Rosenberg & Estis, P.C. Secures Substantial Condemnation Award For Award For Owner Of Property On Eleventh Avenue Affected By The No.7 Line Subway Extension

Rosenberg & Estis, P.C. SECURES SUBSTANTIAL CONDEMNATION AWARD FOR PROPERTY OWNER AFFECTED BY THE NO. 7 LINE SUBWAY EXTENSION

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Rosenberg & Estis, P.C., New York’s largest real estate law firm, through Norman Flitt, successfully negotiated a settlement of a condemnation proceeding wherein the claimant, 220 Eleventh Avenue LLC, an entity associated with The Moinian Group, sought compensation for temporary and permanent easements taken by the City in connection with the extension of the 7 Line Subway System. The permanent easement on this particular property involved the construction of a subway vent building, rising approximately 58 feet on the property, which would remain in place permanently. Under the terms of the easement, the property owner had the right to construct a 148′ building around and over the vent building, containing ground floor parking and commercial space and approximately 12 floors of luxury condominium units.

Previously, Rosenberg & Estis, P.C., acting through Richard L. Sussman and William Byers, negotiated the easement agreement, whereby the City acquired interim easements for access and construction of the vent building and other subway improvements and the permanent easement for the vent building. The easement agreement was quite comprehensive, governing the terms of the acquisition, the construction, maintenance and operation of the vent building and other subway improvements, and the owner’s subsequent construction of a residential building on top of the vent building. The easement agreement also provided critical protections for the owner, including, noise and vibration limits and designated times at which the City could test the ventilation system, as well as remedies for the City’s failure to comply. As the vent building, escalator tunnels and other structures to be constructed by the City were intended to provide owner’s building with structural support, the agreement required a process for additional compensation for any deviations from the baseline plans presented to owner and what was actually constructed. The City was further required, subject to certain limitations, to comply with all environmental laws with respect to the site, whether pre-existing or introduced by the City. Once the easement was in place, the City completed the vent building and the condemnation claim proceeded in Supreme Court through the appraisal process.

The case presented unique issues in Condemnation Law insofar as the City claimed that the permanent easement and the construction of the vent building on the property actually made the property more valuable by several million dollars. The City justified this finding by arguing that the owner would save millions in construction costs for the foundation as a result of the City’s construction of the vent building. Previously, the City had made an advance payment to the owner based on an earlier appraisal, whereby the City’s appraiser determined that the condemnation had damaged the owner enough to justify a substantial award. That appraisal was subsequently amended by the appraisal containing the negative valuation. In contrast to the City’s view of the vent building’s impact on the property, the owner’s appraiser claimed that the loss in value as a result of the vent building would be many millions more than the advance payment.

The negative valuation in the City’s amended appraisal report created issues of first impression with respect to what constitutes just compensation in a condemnation proceeding involving a permanent easement. Owner argued that it was not “just compensation” for the City to pay nothing to the owner, and to seek, in addition, to recover the advance payment made previously, plus interest. The matter was before Justice Shlomo Hagler in Supreme Court, New York County, who found the case of considerable interest.

As the parties were preparing for trial, we were advised by our client that its construction plans had changed and that the client now needed to modify the easement argument to allow its building to be constructed over the entire top of the vent building. Previously, the owner’s construction plans provided for a building to be constructed only over three-quarters of the top of that building and the easement was drafted in conformity. Any modification of the easement agreement required not only the City’s consent, but also required the consent of the MTA, which was not a party to the condemnation proceeding. The need to modify the easement agreement greatly enhanced the City’s leverage and presented an enormous challenge to Mr. Flitt as he proceeded with settlement negotiations.

Given the unique condemnation issues presented, and the lack of reported case law involving permanent easements and subway vent buildings, it was necessary for Rosenberg & Estis to thoroughly research the valuation and appraisal issues presented, and to work closely with the owner’s appraiser in the preparation of a rebuttal appraisal report in response to the City’s negative valuation. Ultimately, through perseverance, a substantial amount of “new money” above the advance payment was obtained, and the City agreed to consent to any proposed modifications of the easement agreement that would ultimately be agreed to between the owner and the MTA in discussions that were pending.

Rosenberg & Estis has previously successfully handled condemnation cases, including obtaining, after a trial, a multi-million dollar in favor of the Riese Organization for an assemblage project in Manhattan. In addition, Rosenberg & Estis has negotiated and drafted easement agreements between the City and property owners, including Extell Development Company and other Moinian entities.