Zoning and Land Use: Turning the World Right-Side Up Again

Kramer Levin Naftalis & Frankel LLP

This summer has brought two appellate court decisions that should help alleviate growing concern in the development community that the New York courts are overly receptive to community-based challenges to new development in residential neighborhoods. In both cases, the Appellate Division for the First Department, which has appellate jurisdiction over trial-level courts in Manhattan and the Bronx, reversed decisions by Manhattan Supreme Court justices. One case challenged the City’s rezoning of Inwood in Upper Manhattan; the other addressed City Planning approval of three high-rise projects in the Two Bridges neighborhood of Manhattan’s Lower East Side.

City land use decisions that approve, or open the door to, substantial new development in residential neighborhoods often generate a high level of controversy, and it is not unusual for community opposition to lead to litigation. Basic principles limiting the scope of judicial review of government agency decisions incentivize lawyers to channel their clients’ objections into new and creative legal theories. Sometimes those theories get traction in the courts, sometimes not. The initial success in trial-level courts of challenges to the Inwood rezoning and the Two Bridges projects were among recent court decisions that precipitated concern in the development community about future trends and expectations. Developers and investors put enormous sums of money at risk in the belief that the law applicable to their investments is reasonably predictable and not subject to surprising revision or reinterpretation in the courts. A perception that the courts are not reliable in their application of the law can chill real estate investment in the City.

In 2019, in the Inwood case, Northern Manhattan Is Not for Sale v. City of New York, community groups and residents persuaded a Supreme Court justice that the City’s environmental review was inadequate because the City’s examination of socioeconomic impacts did not consider various concerns expressed by activists, including secondary residential displacement, the impact on preferential rents and minority- and women-owned businesses, first responder access, speculative investment in the community, and the area’s racial and ethnic makeup. The court rejected the City’s argument that it had followed the methodology set forth in the City’s CEQR Technical Manual and had no obligation to do more.

On July 23, 2020, an Appellate Division panel unanimously reversed and reinstated the Inwood rezoning (2020 NY Slip Op 04235). The court ruled that under the State Environmental Quality Review Act (SEQRA) and the City’s procedures for implementing it (CEQR), the City “did not have to parse every sub-issue as framed by petitioners,” that it was “entitled to rely on the accepted methodology set forth in the [CEQR] Technical Manual,” and that it “was not required to perform analysis aimed at forecasting the mix of ethnicities expected to occupy units in the development, and the corresponding impact on prevailing area patterns of racial and ethnic concentration.” Project opponents have vowed to seek Court of Appeals review, but professionals in the development community breathed a sigh of relief.

The three high-rise projects approved by the City Planning Commission for the Two Bridges neighborhood have precipitated multiple lawsuits, each of which attacks all three projects. There was widespread community objection to the projects due largely to the buildings’ sizes, despite the fact that about 25 percent of the new units would be affordable housing and the projects included the addition of significant public amenities. The first lawsuit to be decided, Council of the City of New York v. Department of City Planning, was a claim by the City Council and the Manhattan Borough president that the Planning Commission’s approval of the projects was subject to the City’s Uniform Land Use Review Procedure (ULURP), and therefore was subject to BP review prior to Commission action and Council review after Commission action. Since local Council members already had expressed their opposition, Council review almost certainly would have led to demands for substantial additional concessions by the developers and possibly rejection of the projects in their entirety. The currently ongoing controversy and uncertainty about the proposed Industry City rezoning in Brooklyn is illustrative.

The Two Bridges lawsuits have turned on uncertainty and confusion about the legal consequences of the projects’ location within what the City’s Zoning Resolution designates as a “Large Scale Residential Development” (LSRD) — a subject that has not been explored or elucidated upon in the courts. In the Council’s lawsuit, a Supreme Court justice held that the approvals were subject to ULURP. The court reasoned that the issuance or modification of “special permits” is subject to ULURP; special permits previously had been issued for some prior development within the Two Bridges LSRD, and it was inconceivable that projects of the scale of those at issue could be approved without issuance of new special permits or modifications of previously issued ones.

In a decision released on Aug. 27, 2020, an Appellate Division panel unanimously reversed and dismissed the case (2020 NY Slip Op 04812). The court held that the projects were consistent with the underlying zoning that had been in effect at those sites for decades, that the projects did not require any waivers or modifications of zoning requirements applicable to the sites, and that the projects therefore did not require special permits and were not subject to ULURP and Council review. The court then systematically refuted each of the arguments regarding statutory interpretation that the Council had advanced to support its position.

The Two Bridges projects are not yet in the clear. The same judge who ruled for the Council also ruled in two cases brought by community groups and activists that the Planning Commission should have made findings in accordance with a particular provision of the Zoning Resolution applicable to LSRDs. The Planning Commission (supported by the Law Department) and the developers disagree. Their appeals are being briefed and should be decided in 2021.

Of course, each case turns on its own issues, and other community-based challenges to controversial projects remain pending. To name some: appeals from a judge’s disapproval of a topped-off 55-story residential building at 200 Amsterdam Avenue (Committee for Environmentally Sound Development v. Amsterdam Avenue Redevelopment Associates LLC) are being briefed in the Appellate Division; the Appellate Division’s invalidation of the approval of a large nursing home for senior citizens at Park West Village on Manhattan’s Upper West Side (Peyton v. N.Y.C. Board of Standards and Appeals) is awaiting oral argument in the Court of Appeals; and the same appellate court that just decided the Inwood and Two Bridges cases upheld the City’s interpretation of various statutory provisions in the face of neighbors’ objections to the conversion of the former Savoy Hotel on West 58th Street to a shelter, but reinstated a vague claim that the building’s egress conditions created a threat to “general safety and public welfare” (West 58th Street Coalition, Inc. v. City of New York, decided on Aug. 13, 2020, NY Slip Op 04521). Still, the Appellate Division’s decisions in the Inwood and Two Bridges cases offer hope that, ultimately, carefully prepared and studied projects can withstand opposition and judicial scrutiny.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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