Awarding Attorney Fees in Access to Property Proceedings
By Adam Leitman Bailey, John Desiderio and Joanna C. Peck
The right to access another’s property codified in RPAPL §881, once described, as recently as 2002, as a “little-used law” (as quoted in Rosma Development, LLC v. South, 5 Misc.3d 1014(A), 798 NYS2d 713 (Sup. Ct., King. Co., 2004) (Schmidt, J.), is now used for lawsuits that arise on a frequent basis, amidst the constantly evolving New York City building scene, when a property owner or developer requires access to an adjoining property to facilitate completion of either a new or renovation construction project.
RPAPL §881 is one of New York’s most important real estate laws as it facilitates building by allowing one property owner access onto another’s property—allowing buildings to rise in small spaces by entering their neighbor’s property.
This right to access statute, RPAPL §881, provides an expedited process whereby the property owner or a developer can commence a special proceeding to obtain a court order granting the owner/developer a temporary license to enter the property of an adjoining owner to make “improvements or repairs” to the owner/developer’s property (a) where the planned improvements or repairs cannot be made “without entering the premises of an adjoining owner” and (b) where “permission so to enter has been refused.”
In a prior article, the authors noted that “[t]he single most litigated issue in [RPAPL] 881 cases involves the determination of the amount, if any, of the license fees and reimbursable expenses [including attorney’s fees] to be paid” to the owners of adjoining properties.
In general, “[a]lthough the determination of whether to award a license fee is discretionary, the grant of a license pursuant to RPAPL §881 often warrants the award of contemporaneous license fees, because ‘an owner compelled to grant access should not have to bear any costs resulting from the access.’” New York Public Library v. Condominium Board of Fifth Avenue Tower, 170 AD3d 544, 95 NYS3d 200, 201 (1st Dept. 2019) (citation omitted).
Nevertheless, RPAPL 881 provides that a “license shall be granted by the court in an appropriate case upon such terms as justice requires” (emphasis added). Whether or not “justice” requires an award of attorney fees incurred by an adjoining owner, in connection with negotiating an “appropriate” license agreement, is also subject to court discretion.
The Roles of the Adjoining Owner’s Attorney and its A & E’s
When a developer approaches an adjacent owner regarding a construction project, the adjacent owner incurs professional fees for: (a) engaging attorneys to draft and negotiate the terms and conditions of the “appropriate” license agreement based upon the nature of the project, and (b) engaging consulting professionals, including architects and structural and geotechnical engineers to review and comment on the developer’s proposed plans.
The Attorneys. Adjoining owners incur attorney fees for one or more of the following: (a) recommending appropriate architects and/or structural and geotechnical engineers to review the owner’s or developer’s plans, (b) drafting and negotiating the terms and conditions of the “appropriate” license agreement, and, when the parties are unable to agree on license terms, (c) representing the adjoining owner (i) in an 881 proceeding initiated by the project owner for an adjoining owner’s alleged “refusal” to grant permission to access its property, or (ii) in a plenary action, to enjoin entry to the adjoining owner’s property by the builder/owner, where the court converts the action to an 881 proceeding, see, e.g., Mindel v. The Phoenix Owners Corp., 210 AD2d 167, 620 NYS2d 359 (1st Dept. 1994).
The Consulting Professionals. An adjoining owner incurs professional architect and engineering fees in reviewing plans of the project owner, to determine (a) whether the developer’s plans comply with the New York City Building Code (“Code”) to provide the required protections, (b) the scope of the intrusion required, (c) the safety and protective nature of the proposed means of access to the adjoining owner’s premises, (d) whether there are less intrusive means available that nevertheless provide an equal degree of safety and protection, and (e) the impact on the adjacent owner’s use and enjoyment of the premises.
The professionals’ review of and comment on the owner/developer’s initial plan often causes the plans to be revised to reduce both the impact and the risk to the adjoining owner’s property and to ensure there is Code compliance. See, e.g., North 7-8 Investors, LLC v. Newgarden, 43 Misc.3d 623, 982 NYS2d 704 (Sup. Ct., Kings Co., 2014) (cited with approval in DDG Warren LLC v. Assouline Ritz 1, LLC, 138 NYS3d 539 (1st Dept. 2016).
Moreover, if the developer has proposed underpinning or other permanent encroachments to the adjacent owner’s property, the developer will need to seek express permission to do so, or risk having its petition in an 881-proceeding dismissed by the Court. See, e.g., Highbridge Facilities v. Cromwell Avenue Investors, LLC, Index No. 810953/2021 (Sup. Ct., Bronx Co., February 23, 2022)(Guzman, J.).
The Pre-Litigation Role
Prior to the commencement of any litigation, the role of the adjoining owner’s attorney is multi-faceted. He/she needs to review the architect/engineer’s expert written opinion concerning the builder/owner’s construction plan and the related protection plan proposed for when access is required to the adjoining owner’s property. The attorney must also inspect the adjacent owner’s property with the consulting professionals, to understand the nature of the proposed construction and the impact the project will have on the adjacent owner’s use and enjoyment of its premises.
To effectively advocate for and negotiate any changes to either of the builder/owner’s plans, the attorney must thoroughly understand the basis of the expert’s opinion and the technical language used by the expert. This is important, not only to ensure that the license terms accurately reflect the expert’s recommendations, and to be able to enforce those terms in the event of a breach, but also, if required at some point, to be able to articulate to a judge why such changes, at the demand of the adjoining owner, were not only necessary but were also made in good faith, and not simply to impose unreasonable conditions for agreeing to a license.
The Litigation Role
When negotiations between the developer and the adjoining owner break down over the terms of the license, or the failure of the developer either to comply with Code or to implement appropriate safety protections appropriate to the condition of the adjacent owner’s property – to ensure protection of both the premises and any tenants, an RPAPL 881 proceeding inexorably follows.
As noted above, the parties then litigate the issues that led to the owner/builder seeking judicial intervention, including (a) the scope and nature of the construction, (b) to what extent the construction on the owner/builder’s property may potentially pose a risk of damage to the adjoining owner’s property, (c) to what extent the access sought interferes with the adjoining owner’s use and enjoyment of its property, and (d) the complexities which the access sought presents in drafting an “appropriate” license agreement. See, e.g., North 7-8 Investors, LLC v. Newgarden, supra.
The principles that apply in determining whether to award attorneys and professional fees to an adjoining owner, who is compelled to oppose an RPAPL 881 proceeding, were clearly delineated in Newgarden and subsequently endorsed by the First Department in DDG Warren LLC, supra:
(1) The language of RPAPL 881 “is sufficient statutory authority to award reasonable attorney fees as a condition of a license, where the circumstances warrant it.”
(2) Where the adjoining owner’s opposition to the 881 petition is that the owner/builder was not “refused access,” but that the builder itself has “refused to agree to reasonable terms for the license, to protect Respondent’s property and to reimburse him for costs he would incur because of the license,” an adjoining owner’s “request for attorney’s fees, both for negotiating a proposed license agreement, and for opposing [the 881 petition], is not based on being a prevailing party in [the] action.” Instead, the “[t]he attorneys’ fees incurred in opposing the petition in [the] case are not an incident of litigation but a continuation of the process of negotiating a license agreement.”
(3) Therefore, “reasonable attorney fees [previously incurred] “in reviewing, drafting and attempting to negotiate a license agreement,” and “attorney fees incurred in opposing a petition or in enforcing the terms of a license granted pursuant to an 881 petition should be recoverable as a condition of the license.”
(4) Nevertheless, “if a respondent is successful in opposing an 881 Petition and no license is granted then that respondent would not be entitled to attorneys fees for successfully opposing the petition.”
(5) In addition, although “[t]he inclusion of attorney fees are not necessarily warranted in all 881 situations,” in those situations where they are warranted, “any attorney fees included as a condition of a license should be proportional to the size and scope of the project.” Newgarden, passim.
Notably, an adjacent owner opposing an 881 action must carefully consider whether its objective it to get the petition dismissed, thereby eliminating the possibility of recovering any attorney’s, or other professional fees, but nevertheless stopping the project, or reaching an agreement on terms of licensed access that provide, inter alia, for the ability to recover attorneys and professional fees for negotiating the license.
For a case where neither attorney fees nor professional fees were deemed warranted, see 2225 46th Street v. Giannoula Hahralampopoulos, 55 Misc.3d 621, 46 NYS3d 772 (Sup. Ct., Queens Co., 2017)(Payment of Adjoining Owner’s “reasonable fees incurred in reviewing petitioner’s plans and making counter-proposals or ongoing monitoring of the work during the term of the license,” were “not required,” where “opponents of the application paint a picture of destruction and hardship that does not comport with the reality of the situation, and appears calculated to exact a disproportionate fee in exchange for license to conduct the construction activities contemplated by the petition.”)
(5) In appropriate cases, as the First Department noted, in DDG Warren LLC, citing Newgarden, courts have “authority to order a bond, even [where] respondents [are] covered by insurance…since the bond secures both possible damages and the payment of the license fees.”
(6) Nevertheless, in ordering an 881 license, courts may not award either engineering or attorney fees that are only estimated or anticipated, and not yet incurred, “[b]ecause no evidentiary basis exists for granting anticipated fees.” Instead, the court may order reimbursement to the adjoining owner, for such fees as it may yet incur in connection with the license, but in an amount to be determined. In the Matter of Panasia Estate, Inc. v. 29 West Condominium, 204 AD3d 33, 38, 164 NYS3d 551, 555 (1st Dept. 2022).
It is important for attorneys representing adjacent owners to be cognizant of the steps outlined above. Although attorneys for adjacent owners seek to include as many protective measures as possible in license agreements, new legislation recently passed by the New York State Senate (Bill S8430A) may facilitate future license negotiations, if and when a final Bill passes the State Assembly and is signed by the Governor.
The Senate Bill codifies much of the case law developed in 881 proceedings, including regarding the kinds of protective measures that courts have required or permitted in specific situations.
In addition, a court could “award reasonable attorneys’ fees to either party upon a finding that the other party acted in bad faith or engaged in willful misconduct in seeking, denying, or conditioning its approval of the rights of entry that the subject of the proceeding.”
No doubt there will still be litigation over how any new provisions shall be implemented in particular cases, but an amended Section 881 may make license negotiations less contentious in the future.
However, the Bill did not pass this legislative session and pro-developer real estate legislation or even pro-citizen real estate bills becoming law in the New York State legislature seem to have a similar chance of passing as does a sighting of the Loch Ness Monster.
Adam Leitman Bailey is the founding partner of Adam Leitman Bailey, P.C., John M. Desiderio is a partner and chair of the firm’s Real Estate Litigation Group. Joanna C. Peck is of counsel to the firm. Summer associate and New York Law student Alexandra Baldwin assisted in the preparation of this article.