Construction License Agreements: Evolving Terms
When a property owner (the “Developer”) seeks to make improvements or repairs to its property but cannot do so without coming onto a neighboring property (either to access its own property or protect the adjoining property), it must obtain a “license” from the neighbor. When the neighbor refuses to grant the license, the Developer may go to court and ask a judge to grant a license under section 881 of the Real Property and Proceedings Law.
Section 881 of the RPAPL is silent about what conditions a judge may impose in his or her discretion and the parameters of such a license have been changing rapidly in the courts. Earlier cases had permitted the imposition of certain limits of insurance protection, time restrictions, and even the payment of the neighbor’s attorney’s fees incurred in negotiating the terms of a license agreement. More recent cases authorized the payment of license fees to compensate the neighbor for the “taking” of any habitable spaces, as where a terrace or rooftop garden has been rendered unusable due to construction scaffolding or protective materials.
A new case has added to the list of obligations imposed upon a Developer by requiring it to post a bond in the sum of $1.5 million—in addition to carrying multiple general liability insurance policies with combined limits of $68 million—to afford more immediate reimbursement for damage to the neighbor’s property.
What made the facts of this case somewhat unusual was that the Developer was a subsidiary of the Extell Development Company. The neighbor brought to the court’s attention newspaper articles describing incidents of falling objects, building damage, and crane accidents at properties adjacent to other Extell developments. Extell did not contest those facts. As a result, Judge Lebovits of the Supreme Court, New York County required Extell to post a $1.5 million bond to protect the property of restaurant tenants in the neighboring building as a condition of obtaining the RPAPL 881 license.
This bond requirement joined a number of other conditions imposed by Judge Lebovits, including a time limit of 6 months to complete the work; a limitation on daily work hours from 8 am to 5 pm; insurance coverage of $68 million naming the neighbor and its tenants as additional insureds; attorney’s fees for any property damage related to the construction; in addition to other typical license agreement conditions. The conditions continue to evolve as individual projects present new and unusual facts.
Contact GDB Construction Law attorney Randy J. Heller, Esq. for more information.