Real Cases in Real Estate By Andrea Lee Negroni, Esq. – July 2, 2014 Update

Updates for the Week of July 2, 2014

New Orleans restaurant cannot use an adjoining lot as a patio bar. The saga of Phillips’ Bar & Restaurant’s use of an adjoining lot as a reception venue and for food and alcohol sales lasted more than a decade, pitting the owners against both the City of New Orleans and the neighborhood association. The Ippolitos bought a lot on the corner of Cherokee Street in 1986, which had been used as Phillips restaurant. A few years later, they bought the adjoining unimproved lot. Phillips has a Class-A general Alcoholic Beverage Outlet license permitting sale of alcohol for on-premises and off-premises consumption. The restaurant and the adjacent unimproved lot are in a residentially zoned area, but the restaurant was “grandfathered in” as a non-conforming use because it had operated there for decades.

A city inspection in 1996 noted fences, planters and an air conditioning unit on the unimproved lot, so the city ordered the Ippolitos to remove the improvements or get a building permit. They did neither. The neighborhood association, Maple Area Residents, objected to use of the unimproved lot as a bar and event venue and asked the city to enjoin use of the patio lot for commercial purposes. From there, things got very complicated, but in 2000, the city received a preliminary injunction, over the Ippolitos’ claim that the patio lot had acquired non-conforming use status by the passage of time.

Ultimately, the 2000 preliminary injunction was declared invalid, because rather than taking steps to obtain a permanent injunction, the city abandoned prosecution of the matter. By 2007, the Ippolitos were back in court, seeking a declaratory judgment that their patio lot was a legal non-conforming use. They lost, and a permanent injunction issued in 2011.

Phillips is a primer on zoning and non-conforming uses, explaining that the essence of zoning is “territorial division,” or segregating different uses into different zoning districts, in order to exclude commercial uses from residentially-zoned areas. It defines non-conforming uses as those legally established before zoning regulations are adopted, or arising through “sustained governmental acquiescence.” Non-conforming uses are construed narrowly, with doubts resolved against expansion of the non-conformity. Some non-conforming uses cannot achieve legal status, such as casual, temporary or illegal uses. The New Orleans regulations applicable to Phillips required a non-conforming business to be open at least 20 hours a week, with signs posted at the entrance. Phillips was open the required hours, but did not post hours of operation on the patio lot.

Phillips won a practical victory despite failure to achieve non-conforming use designation for the patio lot. The permanent injunction barring Phillips from selling alcohol at the restaurant for consumption on the patio lot was overturned by the Louisiana Appeals Court because Phillips’ alcohol license permitted on-premises and off-premises alcohol sales. Therefore, Phillips cannot use its rear lot for food and drink sales, but its customers can buy drinks at the bar and drink them on the rear patio. (Check out the real estate that created all this fuss, on Google’s January 2014 street view of 727 Cherokee Street, New Orleans, LA -- a fenced area at the back of the restaurant – hardly a “patio” to the naked eye.)

Phillips’ Bar & Restaurant, Inc. v. City of New Orleans, 116 So.3d 92 (La. App. 4 Cir. 2013), [enhanced version available to lexis.com subscribers].

Real Cases in Real Estate is a periodic update on real estate law, with legal principles illustrated and explained by lawsuits from around the country. The topics are wide-ranging for appeal to a broad spectrum of readers including lawyers, homeowners, investors and the general public. Andrea Lee Negroni, a Washington DC attorney and legal writer with 25 years of experience in financial services and mortgage law, contributes the case summaries.

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