Staring at a land lease

Get your attorney on the phone and have a nice chat about land leases. I won't show apartments or accept listings in land leased buildings, that's how strongly I personally feel about it. You need the facts explained by an expert so you can make a deeply informed decision.

I was under the impression that most upper east side co-ops have ground leases.

The real issue is when is the lease going to come up for renewal, isn't it? If it's not for 30 years, you might be okay.

I agree with @kharby2 and advised cousins to run as fast as they could from the building they were looking at.

The issue is not only how many years remain on the land lease, it is also how often they reset and what the terms are. The biggest problem is as the land lease either approaches a new reset or gets closer to expiration, the value of the apartment will continue to decrease. This is because after each reset there may be a major increase in the underlying maintenance fee of the apartment.

The apartment my cousins were looking at experienced a 35% increase in maintenance fees after the last reset. In addition, because the board was either poorly advised or just decided to attempt to arbitrate what were clear terms in the land lease, they fought the increase and caused the coop an additional $1.2 million in fees which were funded through additional borrowings on the underlying mortgage.

Meanwhile after reviewing the financial statements the building also had issues with covering their operations with the fees coming in from maintenance and rent on a garage and some commercial space. it was quite clear that they were about to have another increase in MF to cover the costs. In discussing what a MF should be on a 2br on the upper east side they were about $1500 above this which largely accounted for the "discount" in cost of the apartment compared to other similar sized apartments.

stay away from land lease buildings

Please do yourself a favor and at least read the prior threads on land lease bulidings on here. They have been discussed at great length. Advice on this thread is already wrong. For instance, you are absolutely NOT ALRIGHT if the lease expires in 30 years. At 29 years 364 days prior to expiration, most banks will no longer give mortgages for units in the building and you will for all intents and purposes have no buyers should you wish to sell. This is because a 30 year mortgage would extend beyond the term of the land lease and that is the measuring stick banks use to decide whether to extend loans to a building. If the collateral will potentially disappear before the 30 year term is satisfied, then the bank won't lend.

Also, "most" coops on the UES own the land they are built upon. "Most" ARE NOT land leases. If you cannot afford what you want, then you cannot afford it. Rent. Buying into a land lease situation out of desperation is foolish. You need expert guidance here from a RE attorney you trust and who understands these things. An independent financial advisor should also be consulted. You are making possbily the biggest financial decision of your life. Shouldn't you be as cautious and thoughtful as possible?

no way it can be that hard to find a 2 BR <1.2m in UES. You just have to look east of 3rd or above 72nd.

kyle has this right... Land lease units are a sub optimal choice by any measure. They are: 1) illiquid, based on the (deservedly) poor perceptions of land leases in the market 2) Inherently complex, in that the land lease is a separate commercial construct, which can vary widely in terms of its impact to your monthly expenses, and to the marketability of the building/unit 3) Financially unwise for the first time buyer, or the buyer on a limited budget - there are cases where a unit in a land lease building, discounted appropriately, can create a business opportunity for an investor or a sophisticated buyer. 4) Not your only choice - so why make a suboptimal choice, given the wide variety of alternatives?

How do I know the above? I owned a unit at The Forum for two years - terribly run building, awful land lease terms, high maintenance and like Miamia, I was a first time buyer who "backed into" the economics of the monthly payment. It ended well for me - I sold and made money, and got into a much less risky coop, but it took a YEAR to sell, and multiple deals fell through... Had I been close to drowning, I would have drowned waiting for the lifeboat.

just say no.

You can't get a government guaranteed loan on a building with a ground lease, so if you do dip a toe, you'll be paying a much higher interest rate.

This should have ended with kharby2's post.

DO THAT ASAP!!!!!!!!!!!!!

Talked to the attorney, he says exactly what most of you say.
Are you all attorneys !! Nice helpful Attorneys.
Not doing it, cant handle the stress for another 30 years.

The ground lease at 27 E 65th ends in 2058. The landowner, the co-op, and the outfit that rents the retail space have modified the lease several times since 1958, but the term has never been extended.

I don't know what the terms are, but unless the landowner is an idiot, the rent is some percentage of the land's shovel-ready value, with that value being determined every five or ten years.

The co-op and the retail have sued each other at various times over the terms of their co-operating agreement.

The co-op's underlying mortgage was almost foreclosed upon a couple of times in the 1990s. Right now the co-op owes $6,500,000, about two-thirds of which went to replace the entire facade in the early 2000s. The landowner will take possession of the building in 2058, so all that was for just 50 years use.

It doesn't look as if you'd save enough compared to, say, 30 E 65th across the street, to make the numbers work, but it wouldn't hurt to see the financials.

Can't hurt to add the latest "landlease list" to a landlease thread:

100 West 57th - Carnegie House
101 West 23rd
110 Central Park South (leasehold condop)
116 West 22nd - SOMA
142 Duane
150 East 61st
167 East 61st - Trump Plaza
175 East 62nd
177 9th Ave - Chelsea Enclave
190 East 72nd
2 Tudor City Place
205 East 63rd
215 East 96th - One Carnegie Hill
24 5th Ave
242 East 25th
27 East 65th
303 East 57th - Excelsior
305 West 16th (leasehold condop)
333 East 91st - Azure
34 Leonard
343 East 74th
4 West 21st - 4W21 (marketed as "condop" but really landlease coop)
40 East 80th (need verification)
419 West 55th - Loft 55
420 East 51st
445 Lafayette - Astor Place (leasehold condop?)
465 Park Ave - Ritz Tower (need verification)
48 Bond Street
50 East 8th
50 Gramercy Park North
54 East 8th
520 West 23rd - Marais
575 Park Avenue - The Beekman
88 Morningside (Central Harlem)
995 Fifth Ave - The Stanhope
*Battery Park City (*NOT LL. Condos on gov't land w/ PILOT)