The Real Deal New York

The shakedown: How neighboring landlords can profit from new developments

“There are landlords that use this as an opportunity to hold developers up for a ransom payment"
August 08, 2017 03:00PM

A precedent-setting court ruling from last year has opened the floodgates for landlords to demand “ransom” payments from adjacent developments, salty developers say.

For decades, developers negotiated directly with their neighbors to gain access so they could shore up adjacent properties during major renovations or construction. The two sides would normally negotiate a price and things would move forward.

But An Appellate Court upended that practice in April 2016 when it spelled out that neighbors are entitled to things like money to hire architects and or engineers to look over building plans, lawyers to work on agreements and a general licensing fee simply for the inconvenience of construction, Crain’s reported.

As a result, neighbors are increasingly demanding more cash out of developers.

“There are landlords that use this as an opportunity to hold developers up for a ransom payment,” Aurora Capital Associates vice president Jared Epstein said. “We have experienced this previously, and, instead of being extorted, we use the court system to secure the right to protect our neighbors’ properties.”

Experts said more and more landlords are filing cases in court to compel their neighbors to grant them access to properties next to the construction sites.

“Over the last several years, it’s become challenging to even keep track of all the decisions,” said Dani Schwartz, a partner at the law firm Wachtel Missry.

But Ron Braverman, a partner at Braverman Greenspun who represents neighboring property owners in these types of cases, says aren’t asking for anything unreasonable, and payments typically are a few hundred to a few thousand dollars a month.

“The owners of adjoining properties don’t want to be inconvenienced by construction and don’t want the attendant debris and noise,” he said. “It is true that the landscape has changed a bit in terms of payments, but I wouldn’t say that anyone is being taken to the cleaners.” [Crain’s]Rich Bockmann