If the land lease is expiring before the anticipated mortgage term then banks will not give loan easily for buying apartment in those buildings until the land lease term is extended.
When considering a coop in a land lease, one should verify the length of the lease, of course the longer the better. In addition, the terms of increases should be defined, so there are no surprises. A coop purchase on a land lease may have a high maintenance and a low tax deductible .
If the lease is a long term lease then the only worries you have is the acceleration clause of the
Lease and that is usually reviewed and explained to you by your lawyer.
A land leased apartment sale price is much lower relative to the one that is not land leased.
Many time a land leased apartment will have a pretty high maintenance. So even after you pay off
Your mortgage, you will be helping the land lease holder pay off their landlord.
Best of luck.
Let me know if there are any other questions.
VP. Asso broker
Please email or call me for additional information.
Here part of the possible downside. 25 years are left. If you were to purchase and sell in 15 years purchasers will be thinking of how long they want to own and 10 years will shrink the audience. When a lease is expiring (usually renegotiated a a good amount of time before it expires) no one has an indication of the new terms but historically they are significantly higher increasing the maintenance significantly.
Another is that during the term of a land lease there are usually reset clauses. For example, the ground rent for the building is $1m/year with a 3% annual increase. The reset says every 15 years of the lease, the current payment number is reset using a formula and an index to get the number to current economics. If gas was the index and 15 years ago a gallon was $1, resetting today would change the payment to $4m increasing the maintenance.
Arthur "Ungie" Golden
Douglas Elliman | 1995 Broadway, 4th Fl| New York, NY 10023
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Commercial/Residential Sales and Leasing Services