Proposed Changes to Section 881 Could Tip the Scales in Favor of Developers

Why your building’s rights may be at risk from …

THE DEVELOPER NEXT DOOR

The scenario is all too familiar: A developer announces plans to construct a new building next door, and suddenly you’re faced with complex negotiations about access to your property. While most neighboring buildings can work out access agreements amicably when doing routine repairs like facade work, the stakes become much higher when a developer wants to build from the ground up.

TIPPING THE SCALES. New York’s Real Property Actions and Proceedings Law (RPAPL) Section 881 has long provided a mechanism for resolving disputes when buildings can’t reach an agreement about property access. This proceeding asks a judge to make a determination about access and what the terms of access should be, including setting time limitations, establishing license fees and determining who pays for legal and engineering costs.

Currently, courts generally favor protecting the rights of existing buildings because they didn’t ask for a major construction project next door — they’re being forced to accommodate it. In about 95% of cases involving routine repairs between existing buildings, access agreements are reached without court intervention. However, disputes with developers are another matter entirely, especially when they involve ground-up construction that requires extensive monitoring and protective measures.

This balanced system may soon face a significant shift. Over the past two years, developers have been lobbying hard in Albany to amend Section 881 in ways that would dramatically tip the scales in their favor. The proposed changes would explicitly grant developers the right to permanent underpinning of adjacent buildings — essentially a taking of property — and would alter how legal fees are awarded in these proceedings.

Under current practice, courts typically award legal and engineering fees to the building requiring protection from construction next door. The proposed legislation would change this, limiting fee awards to cases where one party acted in “bad faith” during negotiations. This shift would make it much harder for existing buildings to recover the costs of protecting their property rights.

SMALLER PROPERTIES.  The implications are particularly concerning for smaller buildings. Consider brownstone co-ops, or even single-
family properties, who suddenly face a 21-story development next door. Without the ability to recover legal and engineering fees, how can they afford to protect their rights against a deep-pocketed developer?

While the New York State Senate has passed this developer-friendly bill twice, it has so far stalled in the Assembly. Critics argue that the proposed amendments would strip courts of their current flexibility to ensure fair outcomes and would instead create a one-size-fits-all approach that heavily favors developers.

LEGISLATIVE BATTLE. The timing of these proposed changes couldn’t be more critical. As New York City continues to see rapid development, more buildings find themselves dealing with construction projects next door. The current Section 881 framework provides crucial protections for existing property owners, ensuring they can effectively negotiate for appropriate safeguards and compensation when developers need access to their property.

But the message is clear: Pay attention to this legislative battle. While negotiating access agreements and protecting your property during neighboring construction is challenging enough under current law, the proposed changes could make it significantly more difficult and expensive. Board directors would be wise to contact their state legislators and make their voices heard before this important protection is weakened.