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Licensing Fee Shakedowns

Bill Morris: Welcome to Legal Talk, a conversation about governance issues that New York Co-op and condo boards are tackling as we speak. I'm Bill Morris with Habitat, the magazine for New York Co-op and condo directors. And joining me today is William D McCracken, a new partner at the firm, Moritt Hock & Hamroff. Welcome Bill, and congratulations on your big new job.
William McCracken: Thank you very much. It's very exciting. Still unpacking boxes — we're getting there.
Bill Morris: Good deal. Now we were talking about access agreements a few days ago. Access agreements have become hugely important to co-op and condo boards, given local laws, particularly the facade inspection and safety program.
As every five years, buildings have to check those facades and repair them, but access agreements have gotten a little bit sticky. Tell us what the landscape looks like
William McCracken: right now.
And you're exactly right, they are becoming more and more important, a bigger part of our everyday jobs. Everybody seems have to do more and more local law 11 work every five years. Projects get more complex, longer, more stringent, and so the need to get access and protect the neighboring building becomes more paramount with, over time. And getting permission from your neighbors to do this work is an essential piece of the puzzle.
And to do that, you need a license agreement.
Bill Morris: In New York City everybody gets along great all the time. There's never any disagreement between neighbors. Are you seeing more and more conflict, more resistance? More, I don't, I wanna say greed, but are people making unreasonable demands on their neighbors?
Are you seeing that?
William McCracken: But even if people are inclined to get along and aren't being particularly difficult from the point of view of the neighbor who's bearing all of this like disruption to their property when it's not even their work, it's not even their building, you understand that, they wanna be fully protected. They haven't done anything wrong. They maybe want to be compensated for the loss of use. And they're also in no rush to get anything done because this is just a headache for them. And so you have this, these sort of conflicting motivations when you're, when you have on the one side the building that wants to get their work done yesterday and cheaply and as soon as possible, and then the building next door, who would just as soon it, go away and don't really wanna deal with it.
And if they do have to deal with it, wanna be compensated well for letting them do it. So.
Bill Morris: Are those demands becoming unreasonable in your opinion?
William McCracken: Traditionally this was something that was this, that was done on a handshake basis, right? Come over, do the work, throw up a sidewalk protections, roof protections, controlled access zone, get the work you need done, completed, and then we move on with life.
As things have gotten more sophisticated. And also as the demands for these projects have gotten bigger, neighboring buildings have realized that, oh, I can actually charge a monthly access fee on top of our professional fees that are coming out. And there's definitely been an escalation in what people ask for.
You've seen some, frankly, some outrageous demands from buildings, and sometimes you get them because you don't have, you don't have much alternative when you had to do local law 11 work and you have a deadline to get it done, you're over a barrel. And so sometimes you end up paying a lot more than you think you should.
Bill Morris: Now help me with this long-winded law, the Real Property and Procedures Law Section 8 81, that gives the the person. Requesting access certain rights if there's a dispute. But is that law not working
William McCracken: or what? You're right . There is something called Section 8 81 of the RPAPL, you. That gives the building that's doing the work the opportunity to go into court and get a court order saying you have to give us access, right? Because I have to do the work. I can't not comply with local law. 11. I can't not protect the neighboring property, so I have to get permission. The problem with any sort of court procedure in 2023 is it takes a long time to get done and it's uncertain how soon a judge will get to it.
And also because of the way the law is currently written, the judges don't really have much basis to, to come down on the neighboring building to try and negotiate down their demands. So you go to court, you get an 8 81 order, but you end up probably paying similar amounts than what the neighboring building was asking for in the first place.
So it's not really a particularly useful tool to get access.
Bill Morris: Ask you a related question. You say the courts are not moving very quickly. Is this because of a backlog from the Covid pan, pandemic is, are you still, are the courts still hung over from that?
William McCracken: It's a number of things. It's historical issues.
There's actually a report by the city Bar talking about how the New York State Constitution has throttled the number of judges that can be appointed. And that's a problem. Certainly the Covid pandemic, just historical lack of resources in the court system. It's been chronically underfunded. Things have built up and, it's never been a quick process in New York City, but it's particularly, it's been particularly bad the last few years, I think.
Bill Morris: Okay. R-P-A-P-L section 8 81 is on the books, but you say it's not a particularly effective tool for the petitioning party. That's right. What do you, is there a solution to this problem this logjam?
William McCracken: I think that there are a few things. I don't think there's any perfect solution because when we talked at the beginning of the interview about the different motivations that these buildings have, those aren't gonna go away, right? You're still gonna have disagreements as to how much they should be paying, how much it should take, all those things.
So you have to get over those. There are some things that could happen to make things, these things go more smoothly. One thing that was introduced in the legislature last year was an amendment to section 8 81 that would've given courts, judges, the tools to, to come down on that neighboring property owner and say, look, you're being unreasonable.
You're not acting in good faith, and I can actually assess attorney's fees against you, or cut down on what the access fee might be. Like, I have a basis for giving some relief to the guy who's trying to do their work. And so I think personally, I think that would've been helpful if that had passed just because it would've rebalanced the leverage that both sides have a little bit.
Because then I could go to the neighboring property owner I'm negotiating with and say, look, if you're not reasonable, I do have this tool in court. 8 81 has got some teeth now, and you're at risk of getting, say, attorney's fees assessed against you.
Bill Morris: I was, I was unaware of that bill. What became of it?
Did it die in committee or is it still alive?
William McCracken: Last I checked it, it passed the Senate and was stuck in the Assembly. And you know why these things happen, someone smarter than me will have to figure it out, but it's it had passed, I think unanimously or near unanimously in the Senate. And it was just sitting in committee on the assembly.
Nobody had brought it up for a vote.
Bill Morris: When anybody figures out what, how Albany works, I'd like to get the call on that one . But it sounds like you think it, the bill is a good idea. It's still alive and maybe it'll come to pass. Do you think it's a good tool?
William McCracken: I do think it's a good tool. I also think that practitioners can, can do some things to ease the burden, ease the logjam with these things. I. And it gets a little bit weedy, but I do think that if lawyers who are trying to get access on behalf of their clients gets the drawings and plans and specifications over to the neighboring building at an earlier point, as opposed to at the end of the process, like even before the contractors have been formally retained, if they, if there's a way that they can get some technical information over to the neighboring property owner, lots of times that's something that, that holds projects up because the way you sequence these jobs, you don't really get the plans and drawings until a late stage of this. And that sets everybody back. And, your property owner who's wanting to do the work is wondering why this is taking so long, where I think some of it can be alleviated with sequencing the negotiations a little bit better.
Bill Morris: So lawyers and boards should get active early and get, and educate their neighbors about what's gonna happen.
William McCracken: Yeah. Not just what's going to happen in general, but like specifically: I need to put, I need to put roof protections here. I need a controlled access zone there. The problem is, again, without getting too technical, is you don't necessarily have those drawings until the contractors retain, which is later in the process.
But I do think that working with your architect, you might be able to get more information over to the neighboring property at an earlier stage,
Bill Morris: and that would be helpful.
Okay. Bill McCracken, thanks for that. We'll keep our eye on that bill in the assembly, it sounds like it might change the game a little bit.
William McCracken: Yeah, let the fingers crossed.
Bill Morris: Okay, thank you Bill McCracken.
William McCracken: Thank you, Bill, and good luck.

William D McCracken, Partner, Moritt Hock & Hamroff

Outrageous demands. It seems everyone has to do more mandatory facade work every five years. As things have gotten more involved, there has definitely been an escalation in the fees neighboring buildings ask for in access agreements. They may want to be compensated for the loss of use, they want their building to be fully protected, and they're in no rush to get anything done. Some of their demands, frankly, are outrageous. The building seeking access is over a barrel, and sometimes they end up paying a lot more than they think they should.

An inadequate remedy. There is something called Section 881 of the Real Property Actions and Proceedings Law, which gives the building that's doing mandatory work the opportunity to get a court order saying, “You have to give us access so we can comply with the law.” The problem with any sort of court procedure in 2023 is that it takes a long time to get done. Also, because of the way the law is currently written, judges don't really have much basis to pressure the neighboring building to try and negotiate down their demands. So it's not really a particularly useful tool.

Jumpstart the process. If lawyers who are trying to get access on behalf of their clients would get the drawings, plans and specifications over to the neighboring building at an earlier point, some of the delays can be alleviated. Get specific information to the neighboring building — such as where roof protection is needed or where there has to be a controlled access zone — even before your contractors have been formally retained.

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