It has been a long time since the City of New York embarked on a program of subway building with resulting cases defining the rights in the context of a condemnation proceeding. However, we are about to embark on another of those periods in New York City history when the subject will come up again in view of the planned Number 7 Line Extension, the Second Avenue Subway, the Long Island Railroad connection to Grand Central Terminal and the planned new railroad line from New Jersey to Penn Station.

The problem has never been the right to receive compensation for a taking of an interest in the property itself, but rather, the issue in the prior cases had been damages to abutting properties when either elevated railroads or subways were built within the street itself. Today, we see problems not considered in prior case law because today the problem is more complicated. One of those complications is the recently used form of ownership of condominiums and cooperatives both as to who makes claim and who receives the award pursuant to the internal agreements. A further complication is the new technology used in building the subways themselves, the use of rock boring machines which enable construction much deeper underground than in the last subway buildings era, particularly when the tunneling is deep under existing buildings. Then there is the effect on abutting properties of an open cut in the street into which the boring machine is dropped and then kept open to accommodate removal of the rock and dirt from below ground.

Recent events pointed up the below ground tunneling problem. Some time ago when the MTA was taking easements seventy and more feet deep under buildings along Park and Madison Avenues, we received telephone calls asking whether owners should file claims for the taking or take the nominal sums being offered in compensation. We answered that while there was a taking and a right to damage the question could only be answered by they going out and getting engineering advice as to the impact on the building both from the construction and later from the operation of the subway. We pointed out the MTA Environmental Impact Statement (“EIS”) discussed the subject. Whether such advice was sought we do not know or even whether the offered payment was taken or even whether a claim was filed, since we were not retained to file a claim. Our understanding is that both the EIS and the appraisals of the MTA were based on the proposition that by reason of the proposed subway being built far below ground and drilled through the bed rock there would be no impact on the properties affected. Based on the then known facts, that appeared to be a reasonable conclusion.

Fast forward to about two months ago, when we received a telephone call from a recent purchaser of a townhouse in Manhattan’s east side under whose property a tunnel for the Long Island Railroad connection to Grand Central Terminal was being built. He had, before buying the property, been advised of the subway to be built under his proposed purchase. He read the EIS and conclusions of no impact on the properties through which the tunnel was being built and made other inquiries and was satisfied that he could safely buy the property as there would be no discernable impact from the proposed subway.

So what occasioned the telephone call to us? Shortly before, he felt vibrations throughout his house and found out it was being caused by the drilling of the subway beneath his house. Inquiry by him of the MTA confirmed it was caused by the rock drilling machine beneath the house. We confirmed from the MTA that there had been a condemnation of easements in his property some time before. One by one his neighbors were experiencing the same problem and were up in arms. Our inquiry also revealed that the seller had filed a claim in the proceeding, the time for which having expired some time before. We assume an appropriate accommodation was made between the parties thereafter, as we heard nothing abut the situation after that.

But here is the problem. The MTA, in good faith, based on engineering advice, concluded there would be no impact on the properties affected. Inquiry by the above owner from the MTA had revealed they were reportedly as shocked by the impact as was the owner. The vibrations from the drillings was to be only a temporary inconvenience. The drilling machine, we were told, drills through bed rock at the rate of one foot per hour. Assuming the typical townhouse is twenty five feet wide the drilling should be well past any property in a few days. But what happens when the subway work is finished and trains are running. Does any one know whether they will cause similar vibrations? The EIS concludes it will not. The engineering advice reportedly did not foresee the vibrations caused by the drilling. Is it equally unreliable as to potential impacts from the running of the subway trains?

No one will really know until it happens. But when will that be and what does one do if a trial as to valuation is held before then. The Number 7 Line Extension was projected to be completed in 2012. Anyone want to bet the real date and what happens if, as now seems probable, there is a substantial delay before the subways are operational. The present condemnation for the Second Avenue Subway is for only a small section of the line and questions are being raised as to funding. When trains will actually run is a real question. Then, what about those who in good faith, based on the representations in the EIS as to impacts, waived their claims and received nominal compensation, if it turn out those projections were in error. Is it to be caveat emptor.

Now let us look at the rights of those abutting property owners where the subway is being built in the street, focusing on the condos and coops and with particular reference to Murphy v. State of New York, 14 A.D.3d 1276, 787 N.Y.S.2d 120 (2nd Dept., 2004), We had commented on that decision in our column on February 3, 2005. In that case, the Court, making reference to the particular provisions of the condo’s by-laws, found that where there was a taking of a “common element”, there lawn areas adjacent to townhouses, which caused a serious diminution in their value, the claim for damages was in the condo association rather than in the individuals who sustained the damages, even though, under the by-laws, the proceeds were to be distributed to all of the condo owners, not just to those who sustained the damage. While we believe the decision was wrongly decided, we are not the Court of Appeals and that case is still out there, albeit only in the Second Department. The problem is that the by-laws in that case are, while not exact, are remarkably similar to those we have seen in other condo by-laws.

Now let us look at what impact not only that decision might have but other problems as well. That takes a discussion of the rights of abutting owners when the subway is built in the street, as well as impacts from partial takings whether of improved portions or common areas, all of which will be involved in one property or another in these proposed takings. Looking at them, we think we know at least some of the problems, but we are not sure we know the answers, since many will be cases of first impression.

We start with proposition of what interest an abutting property has in a street, assuming, as is the case in most of Manhattan, the fee title is held by the City of New York. It was in the elevated railroad cases in the nineteenth century and thereafter that those rights were defined in cases such as Story v. New York Elevated R.R. Co., 90 N.Y. 122 (1882). Essentially the abutting owner has private easements of light, air and access and it is because the elevated railroad structures impaired on those rights that their construction was deemed a taking of those easements giving rise to the right to damages to the abutting owners. Earlier, in People v. Kerr, 27 N.Y. 188 and Kellinger v. Forty-Second Street, etc. R.R. Co., 50 N.Y. 206, it was held that building of a street level railroad (horse drown street cars) did not give rise to a damage claim as it did not interfere with the rights of abutting owners except in an inconsequential way. Lastly, in Culver Contracting Co. v. Humphrey, 268 N.Y. 26 (1935), the building of a subway in a street was deemed to not to give to the abutting owner a right to recover damages for their taking as no interest of the claimant was “taken”, limiting the claim to a separate damage action, should there be damages caused by the construction itself.

With that as a background, we now look at the various actions contemplated in addition to merely building a subway in the bed of the street. To start with, a large hole will be put into streets to permit the dropping of the rock drilling machine, the effect of which will be to close a portion of the street, There will also be the noise and dirt accompanying its digging and its continuation for the removal of the debris from below ground. Is that deemed a sufficient interference with the easement of access, pursuant to Story v. Elevated R.R.Co. to constitute a taking or is to be like Humphrey vs. Culver Contracting Corp. Will the fact it is not a permanent condition be the determinant. Then there are to be partial takings to accommodate subway stations and facilities for exhaust fans from the subway. Some will be in space owned by condo owners themselves and others will be in common areas. Then, suppose the running of trains in the area below the building, assumedly a common area, causes vibrations and depreciates the values of some apartments more than others. It is at that point that Murphy v. State of New York, supra, becomes a factor. Many of the buildings from which an interest in the real estate is being taken are either condos or coops. While we have not seen more than a few of their by-laws, those that we have seen are similar to that in Murphy v. State insofar as defining the rights of the parties in the event of a condemnation. What will happen when the subway exhausts gasses emanating from an exhaust facility built in a common area are directly below a particular apartment causing depreciation in its value? What will happen when a condo unit is taken but the by-laws define walls and ceilings as common elements? What happens when particular owned parking spaces are taken in a building’s garage and the garage is defined as a common element? What about the second floor apartment which will sit above the newly created subway entrance in either a common area or the space of another owner with its attendant noise which diminishes its market value. The by-laws we have seen do not begin to define the rights of the parties in any common sense way.

We suspect that between the very poorly drawn condemnation clauses and what we believe as the incorrectly decided Murphy v. State, there will be considerable litigation, the result of which we cannot predict unless in contemplation of the coming condemnations the by-laws of these buildings are rewritten as to condemnation

Reprinted with permission from the April 30, 2008 edition of the New York Law Journal © 2010 Incisive Media Properties, Inc. All rights reserved. Further duplication without permission is prohibited.