NY Appellate Court Finds that Substantial Improvements and Expenditures Alone do not Constitute a Vested Right

In December 2000, the petitioners/plaintiffs, Exeter Building Corp. and 17K Newburgh, LLC, became the owners of a parcel of approximately 29 acres of real property in the Town of Newburgh. The property was within the Town’s R-3 zoning district, which permits multi-family housing. In 2002 the plaintiffs applied to the Town of Newburgh Planning Board for approval of a site plan for a proposed project to be known as Madison Green that was to consist of 34 residential buildings, each containing four single-family units, for a total of 136 units. Review of the site plan for Madison Green proceeded, but on March 6, 2006, the Town Board enacted its comprehensive plan as Local Law No. 3 (2006) of Town of Newburgh, and the plaintiffs’ property was rezoned from R-3 to R-1. The plaintiffs commenced legal proceedings against the Town, its Planning Board, and the Town’s Building Inspector, seeking invalidation of Local Law 3 and a declaration that they have vested rights, under both statute and common law, to develop Madison Green under the R-3 zoning regulations. In November 2006, the Supreme Court issued an order invalidating Local Law 3, but also declaring that the plaintiffs did not have vested rights to develop Madison Green under the R-3 zoning regulations.

In New York, a vested right can be acquired when the landowner has demonstrated a commitment to the purpose the permit was granted by effecting substantial changes and incurring substantial expenses for the development. Furthermore, neither the issuance of a permit nor the landowner’s substantial improvements and expenditures by themselves can establish that right. The landowner’s actions relying on a valid permit must be so substantial that the municipal action results in serious loss to the extent of rendering the improvements essentially valueless. In this case, the court determined that none of the permits acquired by the petitioners either singly or aggregately amounted to the Town’s approval of Madison Green. Accordingly the court held that the Supreme Court should have declared that the plaintiffs do not have a vested right to develop the property under the R-3 zoning regulations.

Exeter Bldg. Corp. v. Town of Newburgh, 980 N.Y.S.2d 154 (N.Y. A.D. 2d Dept. 2014)