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As developers are starting to move forward with plans to convert New York City’s office buildings into residential properties, a pivot touted since the early days of the pandemic, the need for access to adjoining properties for construction will proliferate.

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In fact, several major landlords have recently capitulated to the current reality of hybrid work—resulting in an office occupancy constant rate at approximately 40% for most companies, coupled with high interest rates and substantial loss in equity—by surrendering the keys to large office buildings to their lenders.

New owners that acquire these properties at lower valuations given the current market conditions, will be seeking the necessary capital to execute office-to-residential conversions. And whether you are a developer planning to construct a new Class A skyscraper in Manhattan or a cooperative building that requires significant repairs to its façade and there is another property adjacent to your lot, access to the neighboring property may be required under applicable law.

Alternatively, if you reside in a townhouse in Queens next to a vacant lot and receive a notice in the mail from a developer that a 15-story building will be built next to your property, you are likely entitled to protections from the encroaching developer, such as safety measures to protect your building and passersby during the ongoing construction, insurance coverage, and payment in the form of license fees, depending on the scope and level of the subject encroachment.

This article provides an overview of the salient factors that property owners in New York City, developers, and neighbors alike, should consider when faced with any construction project.

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In New York City, given the scarcity and sky-high prices of land, buildings are often built right up to the property line. In such situations, an owner must often obtain access from its adjoining neighbors to proceed with the owner’s construction work. Specifically, New York City Building Code Section 3309.1, mandates that an owner install temporary protections (such as the ubiquitous scaffolding or construction sheds that are fixtures of New York City sidewalks) during construction or demolition work.

Installing temporary protections upon a neighbor’s property in accordance with the Building Code typically requires access to the adjoining property. In addition, depending on the nature of the construction work, access to the neighbor’s roof or other areas of the building may be required. Developers thus should determine well in advance of the date that they expect to start their project whether and to what extent access to a neighbor’s property is needed.

If access is required, it would be prudent to engage the neighbor and start negotiating access with ample time before the project is ready to start. Delays can be costly, particularly if a construction loan was obtained and interest payments are owed, and with slow supply chains and higher costs on imports caused by the ongoing war between Ukraine and Russia and the more recent conflict between Israel and Palestine, a developer, together with its design professionals, should look to avoid a situation in which it is shovel-ready, but access has not been resolved.

On the neighbor side, this can provide significant leverage to negotiate favorable terms in a license agreement, such as provisions requiring the developer to pay monthly license fees and reimburse legal and engineer expenses incurred by the neighbor to negotiate the agreement and analyze the project.

As discussed further below, however, it may be in the neighbor’s best interest to keep its requests reasonable to avoid causing undue delays.

In situations where access is required, the parties are often best served in reaching a swift and amicably negotiated agreement. For the developer, speed and timing can be crucial, and the alternative—initiation of a court proceeding under Real Property Actions and Proceedings Law Section 881 (“RPAPL 881”) seeking mandated access on terms decided by a court—can be time consuming and without guaranteed access.

From the neighbor’s perspective, a negotiated agreement may allow it to secure robust protections such as an obligation for the developer to repair any damage caused to the property, indemnify the neighbor for money damages incurred, provide insurance coverage, or deposit money into escrow to serve as security in the event of property damage or the developer’s breach of the agreement.

In addition, the neighbor may be able to obtain the developer’s commitment to pay monthly license fees to compensate the neighbor for any inconveniences caused by the encroachment and protections installed (for example, if the temporary protections will cover the neighbor’s backyard or terrace and deprive the neighbor of full use of its amenity space for a significant period).

On the other side of the fence, the developer valuing speed and certainty may be more inclined to agree to a higher amount in monthly license fees and other concessions.

Although each agreement is&nbsp;sui generis&nbsp;and stands on its own terms, the negotiations will depend on the construction work involved, the protections required, and the temperaments of the parties. Arriving at a negotiated agreement may give each party more control over the terms of access. If negotiations fail or if one side is making unreasonable demands, however, litigation may be the only path forward.

“Upon Such Terms as Justice Requires”

In 1968, the New York State Legislature enacted RPAPL 881 to address the situation where a property owner refuses to provide access to an adjacent owner that wants to repair or improve its property and needs access to the property owner’s lot to do so. RPAPL 881 provides, in relevant part:

When an owner or lessee seeks to make improvements or&nbsp; repairs to real property so situated that such improvements or repairs cannot be made by the&nbsp; owner or lessee without entering the premises of an adjoining owner or his lessee, and permission so to enter has been refused, the owner or lessee seeking to make such improvements or repairs may commence a special proceeding for a license so to enter pursuant to article four of the civil practice law and rules. The petition and affidavits, if any, shall state the facts making such entry necessary and the date or dates on which entry is sought. Such license shall be granted by the court in an appropriate case upon such terms as justice requires.

A proceeding under RPAPL 881 is governed by Article 4 of the CPLR and can be commenced by filing a petition and supporting papers, which should include affidavits, including from an architect or engineer, from the developer explaining, among other things, what the construction involves, which temporary protections are required, and why access is needed to perform the work.

Additionally, the developer should provide sufficient details in its papers regarding the timing and duration of the requested license, and other facts to establish that granting a license under RPAPL 881 is warranted.

The neighbor will have the opportunity to oppose access and may argue why a license should not be granted, what technical changes are needed to the developer’s protection plans, or what conditions should go with the license inclusive of license fees and reimbursement of legal and engineering expenses.

The court may also hold a hearing and elicit testimony from each side’s expert to determine if a license should be issued and, if so, what conditions should be included with the access order and whether the developer must pay license fees to the neighbor for the underlying encroachment.

This brings us back to the key point: RPAPL 881 grants a court wide discretion to grant a license “upon such terms as justice requires,” which creates uncertainty for both the developer and neighbor, who each independently risk having a court issue an order that may be unfavorable to its position.

For instance, a court has discretion to deny a neighbor’s request for payment of license fees and reimbursement of legal fees which it may have otherwise obtained via a negotiated agreement (see e.g. Matter of Spence v Strauss Park Realty, LLC, 211 AD3d 446, 447 [1st Dept. 2022] [“The court providently exercised its discretion in granting the license but denying respondent's request for license fees, legal fees, costs, and expenses, and by not requiring petitioners to post a bond.”]).

From the developer’s perspective, the pace at which its petition for access will be heard and decided by the court is subject to the judge’s calendar and other potential issues that are largely out of the developer’s control and could delay resolution of the matter, and there is no guarantee that the petition will be granted, to boot (see e.g.,&nbsp;Matter of Thomas Anthony Holdings LLC v Goodbody, 216 AD3d 538, 539-40 [1st Dept. 2023] [“Although petitioner established its need for limited, reasonable access to respondents’ property and respondents’ refusal to provide access, the court providently exercised its discretion in denying the application on the papers, because petitioner failed to provide adequate or sufficiently specific information concerning the temporary overhead, chimney, and rooftop protections at issue to ensure protection of respondents’ interests.”];&nbsp;Matter of Lincoln Spencer Apts., Inc. v. Zeckendorf-68th St. Assoc., 88 AD3d 606, 606 [1st Dept. 2011] [denying RPAPL 881 petition because “[p]etitioner has failed to put forward any explanation as to why the work could not otherwise be performed or indeed, any facts whatsoever.”]).

An owner preparing for construction that requires access to a neighbor’s property should engage in negotiations as soon as practicable to minimize the risk of costly delays. At the very least, early discussions may provide insight on whether the requirements for access may be made, and an amicable agreement can be reached. The owner performing the construction project and the neighbor being encroached upon may be best served by approaching negotiations in a businesslike manner because a negotiated agreement provides finality and certainty for both sides.

If negotiations fail, RPAPL 881 provides a mechanism for the developer to obtain access and proceed with its project upon such terms and conditions that would be determined at the court’s discretion upon expert submissions and proof hearings. However, the uncertainties inherent in an RPAPL 881 proceeding, along with potential delays and the court’s refusal to mandate a license fee or reimbursement for attorney fees and expert costs, generally make a negotiated agreement preferable—and litigation a last resort—for both the developer and neighbor whenever feasible. If litigation is necessary, parties should use skilled counsel experienced in the handling of these types of proceedings.

"Navigating RPAPL 881 Litigation and Construction Access in a Post-COVID World," by&nbsp;Massimo F. D’Angelo and Gregory Wong was published in the&nbsp;<a href="https://www.law.com/newyorklawjournal/2023/10/31/navigating-rpapl-881-litigation-and-construction-access-in-a-post-covid-world/">New York Law Journal</a>&nbsp;on October 31, 2023.

Reprinted with permission from the October 31, 2023,&nbsp;edition of the&nbsp;New York Law Journal&nbsp;© 2023 ALM Media Properties, LLC. All rights reserved. Further duplication without permission is prohibited.

Navigating RPAPL 881 Litigation and Construction Access in a Post-COVID World

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Navigating RPAPL 881 Litigation and Construction Access in a Post-COVID World

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