The first sign that an apartment is in a landlease building is the monthly carrying costs will likely be much higher than similar apartments on the market - because the ground rent is wrapped in with the common charges.
Since these types of buildings do not own the land, they also do not pay property tax, which can minimize some of the deductions an owner might receive.
Accordingly, the purchase price is generally much lower. Which may appeal to those with strong cashflow, but limited savings, and can allow them to own something bigger and better than they otherwise could afford. Careful calculations and personal planning will determine whether the lower buy-in will make the higher monthly carry + some additional risk factors into a smart investment.
Land in these circumstances is generally leased for between 50 and 100 years, with renewals happening at regular intervals well before the expiration. Banks will look at the length of the new mortgage compared to the number of years remaining on the land lease. So a bank may be unlikely to provide a 30-year mortgage for a unit whose land lease expires in 20 years.
Not every bank will lend in a landlease builidng, and some buildings struggle to get financing at all, such as Carnegie House near Billionaire's row - where the land is EXPENSIVE. Their ground rent fees are due to re-set in 2025, creating finances so volatile that lenders aren't able to accurately evaluate whether a borrower will be able to keep up. Therefore, buyers must often pay cash, and it's usually very wealthy buyers that take advantage of these super low prices, that can afford the risk. 3 bedrooms in this building has recently sold as low as 300k!
A "lease abstract" will outline all the details in one place. Who owns the land? What is the tax structure? What are the lease terms? When is the land due to be re-appraised? How is the physical and financial health of the building which might impact additional increases in monthly costs?
When buying in a building on land leased with a private landlord, you should hire an attorney who is a specialist in this field (to whom I will connect you) to look at how much payments have gone up historically and where they are likely to go.
The risk tends to be lower when the government owns the land underneath a building, such as Battery Park City which was built on land excavated from the sites including the original World Trade Center. The whole community is owned and managed by a public benefit corporation created by New York State, and instead of paying property taxes, individual owners who live in these buildings are charged "PILOT" (Payment in Lieu of Taxes) payments.
20 River Terrace, 11M, another land lease building we sold last year.
Landlease buildings are typically co-ops or condops, meaning co-op ownership of shares, with condo rules. Here are some current listings in landlease buildings. All with different types of arrangements.
UPPER WEST SIDE
5 BD 6 BA 3882 SF $6,500,000
*OFFERING YEARS OF FREE (MUCH HIGHER THAN MARKET RATE) MAINTENANCE TO INCENTIVIZE BUYERS
TRIBECA
3 BD 3 BA 1872 SF $4,395,000
*THIS BUILDING WAS FORMERLY A RENTAL CALLED TRUFFLES TRIBECA, NOW CONVERTED BY RELATED INTO A LUXURY CONDOP
GREENWICH VILLAGE
0 BD 1 BA 0 SF $550,000
UPPER EAST SIDE
3 BD 3 BA 2000 SF $1,075,000
MURRAY HILL
1 BD 1 BA 0 SF $659,000
LENOX HILL
2 BD 2 BA 0 SF $999,000
Carlin Wright
90 Fifth Avenue, 3rd Floor
New York, NY 10011
Phone: 917.275.4714
Email: [email protected]
