Real Estate Bd. of N.Y., Inc. v. City of N.Y.

• Decision Date: 23 August 2018
• Docket Number: 6109,6108,101798/15,Index 160081/15
• Citation: 165 A.D.3d 1,84 N.Y.S.3d 33
• Parties: In re The REAL ESTATE BOARD OF NEW YORK, INC., Petitioner–Appellant, v. CITY OF NEW YORK, et al., Respondents–Respondents. The Real Estate Board of New York, Inc., Plaintiff-Appellant, v. City of New York, Defendant-Respondent.
• Court: New York Supreme Court — Appellate Division

165 A.D.3d 1

84 N.Y.S.3d 33

In re The REAL ESTATE BOARD OF NEW YORK, INC., Petitioner–Appellant,

v.CITY OF NEW YORK, et al., Respondents–Respondents.

The Real Estate Board of New York, Inc., Plaintiff-Appellant,

v.City of New York, Defendant-Respondent.

6108

6109

101798/15

Index 160081/15

Supreme Court, Appellate Division, First Department, New York.

ENTERED: AUGUST 23, 2018

Schlam Stone & Dolan LLP, New York (Richard H. Dolan of counsel), for appellant.

Zachary W. Carter, Corporation Counsel, New York (Qian Julie Wang, Richard Dearing and Devin Slack of counsel), for respondents.

Dianne T. Renwick, J.P., Angela M. Mazzarelli, Richard T. Andrias, Troy K. Webber, Peter H. Moulton, JJ.

MOULTON, J.

These consolidated appeals arise from a plenary action and an article 78 proceeding both challenging Local Law No. 50 (2015) of the City of New York.

Enacted in June 2015, Local Law 50 places limits on conversions of Manhattan hotels with at least 150 units. The law places a two-year moratorium (later extended to four years, i.e., to June 2019) on the conversion to full-time residential use of more than 20% of qualifying hotels' "primary hotel space" (see Administrative Code of City of N.Y. § 25–701), which is defined essentially as living and sleeping space for guests. The law exempts any conversions begun in the 24 months preceeding the law's effective date. Local Law 50's stated purpose is to allow study of the effect on the City's economy of such residential conversions of large hotels. Large hotels, the legislative findings assert, are essential to vacation and business travelers, important generators of well paying jobs, and anchors for surrounding economic activity. The legislative findings express concern that conversions are continuing apace and may be "irreversible" (Local Law 50 § 4).

Owners of qualifying hotels may seek a waiver from the Board of Standards and Appeals (BSA) of Local Law 50's limitations on conversions. The waivers are not as of right. The law provides, in relevant part:

"In determining whether to issue a waiver under this section ... the [BSA] shall assess whether [the limits on conversion] permit[ ] a reasonable rate of return, while also taking into account practical difficulties or unnecessary hardship in the way of strict application of such section, so that the spirit of the law shall be observed, the public safety and welfare secured and substantial justice done" (Administrative Code of City of N.Y. § 25–703[d] ).

The waiver provision provides criteria for determining a "reasonable financial return" and then states:

"The [BSA] may grant a waiver pursuant to this section only to the minimum extent necessary to afford relief, in accordance with the intent and purposes of this chapter. In granting such a waiver, the [BSA] shall make an express finding that it is the minimum waiver necessary to afford relief" (Administrative Code § 25–703[e] ).

Plaintiff/petitioner Real Estate Board of New York (REBNY) is a non-profit corporation whose approximately 17,000 members are property owners, developers, lenders, managers, architects, designers, appraisers, attorneys, and brokers involved in the real estate industry in New York City. REBNY asserts that approximately 175 hotel properties in Manhattan fall within the ambit of Local Law 50. REBNY avers that while it is sometimes difficult to determine which entities are the beneficial owners of real property from public records, an initial survey indicates that at least 29 REBNY members own hotels affected by Local Law 50. REBNY asserts that by restricting the rights of the affected hotel owners to convert their properties to condominiums and other residential uses, Local Law 50 has reduced the value of the affected properties to an unspecified degree. It opposes the law on a variety of grounds.

In its article 78 proceeding, REBNY seeks to annul Local Law 50 and permanently enjoin respondents (the City) from enacting similar legislation without complying with the City Charter's Uniform Land Use Review Process (ULURP) and the State Environmental Quality Review Act (SEQRA). In its plenary action, REBNY asserts state and federal constitutional claims sounding in taking without just compensation, due process (under the theory that the law lacks a rational basis), and equal protection (under the theory that the law encumbered the class of hotel owners for the benefit of their employees). The merits of these claims are not before us on this appeal.

The City moved to dismiss both the action and the proceeding on the ground that REBNY lacks standing to bring its claims. The City also argued that the claims are not ripe. Supreme Court dismissed all of REBNY's claims for lack of standing. It did not reach the ripeness issue. We now modify to deny the motion as to all claims except those asserted under 42 USC § 1983.

The Court of Appeals set forth the requirements of organizational standing in Society of Plastics Indus. v. County of Suffolk, 77 N.Y.2d 761, 570 N.Y.S.2d 778, 573 N.E.2d 1034 [1991]. An organization must plead facts tending to show that 1) one or more of its members would have standing to sue; 2) the interests it asserts are germane to its purposes so as to satisfy the court that it is an appropriate representative; and 3) neither the asserted claim nor the relief requires the participation of the individual members ( id. at 775, 570 N.Y.S.2d 778, 573 N.E.2d 1034 ). Other rules of standing applicable to individuals apply with equal force to organizations. Particularly pertinent in the context of a challenge to administrative action is the rule that the litigant must allege injury in fact which falls within the zone of interests protected by the statute invoked ( id. at 773, 570 N.Y.S.2d 778, 573 N.E.2d 1034 ). Furthermore, especially in land use matters, the injury must be "different in kind or degree from that of the public at large" ( id. at 775, 570 N.Y.S.2d 778, 573 N.E.2d 1034 ).

Owners of real property who are subjected to a new zoning classification or other use restriction are "presumptively affected by the change" and "therefore technically have standing" to assert claims ( Matter of Sun–Brite Car Wash v. Board of Zoning & Appeals of Town of N. Hempstead, 69 N.Y.2d 406, 415–416, 515 N.Y.S.2d 418, 508 N.E.2d 130 [1987] ; see Matter of Skenesborough Stone v. Village of Whitehall, 229 A.D.2d 780, 645 N.Y.S.2d 579 [3d Dept. 1996] [landowner had standing to challenge ordinance requiring municipal approval before issuance of mining permit] ).

Accepted as true for purposes of these CPLR 3211 motions, REBNY's assertion that its member hotel owners are currently negatively affected by the moratorium is sufficient to establish standing in the plenary action and in the article 78 proceeding under ULURP (see Society of Plastics Indus., 77 N.Y.2d at 774, 570 N.Y.S.2d 778, 573 N.E.2d 1034 ). REBNY does not have standing under SEQRA for reasons discussed below. REBNY's status as a real estate industry advocacy organization makes it an appropriate representative of those members' interests. No individual participation by any of its members is required for it to assert its claims of the statute's facial invalidity (see Mulgrew v. Board of Educ. of the City School Dist. of the City of N.Y., 75 A.D.3d 412, 906 N.Y.S.2d 9 [1st Dept. 2010] ).

REBNY's allegations of its members' injury in fact are bolstered by Local Law 50's declaration of legislative intent. The law's preamble evinces the City Council's concern that hotel conversions cause a loss of hotel employment and tourism dollars (Local Law 50 § 1[a][2] ). Notably, that section itself notes the "recent conversion history" attributable to the "current market conditions" (id. ). It also specifically notes that "the owners of several such hotels in Manhattan have already announced their intention to undertake the conversion of at least some of their hotel rooms to residential apartments" (id. ). Presumably, if the "current market conditions" were not such that hotel conversions were in fact more profitable than the current use, there would be no need for Local Law 50.

The dissent's view of standing is unduly restrictive (see Matter of Sun–Brite Car Wash, 69 N.Y.2d at 413, 515 N.Y.S.2d 418, 508 N.E.2d 130 ["Standing principles, which are in the end matters of policy, should not be heavy-handed; in zoning litigation in particular, it is desirable that land use disputes be resolved on their own merits rather than by preclusive, restrictive standing rules"] ). To establish standing, the dissent would require that REBNY demonstrate that a member 1) applied for a construction permit during the moratorium or demonstrated existing plans to convert 20% or more of their primary hotel space to residential use; 2) was not exempt under Local Law 50; and 3) unsuccessfully applied to the BSA for a waiver. However, the dissent's required demonstration fails to account for the alleged diminution of property value, or, at a minimum, for the immediate and actual injury associated with the costs of applying for a permit or a waiver.¹

The dissent notes the lack of evidentiary support for REBNY's claim that hotel owners' property values have diminished. The dissent's focus on proof however overlooks that "proof of special damage or in-fact injury is not required in every instance to establish that the value or enjoyment of one's property is adversely affected" ( id. ).

We agree with the dissent that REBNY cannot assert a SEQRA claim in the article 78 proceeding. REBNY has not shown that environmental concerns are germane to REBNY's organizational purposes, which focus on the economic and political health of the real estate industry. Unlike the individual property owner in Matter of Har Enters. v. Town of Brookhaven, 74 N.Y.2d 524, 549 N.Y.S.2d 638, 548 N.E.2d 1289 [1989], who had standing to assert a SEQRA claim, petitioner's standing, as an organization, is foreclosed by Society of Plastics Indus., 77 N.Y.2d 761, 570 N.Y.S.2d 778, 573 N.E.2d...