Owners sought compensation for fixtures that were inconsistent with highest and best use of properties. The City acquired two parcels of land for its West Bushwick Urban Renewal project in Brooklyn. Each property owner sought compensation for trade fixtures, which primarily consisted of fencing, gating, paving, curb cuts, and a sidewalk for a parking lot. The City offered the owners an advance payment for the trade fixtures, but noted that if the land were to be developed to its highest and best use, the trade fixtures would have to be removed. The owners agreed with the City that the highest and best use of the properties was mixed commercial and residential use, and that such development would require the removal of the trade fixtures.

The City moved to dismiss each of the owners’ claims for compensation for the trade fixtures, arguing that it would not make sense to compensate the owners for trade fixtures that would have to be destroyed in order to develop the property to its highest and best use. The owners countered that the City was wrong to value the trade fixtures and land as if they were a single unit, and that the trade fixtures were compensable so long as they were used in connection with a business, intended to be permanent, and would lose substantial value if removed. The lower court granted the City’s motions, and the owners appealed.

The Second Department affirmed, ruling that compensation for an improvement was not appropriate when the improvement is inconsistent with the highest and best use of the property. The court explained that fixtures and land were valued separately in cases where the fixtures are consistent with the highest and best use, the property is a specialty, or the landlord owns the real property and a tenant owns the fixtures.

West Bushwick Urban Renewal Area, Phase 2, 2009 N.Y. Slip Op. 7649 (2d Dep’t Oct. 20, 2009) (Attorneys: Jonathan Houghton, for owners; Michael A. Cardozo, Lisa Bova-Hiatt, Fred Kolikoff, Brooke Zacker, for NYC).