Realty Law Digest

, New York Law Journal


Scott E. Mollen
Scott E. Mollen

Development—Adjacent Property Owner Entitled to Damages Caused by Adjacent Construction—Strict Liability for Damage Caused by Excavation—Damages Included Construction Costs, Lost Rent, Tenant Relocation and Buyout Costs and Professional Fees

The plaintiff owned a 10-unit apartment building located in Manhattan. An adjacent property contained a parking garage owned by defendant "A." "A" had commenced construction work on its garage, including excavation work to create a sub-basement. Defendant "B" was "A's" general contractor. "C" was "a subcontractor for foundation, underpinning and concrete work."

The NYC Department of Buildings (DOB) had issued a notice of violation (notice) stating that "A" had violated NYC Admin. Code §27-1031(b)(1) by failing "to properly carry out excavation work at more than 10 feet below grade and to protect the adjoining property." The notice stated that "A" had excavated to 16 feet, and in doing so, had "failed to protect adjacent structures resulting in 'substantial cracks & separation on various floors of adjacent properties.'" The DOB ordered "A" to cease "all excavation work" and to "[i]mmediately stabilize & protect adjacent structures." The DOB issued a second notice which indicated that "there was 'major structural damage to adjoining structure.'" "A" challenged the second notice at an administrative hearing. The Administrative Law Judge (ALJ) found that "the lack of structural support created dangerous conditions and that the work that was done constituted 'unsafe excavation.'"

The plaintiff had been forced, by reason of "structural damage caused by the excavation of the garage," to vacate its apartment building, which had been fully rented at the time. The plaintiff retained counsel to assist in the process of "buying out and relocating tenants." The rent roll had been approximately $16,000 per month. The building had been completely vacated by December 2005 and remained vacant for four years until December 2009.

Additionally, the plaintiff had hired engineers and experts to analyze the damage and to make emergency repairs, including "underpinning, shoring and support work…." The plaintiff was required "to rebuild structural elements."

The plaintiff incurred more than $2,000,000 in construction costs and had been compelled to finance such work. It had incurred approximately $484,000 in finance closing costs and interest. Moreover, the plaintiff's insurance company would not renew its coverage and replacement insurance was at a substantially higher cost. The plaintiff had received approximately $800,000 from its insurer for property damage and lost rental income.

The plaintiff had sued "A," "B" and "C." "C" had failed to answer the complaint. The plaintiff had moved for a default judgment against "C." However, such motion had previous been denied as untimely and the plaintiff's case against "C" was dismissed. "A" thereafter commenced a third-party action against "C" for indemnification and contribution. "C" again failed to answer. The court had previously found that "C" had defaulted and ordered "an inquest for an assessment of damages." "A" did not pursue the inquest immediately since the main action against it was still being litigated. Thereafter, the remaining defendants, except "C," "entered into a partial settlement…with Plaintiff." The settlement amount was $1.4 million. All defendants other than "A" and "C" were released from further liability.

Thereafter, the court had to determine "A's" liability to the plaintiff, the amount of damages owed by "A" to the plaintiff and "A's" assessment of damages in its default case against "C." "A's" submissions focused on its claim against "C." "A" did not take a position with respect to the plaintiff's request for a judgment against it or the amounts requested by the plaintiff. Rather, it argued that "any amount adjudged against it for Plaintiff's damages should…be added to ['A''s] assessment of damages against ['C']."

The court explained that:

Under Administrative Code of the City of New York §27-1031(b)(1), if an excavation was undertaken at a depth of more than ten feet below the legal curb level "the person who causes such excavation to be made shall, at all times and at his or her own expense, preserve and protect from injury any adjoining structures." In Yenem Corp. v. 281 Broadway Holdings… the Court of Appeals recently found that this law imposes strict liability on an owner of property whose violation proximately caused damage to an adjoining building.

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