There are times when it can be tempting to make certain representations to municipal authorities to facilitate procuring an approval. If untrue, they may come with some devastating consequences.

In Caspian Realty, Inc. v. Zoning Bd. of Appeals of Town of Greenburgh, 68 A.D.3d 62 (2d Dept. 2009) the applicant sought site plan approval from a planning board for a proposed furniture store, where the plans indicated a proposed showroom on the main floor and a cellar for storage. During site plan review, the planning board specifically asked the applicant how they intended to use the cellar. They responded, “for storage and mechanicals only.” The question posed was significant, insomuch as using the cellar as showroom space would double the square footage of the retail space in the premises which, in turn, would exceed the permissible floor area ratio and parking requirements of the municipality, thereby necessitating a variance from the zoning board.

During construction, a town building inspector noticed the installation of various improvements to the cellar (such as partitions, walls, finishes, carpeting) and requested revised plans for the premises. Upon submission, the plans once again showed the cellar as storage space. The town issued certificates of occupancy based upon the designation of the cellar as storage space and required the applicant to install a barricade across the stairway that leads to the cellar.

Of course, the cellar was not used for storage space. After receiving multiple violations from the town and failing to abate, the applicant went to the zoning board for relief from floor area ratio and off-street parking requirements triggered by using the cellar as retail space. The zoning board denied the application stating that Caspian continuously engaged in deceptive conduct and the benefit of granting the variances was outweighed by the detriment caused to the town in diminishing respect for its laws. The applicant appealed to the supreme court, asserting that deceptive conduct is not one of the five enumerated factors zoning boards may consider for an area variance under New York state law. The supreme court found that the applicant engaged in deceptive conduct, but otherwise agreed with the applicant and reversed the zoning board. An appeal to the appellate division ensued. The appellate division reversed the supreme court and affirmed the decision of the zoning board to deny the application, holding that, while the applicant’s deceit does not warrant a denial on its own, when the deceit somehow relates to the five statutory factors it is properly considered by the zoning board.

The lesson to be learned here is neither municipalities nor the courts reviewing their actions are inclined to reward deceptive conduct. When a representation is made to a municipality, every effort must be made to ensure that there is complete understanding amongst all parties. While a misrepresentation may result in a fast-tracked approval, it may also result in a massive loss both in terms of the project’s continued viability as well as the ability to maintain a working relationship with municipalities for future projects.

Originally published in the April 16, 2024 New York Real Estate Journal. Reprinted with permission.