First published: Apr 2024
Panasia Estate, Inc. V. 29 West 19 Condominium Et Al.
TAKEAWAY: The developer intends to appeal the case to the Court of Appeals, not only to reverse the fees award here but also for a ruling that RPAPL 881 does not empower courts to award reimbursement of professional fees in the first place. Such a ruling would be a significant change in the current law, and so this case should continue to be monitored closely. For practitioners, the Panasia case is a cautionary tale. By starting an 881 proceeding rather than just accepting the terms of the license agreement originally proposed by the neighbors (even though the developer considered those terms to be unfair), the developer only marginally improved the terms of the license fees originally proposed by the respondents, but at the cost of literally hundreds of thousands of dollars in legal fees and years wasted in litigation. It is not clear whether the current bill to amend Section 881, which has not passed the Assembly or been signed by the Governor, will significantly change the calculus for project owners looking to negotiate the terms of access or whether it would have made any difference in the outcome here.
WHAT HAPPENED: This long-running dispute over RPAPL 881 just closed its latest chapter when the Appellate Division, First Department, affirmed an order requiring a developer to pay two neighboring properties a total of over $250,000 in legal and engineering fees in connection with the developer’s efforts to get a license to access the two properties to install protections as part of a construction project to add two additional floors to its own building.
The saga began in 2019 when the developer, Panasia Estate, Inc., which owns the building located at 33 West 19th Street, reached out to the two adjoining properties, the 29 West 19 Condominium and the building at 35 West 19th Street, to negotiate a license to access the properties and install protections.
The two neighbors conditioned granting a license on, among other things, having their legal and professional fees reimbursed, and also a substantial license fee to compensate for loss of use of their spaces during the construction project.
When those negotiations did not yield an agreement, the developer filed a proceeding against the two property owners (plus two penthouse unit owners in the condominium) pursuant to RPAPL 881 for a court order granting access to the neighboring property “on terms as may be just.”
The court entered an order granting access, but conditioned such access on the developer paying a graduated license fee schedule and the respondents’ legal and engineering fees, which at that time totaled nearly $70,000. The developer appealed, arguing, among other things, that RPAPL 881 does not authorize the court to award license fees or legal and professional fees. The Appellate Division rejected that argument in 2022, holding that “[t]he respondent to an 881 petition has not sought out the intrusion and does not derive any benefit from it... [e]quity requires that the owner compelled to grant access should not have to bear any costs resulting from the access.”
However, the appeals court reduced the amount of the license fee awarded to the neighbors and also remanded for evidentiary hearings to determine the actual amount of legal and professional fees incurred by the respondents to be reimbursed by the developer. By the time the lower court issued a determination, those fees had ballooned to over $250,000. The developer appealed once again.
IN COURT: The appellate court affirmed the decision to award fee reimbursement. The developer had argued that because the court had previously reduced the amount of the license fees owed by the developer, the neighbors could not be considered the “prevailing party,” and therefore were not entitled to have their legal and engineering fees reimbursed. The appellate court rejected the developer’s premise, explaining that the neighboring parties should not have to pay out of pocket to review the developer’s project and protect their own rights.
The developer also argued that a bill pending in the State Legislature would potentially provide a basis for denying an award of professional fees. But as the court observed, that bill “has not become law” and in any event would not preclude an award of fees “upon such terms as justice requires.”
COUNSEL for Panasia Estate PETER DEE, ALEXANDER TUTTLE Tuttle Yick LLP / for 29 West 19 Condominium, Lauren Cipicchio and Daniel Daly JULIE SCHECHTER, DALE J. DEGENSHEIN Armstrong Teasdale / for MKF Realty Corp. EVAN D. VAN LEER-GREENBERG Van Leer & Greenberg / Justice Lyle E. Frank
