Restrictive Covenant in NY Zoning Approval Presents Prima Facie Case of Regulatory Taking
As reported by our Owners Counsel colleague, Mike Rikon, the New York Appellate Division reversed a Supreme Court ruling that had dismissed a regulatory takings claims in Blue Is. Dev., LLC v Town of Hempstead, 2015 N.Y. App. Div. LEXIS 6363, 2015 NY Slip Op 06488 (N.Y. App. Div. 2d Dep’t Aug. 12, 2015). The property owner purchased a property with the intention of developing 172 waterfront condominium units. A use variance was granted by the municipality, but there was a condition attached to the approval requiring the owner to sell all the units as condos, but permitted the subsequent owner to rent the units. The property owner petitioned the municipality to relax the restrictive covenant and the Town modified the subject covenant in a resolution dated July 13, 2010, to provide that Blue Island “was permitted to lease up to 17 of the 172 units for a period of five years after the issuance of the certificate of occupancy or until the delivery of title to the 155th unit, whichever occurred first. In 2013, Blue Island sought a further modification allowing it to sell 32 units and maintain the remaining 140 as rentals. In a resolution dated November 12, 2013, the Town denied this application without explanation.”
The property owner filed suit challenging the restrictive covenant on two bases: 1) the covenant was beyond the authority of the municipality because it was a regulating the owners ability to alienate the land, not the owners use of the land; and 2) that the covenant effectuated an unconstitutional taking based on a denial of development. The Appellate Court found both challenges had merit and should not have been dismissed by summary motion practice:
“Here, Blue Island’s complaint alleged both that the restrictive covenant did not advance any legitimate municipal interest and that the covenant denied it an economically viable use of the land. Whether Blue Island can ultimately demonstrate that the denial of a modification to the restrictive covenant effects a taking, it has stated a claim, and the Town has not pointed to any documentary evidence defeating that claim. Accordingly, upon reargument, the Supreme Court should have adhered to its prior determination denying that branch of the Town’s motion which was to dismiss the unconstitutional taking cause of action.”
We’ll keep our eyes on Bulldozers at Your Doorstep to see what happens.
