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Does my building have to pay the neighbors for the sidewalk shed that extends in front of their building?

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How much total do you plan to tip the building staff this year?

Question:

The building I'm on the board of has to put up a sidewalk shed in order to make some repairs to the facade, and the shed extends in front of the building next door. Do we have to pay a licensing fee to the building next door?

Answer:

"Sometimes it seems as if every other building in the city has a sidewalk shed in front of it," says Bonnie Reid Berkow, partner at Wagner Berkow, a real estate law firm that works with co-op and condo boards. "People complain because sometimes they stay up for years, because sometimes it’s cheaper to keep the shed up than it is to do work."

Part of why people complain: Local Law 11 requires that owners of buildings over six stories have their facades inspected every five years, and fix any defects. Also, city law requires that owners doing facade work on buildings that are taller than 100 feet extend their sidewalk sheds 20 feet in front of adjacent buildings on either side. This can create conflict, with business owners in the neighboring building who say the shed costs them business, and with tenants, individual apartment owners, and the neighboring buildings' boards, especially if the shed is there for a while.

"The adjacent property owner gets upset. They say, 'You’re blocking out my light, and access to my storefront,' etc.," Berkow says. "But if you put a shed up, it’s not because you want to annoy your neighbor. It’s required by law."

Still, occasionally neighbors demand licensing fees of the owners putting up sidewalk sheds in front of their building. Whether or not they're entitled to a license fee under all circumstances is a matter of dispute.

"There have been a few cases that said, because Local Law 11 is mandatory, and the requirement to install a shed is mandatory, you don’t have to pay a license fee to the neighboring property owner, because you don’t have an option," Berkow says. "But then there were some tweaks to that, where other decisions said, even though the shed is required for Local Law 11 work, you would have to pay a license fee where the work was taking an inordinately long time, or you were interfering with the actual use of the neighboring property. In one case the tenants couldn’t use the roof terrace, the tenants actually left, and the landlord couldn’t rent the apartment because of the shed over the roof terrace. The judge said, 'You have to pay a license fee because of the effect on their property value.'"

It's not necessary to reach out to the neighbors ahead of time, Berkow says.

"There’s no point in going in and inviting it," she explains. "If you say, 'We might have to pay a license fee,' they'll say, 'Of course we want that.'"

Instead, put the shed up, and see if the neighbors complain. This is what most people do. But to avoid angering the neighbors unnecessarily, "First, get it up and get your work done as quickly as your finances will permit," Berkow says. "If it sits there for months with nothing happening, the neighbor is more likely to complain. Second, make sure the shed is erected safely and properly and is not actually touching the neighboring building. It’s supposed to be very close, but it’s not supposed to touch it. If it touches it, then they have a basis to complain."

"And third," she adds, "Work with your neighbor and make sure you have insurance that covers any damage to the neighboring property or damages for personal injury as a result of the existence of the shed and/or the work you are performing.”

If your neighbor is assured they are being protected, they will be less likely to complain and are less likely to be entitled to a license fee. If the neighboring property includes a business with a sign being obstructed by the shed, it is permissible to permit a temporary sign to be posted to the face of the shed.

If the neighbor does start asking for a license fee and threatens to sue, Berkow recommends negotiating a fee, because it's cheaper than fighting it in court.

"If it’s not touching their building, and not interfering with use of the building or its tenants, I’d argue the license fee is not required," she says. But being legally in the right is little consolation if you spend tens of thousands on legal bills.

Somewhere between $1,200-$1,500 a month is a popular license fee, but there is no gold standard. The amount of any license fee would have to be determined on a case-by-case basis, and Berkow has successfully negotiated a significantly lower number.

It's also for the neighbor to ask to have their legal costs paid for drafting or negotiating the license agreement. This could run in the neighborhood of a few thousand dollars. You should question high-seeming license and legal fees, though, and definitely negotiate down anything that strikes you and your lawyers as unreasonable, Berkow says.

Making sure the work is getting done in a timely fashion will go a long way if you actually do end up in court arguing whether a license fee is required, or if the permit needs to be extended with the Department of Buildings.

"If you let it sit there for an extended period of time with nothing happening and it did end up in court the court would look at that as a lack of good faith," Berkow says. "The Department of Buildings could also look at it negatively."

Sidewalk shed permits are generally good for a year, or until the contractor's insurance expires, and permit renewals have to be approved by the DOB. Keeping a shed up without a permit can cost you as much as $8,000 per violation. If you demonstrate to the DOB that you are working in good faith to finish the job and explain any delays, you should be able to get the permit extended without any problem.

New York City real estate attorney Bonnie Reid Berkow is a founding partner of Wagner | Berkow with more than 30 years of experience litigating in state and federal courts in New York state, including cases involving breach of contract, fraud and breach of fiduciary duty, in addition to real estate disputes and commercial actions. To submit a question for this column, click here. To ask about a legal consultation, send an email or call (646) 780-7272.