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Erroneously Issued Permit Does Not Give Property Owner Vested Rights

The New York Court of Appeals restated the rule that construction pursuant to a permit issued in error does not bestow any rights to maintain the structure or use. In Matter of Perlbinder Holdings, LLC v. Srinivasan, the Court held, because the permit on which the property owner relied was invalid, no common law vested rights could be obtained.

At issue is a large billboard sign. Originally, a sign was legally erected on the side of a building. Over time, the zoning of the property changed and eliminated such signs as a permitted use. The single-sided sign was allowed to remain as a “grandfathered” legal non-conforming use. In 2008, the building on which the sign was attached was demolished. The property owner sought a permit to erect a stand-alone sign on a support structure. Initially, the  Department of Buildings (DOB) approved the support structure but denied a permit for a sign. The proposed sign was double sided and lower than the original sign.  The DOB found that to be a legal non-conforming sign, the new sign had to be single-sided and in the same location as the original sign. The property owner appealed the denial of the permit and the Manhattan Borough Building Commissioner overruled and allowed the permit.

The DOB thereafter issued the permit and the sign was erected. In 2010, during a subsequent permit review, the DOB determined the sign permit had not been validly issued. The property  owner appealed to the Board of Standards and Appeals (BSA, which is the equivalent of a zoning board of appeals in other municipalities).  However, there was no application for a variance, only an appeal of the revocation of the permit. The BSA concluded that the DOB was correct and that the right to construct a non-conforming sign had expired, due to t he passage of more than two years since the removal of the building and the original non-confirming sign. Finally , the BSA concluded “…petitioner’s good-faith reliance on the DOB’s approvals did not estop the agency from enforcing its ordinances.”

This Article 78 proceeding then ensued in which the property owner claimed, based upon its reliance on the permit,  it had acquired common law vested rights to the sign. The lower court upheld the BSA’s determination. The Appellate Division agreed that a variance would be required, due to the change in location of the sign and remanded the matter to the BSA to determine whether the property owner’s good-faith reliance on the permit was sufficient to require the grant of a variance.

Initially, the Court of Appeals determined that the new sign did not qualify as a legal non-conforming sign, it was not “grandfathered” and the permit was not validly issued. Therefore, the Court of Appeals held:

“[w]hen a permit is wrongfully issued in the first instance, the vested rights doctrine does not prevent the municipality from revoking the permit to correct its error. Because the 2008 permit was unlawfully issued, petitioner could not rely on it to acquire vested rights.”

The City had also argued that a remand was improper, as there had never been a variance application and the application appealing the revocation did not give the BSA jurisdiction to consider a variance on remand. The Court of Appeals agreed that there were two different provisions addressing variances and interpretations and concluded:

“… the interpretative appeal process necessarily applies in instances other than a zoning variance and does not extend to matters requiring a variance, for which different standards and different procedures are set forth. The Appellate Division therefore erred in remanding the matter for a determination of a variance application…. Finally, a determination as to petitioner’s good-faith reliance should not be resolved by the Court, but rather by the administrative agency, should petitioner seek a variance (see generally Jayne Estates, Inc. v Raynor, 22 NY2d 417 [1968]).”

Therefore, the Court of Appeals modified the Appellate Division decision and dismissed the petition in its entirety.

-Steven Silverberg