What Happens When a Land Lease Expires in NYC? (2020) | Hauseit® Real Estate Guides

What Happens When a Land Lease Expires in NYC? https://www.hauseit.com/what-happens-when-a-land-lease-expires-nyc/ A land lease building is a condo or co-op building that does not own the land underneath the building itself. What this means is that the building pays rent to the owner of the land, under the terms of a land lease. Land leases are generally very long, and apartment owners pay for the land lease as part of their normal monthly co-op maintenance or condo common charge payments. You may be wondering: what happens when a land lease expires in NYC? In most cases, buildings would simply renegotiate and renew the lease with the land owner well in advance of the expiration date for the current lease. How risky the lease renewal process is depends on whether the land beneath a building is government owned or privately owned. For example, most people do not know that all of Battery Park City is on a government land lease. The Battery Park City Authority is a not for profit, government agency whose sole mission is to maintain and improve the neighborhood. There is very little risk that they won’t agree to renew land leases with reasonable terms. Therefore, an experienced buyer’s agent will be able to advise you that you have little to worry about buildings having land leases in Battery Park City. How to Find a Great Buyer’s Agent in NYC: https://www.hauseit.com/find-great-buyers-agent-nyc How risky is an expiring land lease for privately owned land? Land lease buildings in NYC built on privately owned land can present a major challenge in valuation and marketability, especially if a lease is close to expiring. Land lease buildings in NYC typically have a 99 year lease agreement with two 20 year extension options. What happens when a ground lease expires without renewal? This is a nightmare scenario for condo and co-op buildings built on ground that they do not own. The ground lease agreement states that all structures on the land, including anything added by the tenant, is forfeited upon the expiration of the ground lease. As you can imagine, the co-op or condo board will be in a pretty tough negotiating position when it comes to lease renewal with a private, for profit landlord. Because of the uncertainty involved with ground lease buildings in NYC, they actually decline in value over time especially as a lease expiration date becomes imminent. Why might land lease buildings in NYC be a good purchase? Because land lease buildings in NYC trade at a discount and can be very difficult to value when a ground lease expiration is looming, it might present unique opportunities to a buyer who is more concerned about lifestyle and affordability. For example, a land lease building in NYC might have cheaper 3 bedroom apartments available which would otherwise be out of a buyer’s budget. How to Buy an Apartment in NYC: https://www.hauseit.com/how-to-buy-an-apartment-in-nyc/