In a case that had the potential to upend the world of subway construction, the Appellate Division affirmed the proposition that commercial property owners who suffer financial damages as a result of neighboring subway construction work may not recover damages for lost rental income from the MTA or the contractor. So long as there is no property damage resulting from the work, an abutting property owner must endure the temporary inconvenience of subway work, no matter how much it interferes with its business operations.

MacArthur Property owned the ground floor commercial space in four buildings directly abutting the Second Avenue Subway project being constructed by a joint venture of Skanska USA Civil Northeast Inc., Schiavone Construction, and JF Shea Construction Inc. (the “JV”). Although there was no physical damage to its properties or any alleged negligence on the part of either the MTA or the JV, MacArthur alleged that the disruption to the sidewalks and street outside its tenants’ businesses for many years constituted a nuisance and a trespass, and otherwise infringed upon its “easement to light, air and access” to which it was entitled as an abutting property owner. It sued for over $20 million in damages for lost rental income.

The risk to the JV was that it could be liable for damages up and down the Second Avenue corridor simply for following plans and specifications furnished to it by the MTA. Case law from earlier subway construction in NYC was not especially favorable to the contractors. It had held that the contractors were liable for damages resulting from interference with the property owners’ easement. It further created a distinction between work for a “street purpose” (which was protected) and subway work which it found not to be for a street purpose. Moreover, early case law had held that there was no immunity permitted for what the court found to be a mere “proprietary” function, rather than a “governmental” function.

In response to summary judgment motions below, the court dismissed the claims of MacArthur Property and granted the MTA’s and the JV’s cross-motions. Justice Shulman, in a decision ultimately relied upon by the Appellate Division in its affirmance, recognized that the world had changed since subway construction over 100 years ago. Modern tunnel boring machines no longer interfere with the lateral support afforded to adjoining properties, and no longer damage every building in its wake. Furthermore, it held the “street purpose” distinction to be an anachronism no longer serving a useful purpose.

Instead, the court held that an adjoining property owner must bear the inconveniences of public construction for the greater good, provided the interference is not permanent and does not physically damage its property. 

The JV was represented by Randy J. Heller, Esq. of Gallet Dreyer & Berkey, LLP.

For a pdf of the decision by Judge Martin Shulman, J.S.C., please email rjh@gdblaw.com.

The further read about this case: 
Law360: NY Court Clears MTA in $20M Row Over 2nd Ave Subway