Posted by: Patricia Salkin | September 27, 2018

NY Appellate Court Finds Owner Failed to Show that Commission was Prejudiced Against It by Denying Application to Demolish Landmarked Buildings and Finds No Taking

This post was authored by Matthew Loeser, Esq.

New York City Landmarks Preservation Commission (“LPC”) denied the hardship application of petitioner, Stahl York Avenue Co., LLC, to demolish two buildings included within a designated landmark. On appeal, Stahl York contended the denial was without rational basis, and that it was entitled to money damages on the ground that the inclusion of the two buildings within that designated landmark constituted an unconstitutional taking. Stahl further argued that the LPC reached a false and unreasonable conclusion in determining that Stahl could earn more than a 6% return from the two buildings in question.

The record reflected that the entire First Avenue Estate (“FAE”) was one unit of real property treated as a single entity for purpose of levying real estate taxes. Thus, although the part of the improvement that Stahl sought to demolish was 2 of the 15 buildings within the FAE, Stahl was still required to prove that the entire improvement parcel, which included the improvement in question, was not capable of earning a reasonable return. Here, the LPC also analyzed the hardship application solely with respect to tax lot 22 (which contained only the two buildings in question) and rationally determined that no hardship was demonstrated under a separate analysis of that tax lot because Stahl failed to demonstrate that those buildings, considered alone, were not capable of earning a reasonable return.

The court also found that the LPC’s use of the “income approach” rather than the “cost approach” in making its determination was rational. The LPC demonstrated that its use of the income approach comported with the valuation method used by taxing authorities, whereas the cost approach would generate a higher assessed value for the buildings, resulting in higher real estate taxes. Furthermore, the LPC performed more than 20 additional reasonable-return calculations using many of the assumptions that Stahl preferred, as well the “cost approach,” all of which indicated that the buildings were capable of earning a reasonable return.

Stahl’s next contention was that the LPC’s inclusion of the two buildings in the FAE landmark designation amounted to an unconstitutional taking. Although the FAE was divided by lot lines, the City had placed all of those lots within one tax block and has designated it as one unified landmark. Considering the FAE property as a whole, the court determined the LPC’s amendment of the landmark designation to include the two buildings in question, did not result in complete deprivation of the owner’s economically beneficial use of its property. Specifically, the owner was still free to rent units within all of the buildings in the FAE, including the two buildings in question. Accordingly, the holding of the Supreme Court, New York County granting defendants/respondents’ cross motion to deny the petition-complaint, and dismissing the proceeding-action, was affirmed.

Stahl York Avenue Co., LLC v City of New York, 162 A.D. 3d 103 (1st Dept. 5/22/2018)

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