Condemnation—Cemetery's "Takings" Claims Based on Zoning Classification for Residential Use Were Not "Ripe" Since Cemetery had Not Sought a Variance From the Zoning Ordinance—Regulatory "Taking"

A plaintiff cemetery association (cemetery) owned 63.5 acres on the north side of a road (North Parcel) and approximately 12.5 acres on the south side of the road (South Parcel). In 1963, the town amended its zoning ordinance to bar the expansion of cemeteries in town. In 1990, the cemetery sought site plan approval to build a mausoleum on the North Parcel. The town board denied the application. The cemetery then commenced an Article 78 proceeding. A court vacated the town board's decision. Thereafter, the town issued "ordinances that restricted construction of new cemetery buildings." After filing two additional lawsuits, the parties reached a settlement in 1995 and the cemetery built a mausoleum in 1999.

In 2001, the cemetery sought a building permit for a caretaker cottage to be built on the South Parcel. The town Building Inspector (Building Inspector) approved the application. In 2013, the cemetery submitted another building application to replace the existing caretaker's cottage with a new cottage that would incorporate a garage for vehicles, equipment, materials and supplies. The Building Inspector denied the application, but suggested that the cemetery apply for a variance. The cemetery appealed the Building Inspector's decision to a Zoning Board of Appeals (ZBA).

In 2015, the ZBA found that the cemetery was entitled to a building permit to the extent that the proposed building contained a residence, but it affirmed the Building Inspector's decision as to the garage since the garage was a "much larger" garage than a "residential accessory garage." The ZBA believed that the proposed garage actually was a "maintenance facility, storage facility or commercial garage," none of which was allowed under the zoning ordinance.

The cemetery did not seek a variance and instead commenced an Art. 78 proceeding in the state court. A NYS Supreme Court held that the ZBA had properly considered the application and denied the cemetery's petition. The cemetery filed an appeal and that appeal is currently pending.

In 2007, the town began developing a new comprehensive plan (CP). Two prior CPs from 1970 and 2000 identified the cemetery's approximately 76 acres as "cemetery property." Thereafter, the town prepared a map that showed the cemetery's South Parcel as being classified as "cemetery" land and emailed such map to the town's planning department for inclusion in the draft CP.

In March 2014, the town "released a first draft of the (CP), which showed the South Parcel as cemetery land on an existing Land Use Map, that showed the South Parcel as residential land on a Future Land Use Map." A later draft of the CP showed the current and future use of the South Parcel as residential and a fourth and final draft of the CP also showed the current and future use of the South Parcel as residential. The draft CP had explained that property class codes were based on "historic data and ongoing monitoring that reflected the existing use of each lot."

The cemetery thereafter filed an Art. 78 proceeding in the state court seeking to vacate the town's adoption of the 2016 CP. The cemetery also sought an order directing that all land use maps show all of its 76 acres as cemetery property. The town moved to dismiss. The town's motion was denied. The cemetery then sought discovery. The town moved to stay the proceedings, pending a resolution of the ZBA decision appeal. The state court granted the stay.

In 2003, the cemetery sought an exemption from real property taxes relating to the South Parcel on the ground that it is cemetery property. The town assessor denied the application. The town's Board of Assessment Review (BAR) denied the appeal. The cemetery then commenced another Art. 78 proceeding.

The parties settled the matter in 2005, agreeing the South Parcel would be "classified as cemetery property exempt from taxation…on the 2004 assessment roll." The town thereafter treated the South Parcel as tax exempt, but had not changed its classification until Sept. 15, 2016, when the town's assessment roll classified it as cemetery property.

The cemetery alleged that the town's failure to change the classification supported "(1) opposition to plaintiff's caretaker cottage application; and (2) the (CP's) designation of the South Parcel as residential property on the Current and Future Land Use Maps in the Comprehensive Plans."

In June 2017, the town assessor changed the South Parcel's classification from cemetery to residential. The cemetery appealed to the BAR to restore the cemetery designation. The BAR denied the appeal. The cemetery then filed another Art. 78 proceeding in state court seeking to vacate the BAR decision. The court stayed the matter pending resolution of the ZBA. The cemetery moved to vacate the stay and the court denied that motion. Thereafter, the BAR denied the cemetery's appeal challenging the classification of the South Parcel as residential in the 2018 Assessment Roll.

Thereafter, the cemetery commenced the subject action in the United States District Court. The town moved to dismiss the complaint. The complaint alleged claims against the town "under 42 U.S.C. §1983: (1) the town's reclassification of the South Parcel from cemetery to residential in the 2016 (CP) and the 2017 assessment roll violated plaintiff's right to substantive due process under the Fifth Amendment; (2) the ZBA Decision effected a regulatory taking without just compensation in violation of the Fifth Amendment; (3) §285-36B of the town code, which precludes increases in the land area of cemeteries, as a taking under the Fifth Amendment and the New York State Constitution both facially and as applied to plaintiff's caretaker's cottage application; and (4) the South Parcel's designation as residential property in the (CP) violated the Fourteenth Amendment Equal Protection Clause."

The ripeness doctrine "ensures that a dispute has generated injuries significant enough to satisfy the case or controversy requirement of Article III of the U.S. Constitution." An unripe claim is a claim that "is not actual or imminent, but instead conjectural or hypothetical." The "finality requirement demands that 'the government entity charged with implementing the regulations has reached a final decision regarding the application of the regulations to the property at issue.'"

The court explained that, with respect to "land-use claims, the finality requirement is generally only satisfied once a property owner has submitted 'at least one meaningful application for a variance.'" However, a plaintiff need not apply for a variance from zoning laws "if such action would be futile." In order to demonstrate futility, a plaintiff must demonstrate that defendants "had dug in their heels and made clear that all applications will be denied." "Mere doubt" that a variance application will be denied, is "insufficient to invoke the futility exception." And futility will not be established by merely showing "hostility to the developer's plans."

The court held that the cemetery's claims are not ripe since the cemetery "never sought a variance after the ZBA Decision, and without a decision on a variance," the court could not "determine how the South Parcel can be used or how zoning requirements would be applied to the parcel." Moreover, the ZBA had "left open the possibility that, if granted a variance, plaintiff could use the property according to its wishes." Thus, the court held that the plaintiff had not obtained a "definitive answer as to how the South Parcel can be used."

As to whether an application for a use variance would have been futile, the court noted that there was "no history of the town rejecting variance applications relating to the South Parcel." Both the Building Inspector and the ZBA advised the cemetery that it could apply for a variance, "but it chose not to do so." The court concluded that there was "simply no basis on which to conclude that a variance will necessarily be denied." Thus, the court held that the cemetery's claim was not ripe for review by the court.

With respect to the imposition of the 2016 CP and inclusion of the parcel in the 2017 and 2018 tax rolls as taxable residential property rather than exempt cemetery property, the court stated that the town's adoption of the CP "may be final and that it could constitute a 'definitive position' on the classification of plaintiff's property as residential rather than cemetery property…and there is no indication that plaintiff could have applied for a variance from the imposition of the (CP)…." However, even if the CP is final, the cemetery did not allege that it tried to use the South Parcel for cemetery purposes except to the extent that it sought to build the cottage/garage. Since a decision is not ripe for review, "any other injury arising out of the (CP) is 'conjectural or hypothetical.'" The court held that the cemetery failed to plausibly allege that it had been injured and it's claims arising out of this action are "unripe." The court further held that any challenge to hypothetical future taxation is too "speculative to be ripe for adjudication."

The court's analysis also applied to all of the cemetery's "federal land-use claims-takings, due process, and equal protection." Since all of the federal claims are "unripe," the court dismissed such claims without prejudice for lack of subject matter jurisdiction. The court also dismissed the cemetery's NYS Constitution claims. The court declined to exercise "supplemental jurisdiction" over the State law claim.

Additionally, the court denied the town's motion to disqualify the cemetery's counsel on the ground that he was privy to relevant information when he previously served as town counsel. The court found that the theories and claim in prior litigation were different than the subject litigation.

Ferncliff Cemetery Ass'n v. Town of Greenburgh, New York, U.S. District Court, S.D.N.Y., Case No. 18-CV-6411, decided December 17, 2019, Seibel, J.

Commercial Landlord -Tenant—Yellowstone Injunction Granted—Tenant Allegedly Made Alterations Without Landlord's Consent and Failed To Provide Adequate Insurance—Tenant Argued That It Complied With the Lease and to the Extent It Had Not, It Was Willing and Able to Cure—Tenant Asserted That if It Lacked Proper Insurance, Such Insurance Can Be Provided Retroactive so That There Are No Gaps in Coverage

A ground lessee of a shopping center (tenant) sought an injunction tolling the time in which to cure any alleged defaults and staying any landlord-tenant enforcement proceedings between the parties. The tenant alleged that the landlord was attempting to improperly terminate the lease by using "harassing tactics" and that the landlord sought to compel the tenant to renegotiate the lease.

The lease obligated the tenant to maintain insurance policies "with certain specific parameters" and the tenant was obligated to deliver "certificates of insurance as well as the original policies to the landlord." The lease also provided that the tenant may make alterations to the premises provided that the alterations were approved in writing by the landlord, such approval not to be unreasonably withheld "if the estimated cost of any single alteration…shall be in excess of two hundred thousand dollars." The lease also required that the tenant provide the landlord with a "surety company completion bond…free and clear of all liens and encumbrances, in accordance with plans and specifications, which shall be first submitted to and approved in writing by Landlord, which such approval of the landlord shall not be unreasonably withheld."

The landlord had issued a notice to cure (notice) alleging six violations of the lease. The notice alleged that the tenant performed alterations with an estimated cost of more $200,000 without prior written consent, failed to provide a surety completion bond, allowed three summons to be issued against the premises resulting in outstanding violations, allowed a permit to expire without closing out such permit, failed to maintain proper insurance and failed to deliver certain insurance policies with proof of payment. The tenant asserted that if it is found to have violated any provisions of the lease, "it is prepared and able to cure such defects."

Parties seeking Yellowstone injunctions must demonstrate that they hold a commercial lease, the receipt from the landlord of either a notice of default, notice to cure or threat of termination of the lease, a request for injunctive relief before termination of the lease or cure period and that they are prepared to and maintain the ability to cure the alleged default by means "short of vacating the premises".

The tenant argued that certain aspects of the notice are inapplicable, "such as the summonses issued against the premises because they are not in the nature of outstanding, ongoing violations." The tenant claimed that it had already cured the outstanding permit issue. The tenant also provided "copies of insurance policies, which it claims were properly maintained and delivered" to the landlord. The tenant further alleged that if its insurance coverage is insufficient, it is "willing and able to retroactively cure any deficiency regarding past coverage."

The tenant also asserted that the landlord had "wrongfully combined three projects, each with estimated costs under the $200,000.00 threshold, in order to concoct reported violations" of the lease. The tenant alleged that three subtenants had made separate applications to the Building Department for alterations. Although the tenant had not provided "any evidence of such separate applications," the court noted that the tenant" pledges to cure any default stemming from its failure to obtain (landlord's) approval for the subject project."

The tenant contended that the landlord had been engaging in a pattern of harassment as part of an attempt to force the tenant to renegotiate the lease. The landlord countered that the violations regarding the alterations and insurance policies are "incurable."

The court reasoned that since the tenant offered to obtain retroactive rather than prospective changes to insurance policies in order to insure there were no potential gaps in coverage, the tenant is entitled a Yellowstone Injunction. The landlord had failed to demonstrate that the tenant is "unwilling or unable to cure any unauthorized alterations." Accordingly, the court held that the tenant should be "afforded the opportunity to cure the defects enumerated in the notice …" and granted the tenant's motion for the Yellowstone Injunction restraining the landlord from evicting the tenant, pending determination of the subject issues.

Garden City Park LLC v. Frog Hollow Props., Supreme Court, Nassau Co., Case No. 613917/19, decided Dec. 12, 2019, Feinman, J.

Landlord -Tenant—Constructive Eviction—Tenant Awarded 50 Percent Rent Abatement for One-Year Period Based on Construction Noise Arising from Building Renovations—Since the Tenant Never Abandoned the Premises, He Was Not Constructively Evicted and Not Entitled to a 100 Percent Abatement

A rent stabilized tenant commenced an action seeking $25,000 in damages based on breach of the Warranty of Habitability and related claims arising from renovations that were performed by his landlord in 2017 and 2018.

In 2017, the landlord initiated a "major renovation of all the hallways in the common areas including the lobby and the second floor amenity spaces." The amenities included a "fitness center, a lounge, the management office and the pool and sauna." A second floor terrace was also renovated. The tenant's apartment "looked out on the terrace space, and was directly over the second floor renovations." The landlord asserted that the common areas were "very outdated" and the building is approximately 20 years old.

The tenant argued that his apartment was "uninhabitable for approximately a year and a half, primarily due to noise from the renovations." The tenant was a film producer and generally worked from home. He claimed that the construction noise was "so severe," he could not "conduct his life as usual in his apartment."

The tenant testified that, inter alia, a bathroom mirror and a piece of artwork had fallen off the wall due to the renovations and that he had to use other spaces to conduct his work, including friends' apartments, "Starbucks, libraries and an 8^th floor lounge that the building made available to its residence during the renovations."

The tenant had asked the landlord for an alternate apartment. The tenant was placed on a waiting list for the next appropriate apartment and was marked as a "priority on that waiting list."

The tenant further testified that work was done "beyond normal working hours and took place at night or very early in the morning." The tenant submitted "audio recordings of the noise" to demonstrate "how loud the drilling was." The tenant made these recordings on days that included "weekend mornings and at least two dates where it was before 6:30 am." The court found that the recordings established that the noise level was significant enough to prevent the tenant from enjoying the use of his apartment while the drilling took place. The tenant also introduced photographs to show the extent of the work and a print out of NYC Dept. of Buildings violations. The violations were not for noise.

In August 2018, the tenant was moved to a new unit. The tenant sought 100% rent abatement for his initial apartment for a 1 year period. He also sought $94 per month based on rent overcharges for his second apartment, covering a 24-month period. He further sought $3500 for lost income. The tenant had submitted two tax documents from 2017 and 2018 to support his lost income claim. He also sought costs for the subject action.

The court found that the tenant was a credible witness. The court reviewed email correspondence between the parties relating to the complaints.

A landlord witness had explained that the building sought to keep tenants apprised of when noise from construction would be "particularly bad" and the landlord had set up a "wi-fi lounge … for tenants to use during the period of construction, and arranged for temporary gym memberships for tenants to use at a different location." The landlord had also hired a "resident services coordinator" to serve as "a liaison between the construction team, building management and the residents." That witness also submitted pictures of the common area work, a copy of the "Tenant Protection Plan" for the project. She also acknowledged that work had been done at night and in the early morning hours. She further explained that this was done to accommodate two restaurants and a supermarket on the ground floor.

The court held that there had not been a constructive eviction since the tenant had never abandoned the premises. Therefore, the tenant was not entitled to 100% rent abatement.

The court found that there had been "excessive noise as a result of the construction, often on weekends and early morning hours and that the landlord, despite having ample notice, failed to take any effective steps to abate the noise…." Thus, the court awarded the tenant 50% abatement for the one-year period during which the subject condition existed. However, the court dismissed the rent overcharge claim without prejudice since it was then pending before the NYS Division of Housing and Community Renewal.

Additionally, the court dismissed the tenant's claim for loss of income since the tenant had not established that the decrease in his income resulted from the noise in the building.

The court trial record was insufficient to determine the overcharge claim. There was no evidence "of the legal registered rent or actual payments made."

Diaz v. Avalonbay Cmtys. Inc., Civil Court, New York Co., Case No. CV17965/18, decided December 10, 2019, Kraus, J.

Update:  I was just advised that the defendants in the 'Francis v. Kings Park Manor Inc.,' U.S. Court of Appeals, 2d Cir., Case No. 15-1823-cv, decided Dec. 6, 2019 and discussed in last week's column, are pursuing an en banc review by the Court of Appeals (Second Circuit).  This was the case about tenant on tenant harassment involving racial slurs.

Scott E. Mollen is a partner at Herrick, Feinstein.