No Common-Law Duty on Adjoining Owners to Prevent Excavation Stop-Work Delays; Pure Economic Loss Unrecoverable

1. Introduction

In 1992 Third Realty LLC v Third Ave NY Realty LLC (2026 NY Slip Op 03871 [1st Dept June 18, 2026]), the Appellate Division, First Department (Moulton, J.), addressed two “novel issues” arising from a Manhattan development dispute between adjacent landowners.

Plaintiff, 1992 Third Realty LLC, owns a nine-story building at 1992 Third Avenue. Defendant, Third Avenue NY Realty LLC (the developer), owns the adjoining parcel at 1990 Third Avenue and began excavation/foundation work for a new construction project. Plaintiff sued the developer (and its contractor) for, among other claims, strict liability under NYC Building Code § BC 3309.4 and negligence, alleging the developer’s work (including pile driving and “dewatering”) caused plaintiff’s building to settle and lean.

The developer counterclaimed for negligence against plaintiff, alleging plaintiff’s building was structurally deficient and “unsafe,” and that these alleged defects caused the NYC Department of Buildings (DOB) to issue a stop work order that delayed the developer’s project—seeking at least $16 million in purely economic damages. The Supreme Court denied plaintiff’s motion to dismiss that negligence counterclaim. Plaintiff appealed.

The First Department reversed, holding (1) plaintiff owed no cognizable duty to the developer to protect the developer’s excavation/foundation work from stop-work-related delays, and (2) even if a duty existed, purely economic losses were not recoverable on these pleaded facts.

2. Summary of the Opinion

  • The court dismissed the developer’s negligence counterclaim under CPLR 3211 because the developer failed to plead a legally cognizable duty running from the adjacent owner (plaintiff) to the excavating developer.
  • The court emphasized NYC Building Code § BC 3309.4 places the “preserve and protect” obligation on the party performing soil or foundation work—i.e., the excavator/developer—not on the adjoining owner.
  • The court further held that, even assuming some common-law duty existed, the developer’s claim sought only economic loss (construction delay/project value impacts) without alleging bodily injury or property damage caused by plaintiff— placing the claim outside the permissible scope of negligence recovery under New York’s economic loss principles.
  • The court distinguished Yenem Corp. v 281 Broadway Holdings (18 NY3d 481 [2012]) because that case involved economic losses tied to actual property damage to the building affected by excavation.

3. Analysis

A. Precedents Cited

1) Pleading standard on a motion to dismiss

The court applied the familiar CPLR 3211 standard from Leon v Martinez (84 NY2d 83, 87-88 [1994]): accept the pleaded facts as true and give the nonmovant every favorable inference—yet dismissal is still required if the pleading fails to state a cause of action.

2) Elements of negligence and the centrality of duty

Citing Ferreira v Binghamton (38 NY3d 298, 308 [2022]), the court reiterated negligence requires (1) duty, (2) breach, and (3) injury proximately resulting. The decision turned on the first element—duty—as “fatal” to the counterclaim.

3) Duty as a policy-driven legal question; limits on expanding duty

The court grounded its duty analysis in Court of Appeals guidance that duty is a legal question and is shaped by policy constraints:

  • 532 Madison Ave. Gourmet Foods v Finlandia Ctr. (96 NY2d 280, 288 [2001]) (existence/scope of duty is for courts).
  • Davis v South Nassau Communities Hosp. (26 NY3d 563, 572 [2015]) (courts are reluctant to expand duty; consider morality, logic, and social consequences).
  • Hamilton v Beretta U.S.A. Corp. (96 NY2d 222, 233 [2001]) (duty considerations include who is “best position to protect” against the harm).
  • Peralta v Henriquez (100 NY2d 139, 145 [2003]) (balance social benefit against costs/burdens of imposing duty).
  • Palka v Servicemaster Mgt. Servs. Corp. (83 NY2d 579, 586 [1994]) (duty analysis includes the risk of “unlimited or insurer-like liability,” quoted via 532 Madison Ave. Gourmet Foods).

These cases supplied the framework the First Department used to reject a new duty that would shift excavation-delay risks onto neighboring owners for the condition of long-existing buildings.

4) Traditional landowner duties: conditions/activities causing bodily injury or property damage

To illustrate what landowner duties typically look like, the court listed classic scenarios where off-premises bodily injury or property damage occurs due to conditions on land:

  • Mullen v St. John (57 NY 567, 569 [1874])
  • Ivancic v Olmstead (66 NY2d 349, 350-351 [1985])
  • Roark v Hunting (24 NY2d 470, 475 [1969])
  • Associated Mut. Ins. Coop. v 198, LLC (78 AD3d 597, 597 [1st Dept 2010])
  • Gellman v Seawane Golf & Country Club, Inc. (24 AD3d 415, 417-418 [2d Dept 2005])
  • A. L. Russell, Inc. v City of New York (4 AD2d 943, 943 [1st Dept 1957], affd 5 NY2d 794 [1958])

It then addressed activity-based duties—where landowners conduct operations that foreseeably injure neighbors—relying on:

  • 532 Madison Ave. Gourmet Foods v Finlandia Ctr. (96 NY2d at 290) (“activities” causing injury to adjoining premises)
  • Weitzmann v Barber Asphalt Co. (190 NY 452, 457 [1908]) (duty to take reasonable precautions where methods/devices may injure adjoining premises/public places)

The court cited additional “activities” cases—Doundoulakis v Town of Hempstead (42 NY2d 440 [1977]), Wright v Tudor City Twelfth Unit (276 NY 303 [1938]), Rohlfs v Weil (271 NY 444 [1936]), Althorf v Wolfe (22 NY 355 [1860]), and Simmons v Radio Print. Corp. (254 AD 521 [1st Dept 1938], affd 279 NY 783 [1939])— to underscore that the “activity” triggering potential duty is the defendant’s operation at the relevant time.

This mattered because, when DOB issued the stop work order, the only active operations were the developer’s excavation/foundation activities—not plaintiff’s.

5) “Control” as the touchstone of premises responsibility

The opinion framed duty in terms of control and capacity to prevent harm:

  • Butler v Rafferty (100 NY2d 265, 270 [2003]) (possession/control best positions party to prevent harm)
  • Ritto v Goldberg (27 NY2d 887, 889 [1970]) (“control is the test” for tort responsibility of property owners)
  • Tagle v Jakob (97 NY2d 165, 168-169 [2001]) (no duty where owner is “neither equipped nor empowered” to address hazard)

These principles supported the court’s conclusion that an adjoining owner cannot be tasked with “prophylactically” ensuring its building’s design/maintenance shields a neighbor’s excavation schedule—particularly where the excavator controls the means and methods of protection and remediation.

6) The Building Code’s excavation policy: strict allocation of protection burdens to the excavator

Central to the decision was NYC Building Code § BC 3309.4, which provides that whenever soil or foundation work occurs, “the person who causes such to be made shall... preserve and protect from damage any adjoining structures.”

The court viewed § BC 3309.4 and its predecessor (Administrative Code § 27-1031(b)(1)) as embodying a legislative policy that “those who undertake excavation work... should bear its costs,” citing:

  • Yenem Corp. v 281 Broadway Holdings (18 NY3d 481, 491 [2012])
  • K.K. Mach. Co., Inc. v Grillo (242 AD3d 720, 723 [2d Dept 2025])
  • Yenem Corp. v 281 Broadway Holdings (76 AD3d 225, 244 [1st Dept 2010] [Catterson, J. dissenting], revd 18 NY3d 481 [2012]) (quoted for the proposition that worse building condition increases excavator’s protection burden)

This statutory allocation directly undermined the developer’s attempt to invert responsibility through a negligence counterclaim against the adjoining owner.

7) Economic loss limits in negligence

The court rejected the developer’s effort to recover purely economic losses absent alleged personal injury or property damage attributable to plaintiff, relying on the logic of:

  • 532 Madison Ave. Gourmet Foods v Finlandia Ctr. (96 NY2d 280) (economic losses from construction-related disruptions generally not recoverable in negligence without personal injury/property damage; duty must have principled limits)
  • Roundabout Theatre Co. v Tishman Realty & Constr. Co. (302 AD2d 272, 272-273 [1st Dept 2003]) (even proximity/“zone of danger” does not permit purely economic loss recovery)
  • Caronia v Philip Morris USA, Inc. (22 NY3d 439, 452 [2013]) (rejecting significant deviations from tort jurisprudence absent present physical injury/property damage)
  • KSW Mech. Servs., Inc. v DiFama Concrete, Inc. (104 AD3d 818, 819 [2d Dept 2013]) (absent contract, no recovery for only economic loss from construction accidents unless negligence caused both property damage and economic loss)
  • Cedar & Wash. Assoc., LLC v Bovis Lend Lease LMB, Inc. (95 AD3d 448, 449) (tort claims fail when only economic loss is alleged)

The court distinguished Yenem Corp. v 281 Broadway Holdings (18 NY3d 481) because the plaintiff there suffered economic losses “tied to” property damage (excavation caused the building to shift/tilt and DOB vacated it), unlike the developer’s counterclaim here.

B. Legal Reasoning

1) No duty to protect a neighbor’s excavation project from delay

The negligence counterclaim sought to impose on the adjoining owner a duty to have designed/constructed/maintained its building so it would not become “structurally unstable” during the developer’s excavation, thereby avoiding DOB intervention and construction delay. The First Department rejected that duty for multiple, reinforcing reasons:

  • Misapplication of “activities” duty: Supreme Court relied on language from 532 Madison Ave. Gourmet Foods v Finlandia Ctr. about a landowner’s duty when it engages in activities that may injure adjoining premises. But here, the “activity” at the operative time was the developer’s excavation/foundation work, not plaintiff’s.
  • Statutory policy allocation: NYC Building Code § BC 3309.4 places the “preserve and protect” obligation on the excavator. Recognizing a common-law duty running the other way—requiring neighbors to maintain buildings to protect the excavation project—was “antithetical” to that policy.
  • Control/capacity: Plaintiff did not control the excavation, protective systems, or remedial stabilization measures demanded by DOB. Consistent with Ritto v Goldberg and Tagle v Jakob, a party who is not equipped or empowered to implement the relevant safety and stabilization measures should not bear tort duty for those harms.
  • Cost-burden imbalance and insurer-like exposure: Imposing such a duty would force owners of existing buildings to anticipate unknown future adjacent projects and potential delay costs—creating unpredictable, potentially massive exposure, the kind of “insurer-like liability” and “crushing exposure” warned against in 532 Madison Ave. Gourmet Foods v Finlandia Ctr. and the balancing analysis of Peralta v Henriquez.

2) Abandonment of any Building Code-based duty theory

The developer’s counterclaim alleged plaintiff had a duty to comply with the Building Code, but it cited no specific provision. The appellate court noted the developer abandoned this theory in motion practice and on appeal, and in any event, the only specific Code provision identified in the record—§ BC 3309.4—imposes duties on the excavator (the developer), not on the adjoining owner.

3) Pure economic loss is outside the duty’s scope even if duty existed

The developer alleged no bodily injury and no property damage caused by plaintiff; it sought only economic damages from project delay. The court held that even if one could hypothesize some duty, New York law generally forecloses negligence recovery for purely economic loss in this setting. Proximity alone does not create a duty to protect a neighbor’s financial expectations, consistent with 532 Madison Ave. Gourmet Foods v Finlandia Ctr. and Roundabout Theatre Co. v Tishman Realty & Constr. Co..

C. Impact

The decision materially clarifies New York City excavation litigation in three ways:

  1. Reinforces § BC 3309.4’s one-way allocation of responsibility: excavators cannot use negligence counterclaims to shift DOB-related stabilization burdens (and attendant schedule/financing losses) to adjoining owners by alleging preexisting building deficiencies.
  2. Constricts “stop work order” monetization via tort: developers facing DOB stoppages tied to adjoining-building movement cannot plead around the code regime by recasting delay damages as neighboring-owner negligence absent a recognized duty and non-economic injury.
  3. Limits satellite economic-loss disputes between adjacent owners: the holding deters expansive, finance-driven tort claims that could otherwise proliferate in dense urban construction where adjacency is common and delay losses can be enormous.

Practically, excavators should expect courts to treat protection/stabilization and associated delay risk as part of the excavator’s statutory burden. Adjoining owners, for their part, gain a significant defense against counterclaims premised solely on delay economics and alleged historical building deficiencies.

4. Complex Concepts Simplified

  • CPLR 3211 motion to dismiss: a request to throw out a claim at the pleading stage because, even if the facts alleged are true, the law does not recognize a valid claim.
  • Duty (in negligence): a threshold legal requirement—courts decide whether the defendant must legally protect the plaintiff from the type of harm alleged. Without duty, negligence fails.
  • Economic loss rule (in this context): negligence law generally does not compensate purely financial losses (like lost profits or delay costs) unless connected to personal injury or property damage (or otherwise grounded in a recognized special relationship/contract).
  • Strict liability under NYC Building Code § BC 3309.4: a statutory scheme placing responsibility on the party performing excavation/foundation work to “preserve and protect” adjoining structures; liability does not hinge on the adjoining building being in perfect condition.
  • “Dewatering”: removal of groundwater from a construction site; plaintiff alleged it pulled fine soils from under its building, contributing to settlement.
  • DOB stop work order: an administrative order halting construction due to safety concerns; here it cited potential hazard from soil/foundation work affecting adjoining property and required engineering remedial measures to stabilize the adjoining building.

5. Conclusion

1992 Third Realty LLC v Third Ave NY Realty LLC establishes that an adjoining New York City landowner does not owe a common-law duty to design, construct, or maintain its building so as to protect a neighbor’s excavation/foundation work from DOB stop-work delays, particularly where NYC Building Code § BC 3309.4 assigns protection duties to the excavator. The opinion also reinforces that purely economic delay damages—without personal injury or property damage caused by the adjoining owner—are not recoverable in negligence in this setting.