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New vesting regulations proposed.

New vesting regulations proposed

Developers frequently run the risk that New York City will enact obstructive zoning regulations after a site is acquired but before development is completed. Whether the contemplated project would be immune to or injured by such intervening zoning restrictions depends primarily on the: (1) nature of the project; (2) nature of the new zoning restrictions; (3) extent of construction work completed and construction expenses paid or incurred by the time the new regulations take effect; and (4) progress in bringing the project up to occupiable condition. These vested rights considerations are being recast under a proposal recently approved by the City Planning Commission, now pending before the Council (the "Vesting Amendment").

Essentially, current vesting provisions specify what might be called the "building permit and foundation now, plus certificate of occupancy in two years" vesting standard. If a building permit ("B/P") is issued and a building foundation is completed thereunder prior to the adoption of a zoning regulation which prohibits or interferes with the contemplated building use or bulk, then such building would be shielded against the adverse zoning restriction, provided that the building receives a certificate of occupancy ("C/O") not more than two years after the effective date of the adverse zoning restriction. The Vesting Amendment essentially retains the "B/P and foundation now, plus C/O in two years" vesting standard, but with certain modifications concerning multiple building developments, as explained below.

Current vesting provisions also conditionally extend vested coverage to developments that approach but do not satisfy the "B/P and foundation now, plus C/O in two years" threshold. A development operating under a B/P that produces an excavated site and substantial progress on the foundation when the adverse zoning restriction goes into effect can generally receive additional time to complete the foundation and continue construction by virtue of a Board of Standards and Appeals ("BSA") authorization. Similarly, a development operating under a B/P that produces a substantially constructed foundation but no C/O two years after the effective date of the adverse zoning restriction can generally receive additional time to obtain the C/O by virtue of a BSA approval. The Vesting Amendment essentially continues such authority to extend vested coverage, but with certain modifications concerning the C/O issuance period, as explained below.

Elaborating on the foregoing, the Vesting Amendment clarifies or revises the current vesting framework as follows:

1. Foundation-Related Aspects

a) Multiple Zoning Lots. Under current vesting provisions pertaining to most multiple building developments, the completion of any building foundation by the effective date of a bulk-restricting amendment would enable all such buildings to be vested. The Vesting Amendment expressly applies this protection to a development on one zoning lot, as well as to a development planned as a unit encompassing two or more zoning lots (contiguous or separated by a common street). b) Multiple -or 2-Family Houses. Under current vesting provisions pertaining to multiple 1- or 2-family detached residence projects, all foundations must be completed by the effective date of a bulk-restricting amendment in order to enable such development to be vested. The Vesting Amendment changes this by treating multiple 1- or 2-family detached residence projects the same as any other multiple building project facing a bulk-restricting amendment (see paragraph "a" above). c) Number of Building Permits for Multiple Buildings. With respect to multiple building developments, the Vesting Amendment apparently requires the issuance of all B/Ps (together with the completion of one foundation thereunder) by the effective date of a bulk-restricting amendment in order for all buildings to be vested. This may lead to an arbitrary and capricious result, however. For example, in the case of a 10-building project, the timely issuance of 10 B/Ps and completion of one foundation thereunder would vest the entire project, but the timely issuance of nine B/Ps and completion of nine foundations and superstructures thereunder would be insufficient to vest the entire project. Clearly, the cost of producing nine buildings far exceeds the cost of producing one foundation, yet under the Vesting Amendment the latter situation enjoys vested status while the former situation does not. For that reason, the original intention underlying the current vesting provisions was probably to confer vested bulk status on a multiple building development upon the issuance of only one B/P and completion of the one foundation thereunder by the effective date of a bulk-restricting amendment. On this point, the respective intentions underlying the Vesting Amendment and the current vesting provisions seem to be at odds.

2) Certificate of Occupancy-Related


a) Extension of C/O Issuance Period. Current vesting provisions concerning the extension of the C/O issuance period by BSA approval provide very unclear guidance on renewals of and standards for such approval. The Vesting Amendment adds some clarity and certainty by enabling BSA to extend the C/O issuance period for: (i)two terms of two - years each in the case of a one-building project or a multiple building project with a protected use; or (ii) three terms of two years each in the case of a multiple building project with a protected bulk. In either case, BSA would have to find that substantial construction had been completed and substantial expenditures made since the issuance of the building permit. Additional renewable one-year extensions beyond the aforesaid extension periods may be approved by BSA if BSA essentially finds that: (i) hardship or circumstances beyond the developer's control prevent the completion of construction; (ii) significant financial problems would result from the imposition of the new use or bulk restrictions; and (iii) no overriding public health, safety or welfare concern would warrant the imposition of the new use or bulk restrictions. The language embodied in such renewable one-year extension findings is unusual, unclear and untested, and would probably serve as a safety measure in extraordinary situations. b) Lower Density Contextual Zoning. The Vesting Amendment recognizes the special problems facing outer-borough low-rise housing developers who installed foundations in order to preliminary vest against the Lower Density Contextual Zoning bulk restrictions (affecting R3, R4 and R5 zones; approved by the City in 1989), but have not completed their projects owing to today's extremely weak residential market. The Vesting Amendment extends the C/O issuance period until June 30, 1997 for such multiple building projects and until June 30, 1995 for such one-building projects (ambiguities are noted below), provided that the Commissioner of Buildings determines that 30 percent of the building floor area was enclosed by June 30, 1991. It is unclear whether this provision requires only one C/O or all C/Os to be issued for multiple building projects by the indicated deadline. Also unclear is whether the June 30, 1997 or the June 30, 1995 deadline applies to one- or two-family detached residence projects.
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Title Annotation:Zoning Advice
Author:Kowaloff, Steven D.
Publication:Real Estate Weekly
Date:Nov 27, 1991
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