Home Buying in Midtown East>Question Details

Neelam, Home Buyer in New York, NY

What is land lease ? Is it safe to buy and apartment Ina land lease building ? What is the downside ?

Asked by Neelam, New York, NY Thu May 2, 2013

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This question was asked from this property: http://www.trulia.com/property/3113012814-303-E-57th-St-33G-…

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The building structure is owned by one entity whereas the land is owned by another landlord, in Battery Park land owned by government is leased to property owners.

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.
1 vote Thank Flag Link Thu May 2, 2013
Some co-ops buildings (as corporations) do not own the land on which the building is situated in fee simple. Instead, the corporation has a ground lease on the property. If you are considering buying into such a co-op building make sure that the term of the lease extends at least two years (the longer the better) past your anticipated residency unless the co-op corporation has an option to extend the lease at a reasonable expense level, or to purchase the land at a reasonable price. If such a lease expires without the purchase of the land, the shareholders will no longer have any equity in their units (apartments) and will occupy their premises as tenants.
1 vote Thank Flag Link Thu May 2, 2013
When a building does not rest on land that the coop owns, the coop leases the land from the land owner. Many buildings in Manhattan don't own the land and therefore must lease it. Each building negotiates a term for their lease, and a lease needs to be renewed several times over it's lifetime.
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 .
1 vote Thank Flag Link Thu May 2, 2013
The downside of a land lease is the lease of the building with the owner of the land.
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.
Fern Hamberger
VP. Asso broker
Fhamberger@corcoran.com
0 votes Thank Flag Link Sun May 5, 2013
Neelam, I have experience on the buy and sell side of land lease apartments. The Excelsior has 25 years left on it's lease. There are several downsides to land leases and several upsides. It all depends on a persons situation, finances, long term goals....

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.




Thanks,
Arthur "Ungie" Golden
Douglas Elliman | 1995 Broadway, 4th Fl| New York, NY 10023
C: 212.866.8717 | P: 212.712.6078 | F: 646.497.5476 | E: agolden@elliman.com
Commercial/Residential Sales and Leasing Services
Listings: http://www.elliman.com/aug
0 votes Thank Flag Link Sat May 4, 2013
Excelsior lease ends in 2064, so 49 years left and a solid reserve fund.
Flag Sat Jan 17, 2015
Excelsior lease ends in 2064, so 49 years left...
Brinkley Skye Keller Williams NY
Flag Sat Jan 17, 2015
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