The Real Deal New York

Delays at the DOB

The department has become more thorough, but developers complain about slowdowns
By Katherine Clarke | March 01, 2012 07:00AM

It was four years ago this month that seven people were killed in a crane collapse on East 51st Street. Since then, the New York City Department of Buildings — under fire for lax oversight of building plans — has taken steps to improve its safety procedures.

But some real estate professionals say the pendulum may have swung too far in the other direction; the agency is now taking so much time to scrutinize plans and permit applications, they say, that it’s leading to project delays — forcing developers to push back their timelines for commercial and residential projects citywide.

In particular, residential developers said delays in obtaining temporary certificates of occupancy, or TCOs — which indicate that a building is safe for its designed use — and other permits are slowing down closings on condominiums. That, in turn, puts financial pressure on developers who are staring down deadlines to pay back their construction lenders.

Delays are more pronounced in the outer boroughs, expeditors and developers said, in part because the DOB is now being more scrupulous in its inspection of applications in the wake of the scandal surrounding prolific Brooklyn architect Robert Scarano, who falsified DOB documents.

Mayor Michael Bloomberg even acknowledged the delays recently. “We have all heard horror stories about delays in the construction process,” Bloomberg said at the October launch of the agency’s new digital plan review system, which aims to speed up the process of evaluating building plans.

With the new system, “those delays, we think, are going to be reduced dramatically, from months to minutes,” Bloomberg said. “No more endless back and forth, no shuffling between agencies.”

But real estate professionals said the platform is not yet in widespread use, and they are still dealing with slowdowns on projects that started before the new system went into effect in October.

“I’m dealing with [delays] on multiple projects right now,” said Deborah Rieders, a senior vice president at the Corcoran Group, who is marketing several new development projects. “Closings that should have happened in 2011 have now been pushed to 2012.”

Keeping score

The DOB has seen momentous change over the past few years. Commissioner Robert LiMandri, who replaced Patricia Lancaster after she stepped down during the crane collapse controversy, has made concerted efforts to increase the department’s safety regulations. The agency has implemented more than 25 new construction safety laws since 2008, according to news reports. And in 2009, the first modernization of the city’s Building Code since 1968 took effect, expanding requirements for fire protection, structural integrity and work-site accountability.

So far, the department’s increased emphasis on safety appears to be working. There were 128 construction-related injuries in fiscal year 2011, down from 206 in fiscal year 2010 and 223 the prior year, according to the Mayor’s Management Report, or MMR.

But city statistics also show that the agency has recently issued fewer certificates of occupancy than in the past.

Only 2,202 certificates of occupancy (or CofOs) were issued in the first four months of this fiscal year, down from 2,511 in the same period of the prior year, according to the preliminary MMR for fiscal year 2012. Throughout fiscal year 2011, there were a total of 7,044 certificates issued, down from 7,672 the prior year and 9,219 in fiscal year 2009.

Overall, the department completed 48,186 construction inspections (including inspections for CofOs) in the first four months of the fiscal year, down 24 percent from the same period of the prior year. The MMR, which acts as a kind of report card for city agencies, attributed that decline to “reduced field hours resulting from staff vacancies and a more extensive training program.”

The DOB now has 1,061 personnel, according to the MMR, compared to 1,094 in fiscal year 2011 and 1,174 in 2010.

In addition, sources noted, the reduced number of certificates issued could be a result of fewer projects requiring them since the bursting of the real estate bubble.

DOB spokesperson Tony Sclafani declined to comment specifically on how many projects have applied for TCOs, but issued the following statement: “Temporary Certificates of Occupancy are issued after an applicant satisfies all of the necessary safety requirements for a construction project, and those requirements depend on the complexity and scope of that project. In order to speed up the overall approval process, we are now accepting digital plans at the NYC Development Hub so permits can be issued faster than ever before.”

But multiple industry sources said the decreased number of building permits being issued is, at least in part, a result of slower DOB response time.

In the wake of the crane collapse and Scarano scandal, the agency takes longer to review applications and permits, especially in the outer boroughs, expeditors and developers said.

Hudson Companies’ new Third + Bond condominium in Carroll Gardens, for example, waited for several months after construction was completed to get its TCO, according to Sally Gilliland, Hudson’s director of architecture.

One reason for the delay is that “we ended up having to go through a process that was new,” Gilliland said. In the past, she said, TCO paperwork could be submitted directly to the DOB’s “Certificate of Occupancy Room,” but this time, the deputy borough commissioner was required to personally review the documents before they could be submitted.

“We had to sit down and meet with him,” Gilliland said of the deputy commissioner, John Gallagher, who is now acting borough commissioner. “His time was limited, so it was difficult to get access to him in a manner that was timely for us.”

Irene Berzak, an expeditor who works regularly with the DOB to streamline the application process for developers and property owners, explained that in Manhattan, TCOs can be renewed directly with the “Certificate of Occupancy Room.” In Brooklyn and Queens, however, TCOs must first be approved by the borough commissioner.

“It’s very time consuming,” she said.

Hudson had anticipated that Third + Bond would be ready for move-ins in 2010, but it didn’t receive its TCO until early 2011. That inconvenienced the buyers, who had planned to move in months before. “A lot of them had to find temporary housing,” Gilliland said.

Berzak said she’s having similar problems at one of her projects, a newly built assisted-living facility at 137-47 45th Avenue in Queens, where the TCO recently expired. Getting it renewed, which the law requires since the building is now occupied, has taken longer than expected, she said.

“We’re having horrific problems in Queens,” Berzak said.

Because her team has to run back and forth from the borough manager to borough commissioner for necessary permissions and approvals, a staffer has spent several days camped out at the DOB. “We’ve had someone sitting in the office for five days straight,” she said.

Sclafani denied that there were any DOB delays at Third + Bond or 137-47 45th Avenue, but declined to go into more detail. “There were no delays on the department’s behalf,” he said.

Meanwhile, it takes the DOB an average of 24 days to respond to email correspondence, compared to eight citywide, according to the MMR.

Louis Greco, head of development company SDS Procida, which built On Prospect Park and Be@Schermerhorn in Brooklyn, said delays “have been a burden on any number of projects around the city,” he said.

They are especially problematic in the current market, he added, where developers need to be able to green-light buildings for closings as quickly as possible.

“Immediate delivery is a top priority in sales today,” he said. “Nobody is pre-purchasing apartments. They’re afraid to get into bed with a deal that has question marks on it. It’s a lot easier to say, ‘We have the TCO and move-ins have begun.’”

The delays can also hurt the market, brokers said, because if closings get pushed back, neighborhoods appear to have less sales activity. “It makes the value of certain neighborhoods seem less than they actually are,” Reiders said.

Greco said he doesn’t have any direct experience with TCO delays, but construction permit delays have been a problem at a single-family house he’s developing in Brooklyn Heights. The site, which was acquired 18 months ago, is still vacant, he said.

“I have someone on staff that works with the expeditors, but it’s still problematic,” Greco said. While the house is “not a simple project,” he said, “we’ve been in the approval process for 14 months. It should take six months.”

He added that it’s often difficult for developers to know exactly what the DOB wants from them in order to hurry the process along. In his view, the agency should aim to “clearly define what it is they want, and set out systems that can expedite that.”

One expeditor, Scott Schnall, told The Real Deal that there has been an “onslaught” of new paperwork and procedural changes in recent years at DOB, which he attributed to hyper-vigilance prompted by the recent scandals. In 2011, the DOB barred Scarano from filing documents to the agency, after a judge found that the architect knowingly made false and misleading statements to the city on documents relating to several Williamsburg projects, in order to get illegal or oversized buildings approved.

Since then, the department has cracked down: since 2008, a total of 26 licensed professionals have lost their filing privileges with the department, LiMandri said in October.

“Since Scarano lost his [right to file plans,] they’ve tightened up,” Schnall said. “They’re making us pay for what he did.”

At one project Schnall recently worked on, a daycare center at 3212 Church Avenue in East Flatbush, Brooklyn, the owner waited for eight months to obtain a TCO. The delay, he said, stemmed from an error the DOB allegedly made in a filing when it stated that one of the floors in the building was safe to be occupied by up to “3.0 children” — it meant to write 30 children.

Sclafani also denied that there were any DOB delays at that project.

Safer but slower

Certainly, the DOB has made moves to try to reduce delays. The new digital plan review system is designed to accelerate the approval process for construction projects, by allowing architects and engineers to submit plans and resolve issues online.

And industry pros acknowledged that delays aren’t always the DOB’s fault; developers and their staff sometimes fail to comply with requirements in a timely fashion.

“I truly think that people are too fast to say, ‘It’s taking the DOB forever,’” said Frank Fortino, president of expediting and consultancy firm the Metropolis Group. “If you really isolate and inspect the issues closely, there have been delays on everyone’s part.”

And, he noted that the increased DOB vigilance is likely making the city safer for the public. “A few years ago, everything was moving so fast and no one was really checking what was going on,” he said.

Attorney Barry LePatner, founder of construction law firm LePatner & Associates, agreed. “With the downturn and the end of the building boom in New York City, the DOB is certainly paying greater scrutiny than previously to applications,” he said.

He added: “It’s hard to say that greater review won’t benefit the public. The clients we represent would like the process to happen faster, but doing it right and doing it quickly are different. Maybe there’s a middle ground somewhere in the future.”