How current events impact your business and real estate holdings

Thursday, February 27, 2014

DECISION: A Licensed Building on Public Land is Allowed Without State Approval

Licensing a building on parkland has been addressed by New York’s Court of Appeals last Thursday. If you ever have a commercial client who is interested in building a restaurant or food stand on public land, this is an important case to be familiar with.

In 2008, the New York City Department of Parks and Recreation renovated Union Square Park with the intention of building a restaurant on the pavilion in the northern part of the park. When Chef Driven Market, LLC was given a license to run a restaurant on the pavilion in 2012, the community rose in an uproar, claiming that such a restaurant does not have a purpose in the historic park and hence violates the “public trust doctrine.” The community groups exclaimed that a restaurant in the park itself was unnecessary since there were many restaurants to choose from in the nearby area. The pavilion could be used for better purposes, such as dance classes or debate sessions.

However, New York’s highest court has ruled in favor of the city’s Department of Parks and Recreation, disagreeing with the community groups that the restaurant is in violation of the public trust doctrine. The restaurant, with its reasonable prices, outdoor seating available to the public, and charity events, would add to the park’s appeal beauty, and safety and improve the community as a whole. The community groups may have a different opinion as to what the pavilion should be used for, but this does not mean that the restaurant itself is illegal.

It is also important to note that if the Department had leased, not licensed, the pavilion to Chef Driven Market, LLC, then the restaurant would certainly be unlawful without approval from the State. However, since Chef Driven Market, LLC holds a valid revocable license to run a restaurant with ample oversight from the Department of Parks and Recreations, there is no need to get the state’s approval at all. The difference between a license and a lease is that the license gives the Department ultimate control over the day-to-day activities of the restaurant, even the right to terminate the agreement at will. A lease, on the other hand, would give Chef Driven Market, LLC control over the restaurant and use of the property instead.

Brokers, keep in mind that a brokerage license is required for leases, but NOT for licenses, pursuant to RPL 4401(1). If you know anyone that would like to obtain a license to operate a building on parkland, he or she does not necessarily need the help of a licensed real estate broker to do so!