Building in New York is tough and it’s expensive. Building in the close confines found in many parts of New York often adds an additional problem: You may need to access your neighbor’s property to perform part of the construction or to protect their property from damage. For example, you may need to install a sidewalk bridge or roof protection or, perhaps, perform a pre-construction survey and monitor movement of adjacent structures during the project. But you can’t just trespass on your neighbor’s property, right? So, what do you do? The answer is to enter into a “construction license agreement.”
A construction license agreement is a written agreement between the developer (or owner or contractor) performing the work and the neighboring property owner which outlines the terms and conditions under which access to the neighboring property will be permitted during the construction.
What terms should be in a construction license agreement?
Because a construction license agreement is a voluntary agreement between two (or more) parties, there is virtually no limit as to what can be included. Every project is different and certain items have more importance than others depending on the project. However, in most instances, a construction license agreement should have at least the following terms:
A precise description of what work will be permitted on the neighboring property. Will there be scaffolding? Netting? Underpinning? A common practice is to include a copy of the plans as an exhibit to the agreement so there is no confusion or debate about what work will be performed.
What is the duration of the license? Will entry be needed on the adjacent property for a day, a week, a month, longer?
When will access be permitted during construction? Is 24-hour access permitted seven days a week or is it something less?
What insurance will the developer/contractor provide to the neighboring owner to protect them from claims for injuries or property damage that occur as a result of the work being performed? The insurance provision is one of the most important in the license agreement and should specify limits of insurance and exclusions that are prohibited (such as “third party action over” exclusions.)
What monitoring (optical monitoring, vibration monitoring, etc.) will be required on the adjacent property during the construction?
Will there be a license fee paid to the adjacent property owner as consideration for allowing the access to his or her property? Will the fee be monthly or a lump sum? The license fee can sometimes be the biggest sticking point in an access agreement. Often it comes down to valuing the inconvenience of the work for the neighbor. For the developer, it comes down to valuing the delay caused by the neighbor’s non-cooperation. Will there be a delay in construction or will you have to use alternative methods of shoring or protection? All of these items come into play in negotiating the license agreement.
Will the developer reimburse the neighbor for their professional fees incurred in connection with the construction license agreement?
Who will be responsible for repairs and when must they be performed? Perhaps more importantly, who decides the method of repair and whether a repair was done properly?
Will the developer/contractor be performing a pre-construction survey?
Will the developer/contractor indemnify the neighboring owner against claims of injury or property damage?
These are just a few of the topics that can, and should, be covered in a construction license agreement. License agreements are important for both parties to make sure that they are “on the same page” regarding the work and what the rights and responsibilities of each party will be. A construction license agreement is often a “team effort” involving coordination between the legal, design and construction teams to assure that the parties on both sides of the property line are protected. Sometimes that also involves accessing tenant spaces which can add a whole additional level of hurdles to the process.
Anyone entering into a construction license agreement is strongly encouraged to consult with an attorney and an architect or engineer prior to finalizing terms. While many agreements conclude amicably, it is not uncommon for the parties to be unable to reach a resolution and, in those situations, litigation (through an RPAPL proceeding) can often be necessary to resolve the access issues. If you plan ahead you can eliminate, or at least minimize, delays to the project.
Vincent Pallaci, Esq., is a managing member of Kushnick | Pallaci PLLC, Bohemia, N.Y.