Realty Law Digest

, New York Law Journal

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Scott E. Mollen
Scott E. Mollen

Condemnation—Claimant Failed to Demonstrate That There Was A Reasonable Probability That A Gas Station Property Would Be Rezoned and A High Rise Building Could Be Legally Developed Thereon—Deed Restriction

This condemnation proceeding involved a taking of a property located on a high traffic thoroughfare in Brooklyn, New York. The condemnor was the NYS Urban Development Corporation, d/b/a Empire State Development Corp. (ESDC).

The property included a one story gas station building and six pumps. The property was encumbered by "a 3,506 sq. ft. subterranean easement in favor of the Long Island Railroad (LIRR), a subsidiary of the Metropolitan Transportation Authority (MTA)" and by a deed restriction which limited development over the easement to two stories.

The claimant argued that the highest and best use of the property was not as the existing gas station, but as a 12-story mixed use residential and commercial building (proposed building). The claimant asserted that there was "a reasonable probability that the…property would have been rezoned from M1-1 to C6-2A." A C6-2A zone is a mixed commercial residential zone that allows a residential floor area ratio (FAR) of 6.02. The claimant valued the property at $10,500,000, based on the assumption that the property would be rezoned. The condemnor countered that there was no reasonable probability that the property would be rezoned to C6-2A, the gas station use was the "highest and best use" of the property and the property's value was $4.3 million.

Generally, a claimant asserting a value based on a rezoning must show "a reasonable probability that the subject property would have been rezoned." However, "in this case there [was] a question whether restrictions in the deed preclude development of the [proposed building], even if the property had been rezoned."

The highest and best use of a property is defined as the reasonably probable and legal use of vacant land or improved property which is physically possible, legally permissible, appropriately supported, financially feasible, and that results in the highest value.

Here, even if the property had been rezoned, a deed restriction precluded development of the proposed building. In determining whether a use is legally possible, courts will consider, inter alia, zoning and environmental regulations, but also deed restrictions or easements. Here, the easement was irregular in shape and ran the full 95-foot width of the property. The deed restriction barred construction more than two stories over the easement, but also prohibited construction of any foundation "below the depth of the top of the tunnel." The proposed building would contain 11 stories over the area of the easement and would violate the deed restriction. Accordingly, the claimant had to demonstrate that there was a reasonable probability that the MTA would have waived such deed restriction.

The claimant's engineer addressed what could be developed on the property if it was rezoned to C6-2A. Although he was aware of the easement, "he did not discuss the restriction on building more than two stories over the easement area in his report." He testified that "he would be able to get the MTA's approval to build the eleven story building because it would be cantilevered so that it did not impose any load on the existing railroad tunnel." He further asserted that "[w]hen there is an obstacle like this it is always overcome." The court characterized such testimony as "speculative." The claimant's engineer had "offered no testimony that he had discussed waiver of the deed restriction with the MTA," had not cited "any comparable examples where the MTA waived similar restrictions" and besides the easement issue, the deed embodied "a…prohibition on building more than two stories over the easement."

The claimant offered "no evidence that the MTA would waive the deed…, or under what conditions or at what price they might be willing to do so." The claimant had not produced any "policies regarding waiving such restrictions, nor evidence of any buildings where the MTA actually waived such deed restrictions." The court concluded that the claimant had failed to demonstrate that the proposed building was legally possible and was the highest and best use of the property.

Additionally, evidence indicated that the proposed building could not be built on the site. The claimant's engineer's report had not addressed the foundation of the proposed building or whether the building could be cantilevered or not. Rather, it only addressed what the zoning would permit. Although the claimant's experts were aware of the easement, it was "unclear whether they were aware of the deed restriction." While such experts testified that the proposed building would be cantilevered over the easement, their reports did not refer to cantilevered construction.

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