Originally Posted January 22, 2016

New York City’s Landmarks Preservation Commission scored an important victory recently when a state supreme court justice ruled against a developer claiming to have suffered a “taking” following the Commission’s decision to designate the First Avenue Estate as a local landmark. First Avenue Estate is a group of historic apartment buildings located between York and First avenues at East 64th and East 65th streets. All First Avenue Estate apartments provided access to sunlight and fresh air, which represented an innovation in workforce housing at the time of their construction between 1898 and 1915. The buildings of First Avenue Estate—15 in total, all six stories tall—were known as “light-court tenements” and were intended to be alternatives to the dark and poorly ventilated tenement housing in other areas of the city.

Credit: Friends of the Upper East Side Historic Districts

The developer that filed the lawsuit, Stahl York Ave. Co., LLC, sought permission to demolish First Avenue Estate in order to build a new condominium tower. The Landmarks Commission, having designated First Avenue Estate as a landmark, denied the demolition request, a decision that Stahl sought to have overturned. The National Trust joined the Friends of the Upper East Side Historic Districts as friends of the court along with a coalition of other groups. The coalition was represented by attorney Michael Gruen, a seasoned preservation attorney in New York City who has participated in several important lawsuits there. Our amici curiae memorandum is available here.

Background and Procedural History

The litigation involving First Avenue Estate arose after the Landmarks Commission reinstated the buildings’ landmark designation in 2006, following an earlier listing and almost immediate (politically motivated) partial delisting by the now-defunct Board of Estimate in 1990.¹ While First Avenue Estate was delisted, the owner removed part of the limestone and beige brick façade and replaced it with stucco that the Commission described as a “garish reddish pink color.” The Commission also determined that the developer installed new and inappropriate windows and stripped the buildings of their ornament.

Nevertheless, in 2007 the Commission decided to designate the property anyway, finding that the apartments’ layout and place in history as a whole—as much as their appearance—set them apart.² On May 20, 2014, the Comission denied a demolition permit originally requested by Stahl in 2011, which sought exemption from the landmarks ordinance based on “economic hardship.”

Following the Commission’s decision, Stahl filed two legal challenges in federal³ and state court, arguing among other things that the Commission’s denial of a partial demolition permit had “taken” the developer’s property rights, thereby precluding Stahl from realizing any reasonable economic return and entitling Stahl to monetary compensation amounting to approximately $200 million plus interest. The gist of this argument was that the apartments were too small and deteriorated to be rented and that the Commission should have granted an “economic hardship” exception in order to allow the proposed demolition and redevelopment plans.

 

The Court’s Opinion

Writing for the Supreme Court of the State of New York, Justice Michael D. Stallman adopted the Commission’s analysis that any hardship was self created, not reasonable and based on scenarios that contained fallacies. Noting that the Commission’s analysis was “well-reasoned” and “thoughtful,” Justice Stallman ruled that “Stahl has not met its burden of demonstrating [that the Commission] acted arbitrarily or capriciously or in violation of law by denying Stahl’s hardship application. Stahl has not set forth a cause of action for an unconstitutional taking and thus has no viable claim either for money damages, costs or attorneys’ fees.” In reaching his decision, Justice Stallman relied on Penn Central Transportation Corporation v. City of New York, 438 U.S. 104, 136 (1978) and Lucas v. South Carolina Coastal Council, 505 U.S. 1003, 1016 (1992), thereby reaffirming the continued validity of these important takings decisions as well as the role of the Preservation Commission.

Not every takings case has an outcome as clear cut as this one, but as highlighted repeatedly by Justice Stallman, the Commission’s well reasoned decision—based on facts, a solid record and applicable law—went a long way toward demonstrating the reasonableness of its actions. This is a good reminder for all local preservation commissions, wherever they might be.

Will Cook is an associate general counsel at the National Trust for Historic Preservation.

Notes:

1. By a 6-5 vote, the Board of Estimate upheld the majority of the landmark designation but excluded two of the 15 buildings, both of which face York Avenue, from that designation. Those two buildings are the ones at issue in this case. The Board of Estimate had similarly excluded four out of 14 buildings from the landmark designation of the York Avenue Estate (the other light-court apartment block) because that owner had also wanted to build a luxury residential tower. Both decisions were upheld by the state trial court in response to a challenge, but the York Avenue Estate case was appealed further, and the Appellate Division ultimately overturned the Board of Estimate’s decision based on the significance of the historic property as a whole—Matter of 400 E. 64/65th St. Block Assn. v. City of New York, 183 A.D.2d 531 (N.Y. App. Div. 1992), review denied, 81 N.Y.2d 736 (1992).

2. Stahl lost an earlier lawsuit in 2010 challenging the landmark designation—Matter of Stahl York Ave. Co. LLC v. City of New York, 905 N.Y.S.2d 37, 76 A.D.3d 290 (June 24, 2010). The state court upheld the landmark designation, noting that the partial delisting decision in 1990 resulted from a “bad back-room deal” that was an “inappropriate politically motivated action” made under “intense political pressure from a powerful real estate developer.”

3. The federal lawsuit was dismissed on May 21, 2015.

 

#Legal #takings