A new condo building is going up next door to mine. How do we protect our property from damage?
One of the main concerns, when your neighboring lot is about to become a construction site, is that it will impact the foundation of your own building.
“There are strict rules in the building code to protect adjacent property owners. What is required, in addition to giving you notice, is for the developer of the new structure to secure your building's foundation. This is most often accomplished by underpinning your building,” says Steve Wagner, a real estate attorney, and partner at the Manhattan law firm, Wagner Berkow & Brandt.
Typically the developer will need to dig down below the lowest level of the basement, or sub-cellar of your property and this disturbance of the so-called virgin soil can result in cracks or other damage leading right up to a partial collapse of your building. Underpinning extends your building's foundation to the depth of your neighbor's new foundation and gives your building the needed support back down to the virgin soil.
Another concern is that heavy machinery or above-ground construction work might damage your property in other ways. Wagner was recently involved in a case where a crane operator slammed the boom into a client’s building. “Very often there are payments to solve these problems and they can be substantial sums,” says Wagner, who has decades of experience negotiating agreements and compensation in these types of situations.
Get an agreement in place before construction begins
With the right legal representation, your starting point should be to draw up a comprehensive access and license agreement before the construction work begins. A well-negotiated contract will protect you if there is damage either through negligence or as a result of inadvertent damage, even when the correct building procedures have been followed.
Part of the negotiation will be allowing access to your property so the contractors can do the foundational work without eating into the subsurface space of the new building. Included in the agreement should be a pre-construction survey of your property, a detailed plan about how the work will be performed, insurance, and a provision of access to your architect or engineer so they can inspect the building work as it progresses.
Another part of the negotiations might be to get the developer to put money in escrow to cover any possible damage, repairs and even legal fees if you have to litigate.
Making sure your building is named as an additional insured party
An insurance policy in which you or your building are named as an additional insured party, both from the developer and the contractors will be an important part of your damage limitation planning.
“There needs to be a special endorsement to the policy if you don’t have a contract with the developer, otherwise a typical insurance policy will not cover you,” says Wagner.
Having a lawyer negotiate coverage may turn out to be crucial if there is damage to your property as a result of the construction work.
Negotiating a mechanism for resolving issues
Part of the agreement will identify ways in which disputes can be settled. Developers and contractors don’t like to be slowed down when work is underway, so they are not going to want to stop work while the parties come to an agreement.
“It depends on how sophisticated the adjacent property owners are and how big the project is. If you are going to stop a big project, that’s going to be very expensive for somebody,” says Wagner.
Seeking compensation or payment for the construction
You do not have to agree to the underpinning of your property. This usually costs the developer some square footage on his lot. Negotiating access for the underpinning of your building can come at a price for the developer.
“Some payment is not unusual. It buys the right to build on your side of the property line under the ground,” says Wagner.
If work has already begun, you can also seek compensation. Wagner’s firm has negotiated six-figure sums for clients where developers have started underpinning the building without notice or consent.
Another solution might be to sell the property to the developer. Wagner recently negotiated this outcome for a client.
“The developer did everything wrong and we bought a lawsuit to stop them. They kept violating an injunction and I kept on making motions to punish them for contempt. When my client told me he was going to sell when the construction was done, I told him, he could sell to the developer, which he did, at a price that was above market and without a broker,” Wagner says.
Having a good agreement and ideally, a good relationship with your neighbor will help you protect your building. “You can’t stop the work but you can stop them from coming on your side of the property line. It’s well worth coming up with an agreement with the developers who, by the way, should pay your attorney fees,” says Wagner.
New York City real estate attorney Bonnie Reid Berkow is a founding partner of Wagner, Berkow & Brandt with more than 30 years of experience litigating in state and federal courts in New York state, including cases involving breach of contract, fraud and breach of fiduciary duty, in addition to real estate disputes and commercial actions. To submit a question for this column, click here. To ask about a legal consultation, send an email or call (646) 780-7272.
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