Lenders and borrowers in New York City must be cautious of a requirement that can add significant time and costs to development projects. The New York City Department of Building mandates in BC Section 3309 that the entity undertaking the construction or demolition work protect adjoining buildings. However, in order to provide the protection, whether it be underpinning or roof protection, written approval to access the neighboring properties must be obtained from the owners of the those properties. Many property owners will demand payment to provide the required access to the developer. Of course, financial compensation may be warranted if a neighboring property is negatively impacted by a construction project, but more often than not building owners see the “access agreement” or “license fee” as an opportunity to receive a large payoff or even block construction.
Indeed, the requirement is prone to abuse, and can add risk for lenders and developers by adding unforeseen costs and delays to construction projects. In an ongoing court case, for example, a prominent real estate developer is accused of extortion and purposely stalling a construction project.
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