USA – NEW YORK Law and Practice Contributed by: Lindsey Haubenreich, Joseph Heins, Timothy Moriarty, Kimberly Nason and Matthew Fitzgerald, Phillips Lytle LLP
(ZBA) to act as the primary authorities for review and approval of development plans. Each municipality also has a Code Enforcement Officer charged with enforc - ing the land use regulations within the municipality. 4.2 Development Process, Challenges and Enforcement Typically, development rights are obtained through the discretionary land use approval process. Site plan approval is typically handled by a local Planning Board. Variances from the land use code (area and use) are handled by the ZBA. Special use permits can be reviewed and approved by the Planning Board, the ZBA or the governing legislative body, depending on the municipality. All applications for discretionary approval must go through an appropriate environmen - tal review pursuant to the SEQRA. Any party aggrieved by a land use decision may appeal such decision to the New York State Supreme Court in a proceeding known as an “Article 78 action” (referencing Article 78 of the New York Civil Practice Laws and Rules). Such party must establish that they are specially harmed, different from the public at large, by the decision being challenged in order to maintain an Article 78 action. Generally, decisions are entitled to deference and can only be reversed if proven to be “arbitrary and capri - cious”. 5. Investment Vehicles 5.1 Types of Entities Available to Investors to Hold Real Estate Assets There are several types of entities available to inves - tors to acquire and hold real estate, including, but not limited to: • limited liability companies; • corporations; and • partnerships. Limited liability companies are the most commonly used entity type to acquire real estate because they are typically characterised by flexible organisational governance, they offer limited liability protection to all members, and members can define their contractual obligation in the company’s operating agreement to
tailor it to reflect their business agreement and finan - cial arrangements. 5.2 Main Features and Tax Implications of the Constitution of Each Type of Entity Corporation A corporation is an association of shareholders formed under the New York Business Corporation Law that is a legal entity separate and distinct from its sharehold - ers with the capacity for perpetual existence to: • acquire, hold and dispose of property; • sue or be sued; and • have such other powers as may be conferred upon it by law. Owners of a corporation are shareholders, who typi - cally do not manage the day-to-day affairs of the cor - poration. Shareholders elect directors and approve extraordinary transactions and activities of the cor - poration. The primary benefit of corporations is that the share - holders are generally not personally liable for the debts and obligations of the corporation, and liability is limited to the assets of the corporation. Directors and officers are generally not liable to shareholders or the corporation for their actions or inactions with respect to the corporation, provided that they act in a manner that is consistent with their fiduciary duties of care and loyalty. Corporations do not afford the same level of flexibility as partnerships and LLCs. Limited Liability Company An LLC is an unincorporated organisation of one or more persons having limited liability for the contrac - tual obligations and other liabilities of the business. An LLC is a hybrid business organisation that combines the flexibility of governance and economic arrange - ments of a partnership and a corporation. The primary benefit of an LLC is that it: • offers its members limited liability protection akin to shareholders of a corporation; • is taxed like a partnership (except for a single- member LLC or unless the owners elect corporate tax treatment); and
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