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Negotiating a Licensing Agreement? It’s Time to Play Nice

Kathleen Needham Inocco in Legal/Financial on August 6, 2019

Upper East Side, Manhattan

Licensing Agreement

A licensing agreement with the developer next door is a crucial protection.

Aug. 6, 2019

Living in the tight confines of New York City, your chances of dealing with the nuisance of neighboring construction are very great, whether it’s merely to accommodate the bridging and site protection for your neighbor’s facade repair or, far worse, the redevelopment of an adjacent site. Under the best circumstances, construction projects impose a nuisance to the neighbors, creating dust, debris, noise, traffic, and vibration. The worst situation I've ever seen was about 15 years ago, when a co-op on the Upper East Side asked us for help in dealing with a bully developer on an adjacent site. The co-op had received very scant information on when the demolition of the neighboring building was to take place and how the contractor planned to protect the co-op during the ensuing construction.

The demolition of the neighboring building left a wall of the co-op exposed. When the project was stalled for about a year, the developer put a thin plastic sheet over the exposed masonry wall. The co-op got a lot of water infiltration through this wall, but no response from the developer.

This building was constructed in the 1950s with a glazed-brick skin and cavity-wall construction, very common in that era. The brick exterior is tied to the structural frame and backup block wall with metal ties, and the bricks are also supported by metal shelf angles. When the developer came back and started excavation, we observed that the vibration was causing the brick wall to shift from the support angles. We did probes and discovered that the metal ties had snapped, some from corrosion, some from the vibration caused by the demolition next door. We had to declare an unsafe situation and close the construction site until this wall could be stabilized, which caused delays for the developer.

The developer responded by filing a multimillion-dollar lawsuit against the co-op for causing the delay, for improper construction [of the co-op’s walls], and for failure to maintain the building. The co-op counter-sued the developer for causing the damage as a result of the excavation. This went on for about three years, long after the tower was built, and neither party ended up winning in the end because of the high cost of litigation. 

The key to avoiding a situation like this is to start any relationship on a positive note. Discussions with the neighbors as to what to expect and how the property will be protected should start long before the workmen arrive. Then, in the case of a new development, there should be a thorough pre-construction survey. The developer should take hundreds of photographs of all existing conditions and present this documentation to the neighbors, so that everybody agrees what the existing conditions are and the developer is not blamed for pre-existing conditions.

Boards should hire an attorney at the start to negotiate the terms of a licensing agreement. These agreements will address myriad issues, such as access to the site, protection of the property, on-site security, who’s named as an additional insured, what type of indemnification exists, and reimbursement for professional fees.

The terms for access are negotiable, and it's very important to be reasonable when entering into these negotiations. Serious issues, like avoiding structural damage and water infiltration, should be the primary focus. Developers have the right to come on your property to install protection, and a judge will enforce that right. So better to negotiate something that is fair to you from the beginning than to have that adversarial relationship later on.

Kathleen Needham Inocco is a principal of Midtown Preservation Architecture & Engineering.

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