In Joy Builders, Inc. v. Town of Clarkstown, 2018 N.Y. Slip Op. 07110, 165 A.D.3d 1084 (2d Dept 2018), a developer (“Developer”), in connection with the development of two subdivisions, challenged a provision of the Town Code of the Town of Clarkstown (“Town”) which authorized the Town to withhold the issuance of building permits for a subdivision until the applicant/owner has completed the requisite infrastructure and improvements and dedicated the same to the Town.  The Supreme Court, Rockland County, denied the Developer’s motion for summary judgment and the Developer appealed.  The Appellate Division, Second Department, reversed and declared the Town Code provision null void and struck the subdivision conditions affected by that provision.

With respect to the Developer’s projects, the Town Planning Board had approved two subdivisions of 22-lots and 55-lots, respectively.  The approvals contained a condition requiring the Developer to build certain infrastructure and post performance bonds for each project.  Town Code Section 254-18B authorized the Town to withhold the issuance of building permits for 10% of the lots of each subdivision until the Developer completed and dedicated the infrastructure and improvements.  The basis of the “holdback” was to ensure that applicants/owners complete the requisite work.  During construction, the Town relied upon the holdback provision and withheld the issuance of buildings permits for three lots in one subdivision and six in the other.  The Developer, then, commenced this action challenging the Town’s withholding and seeking a declaration that Section 254-18B was null and void.

The Appellate Division noted that towns and municipalities lack the inherent power to enact zoning or land use regulations – rather, they are creatures of statute.  As such, towns may only engage the powers conferred by the State Legislature.  The pertinent statute, Town Law Section 277(9) authorizes the Town to obtain enumerated forms of security in order to ensure the full cost of infrastructure and improvements in the event a developer abandons a project.  However, withholding the issuance of building permits is not among these.  The Court determined that Town Law Section 277 does not expressly authorized the holdback and no such authority can be implied.  Therefore, Town Code Section 254-18B was inconsistent with the Town Law and the Town does not have the power to withhold building permits to provide financial security for the completion of work.

The Court declared Section 254-18B void and struck the conditions of withholding. The Court’s ruling reaffirms strict adherence to the enumerated powers for municipalities in the land use and zoning context.

New York State Town Law § 277(9) authorizes a town Planning Board to require a developer to provide a performance bond or other security covering the cost of installation of subdivision infrastructure and improvements in case the developer fails to finish the required work. Specifically, Town Law §277(9) states: “[a]s an alternative to the installation of infrastructure and improvements, as above . . . prior to planning board approval, a performance bond or other security sufficient to cover the full cost of the same, as estimated by the planning board or a town department designated by the planning board to make such estimate . . . shall be furnished to the town by the owner.”

On October 24, 2018, the Appellate Division, Second Department explored the extent of this enabling legislation in the case of Joy Builders Inc. v. Town of Clarkson.  In Joy Builders v. Town of Clarkson, Joy Builders was developing two subdivisions approved by the Planning Board; a 22 lot subdivision called Highland Vista Estates and a 55 lot subdivision called Little Tor Subdivision.  Both subdivisions were approved by the Planning Board with the condition that Joy Builders would build the infrastructure required for each one including roads, curbs, sidewalks, street signs, light poles and monuments. Joy Builders was required to post performance bonds for each subdivision pursuant to New York State Town Law §277(9).  Additionally, the Town of Clarkson had enacted Town Code §254-18B which authorized the Town to withhold the issuance of building permits for 10% of each subdivision until Joy Builders had completed the required infrastructure improvements. The enactment of this law was the Town’s effort to ensure that the required infrastructure work would be completed.

Specifically, Town Code §254-18B stated:  “Ten-percent restriction of building permits pending dedication of improvements in subdivisions.  Building permits shall be restricted, in accordance with the map note per §254-29B of this chapter, to footings, foundations and utilities only on 10% or one of the structures or dwelling units, whichever is greater, in each subdivision until all required improvements have been completed to the satisfaction of the Department of Environmental Control and shall have been dedicated to the town, unless waived by the Planning Board.”

In response to having Town Code §254-18B imposed, Joy Builders brought a declaratory judgement action against the Town seeking a judgment that the Town Code provision was null and void as ultra vires. The Supreme Court denied Joy Builder’s motion for summary judgement on the complaint, and Joy Builders appealed. The Appellate Division reviewed the enabling authority set forth in Town Law §277 and reversed the Supreme Court’s determination.

The Court stated: “[h]ere, a plain reading of Town Law § 277 establishes that (1) it has no express provision authorizing the Lot Holdback Provision set forth in Town Code § 254-18B, (2) pursuant to the rules of statutory construction, the express provisions of Town Law § 277 must be construed to exclude provisions such as those in Town Code § 254-18B which are not contained in § 277 (see Walker v Town of Hempstead, 84 NY2d 360, 367), and (3) it has no provision from which the Lot Holdback Provision of Town Code § 254-18B can be implied (see Matter of Gruber [New York City Dept. Of Personnel—Sweeney], 89 NY2d 225, 234; Matter of Webster Cent. School Dist. v Public Empl. Relations Bd. of State of N.Y., 75 NY2d 619, 627). Thus, Town Code § 254-18B is inconsistent with the plain language of Town Law § 277(9), which expressly sets forth the manner in which a developer can be required to provide financial security to ensure the completion of the installation of required infrastructure and other mandatory improvements.”

Since the matter was a declaratory judgment action, the Court remitted the matter back to the Supreme Court for the entry of a judgment declaring that Town Code §254-18 was null and void as ultra vires and that the conditions imposed on Joy Builders arising out of that Town Code section were also null and void.