Why do co-op and condo boards need licensing agreements?
In New York City, buildings are so close together that in many cases you can’t do required work on your building or your property without accessing your neighbor’s property — either to do work from the neighbor’s property, to put required protection on the neighbor’s property, to put in underpinning or shoring or other things underground if you’re building a new building. Different degrees of access can be required, which is why we have licensing, or access, agreements.
How do these agreements come about?
The first issue that we need to talk about is the “what.” What work is being done, and what access is needed? The party requesting the access is going to want its right to access to be as broad as possible, while the party granting the access is going to want as much detail as possible in the licensing agreement.
Who’s in on these initial conversations?
Generally, what happens is the neighboring building, usually through a property manager or owner’s rep, contacts whoever the rep is for the building that they need access to and says: “Hey, we need access to your building. Can we start next week?” And then, the party who is going to have to grant the access generally says: “Hold on a second. We want to know exactly what you’re doing. We want plans; we want to get our lawyer involved to do a proper access agreement.” And then that’s where the process really gets moving.
In the co-op/condo context, it’s usually the managing agent speaking to the board, letting members know what’s going on, then the board hires an engineer or an architect to review and comment on whatever plans are being proposed. Many times, those professionals can offer alternatives, either to more properly protect the building or do the work in a less intrusive way.
So the “what” phase is the first step. What’s next?
Step 2 is what I call the “when.” When is the access needed and for how long? The party needing the access generally wants it to be as soon as possible, but the party granting the access may say: “We don’t want to lose use of our garden during May through July. Start the work in July, and you can only have access through August, while people are generally away for the summer.” Another thing to think about is what will happen if the work goes longer than the contemplated deadline. The license fee can take this into account, and that will give the party doing the work incentive to finish as quickly as possible.
We now know the “what” and “when.” Is “how much” next?
Exactly. But boards need to know that the state Real Property Actions and Proceedings Law (Section 881), allows neighbors to have this kind of access, but it also allows the party granting the access to set reasonable conditions.
Reasonable is a slippery word, isn’t it?
Yes, and in almost all cases, the party granting the access is entitled to reimbursement of legal and engineering fees. A lot of times, whoever’s doing the work will try to set a cap on these fees. Generally, as long as they’re relatively reasonable, most parties will pay them and realize it’s not worth fighting over. The way I generally handle the cap issue is to punt the legal and engineering fees until the agreement is negotiated, leaving a blank in the agreement. And when everything else is completed, we exchange amounts. And if I’m the party granting the access, I provide that there’s no access until the fees are paid. Almost always, the fees get paid because everybody wants to move on.
So much for legal and engineering fees. You mentioned a licensing fee. What is that?
That’s a fee paid to the party granting the access. The amounts of these fees are all over the map, depending on what kind of access is being granted. For many years, most agreements did not include license fees for roof protection, sidewalk sheds or scaffolding that did not take away use of a property. In recent years, more and more parties granting access have been demanding license fees in even the most routine cases, but the courts hold that license fees generally should be based on what use of the property is being lost. Meaning if you’re losing a terrace or a recreational use in the summertime, the license fee is going to be higher than if you’re just putting plywood on a mechanical roof that no one uses.
Have co-op and condo boards been trying to gouge their neighbors?
I think co-op and condo boards, in most cases, are more the recipients of the gouging. We do have some co-ops and condos that will demand a fee in basic cases, but most of my clients know that if someone is asking them for access now, they themselves may need access to do similar work in the future. So they recognize that and know that if they demand large fees now, the neighborhood is just going to demand large fees from them in the future.
Is there a teaching moment here?
Sure. I think the biggest lesson on either side is to start early. If you require access, provide as much information as possible from the beginning because most likely the party granting the access is going to request plans, site-safety documents, insurance and everything else. So if you provide it up front, you can likely save time.
If you’re the party granting the access, you want to get an engineer and lawyer involved right off the bat. You generally want your lawyer to use his or her own form of access agreement, not the form the developer provides. And it’s really crucial that you have sufficient protection in these agreements because stuff does happen, especially when demolition and construction are going on. We’ve had several cases where a neighboring building caused significant damage to the building granting access. So you have to have proper indemnification and insurance and even, sometimes, security deposits in the agreements in order to properly protect yourself.
WHO’S SUING WHOM
Resident Entitled to Fees for Facade Work That Would Bar Use of Terrace
The Appellate Division reversed a lower court’s grant of a license pursuant to Real Property Actions and Proceedings Law (RPAPL) §881 for the petitioner to enter the respondent’s property to install roof and terrace protections in connection with facade work being done to the petitioner’s building. The court sent the matter back to the lower court to determine appropriate license fees to be awarded to the respondent, and also to determine if there were less intrusive and equally effective methods of roof protection that wouldn’t completely prohibit the tenants of the terraced apartments from using any portion of those terraces. The court directed the lower court to reconsider the license fee along with the rent abatement that the respondent may suffer from its tenants and to provide an award of future legal fees to the respondent as prevailing party.
Matter of 400 E. 57 Fee Owner LLC v. 405 E. 56th St. LLC
April 29, 2021