Posted by: Patricia Salkin | December 10, 2016

NY Appellate Court Holds Provision of Restrictive Covenant Limiting Leasing of Units was Unenforceable

Landowners, Blue Island Development, LLC, and Posillico Development Company at Harbor Island, Inc., purchased and developed property into 172 waterfront condominium units, and brought action against the Town of Hempstead, challenging the town’s denial of their application to modify provision of restrictive covenant, which only permitted landowners to lease up to 17 units for five years after issuance of certificate of occupancy or until delivery of title. The Supreme Court, Nassau County, denied the Town’s motion to dismiss. The Town appealed, and the Supreme Court, Appellate Division, affirmed. On remand, the Supreme Court denied landowners’ motion for summary judgment.

At issue in this case was the Declaration of Restrictive Covenants, which required Blue Island to sell all of the units in the proposed development as condominiums, but permitted any subsequent owners of the units to lease the units to the extent otherwise permissible under Town law. The court found that Blue Island met its prima facie burden of showing that paragraph seven of the Declaration was of no actual and substantial benefit to the Town. In opposition, the Town failed to raise a triable issue of fact, as it offered no explanation to rebut this showing. Pursuant to RPAPL 1951(1), “a restrictive covenant shall not be enforced if, at the time enforceability of the restriction is brought into question, it appears that the restriction is of no actual and substantial benefit to the persons seeking its enforcement or seeking a declaration or determination of its enforceability.” Accordingly, the court held that the Supreme Court erred in denying that branch of Blue Island’s motion for summary judgment on the second cause of action declaring paragraph seven of the Declaration invalid and unenforceable pursuant to RPAPL 1951.

Blue Island Development, LLC, v Town of Hempstead, 2016 WL 5795587 (NYAD 2 Dept. 10/5/2016)

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