Posted by: Patricia Salkin | September 28, 2018

NY Appellate Court Holds Real Estate Industry Advocacy Organization Did Not Have Standing to Assert SEQRA Claim in Article 78 Proceeding Against City

This post was authored by Matthew Loeser, Esq.

At issue in this case was Local Law 50, which places limits on conversions of Manhattan hotels with at least 150 units. The law placed a two-year moratorium, which was later extended to four years, on the conversion to full-time residential use of more than 20% of qualifying hotels’ “primary hotel space”. Petitioner Real Estate Board of New York (“REBNY”) was a non-profit corporation whose approximately 17,000 members were property owners, developers, lenders, managers, architects, designers, appraisers, attorneys, and brokers involved in the real estate industry in New York City. REBNY claimed that approximately 175 hotel properties in Manhattan fell within the ambit of Local Law 50, and an initial survey indicated that at least 29 REBNY members owned hotels affected by Local Law 50. REBNY further asserted that by restricting the rights of the affected hotel owners to convert their properties to condominiums and other residential uses, Local Law 50 reduced the value of the affected properties to an unspecified degree. In this case, REBNY sought to annul Local Law 50 and permanently enjoin respondents from enacting similar legislation without complying with the City Charter’s Uniform Land Use Review Process (“ULURP”) and the State Environmental Quality Review Act (“SEQRA”).

The record reflected that REBNY failed to show that environmental concerns were relevant to REBNY’s organizational purposes, which focused on the economic and political health of the real estate industry. Moreover, REBNY’s own filings indicated that the organization’s constitution only referenced the environment once, and only insofar as the environment related to economic impact. Accordingly, the court held that REBNY could not assert a SEQRA claim in the article 78 proceeding.

REBNY next contended that Local Law 50 caused owners of large hotels an immediate injury by reducing the value of their properties. The court found that this constituted a facial challenge to Local Law 50 as REBNY claimed that the mere enactment of the statute constituted a violation of its members’ constitutional rights. Furthermore, this allegation did not depend on the extent to which petitioners are deprived of the economic use of their particular pieces of property or the extent to which these particular petitioners are compensated. Accordingly, REBNY’s facial challenge was distinguished from “as applied” challenges.

Insofar as REBNY alleged that approximately 29 of its members owned hotels within the domain of Local Law 50, and that the statute has had an immediate negative effect on the value of the affected hotel properties in alleged violation of these owners’ constitutional rights, the court found plaintiffs stated a facial challenge and their claims were ripe for review. The court noted that even a “temporary” moratorium on certain types of building or development, such as that imposed by Local Law 50, can give rise to a facial challenge. Accordingly, REBNY’s pleadings were sufficient to survive a motion to dismiss.

Real Estate Board of New York v City of New York, 165 A.D. 3d 1 (1 Dept. 8/23/2018)

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