Palisades Center lawsuit

Does Clarkstown Need To Hold A Referendum To Resolve Mall Impasse?

Government Real Estate


Is There A Way To Solve The Legal Quagmire With The Palisades Center?

By Tina Traster

The economic committee of citizens, business people, and town employees Clarkstown Supervisor George Hoehmann appointed several months ago is getting ready to present its findings on what measures the town should consider to stimulate economic development.

Amongst the highest priorities, say several sources, is to resolve the impasse with The Palisades Center, and allow the mall to fill the remaining 240,000 square feet that has been the subject of ongoing litigation for years.

To date, Clarkstown has prevailed twice in court, largely because the suit brought by the mall was too late, but EklecCo NewCo, the Delaware-based LLC that owns Palisades Center, is appealing the district court decision to the Second Circuit Court of Appeals. They can also take their state law claims to Rockland County Court.

The mall is fighting Clarkstown over a town-imposed restriction limiting its right to build out and lease an existing but unused 240,000-square-foot section on the mall’s fourth floor. The 1.85 million square foot mall needs town and voter approval in order to expand.

For nearly a year, Councilman Don Franchino had been calling to put the issue to a public referendum by November, but time has lapsed, and there seems to be no effort underway to find a later date. County Executive Ed Day, as well as many in the business community, have been vocal about resolving the issue, arguing additional filled space will bring in more revenue, and will help the center prosper at a time when malls and retail at large is under enormous pressure.

In the upcoming report, several members of the economic committee are calling for Clarkstown’s leadership to find a way to allow the Palisades Center to expand its unoccupied fourth floor without the need for a public referendum.

The question is whether or not this is legal. It depends on who you ask.

To date, legal advice given to Clarkstown appears to suggest the town must hold a public referendum. But Palisades’ legal team disagrees, sources say, maintaining the position that Clarkstown does have the power to decide the issue unilaterally. Simply put, their argument is that the Town created the need for the referendum and therefore can do away with it.

By agreement, and recorded in the public records, The Palisades Center and the Town stipulated that the Gross Leasable Area (GLA) of the mall would not exceed 1.854 million square feet. This Covenant from 1996 (which runs with the land and binds all future owners) mirrors the language of Town Resolution 909-1996 and is preventing the Palisades Center from leasing 240,000 square feet sitting empty on the mall’s fourth floor.

The Covenant says that this limitation applies until released by the Clarkstown Town Board. But, it also stipulates that the restriction – the limitation on increasing the GLA – is defined as “an interest in real property” and that any modification or release of the covenant would be considered a “real property transfer.”

This matters because in New York State, towns may not divest themselves of interests in real property without a “permissive referendum” – that is, without a town-wide vote on the issue giving the Town Board the right, in this case, to release the covenant and thereby remove the restriction on the GLA for the Palisades Center.

Town Law Section 64(2) is quite clear – any resolution to convey a real property interest is subject to a town-wide referendum. So, as it stands, the town simply cannot release or modify the restrictive covenant without a permissive referendum.

So, what can it do?

According to some legal experts, the restriction on the leasing of space was the product of that same town resolution adopted in October of 1996. Towns have the right under Town Law Section 93 to rescind or repeal their prior resolutions at any time. Rescinding those portions of the 1996 resolution that forced the town to hold a town-wide resolution, specifically the two paragraphs that defined the limitation on the GLA as an interest in real property, and the stipulation against modification or release of the covenant requiring a town-wide referendum, could provide a run around the express limitations in the Covenant.

Rescinding or repeal of those provisions (not the invalidation of those provisions) may allow the town to cut a deal with the Palisades Center to resolve its differences without the need for a public referendum.