Fed. Dist Court in NY Grants Motion to Dismiss Counterclaim Arising from Potential Extinguishment of Restrictive Covenant for Convent under FHA

This post was authored by Matthew Loeser, Esq.

Defendant and Counterclaim Plaintiff Sisters was a religious not-for-profit corporation that owned and operated a convent in the Town of Greenburgh, New York. Plaintiff and Counterclaim Defendant S&R was a New York limited-liability company managed by brothers Stephen and Richard Troy, which purchased, and attempted to develop, a parcel of land directly adjacent to the Sisters’ convent into 41 affordable housing units. On March 2, 2013, the Sisters sent a letter to S&R reserving its rights under the restrictive covenant. Following receipt of this letter, S&R commenced a suit against the Sisters in Westchester County Supreme Court seeking to extinguish the enforcement of the covenant. In their counterclaim, the Sisters alleged that in the event that S&R’s FHA claims succeeded, they should be entitled to compensation for any damages suffered as a result of the “extinguishment” of their restrictive covenant.
At the outset, the court noted that the FHA did not contain any language suggesting that owners whose property lost value as a result of the statute were entitled to compensation. Instead, the court found that if enforcing a restrictive covenant violated the results-oriented directive of the FHA, compensating a party for its inability to enforce that restrictive covenant would improper. As such, regardless of whether a violation on the Sisters’ part had been established, the court found that the Sisters would not be entitled to seek compensation under RPAPL § 1951(2). Since there was no way for the Sisters to reformulate the ACC in a way that would not be preempted, any attempt at re-pleading would be futile.
S & R Development Estates, LLC v Town of Greenburgh, 2018 WL 411918 (SDNY 8/29/2018)