Court of Appeals Holds Permit Holder Cannot Gain Vested Rights Through Reliance on Erroneously Issued Sign Permit

Petitioner sought review of a Board of Standards and Appeals of the City of New York (BSA) decision upholding the New York City Department of Buildings (DOB) revocation of Petitioner's permit for an outdoor advertising sign. 

Petitioner had a large illuminated advertising sign on its building pursuant to a DOB permit from 1980. After the zoning regulations were amended, Petitioner’s sign was grandfathered in as a legal, nonconforming use.  In 2002, the BSA approved Petitioner’s variance request to develop a mixed-use building and move the sign with modifications, but construction never started and in 2008 the building and sign were demolished. Petitioner later sought new DOB permits for a structure and sign. DOB allowed the structure, but objected to the proposed sign as being doubled sided, in a different location, and 25 feet lower relative to the original. Petitioner applied for reconsideration, and the borough building inspector overruled the DOB and approved the sign permit. In early 2010, after the sign had been installed, a DOB audit found that the sign had not been lawfully approved. The BSA agreed that the sign violated the zoning resolution and that nonconforming use status had been lost during the 2 years of non-use following demolition. In addition, the BSA noted that “Petitioner’s good faith reliance on the approval did not estop the agency from enforcing its ordinances.” Petitioner commenced an Article 78 proceeding and the Supreme Court dismissed the petition. The Appellate Division reversed, and both parties were later granted leave to appeal to the Court of Appeals.

The Court of Appeals held Petitioner did not acquire a vested right to maintain the sign and that “the proper procedure to resolve the issue of its asserted good faith reliance on the erroneously issued permit is an application for a zoning variance.”  The Court noted that:

"an owner of real property can acquire a common-law vested right to develop the property in accordance with prior zoning regulations when, in reliance on a legally issued permit, the landowner effect[s] substantial changes and incur[s] substantial expenses to further the development and [t]he landowner's actions relying on [the] valid permit [are] so substantial that the municipal action results in serious loss rendering the improvements essentially valueless" (internal quotes and citations omitted).

Nonetheless, the Court held that “vested rights cannot be acquired, however, where there is reliance on an invalid permit,” as “when 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.”  Since the 2008 permit was unlawfully issued, Petitioner could not rely on it to acquire vested rights. The Court also noted that the petitioner never sought a variance.

The case was Matter of Perlbinder Holdings, LLC v Srinivasan, 27 N.Y.3d 1 (2016).

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