Air Rights the Right Way

October 21, 2009

Air rights – a.k.a. (or m.p.k.a. – more properly known as) unused zoning floor area development rights – can be a great source of confusion – particularly when it comes to determining how to be sure when you buy them that you can use them.

In an important decision last year, the NYS Supreme Court concluded that merely buying unused zoning floor area from an adjoining parcel does not mean that “all zoning rights” needed to complete a development have been secured.

But, we are getting ahead of ourselves.

In order to sell unused zoning floor area, the “granting” (or selling) parcel must (unless it’s in a Special Zoning District that says otherwise, or it’s an individual landmark building) be contiguous to the “receiving” (buying) parcel for at least 10 linear feet. And, both parcels are then joined (in zoning matrimony) on a single Zoning Lot. The joining is done via a Zoning Lot Declaration; the allocation of zoning floor area between the parcels and the transfer or sale of unused floor area from the granting parcel to the receiving parcel is done via a Zoning Lot Development Agreement – or ZLDA. The Declaration can be thought of as the marriage certificate (bringing together the parcels on a common Zoning Lot) while the ZLDA is the prenuptial agreement, apportioning the marital assets – or the unused zoning floor area. Of course, in the zoning arena, there’s no divorce: Once the parcels are joined and a new building is built on the receiving parcel (using the floor area from the granting parcel – and from itself), the parcels can’t be split up. To do so would generally create non-compliance, which is verboten at DOB.

Getting back to the “being careful” part – and the Court case, if the ZLDA only concerns the purchase (transfer) of unused zoning floor area from the sending to the receiving parcel, then something may be missing in the marriage. In order to build on the receiving parcel, something more than just zoning floor area may be needed. The new building may, for example, require Open Space on the Zoning Lot. If there’s insufficient area on the receiving parcel, it might be necessary to locate the Open Space on all areas of the Zoning Lot — including the granting parcel. But, if the ZLDA fails to provide for the use of the granting parcel’s site for Open Space (via an easement, for example), then the union of the parcels may quickly sour. The owners of the receiving parcel, thinking that they had all they needed to build (because they bought the floor area), might be quite shocked to learn that they bought a “pig in a poke.” And, the granting parcel now has something new to sell – and a way to hold up development next door! In short, when zoning floor area is sold and sent to the receiving parcel, it does not carry with it all zoning requirements that might be needed to allow the full use of those rights on the receiving parcel.

If the receiving partner needs something in addition to zoning floor area from the granting partner – like open space, or our favorite, a light and air easement, then both partners had better negotiate this in the pre-nup.

Of course, in order to fully understand the “needs” of a new development on the receiving parcel (e.g. Open Space) the receiving parcel’s zoning counsel and an architect must work in tandem to understand before the Union begins, what the receiving parcel wants in terms of his/her share of the marital zoning assets.

The moral of the story is to avoid a situation where the enthusiasm for the marriage clouds the judgment of the receiving parcel – such that there’s a failure to secure ALL zoning rights needed to build a project. Negotiating for new items after the ZLDA is executed can result in costly delays – and a breakdown in what could otherwise be a viable and agreeable marital union.