In a recent decision, the New York Court of Appeals held that a NYC proprietor could operate a restaurant on city-owned parkland located in Union Square notwithstanding the so called “public trust doctrine”. The restaurant will replace long-time neighborhood favorite Luna Park, which closed in 2007 at the time of a citywide park renovation initiative.

The public trust doctrine provides that public lands such as parks are held by the State in trust for the public benefit of all residents. Thus, before the State can alienate parkland or allow it to be used for an extended period of time for a non-park purpose, legislative approval must be obtained. The proprietor and the Department did not seek legislative approval and the appellants challenged their failure to do so on the grounds that restaurant use was not a permitted park purpose and that the scope of the license granted by the Department was an illegal alienation of parkland.

The Court discussed the longstanding history of restaurants operating in public parks and ruled that the proposed restaurant use constituted a valid “park purpose”. Even if a restaurant use is not the best use of parkland, the Court reasoned, The Parks Commissioner had been vested with broad discretionary power to decide among alternative valid park purposes.

Limitations on the sale or leasing of parkland under the doctrine do not restrict the Department from granting licenses or permits. It was contended that the License Agreement was nothing more than a lease styled to appear as a permissible interest. Despite the fixed term and payment structure of the agreement, the Court deemed it to be a valid license because the restaurant would operate only on a seasonal basis, would provide seating to the general public as well as to patrons, and the Department would retain significant control over the daily operations of the restaurant. The most important factor, however, was that the agreement broadly allowed the Department to terminate the license at will upon 25-days notice (and without reimbursement for unamortized capital improvement costs).

This decision, while providing useful guidelines, may not give sufficient comfort to private parties. While the Court indicated that it would not second guess the decision of the Commissioner, it nevertheless reserved the right to declare even a restaurant use to be impermissible if the “type and location” were not consistent with a park purpose. Further, assuming a proprietor could get comfortable that its use would not be susceptible to challenge, a proprietor - and its financing parties - would have to consider whether it is a prudent business decision to commit funds to a project that is dependent upon a license subject to termination upon limited notice.

For more information, the full decision is available at the following link: http://www.nycourts.gov/courts/appeals/Decisions/2014/Feb14/Feb14.htm