (“QDG”) which sought to construct a large-scale retail, restaurant and movie theater complex known as “Willets West,” on the portion of Flushing Meadows Park where Shea Stadium once stood – currently, the parking lot for Citi Field.  The development was part of QDG’s larger redevelopment plan for Willets Point, a blighted area adjacent to Citi Field.  QDG included Willets West in the development proposal under the theory that “the creation of a retail and entertainment center at Willets West w[ould] spur a critical perception change of Willets Point, establishing a sense of place and making it a destination where people want to live, work, and visit.”

After the City approved QDG’s proposal, a state senator, not-for-profit organizations, businesses, taxpayers, and users of Flushing Meadows Park brought an action seeking to enjoin the proposed development.  They claimed that because the Willets West development was located within designated parkland, the public trust doctrine required legislative authorization, which had not been granted.

The Supreme Court, New York County, denied the petition and dismissed the proceeding. The Appellate Division, First Department, unanimously reversed and granted the petition to the extent of declaring that construction of Willets West on City parkland “without the authorization of the state legislature” violated the public trust doctrine, and enjoined further construction.  The Court of Appeals granted QDG leave to appeal and affirmed the Appellate Division’s ruling.

The Court began its analysis by discussing the public trust doctrine from Brooklyn Park Commrs. v. Armstrong, 45 N.Y. 234 (1871) – a decision it issued nearly 150 years ago – where the Court held that, when a municipality has taken land “for the public use as a park,” it must hold that property “in trust for that purpose” and may not convey it without the sanction of the legislature.  The Court also held that the legislature’s authorization to alienate land held in public trust must be “plainly conferred” by its “direct and specific approval.”

Applying these principles, the Court examined whether the State legislature had authorized construction at Willets West, on property that the petitioners contended was City parkland. To address that inquiry, the Court reviewed the legislation the State legislature had enacted in 1961 authorizing the development of a sports stadium on City parkland that came to be known as Shea Stadium. The Court ruled that, since a shopping mall and movie theater were not consistent with typical uses of a stadium, the statute did not authorize the Willets West development.

The Court also considered the legislative history of the statute and ruled that it too demonstrated that the legislature had only authorized the land to be rented for public stadium use, not for private business purposes.

The Court concluded that the legislative authorization to rent the stadium and its grounds to private parties could not “under our longstanding construction of the public trust doctrine, constitute legislative authorization to build a shopping mall or movie theater.”

Interestingly, the Court acknowledged that the remediation of Willets Point was “a laudable goal” and that QDG’s Willets West development would immensely benefit the people of New York City by transforming a blighted area into a new, vibrant community.  Nonetheless, it pointed out that those contentions had no place in its consideration of whether the legislature had granted authorization for the Willets West development on City parkland that was held in the public trust.  Of course, it concluded, the legislature was free to alienate all or part of the parkland for whatever purposes it were to see fit, provided that it does so through direct and specific legislation that expressly authorizes the desired alienation.

While the Court’s ruling does not impact the mixed-use redevelopment proposed for Willets East, QDG is reportedly evaluating its next steps for the project.

images7PKZX7LEIn this post, which is the second segment of a three-part series, we will highlight the various ways that local governments facing fiscal challenges have turned to imposing fees related to the administration of their zoning, subdivision and other land development ordinances to generate additional revenue.  Such fees are authorized by law and can be justified on the basis that those who derive the benefit from a land use application should bear the cost to review that application, rather than the taxpayers.  However, many municipalities on Long Island are imposing new administrative review fees, or increasing the amount of existing fees, that require applicants to pay amounts that are not reasonably commensurate with the cost of the services performed.  Excessive administrative review fees are subject to legal challenge as an illegal “back-door tax.”

Administrative Review Fees

A local government, as part of its regulatory authority, may establish fees for the payment of the expenses to administer a regulatory program. Pursuant to such authority, governmental entities typically charge fees in connection with applications associated with land development to recoup the costs involved with the review of said applications and associated plans to insure that the proposed work complies with all applicable laws, ordinances and regulations. However, while municipalities are authorized to impose review fees, the courts have made clear that the fee amount that can be charged is limited to that which is “reasonably necessary” to undertake the regulatory review involved. In applying the “reasonably necessary” principle, courts do not require exact congruence between the fees charged and the government’s cost to review an application; but there must be some rational underpinning for the charges levied. In other words, the review fees charged must be commensurate with the actual expense of the application being processed and should not be exacted for revenue-generating purposes or to offset the cost of general governmental functions.

Nassau County’s GML § 239-f Review Fee

In 2015, the Nassau County Legislature adopted Ordinance No. 176-215, which pertains to fees charged by the Nassau County Department of Public Works (“NCDPW”). According to the ordinance, certain fees charged by Nassau County “no longer cover the costs required to administer and process the services for which they are charged.” Therefore, the ordinance states that it is “necessary to fix such fees so that they cover the administrative costs associated with the operation of services of the departments.”

Among the fees imposed by Ordinance No. 176-215 are those charged to review applications for building permits, pursuant to General Municipal Law (“GML”) § 239-f, that are forwarded from the various town, cities and villages. GML § 239-f grants the NCDPW the authority to review applications for building permits for developments having frontage on a Nassau County road, but only insofar as the proposed building, including curb cuts or other means of access, may be related to the County road. Where the application is for a development with an anticipated construction cost of $25,000 or more, the initial review fee is $1,500. However, if the anticipated cost of construction is greater than $250,000, the developer is required to pay a fee equal to .75% of the estimated construction value in addition to the initial review fee.

While there clearly is authority for the NCDPW to charge reasonable administrative review fees to process building permit applications for developments that front on a County road, these fees are vulnerable to legal challenge because the amount of the fees charged, at least for developments costing $250,000 or more, is not commensurate with the cost of the services performed. Nor do they bear any relationship to the development’s impact on County roads or other facilities. To illustrate this point, the fee charged to review a building permit for a 150,000 square foot membership warehouse store (such as a Sam’s Club, Costco, or BJ’s), which is typically a simple concrete block building with inexpensive fixtures and finishes, is likely to be significantly less than the fee charged for a building of the same size and constructed on the same site for use by a retailer that elects to construct its building with better and more expensive materials, fixtures and finishes. Presumably, both retailers’ uses would have the same impact on the adjacent County roads and facilities, but the retailer whose building will cost more to construct will be required to pay more to have its plans reviewed by NCDPW. Aside from being patently unfair (and perhaps illegal), the NCDPW’s review fee structure encourages developers to construct buildings using inferior, less expensive materials.

NCDPW’s building permit review fees, at least when they are based on the cost of construction, appear to be vulnerable to attack because they are not calculated based on the NCDPW’s cost to review an application, or the impact that a proposed development may have on County facilities. Instead, they are based on the amount of the investment that a developer chooses to make in the site. Moreover, according to the Nassau County Legislature’s Review of the Fiscal Year 2017 Budget & Multi-Year Plan, these fees also appear to be imposed for revenue generating purposes and to offset the cost to operate the NCDPW. Indeed, while the NCDPW revenues have generally decreased since 2015, the County’s current budget projects nearly a 300% increase in revenue from GML § 239-f building permit review in 2017.

To date, the NCDPW’s building permit review fees have not been challenged by developers, who instead simply pay the fees and capitalize them into the land value. However, these increased costs are being passed on to consumers who ultimately pay more for housing, goods and services. While these fees are helping Nassau County balance its budget, they are also contributing to the high cost of living that is driving people away at an alarming rate.

In the next and final segment of this series, we will look at real property recording fees, which have increased significantly in Nassau and Suffolk Counties in recent years. These fees are being used as yet another revenue-generating device that some consider to be nothing more than an illegal tax.

 

shutterstock_637510813On April 25, 2017, the Southold Town Board adopted Local Law No. 5 of 2017, which amends the Town’s Zoning Code as it relates to agricultural uses. Specifically, the local law amends and adds certain definitions to the Code in recognition of the changes in modern farm operations. The changes are also consistent with the expanded definitions of agriculture found in New York State’s Agriculture and Markets Law.

The new law broadens the scope of agricultural practices by adding several definitions, including those for agriculture, agricultural production, agricultural processing, farm operations, farmhouses, processed agricultural product and on-farm operation direct marketing.  These changes expand agricultural practices beyond the growing of crops and raising of livestock and will allow farmers to process their crops and other agricultural products onsite and market them for sale, much like vineyards that make wine on their properties. Such processed agricultural products include jams, jellies, cheeses, potato chips, jerkies, meats, fowl, fish, breads and baked goods, beer, wine and distilled alcoholic and non-alcoholic beverages.

Farmers will also be allowed to sell their processed agricultural products directly to consumers from within buildings constructed on the farm for the purpose of marketing their products.  The law even allows non-farmers to sell home grown fruits, vegetables or plants to the general public from a “roadside stand,” which is defined as a display area that is less than 100 square feet in size located on the same parcel where the products are grown.

According to Chris Baiz, the chairman of the Southold Agricultural Advisory Committee and a fourth-generation farmer, the high cost of land requires farmers to achieve greater cash flows in order to operate successfully.  These new changes should help local farmers realize more income from their lands by allowing them to process and market value-added products from within their operations.

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.