Creating Revenue

Space is the final frontier, and in New York, where every square foot is valuable, finding extra space – that costs your co-op or condo very little and earns your property extra income in the process – is a worthy goal.

The goal can be – and has been – achieved. It’s not just for a select few, either. An Upper East Side co-op, for instance, successfully added a second floor to an existing penthouse level. A SoHo co-op added a penthouse level that turned the top-floor unit into a duplex. In both instances shareholders gained space and shares, and the co-ops now collect more in maintenance.

These co-ops accomplished this by using a special permit mechanism provided for in the city’s zoning regulations. If the zoning works out right, the special permit allows the modest enlargement of existing residential buildings (usually pre-1961 buildings, although there are some exceptions). Here are the steps you should follow.

As of Right

The simplest way to add floor area is an “as-of-right” enlargement, which means that – as long as the project satisfies zoning and the building code, and the proper permits have been secured – the board can hire a contractor and proceed with the enlargement. Your architect simply files zoning-compliant plans at the Department of Buildings (DOB), secures a building permit, and proceeds with the work. This is how most development takes place in New York City.

However, what if the building is overbuilt, fully built, or nearly fully built under the applicable zoning? Maybe an architect has indicated there is no more “floor area” available at the site to undertake the enlargement. In determining this, the architect assesses the floor area ratio, or FAR. The city’s zoning resolution and maps designate a maximum FAR for all properties. The FAR is the ratio of total floor area in a building to the area of the zoning lot on which the building sits. For example, a 10,000-square-foot lot may have a designated FAR of 2.0, which means it can have a 20,000-square-foot building on site. That building could contain two floors of 10,000 square feet each or four floors of 5,000 square feet each – subject, of course, to compliance with all other applicable bulk regulations, i.e., yards, height, setbacks, etc.

There may, however, still be a way to enlarge that fully built or overbuilt building. One way to do that is to enter into a transfer of development rights transaction, or air rights deal, with an underbuilt neighbor. The lesser known option employs the Board of Standards and Appeals (BSA) special permit under Section 73-621 of the city’s zoning resolution. The special permit allows you to exceed the maximum permitted floor area by 10 percent.

The Special Permit

What does a busy board need to know about the special permit process? The first step is to determine whether you are eligible; that involves finding out if the existing building exceeds 110 percent of the maximum allowed FAR and whether the building is a pre-1961 structure. Your architect or zoning counsel should be able to answer that question.

Special permits, in general, are discretionary land use actions undertaken by the BSA or the City Planning Commission and are authorized by the city’s zoning resolution. A special permit is very different from a variance, which is seen as “relief” from the zoning regulations as applied to a property with a unique condition and hardship. The special permit requires no finding of unique conditions or hardship. The simple desire to realize the benefits of the special permit is a legitimate basis for such an application. Moreover, such findings are generally easier to satisfy than the complex variance findings.

How It Works

Using the Section 73-621 special permit, the FAR for a site may reach but not exceed 110 percent of the maximum applicable FAR. For example, in the case of a 10,000-square-foot lot with an applicable FAR of 10.0, a maximum of 100,000 square feet of floor area could be constructed. If the pre-1961 building on that lot contains 101,000 square feet, the special permit could facilitate enlargement to 110,000 square feet – 10 percent more than the permitted maximum.

In a recent real-world case, an Upper East Side co-op located in a 9.0 FAR zone sought to add a second floor to an existing penthouse level that increased the overall building’s FAR from 8.84 to 9.1, exceeding the maximum permitted 9.0 FAR. The BSA granted the special permit application since the findings were met and the enlargement did not exceed 110 percent of the building’s maximum allowable FAR. In another example, a small apartment building in Brooklyn with a first-floor restaurant used the Section 73-621 to expand the restaurant use. The building was overbuilt at 3.1 FAR (the maximum allowed was 3.0), and the owner secured approval from the BSA for 3.3 FAR, which added roughly 350 square feet of valuable seating for the restaurant.

Once you’ve determined your special permit eligibility, the board can proceed with seeking the special permit grant from the BSA. The cost of the floor area expansion under the special permit includes filing fees at the BSA, fees of land use and design professionals, and the time it takes to secure the approvals from the BSA (roughly six to eight months). But it could be worthwhile. The new floor area, via a special permit, will add value to the co-op or condo building. Indeed, before you walk away from a contemplated enlargement because it seems to be prohibited by zoning or because a variance seems too difficult, consider the special permit.

(Note: The article is an overview for general informational purposes only. It does not constitute legal advice and is not a comprehensive review of the zoning sections or concepts discussed herein.)