Property owner relied on permit improperly issued by Buildings to claim that advertising sign was a legal grandfathered use. Perlbinder Holdings, LLC owned a building located at 663-669 Second Avenue in Manhattan. Perlbinder for many years maintained a large, single-sided, illuminated advertising sign on the side of the building and had received a permit from the Department of Buildings to operate the sign in 1980. Subsequently, the Council amended the New York City Zoning Resolution in such a way that the advertising sign was no longer legally permitted. The sign, however, was grandfathered as a nonconforming use. In 2002, Perlbinder acquired a zoning variance from the Board of Standards and Appeals to develop a 34-story mixed-use building on the property. The BSA also permitted Perlbinder to relocate the sign. Perlbinder did not act on the permit and the building remained vacant. In 2008, after years of inattention to the property, Buildings issued an emergency declaration, upon which the then-vacant building and the attached sign were demolished.
In the wake of the demolition, Perlbinder sought Buildings’ approval to put up a new, double-sided sign that would be 25-feet lower to the ground than the original sign. Buildings rejected the application, ruling that the new sign must be identical to the original sign in order to be considered a legal, non-conforming use. The then-Manhattan Borough Building Commissioner overruled Buildings’ decision and permitted the new sign to be constructed.
In 2010, Buildings concluded that the permits approving the new sign and sign structure had been improperly granted. Perlbinder, having already constructed a new sign on the property, appealed to the BSA. BSA rejected Perlbinder’s application. It affirmed that the permit for the new sign had been improperly granted, ruled that Perlbinder lost any right to a non-conforming use when the original sign was demolished along with the building.
Perlbinder filed an article 78 petition with the State Supreme Court asking that the court overturn BSA’s determination as arbitrary and capricious. Perlbinder argued that it had relied in good-faith on the permit granted by the Borough Commissioner and had spent a significant amount of money to install the new sign. The Supreme Court ruled that estoppel based on good faith was not available against a municipality, and dismissed Perlbinder’s petition. The Appellate Division, First Department, reversed. It held that Perlbinder had established good faith reliance, and sent the case back to the BSA to decide whether Perlbinder was entitled to a variance.
The New York Court of Appeals reversed the Appellate Division and held that the BSA was correct in ruling that Perlbinder could not rely on the improperly issued permit to establish a vested right in the sign. The Court of Appeals ruled that a real property owner can only obtain a common law vested right to develop property in accordance with prior zoning regulations when the owner acted upon a good-faith reliance on a “legally issued permit.” Because the sign permit had been improperly granted, it cannot be relied upon to acquire a vested right. The City was free to revoke the improperly issued permit to fix its mistake. The Court further ruled that the Appellate Division had exceeded its authority when it sent the case back to the BSA to consider issuing a variance for the sign to Perlbinder. Perlbinder had never asked for a variance, but had relied entirely on the claim of a vested right.
Perlbinder Holdings, LLC v. Srinivasan, 29 N.Y.S.3d 230 (2016)