In Matter of HV Donuts, LLC v. Town of LaGrange Zoning Board of Appeals, the Second Department recently held that a property owner’s nonconforming use rights continue despite a temporary business interruption caused by a fuel truck accident and gasoline spill.

The property owner, Leemilt’s Petroleum, Inc. (the “Owner”), leased the subject property (the “Premises”) to a tenant who operated a gas station and a convenience store at the Premises. Both the gas station and the convenience store were legal nonconforming uses under the Town’s zoning regulations.

Under Section 240-29 of the Code of the Town of LaGrange (hereinafter the “Code”), a “nonconforming use . . . is one which existed lawfully” prior to the date that the Code or an amendment to the Code was enacted, which results in the failure of that prior use to conform to the Code (see Code § 240-29[B]). However, in order for such use to maintain its status as a nonconforming use, it must not be discontinued. The Code provides that a nonconforming use is deemed discontinued when “the nonconformity has ceased for a period of one year or more” (see Code § 240-29[F][4]).

The case arose out of an accident in June 2013, when a fuel delivery tanker hit a light pole, spilling approximately 3,000 gallons of gasoline on the Premises. This forced the gas station and the convenience store to temporarily cease business operations and begin remedial efforts. After the Owner completed the restoration work in October 2014, a leak was discovered in the gasoline pump system piping when it was tested in anticipation of reopening. This required additional remediation and further delayed the reopening.

Eventually, the Owner completed this additional work and thereafter sought approval from the Town’s building inspector to reopen the gas station. The Owner also applied for a building permit from the Town’s building inspector “to upgrade the convenience store building, which had not been damaged by the spill and remediation efforts.” Section 240-29(E) of the Code permits the “re-establishment of nonconforming uses after casualties,” under certain time conditions. Section 240-29(E) of the Code provides the following:

“If any nonconforming building or structure or any building or structure containing a nonconforming use shall be damaged or destroyed by fire or other casualty, such building or structure . . . may be restored and any such nonconforming use resumed to the extent that such building, structure or use existed at the time of the casualty, provided that a building permit for such restoration is obtained within a period of one year from such casualty and is diligently prosecuted to completion.”

Pursuant to that provision, the building inspector granted the Owner’s request, giving it one year from September 22, 2015—the date of the building inspector’s determination—to re-establish its nonconforming use.

A Dunkin Donuts franchise (the “Petitioner”) located across the street from the Premises appealed the building inspector’s determination to the Town’s Zoning Board of Appeals (the “ZBA”). The Petitioner contended that the nonconforming use had been lost and could not be re-established, citing Sections 240-29(E) and (F) of the Code.

The ZBA determined that “there was ‘more to maintaining a gasoline filling station than pumping gas,’” and that the “remediation of the petroleum spills amounted to a continuation of the nonconforming use.” Thus, there was no “discontinuation” within the meaning of Code Section 240-29(F)(4). Furthermore, the ZBA concluded that the building permit requirement of Code Section 240-29(E) did not apply to the convenience store because neither casualty affected the convenience store.

Ultimately, the Supreme Court rejected the Petitioner’s Article 78 challenge, holding that the ZBA’s determinations were rationally based and entitled to deference. The Second Department affirmed. Therefore, under HV Donuts, a nonconforming use may not be lost by remedial and restoration activities that temporarily shut down site operations, provided these activities are diligently pursued and completed.

The Breakers Motel has been a fixture in Montauk since the 1950’s. Situated at 769 Old Montauk Highway, Montauk New York, the motel has 26 units, a pool and restaurant and is located across the street from the ocean.

In 2015 a building permit was issued by the Town of East Hampton Building Department approving renovations to the existing restaurant inside the motel, including an updated dining area, adding a bar, improving the kitchen facilities and more. The neighboring property owner, a revocable trust, unsuccessfully appealed the Building Department’s determination to issue the April 27, 2015 building permit to the Town of East Hampton Zoning Board of Appeals.

In an Article 78 petition and plenary action entitled Jane H. Concannon Revocable Trust v. The Building Department of the Town of East Hampton, Town of East Hampton Zoning Board of Appels, and Breakers Motel, Inc., Index No. 4297/2016, dated February 5, 2018, the revocable trust (“Petitioner”) appealed the Zoning Board of Appeal’s determination to the Supreme Court.

At the Zoning Board of Appeals, Petitioner argued that because a restaurant had not operated on site since the 1970’s, an application for a special permit under the current Town Code was required before the building permit for renovations could have been issued. The Breakers Motel argued that the restaurant has always been a permitted use and was in place prior to the current Town Code provisions requiring special permits.

Breakers submitted that the restaurant fixtures had never been removed from the site, and a prior Certificate of Occupancy issued in 2005 and Site Plan approval issued in 2010 both referenced and approved the restaurant. All parties conceded that the restaurant was never pre-existing nonconforming and was, in fact, always permitted.

Prior to 1984, the subject property was zoned Multiple Residence District (“MD”), which permitted a restaurant as accessory to a motel. After 1984, the zoning was amended to Resort District (“RS”), which permitted restaurants pursuant to a special permit. The Zoning Board of Appeals denied petitioner’s appeal and declined to consider the merits of petitioner’s appeal, finding that the appeal was untimely pursuant to the 60 day statute of limitations set forth in NYS Town Law §267-a and East Hampton Town Code §255-8-35(A).

Petitioner brought the above referenced proceeding by order to show cause seeking a judgment annulling the Zoning Board of Appeals decision, revoking the building permit and imposing a permanent injunction enjoining further renovations to the restaurant without a special permit.

The Court held that a special permit was not required for the restaurant use, since the use had been in place prior to the 1984 adoption of the RS Zoning District. The Court stated,

“Simply stated, the concept of “use” in the context of zoning regulations is not the equivalent of “in use” or “used” as is made clear in the following definitions in the East Hampton Town Code sections 255-1-14(G) and (H)…” The Court further found that the East Hampton Town definitions of use were consistent with “what is generally accepted in New York zoning law,” stating,

“USE: The specific purpose for which land or a building is designed, arranged, intended, or for which it is or may be occupied or maintained. The term “permitted use,” or its equivalent, shall not be deemed to include any nonconforming use. USE: The purposes for which a structure or premises, or part thereof is occupied, designed, arranged or intended,” citing, Salkin, N.Y. Zoning Law and Prac., 3d Edition §38:05, Sample definition.

The Court relied upon the fact that the restaurant configuration on site was never changed; and the kitchen fixtures and equipment had remained in place since the 1970’s, stating, “the area in question was designed, arranged and intended to be a restaurant; i.e., the use continued even though it was not “used” as a restaurant.”

The Court went on to distinguish the special permit restaurant use from pre-existing nonconforming uses that can be abandoned after time since the special permit use was not rendered illegal after the zone change to RS. Relying on Town Code §255-5-25, which states in relevant part that “special permit uses which either lawfully exist on the effective date of this article…shall, in all respects, constitute lawful and conforming uses under this chapter,” the Court held that the Breakers Motel restaurant use was legal, even under the new RS zoning, and did not require a special permit to be maintained or altered.

The Court denied the request for the permanent injunction and dismissed the proceeding. Petitioner submitted a Notice of Appeal to the Appellate Division, Second Department, while patrons of the Breakers Motel enjoyed the newly renovated restaurant and bar.

Zoning codes are often at odds with a property owner’s intended use for its site. In certain situations, a property owner may be able to use the site as intended. For example, if the actual use pre-dates the zoning code change, it can continue as a non-conforming use. This is frequently referred to as the “grandfather” doctrine.House on Law Book shutterstock_105894032

A property owner may also find refuge in the doctrine of “vested rights.” Under this doctrine, the zoning change does not prevent the intended use even if it is not a grandfathered use. Two recent cases, one from the Court of Appeals and the other from the Appellate Division, explain when rights vest and when they do not vest.

Vested Rights Upheld

In Matter of Waterways Development Corp. v Town of Brookhaven, 126 AD3d 708 [2d Dept], leave to appeal denied, 25 NY3d 909 [2015], in which we represented the developer, the Appellate Division determined that the developer of a multi-phase residential development had a vested right to construct three mid-rise residential buildings. These mid-rises, the final phase of the development, had been granted height variances in 1986 that allowed the buildings to be three-stories in height rather than conform to the zoning code limitation of two-and-a-half stories high.

Fifteen years later, in 2001, the developer applied for building permits for the mid-rise buildings, which the Town refused to issue. The appellate court, and the trial court before it, sided with the developer and determined that the Town’s refusal to issue building permits for the mid-rises was wrong because the developer had a vested right to complete the project and the variances were still valid. The appellate court also found that the Town acted arbitrary and capricious in denying the building permits and the Town’s decision was not entitled to deference under the circumstances.

The Court agreed with the developer that the development was a single integrated project. Six of the seven phases had been constructed at the time the developer applied for building permits for the mid-rises. That construction included project-wide infrastructure that benefited not just the six phases but also the contemplated mid-rises. The developer incurred substantial expenditures in good-faith reliance on the continuing validity of the variances, which had been expressly granted “for the life of job.” The Town had not objected to issuing building permits for the first six phases of the project, which construction extended over many years. All of the factors led the Court to conclude that the developer had a vested right to construct the mid-rise buildings.

Vested Rights Rejected

signsIn March 2016, the Court of Appeals issued a decision in which it found that a property owner had no vested right to a large outdoor advertising sign, even though the municipality had issued a building permit for the sign and the property owner had constructed it. In Matter of Perlbinder Holdings LLC v Srinivasan, 27 NY3d 1 [2016], the site previously had a large outdoor advertising sign affixed to the side of a building. A permit for that sign was issued in 1980. Thereafter, the City enacted a zoning regulation that prohibited outdoor advertising signs in that zoning district.

The original sign was grandfathered in as a non-conforming use. In 2002, the owner of the site obtained a variance to construct a high-rise building. The variance allowed the original sign to be relocated with slightly modified dimensions. The owner never built the high-rise. In 2008, the original building, which had become dangerous, along with the original sign, was demolished in accordance with an emergency declaration.

The owner then applied for two permits to build a new support structure for a free-standing sign and to install a new double-side large bill-board type sign on that structure in the middle of the now-vacant property. The department of buildings rejected the application, finding that the new sign could not be considered “grandfathered in” unless it was single-sided like the original sign and was placed in the same location as the original sign.

The borough building commissioner overruled that decision and approved the new sign and support structure on the ground that the new sign was grandfathered in under the zoning resolution. Permits to install the sign and support structure were issued. After the sign was constructed on the support structure, a routine audit of the department of buildings determined that the sign permit had not been lawfully approved and the department of buildings revoked the permit as being improperly granted.

The owner appealed the revocation to the New York City Board of Standards and Appeals (BSA), which affirmed the revocation because the sign violated the zoning resolution. The BSA determined that the non-conforming use had been lost since the original sign had been demolished more than two years before. The BSA also determined that it did not have jurisdiction to rule on the owner’s claim that it had installed the sign in good faith reliance on the permits.

The owner then commenced an Article 78 proceeding to annul the BSA’s determination and reinstate the permits for the new sign. The trial court dismissed the petition, affirming the decision of the BSA. The Appellate Division reversed and remanded the matter to the BSA, holding, as a matter of law, that the owner had established good faith reliance and ordered the BSA to determine on remand if the owner was entitled to a variance based on certain city charter provisions. Leave to appeal was granted and the case went to the Court of Appeals.

The Court of Appeals determined that the zoning resolution prohibited advertising signs in that zoning district and the new sign was not entitled to grandfather status. The Court rejected the owner’s vested rights argument. The Court explained that an owner can acquire vested rights to develop property in accordance with prior regulations when it effects substantial changes and incurs substantial expense to further the development in reliance on a legally issued permit but vested rights cannot be acquired if the permit relied upon was invalid. Since the sign permit was wrongfully issued to the owner, the Court of Appeals decided that the vested rights doctrine did not prevent the municipality from revoking the permit.

Conclusion

These cases make it clear that if a party claims it acquired vested rights in a project that no longer conforms to zoning, it will need to show the approval it is relying upon was validly issued or that it is single integrated project, in addition to demonstrating it conducted substantial construction and incurred substantial cost.