Court Rejects Plaintiff’s Argument that Contract of Sale Implied Development Rights

On April 10, 2013, the Appellate Division, Second Department, decided a case entitled Bibbo v. 31-30, LLC, et al. (2013 NY Slip Op 02366) involving a dispute over development rights with respect to a residential property in New York City. Plaintiff sought damages for breach of contract and to determine claims to real property pursuant to the New York Real Property Actions and Proceedings Law (RPAPL) Article 15 (Action to Compel the Determination of a Claim to Real Property).

The facts are as follows: Plaintiff entered into a contract of sale with Defendants to purchase a parcel of residential property with an existing two-family dwelling. The property was one of two lots that would be created once Defendants/seller subdivided its larger parcel.  Significantly, more than one year prior to the closing, Defendants recorded a zoning lot declaration whereby the available floor area under the New York City Zoning Resolution was allocated to the larger parcel for purposes of constructing a six story residential building and the floor area allocated to Plaintiff’s parcel was limited to the existing two-family residence.

The court rejected Plaintiff’s argument that development rights were implied in the contract of sale, finding that although the doctrine of merger did not apply to the provision at issue, the “intent and purpose” of the contract did not include conveyance of any developmental rights together with the property to the plaintiff.  Thus, Defendants were not required to take any action to convey such rights to the Plaintiff.

This decision exemplifies the harsh caveat emptor, or “buyer beware” doctrine.  Buyers concerned about development rights should have a qualified attorney perform a zoning analysis as part of their due diligence before making a purchase and ensure that the contract of sale clearly reflects the parties’ intent regarding any development rights being conveyed.

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