Michael Druc…, Real Estate Pro in 10022

Can someone assisting me understand the implications of a land-lease? Thank you

Asked by Michael Druckman, 10022 Tue Jan 1, 2013

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You've got three great answers below. One thing. I suspect you are new to the business. As a licensed real estate agent, you might want to have these types of discussions with your principal Broker or the more experienced Associates in your office before going on a public site showing everyone what you don't know. Good luck and Happy New Year.
0 votes Thank Flag Link Thu Jan 3, 2013
there are some Manhattan coop buildings that do not own the underlying land and are leasing the land instead (so called, ground lease or a land lease). There are 2 issues with purchasing an apartment in a land lease coop - higher maintenance than in other similar coops because the lease payments are passed through to the coop's shareholders, increases in such lease payments every few years (rent step ups) until the lease expiration, as set forth in the lease agreement, and mainly, uncertainty about what will happen after the lease expires, whether it gets extended and at what rental rate. The closer such lease expiration date is, the more uncertainty and risk buyers will have...
0 votes Thank Flag Link Tue Jan 1, 2013
Your lawyer can evaluate the Landlease to best explain the implications as to the financial complications involved with a landlease. Certain buildings in the city have landleases where the owner's are unstable and can raise the "rent" for the property to an extreme amount and then the maintenance will rise unreasonably. The date of the expiration of the landlease is critical since that is the date that all bets are off and the owner of the lease can charge whatever they feel like. If the landlease is for another 20 years you have to only be concerned about who you might want to sell the apt to.
The price of apts in Landlease situations are significantly less because of this risk. The properties in Battery Park City, I believe have stable Landleases and therefore their prices are pretty stable, with maintenance being extremely high. Sometimes you might just love the apt and the cost and maintenance are affordable. As long as the terms of the lease are reasonable it might actually be ok to buy.
0 votes Thank Flag Link Tue Jan 1, 2013
The reason the maintenance is so high is because this building is on landlease. In other words, unlike most co-op or condo buildings, the land underneath is not owned by the building and rent must be paid for the right to occupy that land. All of Battery Park City is this way, and scattered other buildings around the city. In general, the apts. in such buildings are priced lower to offset the high monthly cost. I hope this helps.
0 votes Thank Flag Link Tue Jan 1, 2013
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