In this article, partner Ryan M. McCabe breaks down the current state of license fees for air rights in New Orleans.

In many of New Orleans’ oldest (and densest) neighborhoods—particularly the French Quarter—buildings were built to the lot line hundreds of years ago, in large part due to a scarcity of regularly dry land. As an additional way to maximize usable space, many of those buildings featured balconies extending above what is now the sidewalk. Over time, such balconies came to be regarded as an architectural feature synonymous with New Orleans, have provided the benefits of shade and beauty to the public, and have promoted tourism.

Recently, the City of New Orleans caused a stir concerning these balconies by attempting to charge property owners “license fees” of up to $4,000 a year for balconies that may have been constructed hundreds of years ago. The controversy generally unfolded as follows:

  • Under Civil Code article 490, “the ownership of a tract of land carries with it the ownership of everything that is directly above or under it….” In other words, a property owner generally owns the air rights above his, her, or its property.
  • Because the City’s ownership of public sidewalks thus includes the air rights above, the City adopted the policy that it will consider balconies and overhangs that extend beyond the property line and above the sidewalk to be “encroachments” onto public property. In legal jargon, an encroachment is defined as “an interference with or intrusion onto another’s property” or “an infringement of another’s rights.” See Black’s Law Dictionary, at p. 607.
  • Literally hundreds of properties in New Orleans have a balcony or overhang that encroaches into the air above a public sidewalk. Many of these balconies and overhangs were constructed long before sidewalks were built. For instance, the Bosque House at 617 Chartres Street in the French Quarter was constructed circa 1795—during George Washington’s presidency. Likewise, the iconic Napoleon House at 500 Chartres Street was constructed between 1794 and 1814. Both buildings feature balconies that extend above the sidewalk.
  • The property owner would then be faced with a Catch 22—either forego the work or pay the City a license fee that some property owners have characterized as “ransom.” Removal of the offending balcony would not be a realistic option. The New Orleans Municipal Code specifically prohibits the removal of wrought iron balconies in the French Quarter. See 166-5. Even if that were not the case, it would be highly unlikely for the Vieux Carré Commission—the City organization that “protects, preserves, and maintains the distinct architectural, historic character, and zoning integrity” of the French Quarter—to approve the removal of an historic balcony or overhang. The same would be true in the areas of the City falling under the jurisdiction of the Historic Districts Landmark Commission.
  • According to the City, the air rights license fees that it had only recently begun demanding are required by the Article 7, Section 14 of the Louisiana Constitution, which provides that the “property, or things of value of … any political subdivision shall not be … donated to or for any person…”
  • The issue, however, is not as clear-cut as suggested by the City. Article 7, Section 14 of the State’s Constitution was intended to prevent the gratuitous donation of public property. Arguably, it does not extend to a balcony encroachment for several reasons. Further, other laws governing the lease of public property potentially conflict with the City’s interpretation of the Constitution.
  • Other cities throughout the State, including Baton Rouge, Alexandria, and Natchitoches, do not impose similar charges on property owners.

As one might expect, there has been considerable public outcry in response to the City’s recent “balcony tax”—so much so that the City recently agreed to suspend enforcement of it temporarily while it reviewed its legality. SeeNew Orleans stops ‘air rights’ leasing for balconies for 30 days to review legalityby Greg Larose of The Times-Picayune.

Interestingly, since announcing the balcony tax’s temporary suspension, the issue has largely remained dormant, receiving no further news coverage. As the City’s position on air rights encroachments affects many of our clients, we will continue to monitor the situation.

Filed under: Commercial Real Estate, Development, Zoning and Land Use, Industry News, Residential Real Estate
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