Underpinning – Can You Dig It?
Urban developers often need to cross their neighbors’ property lines in order to efficiently construct their projects. Two of the more difficult challenges are (i) using the airspace of other property for construction crane overswing, and (ii) installing shoring under the neighbors’ building to properly protect it from movement during excavation. While using the property of another without permission is a legal trespass, there are different “ground rules” (pun intended) for going below the earth, compared to using airspace. This week we cover underpinning agreements; in a future issue we will be discussing tower crane swing issues.
California has detailed rules for protecting a neighbor’s property during excavation which can be used to force developers to make substantial payments to their neighbor or incur major costs. Each property owner is entitled to lateral and subjacent support from neighboring landowners. (Cal. Civ. Code § 832.) At the same time, the law permits landowners to “make proper and usual excavations” on their land for construction and improvements. These sometimes-competing rights of support for one landowner and excavation for another create a quandary for developers who must conduct extensive excavation while preventing subsidence on their neighbors’ land.
Landowners who intend to excavate their foundation must provide “reasonable notice” to their neighbors. (Cal. Civ. Code § 832.) The code provides that at a minimum the notice must state the depth of the excavation and when it is scheduled to begin. Although the statute does not define the when or how notice must be made, landowners should provide notice in writing, preferably by certified mail or verifiable means, with a sufficient amount of time for neighbors to prepare their property for the excavation. It is also wise to notify neighboring tenants of the upcoming excavation to avoid surprising the tenants, and receiving complaints.
Also, a landowner making excavations must not only use “ordinary care and skill,” but also has an obligation to take “reasonable precautions” to sustain the lateral and subjacent support its land provides to adjacent properties. (Cal. Civ. Code § 832.) Furthermore, if excavation is to be deeper than nine feet and the foundation of an adjacent building is also deeper than nine feet, the developer has an additional duty to protect the adjacent land and any buildings on the adjacent land, provided that the necessary license is given to enter the property, and is liable for any damage to the adjoining property and any buildings on it. (Cal. Civ. Code § 832.)
In practice, for many projects the only way to ensure an adjacent building’s stability is substantial underpinning, tiebacks or shoring. However, the statute does not permit a developer to enter the neighbor’s property unless the neighbor grants a license to the developer. Id. The developer has an obligation to protect its neighbor’s property—including buildings on the property—but has no right absent a negotiated license to enter the property to install underpinning or shoring. Some attorneys use this tension as leverage in negotiations by taking the position that if the neighbor does not grant a license, the developer has no obligation to protect the neighboring property. However, it is highly questionable whether this defense would work if damage occurred, and most contractors would not take this risk. Local building departments often carefully review the shoring plans to confirm that there is no risk of damage to a neighboring property.
Unfortunately, since there is no way to force a neighbor to grant access, developers are sometimes asked to pay for the right to underpin their neighbor’s property. Sophisticated real estate developers and owners often times consent to these agreements without requiring payment, knowing that underpinning and tiebacks will, in almost every case, make their building safer and improve their foundation at no cost. Smaller property owners and residential projects often use an adjacent construction site as an opportunity to increase revenue. In either case, the developer can expect to be required to provide a hefty insurance policy and broad indemnity for any damage that occurs. What is often negotiated is whether the developer is responsible for any loss of business or tenant claims for disruption during the construction process. The parties’ bargaining power and relationship will often be a major factor in how these negotiations turn out.
It seems that this problem would be ripe for a legislative solution, especially in urban environments where infill development has caught fire. Unfortunately, no solutions are pending at the State or local level. This may continue to be a cost of doing business since the thorny issues of private takings and giving benefits to developers may be a tough sell.
Development Impact Fee Deferral Program Set to Expire July 1
The city’s fee deferral program, which allows for up to 80 or 85 percent of project impact fees and BMR in-lieu fees to be deferred until the first certificate of occupancy is issued, is set to expire July 1, 2013. The program had been enacted in 2009, in the middle of the economic crisis, and was meant as a stimulus measure, and included a sunset clause. In our experience, this has been a very successful program, with virtually all projects taking advantage of it since its adoption. Action by the Board of Supervisors would be required to preserve the program. The Planning Commission will be holding a hearing on the effectiveness of the fee deferral program on June 13. The result of that hearing will be a recommendation to the Board of Supervisors to extend the program or let it expire.
DBI is currently informing the public that projects can take advantage of the fee deferral program so long as they have a complete permit application on file prior to July 1, as well as a fee deferral request on file. If no legislative action is taken, beginning July 1, all impact and in-lieu fees applicable to a project will be due prior to the issuance of the building permit or first site permit addenda authorizing construction.
RECON Is Upon Us
We are sure that many of our clients will be making the trek down to Las Vegas for the Annual meeting of the International Council of Shopping Centers (ICSC). Kevin and Andrew will be attending to take in some of the talks and make the rounds. For those of you who will be in Lost Wages for RECON, if we haven’t already talked and set something up, give either of us a call if you would like to connect during the show.
Hurtling Hurdles in the Upper Market
As a number of readers noticed, the title of the May 1 firm Update (“New Hurtles for Formula Retailers Looking at Upper Market Street”) included a grammatical gaffe. The title should have contained the noun “hurdle,” meaning an upright frame, typically one of a series, that athletes in a race must jump over, but instead contained the verb “hurtle,” which means either to move with great speed, or to fling with great force. Next time we edit a document containing homophones, we’ll apply more thyme and patients!
The issues discussed in this update are not intended to be legal advice and no attorney-client relationship is established with the recipient. Readers should consult with legal counsel before relying on any of the information contained herein. Reuben, Junius & Rose, LLP is a full service real estate law firm. We specialize in land use, development and entitlement law. We also provide a wide range of transactional services, including leasing, acquisitions and sales, formation of limited liability companies and other entities, lending/workout assistance, subdivision and condominium work.
