Won’t You Be My Neighbor? Reminder that Court-Ordered Construction Access License Fees Under RPAPL § 881 Are Not GuaranteedAugust 2018
Most New York City development projects are very close to one or more neighboring properties. When that happens, the Building Code requires protection for the neighboring property. That may mean the developer needs access into the interior of the building or over its airspace. For instance, a developer could need to install innocuous equipment to monitor for vibration or cracks in the neighboring building; or the developer could need to install sheds or scaffolding, which are ubiquitous in New York City construction. Sometimes a developer also excavates deeper than the neighbor’s foundation, which could require access underneath the neighboring building to install permanent underpinning for support.
Plan A is to get consent directly from the neighbor, through a construction license agreement in which both parties negotiate the scope and terms of access that will be permitted. But sometimes private negotiations break down, or a neighbor will refuse to negotiate at all. When that happens, developers often move to Plan B – seeking a court ordered access license available through §881 of the New York Real Property Actions and Proceedings Law.
Courts hearing §881 cases strive to apply a “reasonableness standard in balancing the potential hardship to the applicant if the petition is not granted, against the inconvenience to the adjoining owner if it is granted.” Developers and neighboring property owners may litigate many points in these cases, however, commonly at issue is whether the court will impose a license fee and, if so, the amount of the license fee.
Court ordered license fees are discretionary, but New York courts typically do award them. That track record seeps its way into private negotiations, where parties often evaluate their leverage on fees based on the fee a court would be expected to impose as part of a §881 license. But in a June 2018 New York Supreme Court decision, the court served another reminder that neighboring property owners (in private negotiations and actual §881 cases) should not always assume they are automatically entitled to an §881 license fee.
In this particular case, the developer and neighboring apartment building owner had privately negotiated, and agreed that the developer could install protective devices on the neighboring property, including a construction fence, a sidewalk shed, roof protection, fire escape netting and other overhead protection. However, they disagreed about the license fee, so the developer filed a §881 case. The neighbor asked the court for $9,000 per month for 24 months, to compensate for diminution of the rental value of the building’s market rate apartments. The court found that this claimed loss in rental income was highly speculative, and the inconvenience to tenants caused by the required access was minimal, and so it declined to impose any license fee on the developer.