Please Help! Land Lease Decision!!

Looked at that place in early 2011 before I found out the situation and bough elsewhere in BK Heights. Just walk away before getting more attached. It's shitshow with landleases everytime.

Btw you cant get a 30yr mortgage on a building that has 30 or less years left on the lease. Technically the owner can not
Renew the lease and you'd be out of a home. The assessments are the coops owners paying for the high purchase price of the land or the new higher lease cost.

The best reason not to buy in a land lease...just look at the history at the Excelsior 303 East 57 St.

Daniel178: "...it doesn't expire for another 31 years (and I'll probably be there a maximum of 15)."

How much are you willing to pay if it were to expire in 16 years?

You don't understand, Daniel178. D-day comes at 30 years for a land lease. When there is less than 30 years left, no bank will lend for any type of mortgage. The building becomes toxic. The lease must be extended or the land purchased by the coop. The land lord has you over a barrel. See past threads on here about land leases. The situation you outline is actually close to a worst case scenario to buy into.

The ad says the assessment is to pay for new windows, not taxes. It's a landmarked building, so they must've been pricey.

The step-ups are the periodic increases in the rent the co-op pays the landlord. Typically the rent resets every five or ten years, and is something like 6% of the unimproved value of the land, with that value being agreed upon by appraisers representing the landlord and the co-op.

Your rent/buy calculation is easier in that one factor -- the future value of your shares -- is already known: you know that in 31 years your shares in an asset-less corporation will be worthless.

So, what you're paying for is the net present value of 31 years of the difference between maintenance and market rent. The toughie, as usual, is predicting how both are going to change. You could guess that that's now $2000 per month, increasing by x% per year for 31 years.

One way to look at it is as if you're buying a 31-year annuity with an inflation-adjusted payout. Take it to an accountant or financial planner and have them run some numbers.

I know someone who lives in this building: DO NOT BUY THERE. The owner of the land wants a big rent increase on that land and your common charges could rise exponentially. Nothing is selling that building--nor has sold (with a couple of exceptions) for the past few years. Really. Run, don't walk.

land leases are for suckers!

decision is made as soon as one hears the two words: land lease

the decision being to cease further discussion of the property

Don't do it- bottom line at the end of you paying off your 30 yr mortgage you don't own the apt- so you need to look at your mortgage payments as basically rent. My MIL lives at 303 east 57th street and the prices are in a downward spiral. The closer you get to the conclusion of the lease the more value your apt will lose. There is a reason that most people won't touch them and they trade at a discount.

I don't a whole lot about land leases, but as a potential buyer, when I see one I run

Someone above got close to stating this explicitly, but I want to add it again:

If there are 31 years left on the land lease, that's minimally "ok" for your loan, but as soon as you've owned the place a year or more, and you decide to sell, it's very much NOT OK for your buyers' loans. Therefore you will have a very difficult time reselling, almost immediately after purchase (unless the lease is extended).

Of course to get the lease extended, the landowner will demand more money, and to obtain that money your maintenance will go up or your building services/maintenance will be reduced (or both). Either of these things occurring will cost you resale value too.

buy or lease. Don't buy AND lease

With a land lease, the only answer is NO.

In real estate, the land tends to increase in value over time, while the improvements depreciate in value over time. It makes no sense to buy the depreciating portion of the asset and lease the (potentially) appreciating one. If you ask me, land leases should be illegal except for mobile homes. There's no societal benefit to having them and a lot of societal risk.

Even in a best-case scenario, where the co-op eventually buys the land, it's usually at such a high price that maintenance alone can be the equivalent of rental costs. And from what I gather, it usually triggers a decent number of foreclosures/short-sales from people who just walk away from a hopeless situation. Stop the madness and ban land leases.....

@lad I totally agree with your comments. Land leases should be banned. You're so right in stating you own a depreciating asset while the land is appreciating. Consequently the outrageous common charges make your apartment less competitive and limits the potential pool of buyers.

No one is ever compelled to buy into a land lease apartment or to develop a building under such an arrangment. If free-thinking individuals choose to do so, why is it government's role to stop it? Should the government also determine if you should buy a coop or condo or rent? Everyone's a victim. Government will protect you from yourself and land lease coops. Please. Isn't there enough we need government to focus on already?

walk.

People need to do a lot more due diligence when examining the land lease. Some land leases allow the Coop Corp to buy the land for a set price OR for a nominal price ($1.00).

I would like to add something that many forget. The bank (although they may not) needs to take into account that the borrower may default on the loan AND they will need to sell the property in foreclosure.

Let's assume there is 31 years left on the lease and the borrower takes out a 30 year mortgage. In year 10 the borrower goes down a spiral, loses their job/money and defaults. Now the bank wants to foreclose with 20 years left on the loan/security agreement and 21 years left on the lease. The price the bank will be able to sell the unit would be much much much less if there is no solution to the land lease.

The bank will have to pay the monthly maintenance (which could be higher) for that time too after they foreclose.

The bank SHOULD take this into consideration when doing a loan....they don't always do it. I don't believe 30+ years is the magic number either.

The bottom line, get a good lawyer who deals in Coop transactions. Make sure he comes recommended by one of the idiots who trolls this site.

What kind of ppl buy into land-leases?

- clueless foreign buyers
- mega millionaires who care nothing about equity
- desperate/cluess first time buyers
- buyers from Central London where 100 year leases are the norm.

or is there a class of people where it makes perfect sense

Land leases aren't all the same. Some have a right to purchase at the end of the lease.

Bugelrex, that is somewhat untrue.

It makes sense to buy a land-lease building after doing proper due diligence and seeing the TRUTH.

Can you purchase the land after the lease? Is the price nominal?

How many years left on the lease? 50+?

Is there a set renewal rental value at the end of the lease?

Consigliere -- please post a reference to an actual ground lease coop in Manhattan where the underlying land was purchased (or can be purchased at a future date) per contract at a nominal price such as $1.

West 34, my exact quote was: "Some land leases allow the Coop Corp to buy the land for a set price OR for a nominal price ($1.00)."

I never said one was purchased for $1.00. I was just giving an example of a nominal price.

One Brooklyn Bridge has a land lease that allows the building to purchase for $1 at the end of the lease.

One Brooklyn Bridge is a condo. Not a land lease coop. Land is city owned (like Battery Park City).

Consigliere - I can read, can you? So again - please post a reference to an ACTUAL ground lease coop in Manhattan where the underlying land was purchased (or can be purchased at a future date) per contract AT A NOMINAL PRICE (like $1).

In other words an ACTUAL example (or let me guess, you just like to call other people here idiots while you spew made up bs).

I'd have a good RE lawyer take a close look at the 1 BB Park land lease/offering memo--it is likely not as simple as described by 1BB Park cheerleader @nyc_observer

West34 please CALM DOWN! Grab a xanax and a scotch. Nobody wants to e-fight. My point was land leases are not the enemy and due diligence is your friend. As for your post....

One Brooklyn Bridge is a leasehold condo. It is done by statute.
http://law.justia.com/codes/new-york/2006/real-property/rpp0339-e_339-e.html

Just for fun though, this condo has the ability to purchase the land from the STATE OF NEW YORK for $1.00 (aka a nominal price). They rent the land for 99 years and than can purchase.

Also, I am saying only the following again "Some land leases allow the Coop Corp to buy the land for a set price OR for a nominal price ($1.00)." There is an OR not an AND. Now if you want read the terms of the ground lease for every building in NYC and do your own due diligence, go for it.

I am not going to claim I have a knowledge of roughly 100+ ground lease coops and the prices to purchase the land in them. I am not going to claim I know every coop that purchased the land and the price they paid.

I am just saying, for the last time, "Some land leases allow the Coop Corp to buy the land for a set price OR for a nominal price ($1.00)."

I, FOR THE SAKE OF ORIGINAL POSTER, was explaining that it the ground lease could be a non-issue.

All I'm asking for is ANY example of a COOP land lease that ever had or would have the option to buy the land at a nominal fee. You just made that statement, for the third time, and all I'm asking for is some evidence that it's true.

West34, I understand what your asking for. I don't have the information for you at this time, I am sorry I can't help you further with that information.

There are a bunch of buildings as you know with ground leases and I personally have only dealt with 3 of them. So I am not that familiar with the SPECIFIC price to purchase the ground lease on most. I don't know the FULLY history of coops that purchased the land either.

Bottom line,IMO, don't buy anything with a land lease.

Especially from RAL.

A buyer for a unit in this type of building might be someone who could pay cash (no worry about mortgage), and plans to stay over 15 years. Say, 20 years. And is willing to think of it as a rental situation. Because if you get ANY money when you sell it, it would be a nice apartment for a good rental price. If you just give it away, it will be pretty much market rate for a nice rental. It is not an investment situation most likely. Although it could be. You don't know until you see the lease agreement.

Oops. I posted too soon. The land lease terms are $75,000 per year plus a sum designated as "additional net rent", which was defined as "15% of the gross income in excess of $175,000 per annum received by the Tenant in the operation in and from the sub-tenants of the Demised Premises".

I know the lease holder of the building and dont think he plans on extending the lease so i would run

The land lease was signed in 1959 and it specified that the "tenants" - ie the building owner, had the option to renew the lease three times - First Renewal term was 1980-2001, the Second Renewal Term was 2001-2022 and the Third Renewal Term is 2022-2043. There is no option listed in the lease agreement to renew the lease after that and from what I have been able to gather from the lawsuits and the bad blood that seems to exist between the land lease holder and the co-op board this lease will not be renewed which means that if the land lease holder wants to , he can evict everyone from that building and would be within his rights to do so. This seems unlikely to happen so most likely the building would return to being a rent stabilized building and everyone would become renters. The building was rent stabilized at the time the lease was signed in 1959 and in 1984 the tenants decided to form a coop and the State Attorney General approved it, which seems odd given the land lease issue. So from what I have been able to gather the shares that you buy in this building are essentially worthless and what you are buying is essentially a lease in what will be a rent stabilized apartment building. I think if you look at it that way - that you are paying to lock in a relatively low rent in a desirable neighborhood - then that would be a more realistic outlook than looking at it as an investment that will appreciate over time because it won't. It might make sense to buy if you can get the price below $300,000 and get a 15 year mortgage and pay it off 12 years before the land lease comes due. But would you stay that long? And what happens after that? It's still not clear to me exactly what the land lease holder is entitled to do after the lease expires and whether the building reverts to him or who actually owns the physical building itself. Would he be required to buy the apartments back from people or would they just be squatters that he would evict? I have no idea.

I was looking into this as well because I saw a apartment in Brooklyn hights and I thought this was my chance .  I looked into it and my lawyer said to run. There are alot of apartments already rented out for well above what is considered stabilized and the you don't actally own a apartment you just own shares in a coop that is reverting to the owner . 
I Googled the original coop offering when the shares where offered it was clear in the offering that building and land will revert back to owner so you are only buying a long term rental. Based on the previous litigation it doesnt really seem like the owners of the land wants to make any deals . So as much as I would love to own here at this price I'm not taking the risk