How to Negotiate a License Agreement

David Berkey, Managing Partner, Gallet Dreyer & Berkey

If there is new construction next door or a neighboring building is doing repairs or improvements and requires access to your property, you need to negotiate a license agreement to make sure you are protected. It’s a back-and-forth process, but there are certain non-negotiables — and limits.

Monthly access fee. When negotiating how much the other party will pay you per month, bear in mind it’s not always only the common elements that are affected. If there’s a penthouse unit and the unit-owner or shareholder is losing the right to use part of their property, there should be consideration to pay part of the license fee to that person.

Reimbursement of professional fees. In addition to covering your legal fees, the party seeking access should cover those of your engineer or architect, who should review the scope of the work, as well as the site safety plan required by the Department of Buildings, and also monitor the work as it goes on and any changes in the original plans.

Insurance. The neighboring building needs to obtain insurance in which you are covered as an additional insured party in case there is damage to your building. You also want contractual indemnification provisions so that it will make you whole for any costs not covered by insurance.  

Penalties. It’s not a good idea to try to build in penalties by stepping up the monthly access fee if the project extends beyond the agreed-upon time period of the license. Most courts won’t allow that, because their view is that the interference with your rights is not something that increases in value over time.