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The City of New York v. Seguine Bay Estates LLC

Supreme Court, Richmond County

May 7, 2017

THE City of New York and THE LANDMARKS PRESERVATION COMMISSION, Plaintiff
v.
Seguine Bay Estates LLC, LEO TALLO and THE LAND and BUILDING THEREON KNOWN AS 509 SEGUINE AVENUE, A/K/A BLOCK 6666 LOT 1., Defendants.

          Attorney For Plaintiffs, Zachary W. Carter, Attn: Michelle Goldberg-Chan, Karen B Selvin, Rachel Moston.

          Attorney for Defendants: Howard M. File.

          PHILIP S. STRANIERE, J.

         Avram:He's right and he's right? They both can't be right.

         Teyve:You know you are also right. [1]

         Plaintiffs, City of New York (City) and The Landmarks Preservation Commission (Landmarks), commenced this action to compel the defendants, Seguine Bay Estates LLC (Seguine), Leo Tallo (Tallo) and the Land and Buildings thereon known as 509 Seguine Avenue a/k/a Block 6666 Lot 1 in the County of Richmond, City and State of New York, to comply with the order of the Landmarks Commission issued pursuant to Title 25 Chapter 3 of the New York City Administrative Code (NYCAC) to maintain in good repair the building known as 509 Seguine Avenue, Staten Island, New York a/k/a the Manee-Seguine Homestead.

         After a trial on the issues raised in plaintiffs' complaint and defendants' answer, the court rendered a written decision dated December 29, 2016 in which it determined that the Manee-Seguine Homestead is a structure of historical significance and should be preserved; defendants were each "a person in charge" as defined in the NYCAC §25-302(t) and they had failed to maintain the premises as required by the statute [NYCAC §25-311] and to comply with the order of Landmarks to do so. The court assessed a penalty of $5, 000.00 a day, the maximum permitted by the statute [NYCAC §25-317.1]. The total penalty assessed for the period of noncompliance, March 2, 2012 to December 2, 2016, was $8, 550, 000.00. To date defendants have not complied with the Landmarks order, nor have the plaintiffs taken any steps to place the premises in good repair. For the period December 2, 2016 to May 2, 2017, an additional $750, 000.00 in penalties have accrued.

         The court set a hearing on the issue of whether the statute [NYCAC §25-317.1] limited any penalty to the fair market value of the property with or without improvements or if the total fine assessed by the court in its decision is valid.

         A hearing was held on March 7 & 8, 2017. Both sides produced expert testimony as to the fair market value of the property.

         The statute in question provides:

§25-317.1 Civil Penalties
a. Any person who violates any provision of 25-305, 25-310 or 25-311 or subdivision c of section 25-317 of this chapter or any order by the chair with respect to such provisions shall be liable for a civil penalty which may be recovered by the corporation counsel in a civil action in any court of competent jurisdiction. Such civil penalty shall be determined as follows: (1) The defendant shall be liable for a civil penalty of up to the fair market value of the improvement parcel, with or without improvement, whichever is greater, .

         The court asked each side to produce expert testimony as to the fair market value of the parcel with or without the improvement. As noted by the above quote from "Fiddler on the Roof, " when expert testimony is involved, you may wind up with a situation when both experts are right.

         You would also presume that an assignment to opine on the fair market value of the parcel with or without the improvement would be a relatively easy task and although the conclusions may differ, what was being compared would be similar. If that's what you think, "then you've got another think coming." [2]

         Regarding the fair market value of the property with the improvement, the experts compared apples to apples. One may have been using Macintosh and the other Granny Smith's but they were both in the apple family. However, their opinions on the unimproved parcel contained substantial differences between the experts. The court received a comparison between defendants' apples and plaintiffs' oranges.

         Defendants' appraisal expert opined as to the value of the parcel without improvements but with all of the existing governmental restrictions, including the landmark designation, still in place. Plaintiffs' appraisal expert based his opinion on the value of the parcel with the landmark designation having been removed so that the entire 21, 000 square foot lot would be considered vacant land. So as noted by Teyve, perhaps, they both are right.

         Both experts rejected the income approach of fixing fair market value as not being applicable. Both experts discounted the C-1 commercial overlay as being a viable development option as the parcel is located in a residential area and both believed that the widening of Seguine Avenue to its mapped width had little or no effect on the property value. Both agreed that the landmarks designation in this situation rather than enhance the market value of the property actually was a serious detriment. Neither expert took into account the purchase price of the property by defendants in September 2009 of $465, 000.00 nor gave any relevancy to the fact that the Department of Taxation and Finance fixed the market value of the property at $445, 000.00 for fiscal year 2016-2017 as required by Real Property Tax Law §1200.

         Because defendants were challenging the court's finding and the assessment of the penalty, it was determined that their expert would testify first.

         I. Defendants' Appraisal Expert:

There is a traditional song contained in the Passover Haggadah known as "Dayenu." The Hebrew word translates as "it would have been enough." The best way to describe defendants' expert's testimony is to shout "dayenu" -"it would have been enough"- after each governmental restriction affecting this parcel is explained. Leading to a conclusion that taken together the restrictions currently in place are "more than enough" to make the property valueless for appraisal purposes and amount to a taking under the law requiring just compensation to the defendants.

         The parcel is now zoned R3X, a residential designation limited to detached one and two-family houses. This designation is more restrictive then the zoning in place when the property was purchased by the defendants in 2009. An initial plan in 2004 by a prior owner and approved by Landmarks proposing the construction of four attached houses near the corner of Seguine Avenue and Purdy Place is no longer permissible under current zoning and revised flood and wetlands maps. It is irrelevant to any discussion of current development options.

         Under R3X there are certain height restrictions for each building. The property also has a commercial overlay which would permit limited commercial development, but both experts rejected this as a potential use. To develop the parcel for residential purposes would require subdividing the property into buildable lots and dealing with the Department of Finance as well as the Department of Buildings. If the parcel was only subject to R3X zoning and compliance with all Department of Buildings requirements. Dayenu.

         The parcel is part of the Special South Richmond Development District (SRD), which further restricts development regarding lot size, the number of trees, set-backs from the street, side and rear yard distances. With this SRD designation in place, the lot size of 21, 000 square feet would yield only three or four buildable lots after subdivision. One of the lots would have to be the current structure leaving the balance of the parcel for development. So if three house could be built for sale, the landmarked building would still have to be renovated to "good repair" at some cost or, if made habitable, at a substantially greater cost. Neither expert opined specifically what would be the reduction in the value of the three potential houses to be built if the boarded up landmark structure is overlooking the new homes. If the parcel was only in the South Richmond District. Dayenu.

         The parcel has an encroachment of wetlands running about 20 feet into the parcel from Purdy Avenue for the site's full 167.28 foot length. The New York State Department of Environmental Conservation (DEC) has designated the area as a "wetlands buffer zone with wetlands vegetation." This means that the property may or may not be developed. To build in or near wetlands approval from the DEC, if not also from federal and city agencies which regulates these environmentally sensitive areas, would be needed. This would affect the soft costs involved in the development of the property and might substantially delay the approval process. The restriction could effectively eliminate 3, 300 square feet of the lot from being developed. If the parcel was only in a wetlands buffer zone. Dayenu.

         The parcel is located in the HUD Flood Community 360497. The structure is in Zone X while the entire front of the parcel from Purdy Avenue to the house is considered a VE flood district. This is considered a flood zone with a high risk of storm waves. The expert stated that the flood map used brings the VE flood zone as close as within one-inch of the structure. If the homestead itself was subject to flood zone restrictions, it could substantially alter what had to be done to renovate or preserve the structure. If you believe prevailing scientific theories, sea level is rising. If this is accurate, the building could become subject to the flood zone and have additional construction limitations put into place. Post "Super Storm Sandy" flood maps may change the extent of the designation. New FEMA maps were approved in 2013 but have not been adopted by the City further complicating any potential development. If the structure is in a flood zone, it would require flood insurance. The VE designation for the vacant portions of the property requires approval from federal, state and local government to build and may require certain safety restrictions such as raising the height of any building by adding a lower level of non-habitable space in order to raise the living area above the anticipated flood levels. However, raising the height of any proposed buildings to comply with the flood zone restrictions may put such structures in violation of the SRD and R3X maximum height limits. This might entail the developer having to seek a variance from the Department of Buildings. Also at a previous court appearance, representatives of the plaintiffs, expressed a concern that any development of the vacant portion of the parcel not block the public's view of the historic structure. This Landmark's restriction might conflict with development requirements for structures in a flood zone. This is a real issue because the R3X zoning permits only detached houses on the parcel, so any design would have to partially block the street view. At a minimum it would add to the cost and time to develop the property. If the parcel was only a VE flood zone. Dayenu.

         As to the structure itself, although neither side did any specific testing as to the materials used on the structure, it would not be surprising to find that the building contains both lead paint and asbestos shingles. In either situation, special environmental regulations would become applicable and would control the removal. If the parcel had only environmental concerns. Dayenu.

         Defendants' expert went to on to explain the meaning of the "highest and best use" of the parcel both with the land vacant (without the improvement) and with the existing structure (with the improvement). He differentiated between the three commonly accepted methods used by appraisers to determine fair market value. The income approach was not used because the property generated no rental income. Defendants' appraiser utilized both the Sales ...


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