Would UWS Hi-Rise Developer be Forced to Demolish Top Floors?: First Department Tackles Complicated/Ambiguous Zoning Rules

This was originally published on the SGR Blog.

Questions presented: Was it proper for Supreme Court to annul the determination by the Board of Standards and Appeals to approve a new 55-story condominium building at 200 Amsterdam Avenue on the Upper West Side of Manhattan? For Supreme Court to direct the demolition of an unspecified number of floors from the building? And were legal proceeding moot because the building was substantially completed and the Committee of Environmentally Sound Development and the Municipal Art Society of New York failed to exercise continued due diligence to halt the project by not seeking injunctive relief at every stage of the protracted litigation?

The building lot was originally part of a single parcel of land, which in the 1960s consisted of five buildings along West End Avenue. In 1987, the DOB approved a subdivision into two separate parcels that included partial tax lots and, subsequently, two mergers with four other tax lots. In 2015, the DOB approved another zoning lot subdivision, creating two new zoning lots, both of which contained partial tax lots, and filed a declaration with the City Register. The pertinent subdivided zoning lot included the improved land at 200 West End Avenue, the unimproved land at 200 Amsterdam Avenue, and portions of four other tax lots.

Amsterdam Ave. Redevelopment Assoc. LLC purchased 200 Amsterdam Avenue on October 15, 2015, and applied for a building permit with the DOB on September 27, 2016. The DOB issued initial approval of the full building permit application on May 9, 2017. On May 15, 2017, petitioners brought a zoning challenge to the DOB. The DOB issued a notice to revoke in June 2017, and in July 2017, directed an audit concerning the inclusion of partial tax lots. On September 27, 2017, the DOB reissued the building permit. Construction of the building began on or about October 5, 2017.

On October 27, 2017, petitioners appealed the permit issuance to the BSA, arguing that the zoning lot did not comply with the definition in ZR 12-10 (d) due to its inclusion of partial tax lots. In response, the DOB requested that its 2017 decision to issue the permit be affirmed, given the history of the lot and surrounding properties, all of which included partial tax lots. It first explained that its longstanding interpretation of ZR 12-10(d), adopted by the City Planning Commission on or about July 13, 1977, as an amendment to the definition, reads in relevant part:

A “zoning lot” is . . . (d) a tract of land, either unsubdivided or consisting of two or more lots of record contiguous for a minimum of ten linear feet, located within a single block, which at the time of filing for a building permit…is declared to be a tract of land to be treated as one zoning lot for the purposes of this resolution.

Language following subsections (a)-(d), dating to the 1961 adoption of the original definition, provides: “A zoning lot, therefore, may or may not coincide with a lot as shown on the official tax map of the City of New York, or on any recorded subdivision plat or deed.” The terms “tract of land,” “unsubdivided,” and “a lot of records” are not defined. Once a tract of land is treated as a single zoning lot, the maximum bulk of a building permissible under the zoning resolution is calculated on the basis of the merged zoning lot.

The DOB also discussed the 1978 memorandum by the DOB’s then-acting commissioner, Irving E. Minkin, P.E. The Minkin Memo set forth guidance and procedures to implement the requirements of ZR 12-10(d) and clarified that the amendment applied to:

“an applicant for new developments or enlargements who desires to permit the use of a tract of land within a single block as a single zoning lot, which may consist of one or more tax lots or parts of tax lots, as shown on the official tax map whether in common ownership or not [].”

The DOB noted that the allowance for partial tax lots “appeared to be supported by th[is] additional text,” stating that a zoning lot “may or may not coincide with” tax lots. It also stated that the concept of zoning lots did not exist prior to December 15, 1961, “and since the zoning lot definition adopted on that date defined a zoning lot as a lot of records’. . . it is apparent that the term ‘lot of record’ could not have referred to zoning lots,” but, rather, tax lots. It further asserted that there was a draft bulletin in the process that would “supersede the Minkin Memo,” but it had “not yet rescinded the Minkin Memo.”

A public hearing was held on March 27, 2018, concerning the 2017 BSA appeal. While a decision in the 2017 BSA appeal was pending, on April 25, 2018, petitioners commenced an action in Supreme Court seeking a declaration that the zoning lot was improperly formed and a temporary restraining order and preliminary injunction to stop construction. By so-ordered stipulation dated May 9, 2018, the parties agreed that petitioners’ motion for a temporary restraining order and a preliminary injunction would be held in abeyance. Specifically, the stipulation stated that:

“[Amsterdam] agrees that it will not rely on any progress in construction or development at the Site during the Time Period, or on any expenditures it makes in connection with the Site during the Time Period, to support any argument that the Owner is entitled to continue or complete construction at the Site. This would include any arguments the Owner may assert relating to . . . mootness.”

The stipulation defined the “Time Period” as

“The period between May 1, 2018, and either (a) ten days after the filing by the [BSA] in its office of the resolution setting forth the [2017] BSA’s decision disposing of [this case] or (b) the completion of the foundation at [the building], whichever of (a) or (b) is earlier.”

Construction of the building was not halted during this time.

Meanwhile, in the 2017 BSA appeal, the DOB sent another letter in support of upholding the building permit. The DOB referenced previous BSA findings that a “longstanding plausible interpretation” and “substantial reliance by the property owner on that interpretation” should be upheld, “notwithstanding the fundamental validity of DOB’s current interpretation.” A second public hearing was held on June 5, 2018.

On July 17, 2018, the BSA commissioners voted to deny petitioners’ 2017 BSA appeal and uphold the permit issuance, three-to-one, and issued a resolution to that effect on September 7, 2018. The building foundation was completed on September 13, 2018. In accordance with the stipulation, petitioners were promptly notified as to the progress of construction.

On September 27, 2018, petitioners and Amsterdam agreed to extend the May 9, 2018 stipulation to hold petitioners’ motion for a temporary restraining order and preliminary injunction in abeyance through the date of entry of an order or judgment in the 2018 Supreme Court action, but only if petitioners filed an amended pleading by October 8, 2018.

On October 9, 2018, petitioners filed a verified petition and amended complaint in Supreme Court, challenging the 2017 BSA’s determination. On March 14, 2019, Supreme Court granted the petition, vacated the 2017 BSA determination, and remanded the matter to the BSA for review of the building permit approval “in accordance with the plain language of the ZR.” Critically, no injunction was issued, and the Court explicitly stated that “[a]ny requested relief not expressly addressed by the Court has nonetheless been considered and is hereby denied.” As of March 14, 2019, the building had been completed for 22 floors, with the curtainwall up to the 7th floor.

In April 2019, petitioners moved for a preliminary injunction to halt construction pending a new determination by the BSA. After hearing an oral argument on April 30, 2019, Supreme Court denied the motion, “permitting the construction to continue until the BSA’s resolution is finalized.” At this juncture, the building had been completed up to the 26th floor, and the curtain wall had been installed up to the 13th floor. Significantly, while petitioners filed a notice of appeal from the Supreme Court’s order on May 21, 2019, and Amsterdam twice agreed to extend petitioners’ deadline to perfect their appeal – but petitioners abandoned their appeal of the order denying the April 2019 motion for injunctive relief.

The BSA passed a second resolution on June 25, 2019, upholding the DOB’s permit. It found that “no categorical rule appears in the provisions of the Zoning Resolution that a ‘tract of land’ need be a complete tax lot.” It held that petitioners’ interpretation “would render the . . . specific statement about ‘lots on any recorded subdivision plat or deed’ wholly redundant because the only ‘lots of record’ would be the previously described ‘lot as shown on the official tax map.’” It reasoned that” ‘lots of records’ must be an umbrella category” that does not exclude other recorded lots. The BSA also held that the lot qualified as “unsubdivided,” given the recorded documents describing it as a single tract of land and also a tract consisting of two or more lots of record based on “documents and maps recorded” with the City Registrar.

The BSA also noted that it had heard testimony concerning the DOB’s uncertainty as to whether it would issue the draft bulletin superseding the Minkin Memo, saying it “may not see the light of day.” The BSA found the Minkin Memo “consistent with the ‘zoning lot’ definition” and did not credit petitioners’ position that the Minkin Memo “set forth an ‘incorrect’ interpretation, rather than an alternative interpretation equally supported by a plain reading of the text.” It then noted that 28 certificates of occupancy had been issued on the same block, “certifying that parcels of land that include partial tax lots comply with applicable zoning requirements.” In sum, the BSA found that the lot was “either unsubdivided or consisting of two or more lots of record” and again upheld the DOB’s permit.

Petitioners commenced a proceeding on July 24, 2019, seeking an order annulling the BSA’s 2019 resolution as arbitrary and capricious and affected by an error of law; revoking the DOB permit; declaring that Amsterdam’s zoning lot was void, could only consist of the tax lot on which the building was being constructed, and the building exceeded the maximum floor space allowed; an injunction halting further construction and directing the removal of portions of the building that exceeded the allowable bulk of 17-to-20 floors, and costs and attorneys’ fees.

Amsterdam asserted that as of September 5, 2019, the building was substantially completed. The superstructure was then 53 floors, and the curtain wall was installed through the 32nd floor. Amsterdam also noted 34 other instances of approved zoning lots containing partial tax lots. The BSA and the DOB asserted that the BSA’s decision was rational, supported by the record, and entitled to deference.

By letter dated October 17, 2019, petitioners notified the Supreme Court that Amsterdam was advertising condos for sale and requested that Supreme Court move up an oral argument because they were “concerned” that, if their petition was granted, “it will become more difficult to obtain the necessary relief — the removal of the offending top floors.”

Supreme Court granted the petition and entered judgment for petitioners on February 27, 2020. First, the Court found that the BSA’s reliance on the Minkin Memo was unreasonable because the DOB had clarified that it found the old interpretation to be incorrect and planned to supersede it by a bulletin that was already drafted. The Court wrote that the DOB had “the authority to declare what the Zoning Resolution means and BSA has the authority to determine if DOB’s interpretation is correct,” but that the BSA “balked in its duty” because it “premised” its decision solely “on the fact that the Minkin Memo had not yet been superseded.” The Court also faulted the BSA for failing to give the DOB’s new interpretation retroactive effect, in light of the Court’s holding in the 2018 Supreme Court action.

Second, Supreme Court held that the zoning resolution did not, in fact, allow for the formation of zoning lots using partial tax lots, based on its “plain language.” It stated that for the BSA to find otherwise “violates the public policy of transparency imbued in the zoning rules and regulations which are intended to provide proper notice and protection to the public to avoid unwarranted confusion and promote clarity . . . to further the City’s interest in ensuring zoning compliance.”

Third, Supreme Court rejected Amsterdam’s contention that its completion of the project could prevent an injustice since a wrongfully issued building permit did not vest it with any rights. The Court also assumed that Amsterdam completed much of the construction before the judgment in the 2018 action and thus found that it had waived its right to raise mootness.

Finally, the Court vacated the BSA’s 2019 determination, directed the DOB to revoke the building permit, ordered Amsterdam to remove floors exceeding the bulk allowance, and awarded costs and attorneys’ fees to petitioners. 

Amsterdam, DOB, and the BSA appealed. The Appellate Division reversed and dismissed the proceeding—because the BSA rationally interpreted the zoning resolution’s undefined and technical terms, and its interpretation should have received deference. 

Where the interpretation of a statute or its application involves knowledge and understanding of underlying operational practices or entails an evaluation of factual data and inferences to be drawn, the courts regularly defer to the governmental agency charged with the responsibility for the administration of the statute. Here, the BSA was the ultimate administrative authority charged with enforcing the zoning resolution. And was comprised of experts in land use and planning, who not only possessed technical knowledge of New York City’s zoning regulations and their operation in practice but also was uniquely equipped to assess the practical implications of zoning determinations affecting the City’s eight million residents. Courts have consistently deferred to the BSA’s interpretation of the zoning resolution in matters relating to its expertise, so long as the interpretation was neither irrational, unreasonable, nor inconsistent with the governing statute.

The First Department found that the law was not entirely clear and unambiguous when read as a whole because it contained undefined technical terms and was capable of conflicting interpretations. In addition to not defining “a lot of records” and “unsubdivided,” nothing in the language of subsection (d) required that a tract of land be comprised of “entire” lots of record — whether they be tax lots, recorded plats, or deeds, or some other recorded interest. Thus, the Court deferred to the BSA’s interpretation since it involved “special expertise in a particular field to interpret statutory language,” and its decision was not “counter to the clear wording” of the zoning resolution. The Court also found Supreme Court erred in conducting a de novo review of the BSA’s determination, as the statute contained undefined and technical terms with conflicting interpretations, and the Court below should have deferred to the BSA’s interpretation when it is reasonable, as was the case here.

The BSA’s interpretation of the relevant subdivision was neither irrational, unreasonable, nor inconsistent with the governing statutes. It rationally interpreted the resolution and properly considered Amsterdam’s reliance on the DOB’s longstanding Minkin Memo and the history of the block, as several other buildings on the block were issued certificates of occupancy, even though they also included partial tax lots. And when an agency adopts a construction that is then followed for a long period of time, such interpretation was entitled to great weight and may not be ignored.

The statute does not expressly prohibit the use of partial tax lots and does not provide explicit guidance about whether partial tax lots may be included in a zoning lot. Nor does it refer to “complete,” “whole,” or “entire” tax lots. The statute states that zoning lots “may or may not coincide” with tax lot lines, and it was reasonably interpreted to mean that zoning lots need not adhere to tax-lot boundaries at all.

The BSA was not required to follow the DOB’s then-proposed bulletin, the final version of which expressly affirmed that it did not apply retroactively. In any event, Amsterdam did not have “forewarning” that the DOB would change its interpretation when it filed for a building permit but only found out after the permit was issued. And imposing the change retroactively would depart from the DOB’s prior approvals of zoning lots containing partial tax lots, on which Amsterdam relied, and it would impose a substantial hardship by requiring extensive demolition.

The First Department also found that the proceeding was moot because the building was substantially completed, and petitioners failed to seek injunctive relief at every step. The doctrine of mootness may be invoked where a change in circumstances prevents a court from rendering a decision that would effectively determine an actual controversy. In the construction context, several factors are significant in evaluating claims of mootness, chief among them being a challenger’s failure to seek preliminary injunctive relief or otherwise preserve the status quo to prevent construction from commencing or continuing during the pendency of the litigation.

The stipulation clearly provided that Amsterdam would not rely on the progress of the construction for the time period defined by its terms. That stipulation was extended to the entry of an order or judgment that determined claims for setting aside and vacating the BSA Resolution. Supreme Court granted the petition, vacating the 2017 BSA determination, on March 14, 2019.

While petitioners moved for injunctive relief in April 2019, Supreme Court denied the motion and permitted “the construction to continue until the BSA’s resolution is finalized.” Significantly, although petitioners filed a notice of appeal from that decision on May 21, 2019, and Amsterdam twice agreed to extend petitioners’ deadline to perfect the appeal, petitioners abandoned their appeal of the order denying their April 2019 motion for injunctive relief. Petitioners failed to pursue their appellate remedies, and the building was substantially completed. It was undisputed that Amsterdam spent an additional $50 million in construction costs, of the $500 million spent in total. The building had risen 53 floors with the curtainwall installed through the 32nd floor. Accordingly, the Court found that petitioners did not move for injunctive relief at each stage of the proceeding.

Petitioners argued that Amsterdam waived its right to assert mootness by stipulation, raised judicial and equitable estoppel, and asserted that Amsterdam was forewarned that the DOB was changing its interpretation, which they alleged applied retroactively. However, other factors weighed in Amsterdam’s favor. Amsterdam did not proceed in bad faith and without authority. Instead, it performed construction under a building permit based on the DOB’s original interpretation that the DOB had continually asked to be upheld, and it had every business incentive to complete the building as quickly as possible. Additionally, given that the building was substantially completed, the work could not be readily undone without undue hardship. And Amsterdam was correct that the complete tax lot issue was not likely to recur since the DOB’s new bulletin limited its application prospectively.

Amsterdam did not waive mootness by stipulation or assert a right after having led petitioners to form the reasonable belief that the right would not be asserted. Indeed, when asking Supreme Court for an earlier date for oral argument, petitioners expressly recognized that a delayed resolution in Court would make it “more difficult” to require Amsterdam to remove the top floors, a clear reference to mootness. Nor did Amsterdam take conflicting positions in litigation. When arguing against a temporary restraining order in the 2018 Supreme Court action, Amsterdam’s counsel asserted that petitioners had the right to answer a mootness argument by pointing out that they timely sought injunctive relief. Nonetheless, petitioners failed to pursue injunctive relief after Supreme Court denied the motion in April 2019. By then, the building was substantially completed, and the proceeding was moot.

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