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New York City 5G Regulation – Wireless Regulatory Requirements NYC

New York City’s 5G Regulatory Playing Field in Flux?

With the advent of 5G a few years ago, numerous agencies in the City of New York undertook evaluations of their rules and regulations governing the deployment of wireless facilities throughout the five boroughs. Agencies like the Department of Information Technology & Telecommunications (DoITT) issued new RFPs for small cell access to City right of way, the Department of Buildings (DOB) reviewed its long-standing building and zoning interpretations, and the Fire Department of New York (FDNY) provided further guidance on its firefighter access requirements for rooftop installations. For those engaged with the City collaborating on the legal and practical issues associated with wireless siting for decades, it’s felt like déjà vu all over again.

The DOB’s new shift had an immediate impact halting permitting for most modifications to existing tower sites that had been previously permitted as a Use Group 6D facility similar to the numerous other public utility facilities allowed by right in commercial and manufacturing zoning districts.

In late 2018 in unpublished informal guidance, the DOB’s Technical Affairs division directed plan examiners across the City to implement numerous regulatory interpretive changes immediately. The effect was swift and serious and involved numerous provisions of the City’s Building Code, Zoning Resolution and TPPN #5/98 as formally adopted by the DOB to exempt rooftop cellular facilities from zoning over twenty years ago. Two years later, the wireless industry is still addressing many of the informal changes which are materially impacting the technical ability to deploy 5G equipment and provide New Yorkers with the best-in-class wireless services they deserve.

One of the little-known changes to come from DOB in 2018 was a new zoning interpretation reclassifying monopole towers in commercial and manufacturing districts as a “radio tower” use versus an “other communications structure” use as they had been defined and historically interpreted under the City’s Zoning Resolution. The DOB’s new shift had an immediate impact halting permitting for most modifications to existing tower sites that had been previously permitted as a Use Group 6D facility similar to the numerous other public utility facilities allowed by right in commercial and manufacturing zoning districts. It also resulted in the revocation of building permits for one proposed monopole behind a shopping center next to the Willowbrook Parkway on Staten Island as proposed by one of the wireless carriers (the “Carrier”).

On behalf of the Carrier, our office filed an appeal with the New York City Board of Standards and Appeals (BSA) challenging the DOB’s shift in interpretation of the City’s Zoning Resolution which had sought to reclassify monopole uses by interpretation and as a matter of law. We filed briefs arguing that the state’s highest court ruling in Rosenberg v. Cellular One, 82 N.Y.2d 364 (1993) holding that cellular facilities are ‘public utility’ facilities for zoning purposes, the language of NYC’s Zoning Resolution and the DOB’s own formal prior interpretations including TPPN #5/98 all recognized wireless carriers’ status as utilities under zoning laws in New York. In a well-reasoned decision published in November of 2020, a majority of the BSA agreed with the Carrier’s legal positions and upheld the appeal ordering the DOB to classify the proposed monopole at issue as a Use Group 6D by right facility for zoning purposes. New Cingular Wireless PCS, LLC, BSA 2019-281-A (BSA Decision).

Importantly, the value of the BSA Decision to the wireless industry is more than just one new tower victory in a commercial zoning district. It constitutes legally binding precedent that effectively recognizes that the thirty plus existing monopoles in commercial and manufacturing districts that were permitted by right are in fact legal and do not require any special permit approvals and the multitude of submission and hearings before community boards and the BSA itself. That alone represents a multimillion-dollar savings to tower owners and clears the way for DOB permitting of their tenant’s 5G upgrades at existing tower sites. Additionally, the BSA Decision reinforces with DOB the industry’s unique status under New York State zoning law (with corollaries in federal law), that requires balancing of regulatory requirements for wireless infrastructure with the critical services they provide in delivering public safety, innovation, economic development and internet access to the public.

Agriculture in the Hudson Valley: When State and Local Policies Conflict

This blog is the second in a series discussing the ins and outs of Article 25-AA of the Agriculture and Markets Law (AML) and its protections for farm operations including agricultural tourism (or agri-tourism) – such as farm stays and retreats, hotels and resorts, and beverage-based operations such as wineries, cideries, distilleries and breweries.

The Agriculture and Markets Law (AML) ensures that local governments shall not “unreasonably restrict or regulate farm operations” within approved Agricultural Districts. But what happens when local laws or regulations conflict with the State’s policy objectives? In that case, the local law or regulation is superseded by the State policy and is subject to nullification.

New York State’s Department of Agriculture and Markets (the Department) can proceed in several ways:

  • Opinion Letter – Upon a request from a municipality, farm owner or operator, the Department will issue an opinion letter as to whether the municipality adopted, proposes to adopt or is administering a law or regulation that will violate AML §305-a by unreasonably restricting or regulating a farm operation. Often, if the Department finds that an unreasonable restriction has or will occur, the municipality will communicate with the Department to develop mutually acceptable modifications to the law or regulation.
  • Order – At times, the municipality does not agree with the opinion letter and will not change its proposed law or regulation accordingly. The Department is then authorized to issue Orders to protect farm operations from unreasonably restrictive laws. These Orders are issued on a case-by-case basis only after conducting a thorough review, where both the farm owner/operator and the municipality have the opportunity to submit arguments to the Department. A party disagreeing with the order of the Commissioner could challenge the determination through legal action.
  • Direct Action – The Department’s Commissioner also has authority, upon receiving a complaint from a person owning property within an agricultural district, to bring a direct action against a municipality to enforce the provisions of the Agriculture and Markets Law.

Submissions to the Department should be accompanied by legal argument as to why the municipality’s law or regulation unreasonably restricts agriculture and why the assistance of the Department is necessary. The attorneys at Cuddy & Feder, LLP have successfully advocated before the Department on behalf of agricultural operations and are available if you believe a local law may unreasonably restrict your agricultural business.

Read Part 1: Agriculture in the Hudson Valley: Understand Your Right to Farm

close NYC storefronts during COVID 19

Rethinking Force Majeure in Light of COVID-19 (December Update)

On December 16th, 2020, the United States District Court for the Southern District of New York issued an opinion in which the Court interpreted a force majeure provision as it relates to the COVID-19 pandemic.

In JN Contemporary Art LLC v. Phillips Auctioneers LLC, the parties disputed whether performance under a New York contract was excused due to the COVID-19 pandemic, in accordance with a force majeure clause in the contract. JN Contemporary Art LLC v. Phillips Auctioneers LLC, 2020 WL 7405262 (S.D.N.Y. 2020). The force majeure provision in the contract stated that one of the parties had the right to terminate the contract “[i]n the event that the auction is postponed for circumstances beyond our or your reasonable control, including, without limitation, as a result of natural disaster, fire, flood, general strike, war, armed conflict, terrorist attack or nuclear or chemical contamination . . .” The Court concluded that the term “natural disaster” did in fact include and cover the COVID-19 pandemic, therefore excusing performance under the contract. The Court further held that the COVID-19 pandemic, which required the shutdown of normal business activity, “is the type of ‘circumstance’ beyond the parties’ control that was envisioned” in the contract’s force majeure clause, and that the “environmental calamities” and “widespread social and economic disruptions” listed in the force majeure clause are of a similar nature to the pandemic.

It is important to note that the case has not yet reached the higher courts, and, if it does, it is unclear how the 2nd Circuit Court of Appeals will rule on the issue. Generally, New York courts narrowly construe force majeure clauses, only excusing performance in circumstances where the force majeure clause specifically included the event that prevented performance. However, if this case is upheld, it has the potential to change New York contract law and provide contractual relief to parties affected by the COVID-19 pandemic, where relief previously may not have been available.

We will continue to provide updates as the courts further discuss and rule on the COVID-19 pandemic and its impacts on force majeure clauses in contracts.

Read more about force majeure

FCC Orders on Small Cell Regulation Upheld by Ninth Circuit

FCC Orders on Small Cell Regulation Upheld by Ninth Circuit

A recent Ninth Circuit decision upholding major portions of three FCC regulations is a win for the expansion of wireless communication.

In response to the dramatic increase in the deployment of small wireless facilities (small cells) to support 4G wireless networks and the even greater increase that will be needed for 5G networks, the FCC, in 2018, issued three orders related to small cell regulation. The orders—Small Cell, Local Moratoria, and One-Touch Make-Ready Orders—were all promulgated under the Telecommunications Act of 1996 and sought to modernize the FCC’s regulatory structure consistent with the intent of the Act to encourage the rapid deployment of advanced telecommunications technology and the expansion of wireless communication.

The expansion of wireless infrastructure and the deployment of small cells can sometimes be met with resistance from local governments and public and private utility companies that own the utility poles that small cells are attached to. The FCC’s orders met such resistance and were immediately challenged by various stakeholders, including municipal groups and utility companies. The various legal challenges were consolidated into one matter before the Ninth Circuit Court of Appeals, decided earlier this year. City of Portland v. U.S., 969 F3d 1020 (2020).
With minor exception, the Ninth Circuit affirmed the orders, finding that the FCC acted within the scope of its congressionally delegated authority and that its conclusions were reasonable.

Local Fees

The court upheld the FCC’s factual determination that excessive local fees have a prohibitive effect on wireless services and upheld the presumptively reasonable (safe harbor) fees the FCC set, which limit the application and yearly recurring fees that local governments can charge for small cells in the public right-of-way (ROW).

Shot Clocks & ROW Access

The court upheld the new time requirements (Shot Clocks) for local authorities to act on applications to deploy small cells: 60 days for applications for collocation of small cells on existing infrastructure and 90 days for location on new infrastructure. It also held that the Shot Clocks apply to all applications required for deployment. In a departure from past guidance, the FCC held that the presumptive remedy for failure to act within the Shot Clock timeframe is an injunction directing that the local government issue all permits necessary for deployment.
The court also upheld the FCC’s determination that the Telecommunications Act, and the FCC’s correspondent regulations, apply to applications to access the ROW. Specifically, the court held that in managing access to the ROW, municipalities are not acting in a proprietary capacity and therefore do not have discretion to either prevent ROW access or to manage the ROW to benefit the municipality’s financial interests.

RF Exposure

Often a hot button issue with the public, the Court found that the FCC had previously reviewed and addressed radiofrequency (RF) emissions standards and that the existing regulations related to RF exposure did not require amendment.

Local Moratoria on Small Cell Applications

The court upheld the FCC’s prohibition on local moratoria related to accepting, processing and approving applications for the deployment of small cells and the prohibition on “de facto” moratoria—local practices that unreasonably delay and effectively ban such applications. This determination also strikes down any local ordinances expressly banning 5G deployment.

Utility Pole Attachments

The court upheld the One-Touch Make-Ready Order, which expedites the process of attaching wireless infrastructure to utility poles. In upholding the order, the court confirmed that:

  • The FCC has the authority under the Telecommunications Act to regulate utility-owned pole attachments.
  • Wireless telecommunications companies attaching to utility poles can use their own utility-approved or qualified contractors to perform simple and complex make-ready work as it relates to their deployments on the pole and within the power-supply space above the utility pole.
  • Public and private utility companies are prohibited from denying utility pole access to a new wireless telecommunications company solely because of a preexisting safety violation that the new attacher to the pole did not cause.

Aesthetics

The only aspect of the Small Cell Order that the court reversed related to local aesthetic regulations. The court struck down the requirement that local aesthetic regulations be no more burdensome than those applied to other types of infrastructure deployments and the requirement that aesthetic regulations be objective. The court found the Telecommunications Act does permit some type of different treatment of different technologies, and that the “objective” requirement was itself vague. The court did affirm the FCC’s requirement than any aesthetic requirements be reasonable, however.

Conclusion

Portland upholds the FCC’s ability to interpret and enforce the Telecommunications Act and limits local authority over small cell deployments. While the realities on the ground are that small cell deployments will likely continue to face local resistance in some instances, Portland substantially limited the ability of local governments to construct a regulatory bulwark against deployment.

The New York State Office of Renewable Energy Siting Will Hold Public Hearings Starting November 17, 2020 on its Draft Regulations

In April 2020, New York State enacted the Accelerated Renewable Energy Growth and Community Benefit Act, which has been codified as New York State Executive Law § 94-c. The purpose of the Act is to expedite the review and permitting of major renewable energy facilities to help New York achieve its renewable energy targets as required by New York’s 2019 Climate Leadership and Community Protection Act (CLCPA).

A comprehensive introduction to the Accelerated Renewable Energy Growth and Community Benefit Act (the Act) and its potential long-term impacts is found in Neil J. Alexander’s “Support for the Energy Sector in New York State, Part 3: Long-Term” blog. As noted, the new siting rules will ensure that renewable projects larger than 25 megawatts (MW) can receive approval within a year of the application being deemed complete, which is in stark contrast with the previous siting process that could take several years or more. To help achieve this end, the Act established the Office of Renewable Energy Siting (ORES) to administer the expedited siting process in a predictable and timely manner, while providing opportunities for input from local municipalities. The ORES is tasked with promulgating regulations within a year and correspondingly issued its first draft regulations for public comment on September 16, 2020. Five in-person public hearings and two virtual public hearings on the draft regulations will be held across the state in November of this year. More detailed information on the public hearings, which begin next week, is available here.

Pre-Application Reports, Studies, and Local Engagement

The draft regulations include several notable features. Among the more salient aspects, the regulations require significant pre-planning before submitting an application to ORES and a completeness determination is made, which starts the clock on the one-year approval period:

  • Consultation with local agencies is required no less than 60 days before an application is filed. The Applicant must also meet with community members who may be adversely impacted with notice mailed to all persons within one (1) mile of a proposed solar facility or within five (5) miles of a proposed wind facility. Notice must also be provided no less than three (3) days before the date an application is filed.
  • At the earliest possible time in the preliminary project planning any Federal, State or locally regulated streams, wetlands and waterbodies must be delineated. The draft wetland and stream delineation reports must be submitted to the ORES and NYSDEC with ORES providing a final approved jurisdictional determination to the Applicant within 60 days of receipt of the Applicant’s draft reports.
  • The Applicant must also conduct a wildlife site characterization and provide the results to the ORES and NYSDEC. The Applicant shall then meet with the ORES and NYSDEC within four weeks of delivery of the draft wildlife report unless the meeting is waived by agreement. Habitat assessments and/or survey reports may also be required based on the characteristics of the site.
  • If any portion of the project is within an area of archeological sensitivity an Applicant must conduct a Phase IA archeological/cultural resources study and submit the results to the ORES who will inform the Applicant as to whether a Phase IB field study is required. If warranted by the Phase I studies, the Applicant may also be required to conduct a Phase II site evaluation to assess the boundaries, integrity and significance of cultural resources identified.

Lastly, if an Applicant is seeking a permit for a major renewable energy facility other than a solar facility or a wind facility, it must consult with ORES one year prior to submitting an application. Any Applicant is afforded the opportunity to request a pre-application consultation with ORES.

Compliance (or Non-Compliance) with Local Laws

Another notable feature of the Act and draft regulations is that Applicants are directed to construct and operate a facility in accordance with applicable local laws, except for those local laws that ORES determines, at its discretion, to be unreasonably burdensome. For each local law identified by an Applicant a statement justifying the exemption request must be provided.

The statement must demonstrate:

  • There are technological limitations that would make compliance technically impossible, impractical or otherwise unreasonable;
  • The costs to consumers associated with applying the identified local substantive requirements would outweigh the benefits of applying such provision; or
  • The needs of consumers for the facility outweigh the impacts on the community that would result from refusal to apply the identified substantive requirements.

Considering the foregoing, ORES may elect to not apply an identified requirement if it finds such requirement is unreasonably burdensome in view of the CLCPA targets and the environmental benefits provided by the facility. Local laws which the Applicant believes are unduly restrictive must also be identified for the local agencies as part of the preapplication consultation process along with an explanation of all efforts by the Applicant to comply with such local provisions. Municipalities further participate in the process by filing a statement of local law compliance with the ORES which can lead to an adjudicatory hearing if substantive and significant issues are raised.

Compliance with local setback requirements is one area that may provide the potential for reoccurring conflict. The setbacks established by the draft regulation’s Uniform Standards and Conditions are summarized in Tables 1 and 2:

The Uniform noise standards present another area of potential conflict with local regulation. The draft regulations establish that a maximum noise limit of 45 dBA for any non-participating residence and 55 dBA for any participating residence is permitted for both wind and solar facilities. Additionally, facilities are permitted on agricultural lands and where a facility proposes to permanently or temporarily impact active agricultural lands, the facility must be constructed in accordance with the New York State Department of Agriculture and Markets Mitigation Guidelines. This includes retaining an independent third-party consultant to monitor compliance with the required agricultural mitigation plan.

Host Community Benefits

To offset any potential burden, the Act and draft regulations also require the Applicant to provide host community benefits. A proposal was released by Department of Public Service Staff on September 23, 2020 suggesting that residential electric utility customers residing in a host community receive an annual bill credit for each of the first 10 years that the facility operates in the community. Facility owners would make an annual contribution of $500 per megawatt for major solar facilities and $1,000 per megawatt for a major wind facility which would be distributed equally among the residential utility customers of the community.

Determination of Completeness

Once an Applicant meets all of its pre-application obligations and submits an application to ORES it must be deemed “complete” before the prescriptive time limit to issue a permit accrues. The ORES must make this determination of completeness or incompleteness within sixty (60) days of receipt of the application. If the application is determined incomplete, ORES must notify the Applicant and list all identified areas of incompleteness and a description of the specific deficiencies. If the ORES fails to provide notice of its determination within sixty (60) days, the application is deemed complete. Notably, applications may only be amended prior to the notice of completeness, and amendments defined as “major” must additionally receive the express written permission of ORES before they can be filed.

As noted above, ORES must act on an application within one (1) year of the Office deeming the application complete and within six (6) months of the Office deeming an application complete for facilities which are proposed for a “repurposed” site such as a brownfield, landfill or other previously disturbed commercial or industrial use property.

For more information on the Act and the draft regulations contact energy@cuddyfeder.com.

Cuddy and Feder Law Firms New York

NYS Executive Order Extends Remote Notarization

On March 19th, 2020, Governor Cuomo signed Executive Order 202.7, which temporarily suspended the rule requiring physical appearance before a notary public and authorized notarization via audio-video technology. On November 3rd, 2020, Governor Cuomo extended the use of audio-video technology through December 3rd, 2020 with Executive Order 202.72.

In order to comply with Executive Orders 202.7 and 202.72, all parties must abide by the following procedures as outlined in the Executive Orders, and as set forth in the Guidelines posted by the New York Department of State: a) the signatory must present a valid photo ID to the Notary during the video conference, and may not simply transmit a copy of the ID prior to or after the video conference; b) the parties must be able to interact directly during the video conference; c) the signatory must be physically located in New York, and must affirmatively represent this to the Notary; and d) the signatory must transmit a copy of the signed document directly to the Notary, by fax or email, on the same date the document was signed, and the Notary may then notarize the transmitted copy of the document and either fax or email the document back to the signatory.

We will continue to monitor the Governor’s website for any extensions to Executive Order 202.7 as a result of the ongoing COVID-19 pandemic.

Greenwich CT waterfront

Life in a Flood Zone: What to Know When Renovating Shoreline Property

The majority of land along Long Island Sound and major rivers in New York and Connecticut are located within a special flood hazard area, otherwise known as the “100-year flood zone.” Floodplain development standards apply to a wide range of land use projects in the 100-year flood zone, including both large commercial redevelopments and single-family home renovations. For many of the communities in this area, flooding is a major problem and compliance with Federal and newly-updated local laws is a hot topic.

Given the heightened concerns over floodplain development standards and new municipal initiatives, Cuddy & Feder’s land use attorneys are seeing both commercial and residential projects impacted by requirements for compliance with flood zone regulations. Be it a new multi-family residential building, shopping center, addition to an existing home, tennis court restoration or even a new pool, floodplain development requirements can impact many types of projects.

Federal Guidance

The National Flood Insurance Program (NFIP) is administered by the Federal Emergency Management Agency (FEMA) and provides financial protection to property owners by offering flood insurance. FEMA’s Flood Insurance Rate Maps (FIRMs) identify flood hazards and risks for specified areas by classifying them into flood zones and assigning Base Flood Elevations which reflect the area of land that has a 1 percent chance of flooding in a given year.

When planning a project, it is important to know if you are in a special flood hazard area and if so, what the designation of flood zone and Base Flood Elevation the property is classified in.

FEMA flood zones are not only used to determine insurance requirements and costs, they determine construction standards and prohibitions for development. FEMA’s detailed design and construction standards can apply to new buildings, accessory structures and the alteration of some existing buildings that constitute a “Substantial Improvement.” These standards vary depending on the classification of the flood zone and in some areas, can prohibit certain designs altogether.

Additional Local Laws

In addition to federal law requirements, New York and Connecticut state laws require municipalities to adopt and enforce local flood plain management laws for flood-prone areas to reduce the risk of flooding. Many communities have adopted their own floodplain development laws that exceed FEMA’s technical standards, so it is important to review more than just the federal design bulletins when planning for a project. For example, design restrictions prohibit a basement in all areas of special flood area, due to concerns of hydrostatic pressure and flood forces on exterior walls that can compromise structural integrity of the building. The lowest habitable floor of the home must be elevated to or above base flood level, depending on what the local code requires for the flood zone classification. Another common obstacle is the restriction of or prohibition of fill, depending on the flood zone classification. This restriction can impact plans for accessory structures, such as tennis courts and pools. Note that many of these standards are applicable to renovations of older homes if the alterations constitute a “substantial improvement.”

A local official or agency is typically designated to administer the floodplain management program and will review architectural and engineering plans for compliance with floodplain requirements and issuance of a separate floodplain development permit.

Pending Updates and Amendments to Flood Zone Classification

The existing FIRMs for many local areas, including Westchester County, have proven outdated given technical advances in surveying and engineering capabilities. FEMA, in collaboration with State, county and local governments, is in the process of updating the flood maps to reflect more accurate elevations, water flow and drainage patterns based on available technology. Until the preliminary maps are finalized however, all development must adhere to standards for the property’s officially designated flood zone. Relief may however be available for those property owners seeking to make improvements in an area that is inaccurately classified. Flood maps can be corrected to reflect actual current elevations, which can change the flood zone classification of a property or structure. Such a request is made to FEMA through the Letter of Map Amendment (LOMA) or a Letter of Map Revision (LOMR) process. This process of amending or revising a flood map to reflect accurate conditions must be completed before filing a building permit or site plan application with the municipality because noncompliance with floodplain development standards precludes any other local approval authority or action. In rare instances, variances from these standards can be granted by the designated floodplain appellate body, commonly the Planning Board.

When planning a project, it is important to know if you are in a special flood hazard area and if so, what the designation of flood zone and Base Flood Elevation the property is classified in. We recommend having a recent and accurate survey of the property conducted so elevations can be reviewed and working with an architect who is familiar with floodplain development design standards. Cuddy & Feder’s land use attorneys can assist with flood zone development and have extensive experience working with FEMA’s mapping specialist and engineers to amend flood zone classification and have also obtained variances from local floodplain development codes in cases of specialized circumstances.

Cop directing traffic due to a road block

Rethinking Force Majeure in Light of COVID-19

As a result of the impacts of COVID-19, many parties are having difficulty satisfying contractual obligations. As such, now more than ever, it is imperative that parties have an understanding of how New York Courts interpret the force majeure doctrine and the doctrine of impossibility, both of which may be used to excuse non-performance in certain circumstances.

It is crucial that force majeure clauses are carefully drafted so as to include COVID-19 and other public health emergencies.

As a general matter, New York Courts narrowly construe force majeure clauses. A party will be excused from performance only if the force majeure clause includes the specific event that prevents that party’s performance. Reade v. Stoneybrook Realty, 63 A.D.3d 433, 434 (1st Dept. 2009). In circumstances where an agreement does not include a force majeure clause, or where an agreement does not specify the relevant occurrence as a force majeure event, courts will generally not allow a force majeure defense to be claimed. General Electric Company v. Metals Resources Group Ltd., 293 A.D.2d 417 (1st Dept. 2002). Since the force majeure doctrine will generally only be available where a provision in an agreement specifically allocates risk in case of a force majeure event, it is crucial that force majeure clauses are carefully drafted so as to include COVID-19 and other public health emergencies.

Where the force majeure doctrine cannot be used to excuse non-performance of contractual obligations, a party may try to excuse its non-performance under the doctrine of impossibility. The doctrine of impossibility excuses non-performance where, among other things, performance of the contractual obligation is objectively impossible. Reed Found., Inc. v. Franklin D. Roosevelt Four Freedoms Park, LLC, 108 A.D.3d 1, 7 (1st Dep’t 2013). Accordingly, New York Courts have held that performance of a contractual obligation is not excused when such failure is occasioned merely by financial difficulty or economic hardship, even to the extent of insolvency or bankruptcy. Id.; see also Ebert v. Holiday Inn, 628 F. App’x 21, 23 (2d Cir. 2015). In one of the early cases examining contractual relationships during COVID-19, the court did not excuse the defendants’ non-performance of a contractual obligation under the doctrine of impossibility merely because the defendants’ financial difficulties arose out of the COVID-19 pandemic and compliance with the PAUSE Executive Order. Lantino v. Clay LLC, No. 1:18-CV-12247 (SDA), 2020 WL 2239957 (S.D.N.Y. May 8, 2020).

Given New York courts’ hesitation to blindly use the doctrines of force majeure and impossibility to excuse non-performance, in the future, parties should pay particular attention to the force majeure clauses in their agreements and make sure such clauses are drafted with enough specificity to increase the chances that New York courts will rely on such a clause in order to excuse non-performance.

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Rooftop Solar Leases: Revenue

Many property owners in Westchester have unfortunately found their rental income streams negatively impacted by the COVID-19 pandemic. In the face of such unpredictability in the market, many landlords are looking at alternatives to traditional tenancies, and rooftop solar leasing is one such attractive source. But prior to entering into any rooftop solar lease, landlords should be aware of certain issues common to the solar industry.

First, solar leases tend to run for longer terms than typical office or retail leases. Most have terms of 20-25 years with options for one or more additional five-year terms. As a result, lease provisions related to the condition of the property and, more specifically, the roof, are especially important. A main point of negotiation is what happens if the roof needs to be repaired or replaced during the term of the lease, which is probable given the lengthy term. Solar tenants, of course, will try to pass the cost of removing/re-installing the solar facility, and any lost revenue thereof, upon the landlord, but there are many ways to reach a compromise on the issue.

Solar leases tend to run for longer terms than typical office or retail leases. Most have terms of 20-25 years with options for one or more additional five-year terms.

Generally, most solar tenants request a certain period of time for due diligence, approvals and construction prior to commencing rent payments under the lease. This period can range from as short as six months to as long as 36 months. During this period, the tenant typically has the right to terminate the lease if it determines that the solar project is not feasible. If the period of time is considerable, a landlord could request compensation in consideration for reserving the roof for the tenant.

Many solar tenants obtain financing to pay for the cost of constructing the solar facility, likely secured by the tenant’s interest in the lease. Therefore, the tenant will request that the lease contain various lender-friendly provisions. Landlords should review these provisions carefully, as they may restrict the landlord’s ability to exercise its rights under the lease after a tenant default.

Other typical issues include:

  • Assignment provisions: solar tenants typically seek to assign their interest in the lease to an operator of solar facilities
  • Access to light: solar tenants typically restrict the landlord from constructing any improvements on the roof that may impede access to sunlight (i.e., satellite dishes, wireless towers, etc.)
  • Guaranty of lease: landlords should consider whether or not to request a guaranty of the lease, either during the construction period or throughout the term
  • Insurance and roof warranties: the landlord should ensure that the solar installation does not increase the lender’s insurance premiums or void any roof warranties (some solar installations will penetrate the roof and others will not)
  • Taxes/PILOT: in New York, real property improved by a solar facility is exempt from re-assessment as a result of the solar facility for a period of 15 years, but the applicable municipality may nevertheless impose on the property a Payment In Lieu of Taxes Agreement, which, if not paid, will result in a lien on the real property

The Real Estate and Transactional Department at Cuddy & Feder is available to address all your solar leasing concerns.

NYC Law Seeks to Suspend Individual Guarantor Liability in Commercial Leases

Updated: October 30, 2020

 

NYC Law Seeks to Suspend Individual Guarantor Liability in Commercial Leases
Effective immediately as of May 26, 2020, individuals may not be personally liable for certain tenant obligations they agreed to guaranty. A new law signed by Mayor Bill de Blasio prohibits the enforcement of “a provision in a commercial lease or other rental agreement” involving real property located within New York City which provides that an individual guarantor is liable for rent, utility expenses, taxes, and/or routine building maintenance fees for which the commercial tenant is responsible if certain conditions are satisfied. These conditions relate to impacts suffered by the commercial tenant as a result of compliance with Governor Andrew Cuomo’s executive orders issued in response to the COVID-19 pandemic.

Accordingly, under the new law, if:

  • the tenant was required to cease serving food or beverage for on-site consumption pursuant to executive order 202.3 issued on March 16th; or
  • if the tenant is a non-essential retailer subject to in-person limitations pursuant to executive order 202.6 issued on March 18th; or
  • if the tenant was required to close to members of the public pursuant to executive order 202.7 issued on March 19th; and
  • the tenant’s default occurred between March 7, 2020 through September 30, 2020, then, the individual guarantor will not be personally liable for rent, utility expenses, taxes, and/or routine building maintenance fees for which the commercial tenant is responsible under the lease.

While the new law may seem to present a significant challenge for landlords seeking to enforce their rights against individual guarantors during the pandemic, practitioners have found that the law is ambiguous in a couple of key respects.

First, most guarantees of tenant obligations do not appear in a “commercial lease or other rental agreement”. Rather, it is typical to find a separate document wherein the individual guarantees the tenant’s obligations under the lease. The lease itself may not refer to a guaranty at all. Based on the plain reading of the new law, it is unclear whether the law will apply to prohibit the enforcement of a stand-alone guaranty.

Second, a number of ambiguities arise depending on when and how a landlord chooses to notice a tenant’s default under the lease, including during the time period set forth in the law.

In sum, while the new law may provide for relief to certain tenants during these unprecedented times, the specific application of the law remains unclear at present. The Real Estate and Transactional Department at Cuddy & Feder, led by Partner and Department Chair Michael L. Katz, is monitoring the situation and will continue to provide updates as developments in the new law unfold.