Petition Sufficiently Alleged the Town’s Restrictive Covenant Was Invalid (1) Because It Sought to Regulate the Owner of Land Rather than the Use of the Land, (2) Because It No Longer Could Accomplish Its Purpose, and (3) Because It Effected an Unconstitutional Taking of Petitioner’s Land

The Second Department determined petitioner had stated causes of action contesting the validity and enforceability of a restrictive covenant promulgated by the town requiring that condominiums built by petitioner be sold rather than leased. Petitioner had sufficiently alleged (1) the restrictive covenant was invalid because it regulated the person who owned the land (petitioner) rather than the use of the land, (2) the restrictive covenant was not enforceable because its purpose could not be accomplished, and (3) the restrictive covenant amounted to an unconstitutional taking. The court explained the applicable legal principles:

The power to zone “is not a general police power, but a power to regulate land use” … . “It is a fundamental rule that zoning deals basically with land use and not with the person who owns or occupies it'” … . Furthermore, ” a zoning ordinance will be struck down if it bears no substantial relation to the police power objective of promoting the public health, safety, morals or general welfare'” … .

“[R]estrictive covenants will be enforced when the intention of the parties is clear and the limitation is reasonable and not offensive to public policy” … . However, even the ” [p]urchase of property with knowledge of [a] restriction does not bar the purchaser from testing the validity of the zoning ordinance [because] the zoning ordinance in the very nature of things has reference to land rather than to owner'” … .

…[Petitioner] sufficiently alleged that the restrictive covenant is improper because it regulates [petiioner’s] ability as the owner of the property to rent the units rather than the use of the land itself. [Petitioner] has further alleged that, particularly in light of the provision permitting future owners to lease units in the development, the restrictive covenant “bears no substantial relation to . . . the public health, safety, morals or general welfare”… .

“Pursuant to RPAPL 1951(1), a restrictive covenant shall not be enforced if, at the time enforceability of the restriction is brought into question, it appears that the restriction is of no actual and substantial benefit to the persons seeking its enforcement or seeking a declaration or determination of its enforceability, either because the purpose of the restriction has already been accomplished or, by reason of changed conditions or other cause, its purpose is not capable of accomplishment, or for any other reason'” . Here, assuming that there is a benefit to be obtained by requiring the units to be sold rather than rented, [petitioner] has alleged that, because the rental restriction imposed by the restrictive covenant applies only to it and not to any subsequent owner of any of the units in the planned development, it is of no substantial benefit to the Town or its citizens. In support of its motion to dismiss, the Town has offered no explanation as to why this is not so. … * * *

With respect to the third cause of action, which alleged an unconstitutional taking based upon “denial of development, as opposed to excessive exactions” …, the test set forth by the United States Supreme Court in Agins v City of Tiburon (447 US 255) applies … . Pursuant to this test, “a zoning law effects a regulatory taking if either: (1) the ordinance does not substantially advance legitimate state interests’ or (2) the ordinance denies an owner economically viable use of his land'” … . However, “[a] reasonable land use restriction imposed by the government in the exercise of its police power characteristically diminishes the value of private property, but is not rendered unconstitutional merely because it causes the property’s value to be substantially reduced, or because it deprives the property of its most beneficial use” … . Thus, a court must examine “(1) [t]he economic impact of the regulation on the claimant’; (2) the extent to which the regulation has interfered with distinct investment-backed expectations’; and (3) the character of the governmental action'”… . Blue Is. Dev., LLC v Town of Hempstead, 2015 NY Slip Op 06488, 2nd Dept 8-12-15