BY JOHN KIRITSIS, ESQ., CPA, MBA, MS, JD, LL.M
Buying development rights, also known as air rights or transferable development rights (TDRs), in New York City (NYC) involves the purchase of unused or underutilized development potential from one property to be transferred and used on another property. This process allows property owners to increase the height or density of their buildings beyond what is normally allowed by zoning regulations. Here’s an overview of buying development rights in NYC:
- Zoning Regulations:
Zoning regulations in NYC dictate how properties can be developed, including building height, density, setback requirements, and land use. Some properties may have unused development rights due to limitations imposed by zoning.
- Selling and Buying Rights:
Property owners with unused development rights can sell them to other developers or property owners who want to increase the size or density of their projects. The developer purchasing the rights gains the ability to build beyond what the original zoning allows.
- Transfer Mechanism:
The transfer of development rights involves legal agreements between the seller and buyer, outlining the terms of the transfer, the number of rights being transferred, and any conditions or restrictions. The NYC Department of City Planning oversees the transfer process.
- Certificate of Transferable Development Rights (CTDR):
The seller receives a Certificate of Transferable Development Rights (CTDR) from the Department of City Planning, which confirms the number of rights being transferred. This certificate is then provided to the buyer.
- Restrictions and Regulations:
There may be limitations on where development rights can be transferred, such as within specific geographic areas or zoning districts. Additionally, some historic districts or landmarks may have restrictions on the transfer of development rights to protect the character of the area.
- Calculating Value:
The value of development rights can vary widely based on factors such as location, zoning district, market demand, and the potential value they add to the receiving property. Pricing is often negotiated between the parties.
- Receiving Site’s Zoning Compatibility:
Before purchasing development rights, the receiving property’s zoning and existing conditions must be compatible with the transferred rights. The receiving site must be able to accommodate the additional development.
- Public Review and Approvals:
In some cases, the transfer of development rights may require public review and approval, especially if it involves significant density increases or has an impact on the surrounding neighborhood.
- Legal and Financial Considerations:
Both parties involved in the transfer should consult with legal and financial professionals who specialize in NYC real estate transactions to ensure that all legal requirements are met and that the agreement is properly structured.
Buying development rights can provide developers with the opportunity to maximize the value of their properties and create larger, more valuable projects. However, due to the complexities of zoning regulations, potential restrictions, and legal considerations, it’s important to work with experts who are knowledgeable about NYC’s development rights transfer process.
Citations, References and Potentially Useful Resources for Further Information:
New York State Constitution
Federal Securities Regulation
New York State Martin Act
New York Condominium Act
New York State Security Regulations
New York Business Corporation Law
New York Limited Liability Company Law
New York Uniform Partnership Act
Federal Internal Revenue Code
New York State Tax Laws, Rules & Regulations
New York City Tax Laws, Rules & Regulations
Winston Churchill Owners, Inc. v. Regents Real Estate Associates
Board of Managers of the Park Regis Condominium v. Park Regis Owners Corp.
Park Sutton Condominium v. 447 E. 57th St. LLC
28 E. 10th Street Corp. v. Veras
Riverside Syndicate, Inc. v. Munroe
Essex House Condominium v. Marks
The Parc Vendome Condominium v. Atkinson
54-56 Meserole Street Owners Corp. v. Rossi
The Beekman Regent Condominium v. Bottiglieri
Chelsea 19th LLC v. West 19th Street Realty LLC
New York Department of Finance
New York City Department of Buildings
New York City Bar Association
New York State Bar Association
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