What is the proper procedure to resolve issues arising out of a mistakenly issued permit? by Steven Glassberg

Steven Glassberg, Glassberg & Associates

The New York City Department of Buildings makes mistakes all the time.  The Court of Appeals recently clarified what happens if a property owner relies on an erroneously issued permit and what the proper procedure is to resolve any issues which may arise out of a landowners good faith reliance on a mistakenly, or erroneously issued permit.

In Matter of Perlinder Holdings, LLC v Srinivasan, 27 N.Y.3d 1 (2016), the owner of the building located at 663-669 Second Ave., had an illuminated billboard on the side of his building. The permit for this billboard was issued in 1980. Subsequent to the permit being issued, the zoning laws were changed. The original sign was “grandfathered” in as a legal, non conforming use.

In May 2002, the owner sought, and was granted, a zoning variance to construct a 34-story, mixed-use building on the property. The landowner also received approval to relocate the original sign, as part of the plan to build the mixed-use building. Neither the building, nor the approved relocation of the sign was built. In 2008 the building was demolished.

The landowner then filed two applications to erect a new support structure and a new sign. The Department of Buildings granted the support application, but not the sign permit, reasoning that the new sign was different than the original because it was not in the same position as the original sign and was 25 feet lower than the original. The Department of Buildings noted that to be considered “grandfathered”  the new sign had to be both single-sided, as the original was, and on the same location as the original. 

The Manhattan borough building commissioner overruled Department of Buildings’s objections and approved the new permit and Department of Buildings issued a permit for the installation of the new sign.  Two years later, in 2010, after the sign and structure had been installed, during the course of an audit, the Department of Buildings determined that the sign had not been lawfully approved and both permits, for the structure and for the sign, were revoked.  The landowner appealed to the Board of Standards and Appeals (BSA). The BSA affirmed the Department of Buildings’s actions and noted that the landowner’s good faith reliance on the Department of Buildings approvals did not estop the agency from enforcing its ordinances. The landowner filed an Article 78.

The Supreme Court upheld the BSA’s determination. The Appellate Division reversed the Supreme Court and remanded the case to the BSA. The Appellate Division opinion considered, among other factors, the “good faith reliance” on the Manhattan borough building commissioner’s decision. 

The Court of Appeals determined, despite its recent ruling in Matter of Exeter Building Corp. v Town of Newburg, 26 NY3d 1129 (2016), which stated that a property owner can acquire a common law right to develop property in accordance with prior zoning regulations when the prior right was obtained pursuant to a ‘legally issued permit,’ that the landowner in Matter of Perlinder Holdings, LLC v Srinivasan, 27 N.Y.3d 1 (2016) did not acquire any vested rights because the permits were “wrongfully issued.”    

The landowners’ good faith reliance on the “wrongfully issued” permits is no longer a factor that the courts can consider in determining if a property owner acquired any common law rights to a property. Good faith is now left to be determined by the Department of Buildings and BSA should a property owner seek a variance to a zoning application.

Steven Glassberg is the founder of Glassberg & Associates, LLC, New York, N.Y. and Port Washington, N.Y.