Second Department Finds Development Rights Constitute Real Property Under RPAPL § 1602

Plaintiffs Thomas G. Hahn, Jr., Jeanne Halstead, and Barbara Butts (collectively “Plaintiffs”), and defendant Johanne Hagar, were siblings who owned a 101–acre farm (“Hahn Farm”) in the Town of Pleasant Valley, which had been in the parties’ family for over 240 years.  The property was owned jointly by the parties’ parents until their father’s death in 1995, and then solely by their mother until her death. The mother’s will left a qualified life estate in the property to Thomas G. Hahn, Jr., and the remainder interest to her four children in equal shares.  Plaintiffs sought authorization pursuant to RPAPL § 1602, which allows the owner of a possessory interest in real property to apply to a court for an order directing that the “real property, or a part thereof, be mortgaged, leased or sold,” to sell the development rights to the property in order to preserve its future use as a farm.  However, the Court found that development rights do not constitute real property, or a part thereof, for purposes of RPAPL § 1602. Accordingly, the court dismissed the proceeding, and Plaintiffs appealed.

The Second Department found that while the parties stipulated to a definition of “development rights,” the specific rights or burdens broadly referred to by this term could vary according to contractual terms or applicable governing statutes.  Here, the court held that development rights, as defined by the parties, constituted “real property, or a part thereof,” for purposes of RPAPL 1602.

Even so, the Court affirmed the lower court’s dismissal because Plaintiffs failed to establish that the proposed sale of development rights would be expedient.  Specifically, the plaintiffs failed to present any evidence of a proposed buyer for the development rights or the value of the underlying property both with and without the development rights. In addition, Plaintiffs failed to present evidence of any other tangible or intangible benefit that could be achieved by a sale of the development rights, or that the sale was necessary to preserve the property as an asset. Accordingly, the Court held that the Supreme Court properly directed the dismissal of the cause of action pursuant to RPAPL § 1602.

The case was Hahn v Hager, 153 A.D.3d 105 (2d Dep’t 2017).

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