www. NYLJ.com Volume 257—NO. 16 Wednesday, January 25, 2017

Zoning and Land Use Planning

Can Zoning Stop Property By Anthony S. ­Owners from Renting? Guardino

any local governments Department, in Blue Island Dev. v. the developers sell all of the units (and residents) prefer Town of Hempstead, 131 A.D.3d 497 in the proposed development as property owners living (2d Dept. 2015), and Blue Island Dev. condominiums. The covenant per- in their communities v. Town of Hempstead, 143 A.D.3d mitted any subsequent owners of rather than tenants. 656 (2d Dept. 2016). the units to lease the units to the ThisM is not a new concern. Disputes The underlying dispute arose extent otherwise permissible under between municipal officials and rent- when Blue Island Development and town law. ers, whether for the short-term or Posillico Development Company at On the request of the developers, over a more extended period, have Harbor Island, purchased land in the the town subsequently modified the long preceded the recent public bat- town of Hempstead on Long Island restriction to permit them to lease tles over Airbnb and other online mar- up to 17 of the 172 units for five ketplaces and homestay networks. In Disputes between municipal years after the issuance of the cer- many cases, courts have resolved the officials and renters have long tificate of occupancy or until the issues in important rulings. delivery of title to the 155th unit, preceded the recent public bat- This column explores a number whichever occurred first. The town, tles over Airbnb and other online of the significant New York court however, denied the developers’ marketplaces and homestay decisions that help to establish a later request to further modify the framework for analyzing the valid- networks. restriction to permit them to sell 32 ity of zoning restrictions and the that formerly had been used as an units and maintain the remaining conditions imposed by local gov- oil storage facility. The developers 140 units as rentals. ernments on permits and variances intended to remediate the environ- The developers then sued the when rental units are involved. mental contamination and develop town, challenging the validity of the the property into 172 waterfront town’s restriction on their renting Waterfront Development condominium units. the units. Consider the decisions by The town approved their request In its 2015 decision, the Second the Appellate Division, Second for a change in the property’s Department explained that the zoning but imposed a restrictive power to zone was “not a general covenant on the property that police power, but a power to regulate Anthony S. Guardino is a partner with Farrell Fritz in the firm’s Hauppauge office. required, among other things, that land use.” It cited the “­fundamental Wednesday, January 25, 2017

rule” that zoning essentially deals v. Town of Brookhaven, 142 A.D.2d town for a “legitimate govern- “with land use and not with the per- 213 (2d Dept. 1988). mental purpose”—to aid occupy- son who owns or occupies it.” This case involved a challenge to a ing homeowners in retaining and It then found that the develop- local law adopted in the Long Island maintaining their properties while ers had sufficiently alleged that the town of Brookhaven providing for answering the need for affordable restrictive covenant was improper the issuance of a limited number of rental accommodations without because it regulated their “ability as permits allowing the creation and disturbing the single-family-res- the owner of the property to rent the maintenance of accessory rental idence character of the affected units rather than the use of the land apartments within owner-occupied districts—and that it was “reason- itself.” In the view of the court, par- single-family homes. ably related to some manifest evil.” ticularly in light of the provision in the The Second Department ruled that restrictive covenant permitting future On the one hand, zoning deals there was nothing improper in the owners to lease units in the devel- town’s goal of alleviating the grow- with the use of land, and where opment, the covenant had “no sub- ing shortage of affordable housing multi-family housing is the “use,” stantial relation to…the public health, within the town while at the same it should not matter whether safety, morals or general welfare” and time providing financial relief to the Supreme Court, Nassau County, occupants own their property those homeowners who might be had properly declined to dismiss the and make a monthly mortgage of modest means and who would developers’ cause of action seeking payment to their bank or lease be better able to retain ownership to declare the covenant invalid. it and make monthly rent pay- of their residences and to maintain The Second Department’s 2016 ments to their landlord. On the them in aesthetically acceptable decision easily followed from its other hand, communities have a condition by leasing the available, 2015 ruling. In 2016, it agreed with strong interest in preserving the unused living space in their homes. the developers that the restrictive quality of life in their residential The Second Department next covenant was unenforceable because neighborhoods by encouraging rejected the plaintiff’s argument it was of “no actual and substantial owners to occupy their homes. that the town’s law impermissibly benefit” to the town. regulated the users of property The key lesson that can be taken A property owner who did not rather than its use given that it from the Blue Island cases is that live in the home he owned asserted required that homeowners occupy a restrictive covenant imposed as that the law drew an irrational their homes to obtain the permit. part of a zoning change limiting the distinction between owners who After observing that, “as a prac- ability of a developer to rent units occupied their homes and those tical matter, many zoning laws in a multi-family development is who did not, and that it impermis- extend beyond the mere regu- unenforceable. This does not mean, sibly regulated the users of the lation of property to affect the however, that all rent-versus-own­ property rather than the use of owners and users thereof,” the limitations are invalid. property. court explained that an acces- The Second Department was not sory-use zoning provision such as Accessory Apartments persuaded. Brookhaven had adopted “by its Nearly 30 years ago, in 1988, the It first found that the distinc- very nature” ordinarily attached Second Department decided Kasper tion had been adopted by the “to the occupancy of the premises Wednesday, January 25, 2017

rather than to the mere owner- that the property was his primary ­housing is the “use,” it should not ship thereof,” so that the property residence but that he rented it out on matter whether occupants own owner “typically must occupy the a short-term basis for approximately their property and make a monthly premises in order to take advan- three months per year. He challenged mortgage payment to their bank or tage of the benefits offered by an amendment to the town’s zoning lease it and make monthly rent pay- accessory-use legislation.” ordinance requiring special use per- ments to their landlord. Thus, where mits for the rental of non-owner-occu- an ordinance or regulation seeks to Use Variance pied dwellings for periods of less than prohibit renters in a multi-family Two years later, the Second Depart- four months. development, as in the Blue Island ment issued its decision in Matter The Third Department upheld the cases, it will not be upheld. of Finger v. Levenson, 163 A.D.2d ordinance, finding that it was not On the other hand, communities 477 (2d Dept. 1990), upholding an “arbitrary, capricious or illegal.” have a strong interest—a legitimate owner-occupy restriction in connec- It noted that the town had identi- governmental purpose—in preserv- tion with a town’s issuance of a use fied many “legitimate governmen- ing the quality of life in their residen- variance. tal purposes” for the ordinance’s tial neighborhoods by encouraging Here, the upstate town of Putnam enactment, including preserving aes- owners to occupy their homes. Valley granted a property owner a thetic integrity in residential neigh- Thus, with respect to single-family use variance to use his property as borhoods, encouraging residential neighborhoods, courts historically two dwelling units and a store sell- property maintenance, prevention have been more tolerant of regula- ing antiques so long as the antiques of neighborhood blight, protecting tions that were reasonably aimed store occupied no more than 25 per- residential property values, permit- at achieving these goals by limiting cent of the total floor space of the ting efficient use of the town’s dwell- renters and requiring or favoring dwelling and he resided in one of ings to provide economic support to owner-occupancy. the units. residents, and enhancing the quality The Second Department noted that of life in residential neighborhoods. the property was in an area zoned In the Third Department’s view, for single-family dwellings. It then placing restrictions on absentee concluded that the conditions were landlords was “reasonably related “reasonably related” to the purposes to achieving these goals” and did underlying the town’s zoning code, not improperly distinguish between and were valid. homeowners who occupied their premises and those who did not. Special Use Permits Conclusion Then, in 2004, the Appellate Divi- sion, Third Department, decided The court decisions discussed Spilka v. Town of Inlet, 8 A.D.3d 812 in this column all explore whether (3d Dept. 2004). municipalities can use zoning to limit The owner of a one-family dwelling renters in their communities. On Reprinted with permission from the January 25, 2017 edition of the NEW YORK located in a residential neighborhood the one hand, zoning deals with the LAW JOURNAL © 2017 ALM Media Properties, LLC. All rights reserved. Further duplication without permission is prohibited. For information, contact 877-257-3382 of the upstate town of Inlet alleged use of land, and where multi-family or [email protected]. #070-01-17-32