New York's Cooperative and Condominium Community

Habitat Magazine June 2020 free digital issue

HABITAT

LICENSING AGREEMENTS

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Licensing Agreements

Jan 27, 2020

Licensing agreements are a big deal for co-ops and condos, but it seems boards are becoming more aggressive and greedy. Stewart Wurtzel, member at Tane Waterman & Wurtzel, helps Habitat understand why.

Licensing agreements are a big deal for co-ops and condos, but it seems boards are becoming more aggressive and greedy. What’s going on?

I think you're seeing a change in the courts, which have started to say that if you’re seeking access to neighboring properties in order to do construction, improvements or repairs on your property, you should pay that neighbor license fees. And a lot of buildings are taking advantage of that. It’s what I call a “bad neighbor policy.”

Can you explain?

The statute on these kinds of licenses, RPAPL 881, basically provides coverage for any damage incurred. If someone damages your property and you incur legal or architectural fees, you should be reimbursed for that. But in the last few years, the courts have been ruling that you can levy additional charges, and we're seeing buildings making demands for license fees that can add up to $30,000 or $40,000 over the course of a project.

In your opinion, are boards treating these fees as a cash cow?

That certainly happens. We represented one property with a rental building next door whose owner was pretty much running an illegal Airbnb, and tenants would make illegal use of his roof. When we had to do work on our roof, we needed access to their roof, and the owner wanted to be compensated for the loss and the inconvenience to their illegal Airbnb tenants.

What do you advise boards when dealing with license fees?

If you’re starting a project that's going to impact a neighboring building, the board needs to approach that neighbor early, explain what work is being done and negotiate terms, all of which could make them more reasonable about their fees. If you can’t come to an agreement, you have to go to court, which costs everyone a lot of money and time. That said, it also pays to be reasonable when someone is approaching you, since the situation could be reversed in a few years. We’ve seen cases where a building is saying, “Well, we had a hard time from our neighbor when we needed work. Now they need work. We're going to get every penny back, and then some.”

It sets a bad precedent.

And it's unfortunate, because a lot of cases where this is coming up doesn’t involve making improvements, but instances where one building poses a potential danger to the one next door, and fighting over license fees stands in the way of getting things fixed.

Since the statute is so vague, should the State Legislature or City Council set fees to give people some sort of guidance?

I don't know if they can set fees per se, because there are circumstances where a license fee is warranted. I think what the Legislature really needs to do is clamp down and make it clear that fees are a last resort. Of course, people need to be insured and have reasonable expenses covered, but you can do that by drawing up an agreement and having your attorneys look at it.

So in closing, the No. 1 thing for boards is to be reasonable when negotiating with your neighbor, whether you're doing the work or they're asking for access from you. And what about the legislation?

I think everybody in the city who owns property should contact their representative and urge them to take action to rein in fees, because they’re just going up and up. When the decisions first started coming down, you'd see a $1,000 monthly fee, but now we’re seeing demands for $3,000 – which is just a starting point – and these are not for large-scale intrusions. That’s a lot of money to ask your neighbor to pay.

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