New York City Construction License Agreements: Developer and Adjacent Owner Responsibilities

As every New York City real estate developer knows, obtaining access to neighboring properties to install legally mandated construction safety protections required by the New York City Department of Buildings (the “DOB“) can be a convoluted and expensive process.

This post in our series on New York City construction license agreements and New York Real Property and Proceedings Law (“RPAPL“) § 881 petitions will discuss the provisions and content typically found within license agreements permitting developer access to a neighboring property. As with any agreement, most of the provisions in these license agreements are negotiated between counsel for each party and are made more or less stringent depending on the relation of the parties and the scope of the project and protections on a neighboring property.

In a previous post in this series, we covered the scope of the project, the initial scop of access, temporary and permanent protections and possible airspace access. In this post, we will discuss the responsibilities of the Developer and the Adjacent Owner in connection with the License Agreement.

The provisions below are not exclusive and not all of the below will be in the final negotiated agreement for any given project. However, the below topics and provisions are in the majority of New York City License Agreements.

Responsibilities of the Developer

The most important Developer responsibility is to perform the work in accordance with relevant state and city laws and in a workmanlike manner, and to obtain all necessary permits prior to commencing any such work. If the Developer’s project causes damage to the Adjacent Premises, the Developer will incur responsibility for inspecting and performing necessary remediation and/or repair work to the Adjacent Premises. In certain circumstances (depending mostly on the timing and the scope of repair), the Adjacent Owner may request to complete the work themselves and have the costs reimbursed by the Developer.  The License Agreement should spell out the timelines for commencement and/or completion of such repair work and when or if the Adjacent Owner will be undertaking its own repairs.

The Developer is responsible to discharge and/or remove any mechanic’s liens or other liens that are filed against the Adjacent Premises as a result of the Project or the access to the Adjacent Premises.

As will be more fully fleshed out in a later post, the Developer (and/or its General Contractor) is responsible for maintaining adequate insurance in line with the DOB requirements and naming the Adjacent Owner as an additional insured on the Developer or General Contractor’s insurance policy for the Project.  This provision often survives the term of the License Agreement until after the Project is actually complete, not just access to the Adjacent Premises.

Additionally, the Developer and its General Contractor are responsible to indemnify, defend, and hold harmless the Adjacent Owner from and against, any and all causes of action, damages, claims, demands, judgments, liens, penalties, orders, violations, losses, costs, or expenses, arising from a material breach of the Agreement by Developer.  The scope of indemnity and what acts or omissions of the Developer and/or its construction team are covered by the indemnity provision will invariably include more than I discuss here. Often the scope of the indemnity will be is negotiated by the attorneys for the respective parties to ensure maximum coverage.

Responsibilities of the Adjacent Owner

Since the Adjacent Owner does not usually want to enter into a License Agreement or potentially lose access to portions of their property, the Adjacent Owner does not have many responsibilities other than honoring the terms of the License Agreement. For example, the Adjacent Owner typically undertakes to provide access to the Developer as provided for in the License Agreement.  and not interfere with or otherwise delay or impede the Project.

When the Adjacent Owner has installed or maintained part of their property that encroaches onto the Project Premises, the Adjacent Owner will undertake the responsibility to remove the encroachments (i.e., an AC Unit outside a tenant’s window that is in the airspace of the Project Premises).  As with anything, the parties can negotiate who will remove the encroachment and when.

Stay tuned for our next post where we will dive into other sections of a typical License Agreement for New York City construction projects.

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