SPC Attorney Presents Legal Arguments to HRBRRD Board Regarding the Modification of Access Permits - May 8, 2012

At the May 8, 2012 Board meeting of the Hudson River Black River Regulating District (HRBRRD) the Sacandaga Protection Committee’s (SPC) Attorney presented arguments to the Board in opposition of a proposed resolution that would allow modification of Beach Access Permits.  

The issue of potential Access Permit modification arose from a dispute between neighboring front lot permit holders.  As a general rule, the SPC avoids involvement in specific disputes between permit holders; however, given the potentially far-reaching implications of the proposed Board resolution, the SPC felt it important to weigh in on this issue.  A webcast of the Board meeting can be viewed here.

The issue is addressed in a Memorandum from our attorneys dated May 8, 2012 and summarized below.  An original PDF of the May 8, 2012 Memorandum can be downloaded here.  The Recorder published an article on this issue May 9, 2012 – ‘Reasonable’ resolution for lake permits in questions.

Background

This memorandum addresses the consequences that will result from granting the Laubenstein/Santucci appeals (the “Appeals”), and the uncertainty that will be created by adopting the vague and ambiguously worded “Resolution to Authorize Modification of Front Lot Access Permit Widths” (the “Proposed Resolution”).  Ordinarily, the Sacandaga Protection Committee (“SPC”) would not become involved in an appeal, nor would it comment on specific disputes between Permit Holders.  But in this case, the issues raised by the Appeals have Lake-wide impact, and will cause significant negative consequences for all Permit Holders.

From a review of facts underlying the Appeals, it appears that the Laubensteins and Santuccis purchased their property without a front-lot permit and that the consideration they paid for their property reflected this fact.  Mr. Laubenstein then subdivided his property, and sold a portion to the Santuccis.  The consideration the Santuccis and Laubensteins  paid for their lots also reflected the fact that no front-lot permit was available for their lot.  It appears that the Laubensteins have applied for a front-lot permit to increase the resale value of their property.  By specific intent and design, the permit area fronting the Laubensteins/Santuccis’ property is associated with the Michaleks’ parcel, and the consideration the Michaleks paid reflected this.  While the original property was subdivided into the Michalek/Laubenstein/Santucci parcels, the permit area was not; the consideration paid for each of these parcels reflected this. 

The Laubensteins/Santuccis applied for front-lot permits for area that has already been permitted to the Michaleks.  Because of Resolution 10-03-01, “Resolution to Acknowledge Certain Past Practices Pertaining to the Permit System Rules,” (the “Original Resolution”), District staff was required to deny the permit applications.  To create certainty and to avoid arbitrary action, the District adopted the Original Resolution, which provides, in part, that “the Regulating District will give preference to current Permit Holders for the renewal of said Permit Holder’s current Permit, including the current assigned width, regardless of the width of the appurtenant property.”  The Original Resolution further provides that “upon the transfer of any Permit Holder’s appurtenant property, the Regulating District will give preference to the Permit Holder’s successor(s)-in-interest of said appurtenant property, for the granting of a new Permit based upon the current Permit, including the current assigned width, regardless of the width of the appurtenant property.”  The Original Resolution provides stability, certainty, fairness, and, most of all, a uniform standard whereby permit applications and permit widths are determined.  It is this degree of certainty that allows Permit Holders and would-be purchasers—and their lenders—to adequately value Lake-front property.

Now, after purchasing property for an amount based upon the lack of a front-lot permit, the Laubensteins/Santuccis have asked the Board to decrease the value of the Michaleks’ property, and increase the value of theirs.  And, as the result of the Appeals, the Board has been asked to adopt the Proposed Resolution, which is supposed to allow the Board to alter permit-widths if a current Permit Holder fails to “reasonably” agree.      

Granting The Appeals Will Create Uncertainty And Cause Other Yet-Unknown Problems      

If the Board re-draws the permit boundaries to take permit width from the Michaleks for the benefit of the Laubensteins/Santuccis, a dangerous precedent will be set that will have far-reaching implications to all Lake-front property.  The certainty created by the Original Resolution will be destroyed, and all permit areas would be subject to change.  By granting the Appeals and overruling the District staff, the Board will have established precedent for Permit Holders to alter permit widths through the appeals process.  

There are numerous scenarios where this precedent could create disputes, with no standards for determining outcomes:  (1) a Permit Holder may have a less desirable permit area (e.g., inability to erect a dock), and may wish to modify his/her width to include a more desirable area; (2) a Permit Holder may subdivide his/her lot and sell the subdivided property, at a reduced cost, without relinquishing any permit area, only to see the purchaser later apply for a portion of his/her permit; (3) because permit width is no longer constant, Lake-front property valuations will be uncertain, which may, among other things, impact financing capacity; and (4) other properties that may technically qualify for front-lot permits, but, for whatever reason never obtained them, will now be able to apply for other Permit Holders’ permit area.  Following the Original Resolution, as the District staff did in this case, will avoid these issues.  By denying the Appeals and affirming the staff’s determination, the Board will preserve the current system, whereby Permit Holders know what their permit area is when the buy their property, and when they go to sell it.       

The Proposed Resolution Creates A System Whereby Permit Widths May Be Arbitrarily Modified, Without Any Enumerated Standards Or Criteria 

The Proposed Resolution seeks to give the Board more flexibility to deal with “inequitable” situations.  But instead, the Proposed Resolution creates a system whereby the Board may alter permit widths arbitrarily, with no set standards or criteria.  Specifically, the Proposed Resolution provides that the Original Resolution shall not apply to “[m]odifications to width or alignment of front lot access area(s), regardless of the width of the appurtenant property, provided all affected front lot Permit Holders reasonably agree to said modification.”  This provision is vague, and use of the term “reaonabl[e]” is an invitation for further disputes and subsequent litigation.  What does reasonable mean?  What standards, if any, will the Board use to determine whether a Permit Holder is acting reasonably in disagreeing?  These questions are left unanswered by the Proposed Resolution.  How is it ever unreasonable for a Permit Holder to resist giving up permit area?  It seems eminently reasonable to resist giving up property value without compensation in any case.  What if compensation were offered to alter permit width?  Would the Board get into evaluating the reasonableness of consideration for permit area?  Adopting the Resolution will force the Board into a position where it will be forced to judge the reasonableness of taking property value from one Permit Holder and giving it to another.  

The Proposed Resolution would also invite successful legal challenges to the Board’s standard-less entrance into permit-area disputes.  The Court of Appeals has held that administrative determinations made without meaningful standards are, by definition, arbitrary and capricious.  “Inasmuch as there [are] no standards . . . set forth to guide the chairman in deciding whether to grant an exemption, the denial of petitioners’ applications was arbitrary and capricious.  The safeguard against arbitrary administrative action lies in the promulgation of adequate standards in the [decision-making process] to insure meaningful judicial review . . . .  Protection . . . against the exercise of arbitrary administrative power demands both procedural safeguards within the agency and outside checks upon the exercise of untrammeled administrative discretion.”  Nicholas v. Kahn, 47 N.Y.2d 24, 33 (1979).  Determinations made without application of any objective standards will be annulled because, to hold otherwise, would prohibit meaningful judicial review.  Brightonian Nursing Home v. Daines, 93 A.D.3d 1355 (4th Dep’t 2012) (“Because the Commissioner may consider ‘such other factors as [he or she] deems appropriate,’ the statute does not adequately apprise nursing home owners and operators of the standards used to assess their equity withdrawal requests and precludes meaningful judicial review.”).              

Further, the Proposed Resolution will create uncertainty with respect to property valuations.  Lake-front property values are affected by the existence, size, and type of access to the Lake.  These factors are entirely dependent upon the District permits.  Creation of a system whereby Lake-access may be changed based upon the Board’s reasonableness determinations will have a definite, negative impact on property values.  How may Lake-front property owners market their properties?  How will lenders value properties where access to the Lake may be limited or modified?  How will lack of consistency affect assessed valuations?  At the very least, these issues must be evaluated and debated further before a radical change to existing practice and policy is adopted.  

The Proposed Resolution further provides that the Original Resolution shall not apply to “[b]ack lot Permits which are relocated from in front of a current front lot Permit Holder’s property establishing the eligibility for such front lot access permit provided the Back lot Access Permit holder reasonably agrees to the re-location.”  Again, the reasonableness standard is vague and allows for arbitrary action.  The Board is setting itself up to be the judge and jury of Permit Holders’ reasonableness.  Supposedly this section is meant to allow for a relocation of a back-lot permit from the center of a front-lot Permit Holder’s permit area.  While this may seem logical and appropriate, what determines whether a back-lot Permit Holder’s disagreement is reasonable?  Assume that a back-lot Permit Holder’s permit area is located in the center of a front-lot Permit Holder’s permit area, and the front-lot Permit Holder wishes to relocate the back-lot Permit Holder’s permit area to the side.  Now suppose the back-lot Permit Holder disagrees, based on the following: (1) the permit area is fine as it is, and it has been this way for many years, perhaps even for generations; or (2) the current permit area is more desirable than the area to which he/she would be relocated (e.g., better beach, easier to access, better view, easier access to water).  How would the Board judge reasonableness here?  Again, how is it ever unreasonable to protect something that gives value to property?  The Board should avoid making these types of evaluations and reasonableness judgments at all cost.    

Finally, it appears that the Board has not yet evaluated the potential liability the District may face upon wading into permit-area disputes.  While the permits are temporary and revocable, the District has nonetheless established a system over the course of eighty years whereby permit areas are established for certain parcels.  Property values have become dependent upon these permits, and any change to permit areas has a corresponding effect on property value.  If the Board sets itself up as a body that may take property value from one Permit Holder and give it to another, there are certainly due process and takings issues that will be yet explored in subsequent litigation. Moreover, if the Board allows the relocation of back-lot permits to areas where access may only be obtained over private property, the Board is likely effectuating a taking, requiring just compensation to the private-property owner.  At the very least, the Proposed Resolution should take into account whether any proposed back-lot permittee has legal access to the permit area prior to granting permits.  These are issues that must be considered fully before a radical policy change is made, effecting all Permit Holders.     

Conclusion

The SPC recommends to the Board that the Appeals be denied because of the Lake-wide negative effects, and that the Proposed Resolution be rejected.  The Board should continue to apply the Original Resolution, and maintain the certainty that has been established for permit areas.  Doing so will allow Permit Holders to properly evaluate their property values, and will maintain a system whereby permit areas are determined by objective standards.  SPC cautions the Board that the Appeals and the Proposed Resolution will open the door to more permit-area disputes, and the Board would be forced into making standard-less reasonable determinations.  At the very least, the Proposed Resolution should be referred to the Stakeholders Advisory Committee for further study and recommendation.