Posted by: Patricia Salkin | April 4, 2008

NY Court of Appeals Holds Building Permit Can Be Withheld Absent Assurances That Use Will Be in Accordance with the Law

In reversing a decision of the Appellate Division, the New York Court of Appeals held that the New York City Building Department did not act inappropriately in requiring the petitioner to present assurances that they would use the proposed 19 story building as a dormitory (which they represented was the intended use) when the deed restricted the use of the building to a community facility that included a “college or school student dormitories.”   

The City Building Department denied a permit to construct a dormitory on the ground that the petitioner had not shown it could actually use the building as a dormitory, and that if it did not use the building for this purpose, the result would either be an illegal use or a vacant building.  The petitioner proposed a 19-story dormitory on the property that would be configured much like an ordinary apartment building.  However, if the building turned out to not be a viable dormitory and/or to be used as a regular apartment building, this would violate the deed and the zoning laws. The City wanted assurances that the building would be used as a dormitory, and specifically, they asked the petitioner to “substantiate” the proposed dormitory use by showing an “institutional nexus” – meaning a connection to an educational institution to demonstrate that the building would in fact be a dormitory.  Petitioner was unable to offer this type of assurance, but rather continued to assert that the building would be operated as a dormitory for college or school students. The Appellate Court held that the City could not deny the permit since to do so was “an impermissible administrative anticipatory punishment.” The Appellate Court also noted that in the event the building was not used as a dormitory, the City’s remedy would be either denial or revocation of the certificate of occupancy, or an action to enforce the deed restriction.                     

The Court of Appeals disagreed with the Appellate Court, and stated that “the mere possibility of a future illegal use is not an adequate reason for withholding a building permit…” and that where “officials reasonably fear that the legal use proposed for a building will prove impracticable, it is not improper to insist on a showing that the applicant can actually do what it says it will do.” The Court said that it was prudent for the City to seek assurances  and in this case, in the form of connection to an educational institution. The Court concluded that the City officials did not act in an arbitrary or capricious manner in denying the permit.   

In the Matter of 9th and 10th Street L.L.C. v. Board of Standards and Appeals of the City of New York, 2008 WL 762290 (3/25/2008).    

The opinion can also be accessed at: http://www.nycourts.gov/ctapps/decisions/mar08/40opn08.pdf


Responses

  1. I can’t help but wonder if common law deed restrictions may have helped the petitioners and NYC avoid misunderstandings about the permissible uses of this property. Retaining a right of re-entry under a defeasible grant may have provided the assurances the city was seeking. For example, the school may have been granted subject to the condition subsequent that a leaseholder ceases to be a student. The potential loss in face of re-entry would be too great for the developers to risk developing luxury East Village apartments under the guise of dorms. Such a severe result may encourage compliance with the development options but it may also hinder interest in developing former city properties.

    Ultimately, the petitioner did not attempt to contract for dorm space with local schools, which would have at least shown good faith effort to demonstrate its intention to develop dorm space. Something less than a contract, such as letter of commitment leaving some terms open to negotiation after completion, may have provided the city with the assurance it was seeking. Lacking this, it would appear that bets were being hedged on the profitability of dorm space in the East Village.


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