Land lease Buildings

Landleases generally are toxic. And a 10 year renewal? You be insane to become invovled in that. In my opinion there is no discount that would make such a purchase prudent. None. Distressed land owner? Who cares. Someone will always own the land and have to honor the lease. The issue is they are free to quintuple the rent charged if they want to. You want in on that nightmare?

If they don't renew the lease, you lose your apartment.

And I believe the new Freddie and Fannie regulations will not allow for guaranteed mortgages unless the land is owned.

That said, in the UK 999-year leases were very common before freeholds were allowed on properties not attached to the ground. You might want to dip your toes into a 999-yearer.

FNM/FRE conforming limits and terms are irrelevant for this unit. Do private lenders typically include such terms for jumbos?

Kylewest- Why are landleases "generally toxic?" I understand what could happen but I'm curious if you have evidence/stories of such quintuplings (or other severely higher than market based terms) hurting owners in a specific building? Or are your comments purely generic? Are typical leases inclusive of annual CPI (or other) escalators? If prices were quintupled, hard to see who's got economic incentive to pay that assuming something close to market rates? No doubt

Does anyone have actual experience reading/writing/reviewing these contracts?

does this mean the chelsea enclave is totally screwed?

"Do private lenders typically include such terms for jumbos?"

They are now.

check out 101 W23rd st. to see what unresolved landlease does to values. There's also a building on 63rd st (1st or 2nd ave) that is have the same nightmare.

Does anyone know if ANY of maintenance is deductible in landlease? Since there is no underlying mortgage for the coop, I don't think you can deduct any of it. Exception for BPC or land held by state/quasi-government orgs.

I'm not sure if a 999 year lease is sufficient. I plan on being around for a while, so I might have trouble selling my apartment in the year 3009.

Kylewest, I argue with you quite consistently (and love your posts!) but I think here you're being a little bit harsh. 101 W. 23rd Street is, IMHO, every bit as affected by its prior financial record (which includes a bankruptcy) as it is by the landlease.

One of my firm's brokers sells often in the Marais at 520 West 23rd, and I know he believes in the building because he lives there. I myself nearly bought in Carnegie House at 100 West 57th Street.

So I'd say it's an issue for a buyer's lawyer to examine carefully, but I wouldn't rule out all landlease buildings out of hand.

ali r.
{downtown broker}

I would rule out a landlease with a minute less than 40 years left on it and would greatly prefer 50 or more before I think the risk is acceptable. But that's me. I have a low threshold for risk--especially with my housing money.

And I love your posts and insights, too, front_porch. I didn't think we argue that much...I think I most often agree with you. ;)

My 2 cents is that generally land lease purchases are less expensive per square foot than your standard condo or coop, based on the risk factors. Realistically i do not think that the risk is that the lease will not be renewed, rather it is that most of these buildings have a long term lease, BUT a built in allowable increase after a certain period of time, and depending on values if the owner of the land increases by the allowed amount, the common charges could increase dramatically at that time. I believe, but don''t quote me exactly, that for example the Marais, which you mention ali, has something like a 25 percent allowable increase in 2015, which is not that far off. Having said that, the purchase prices can be quite appealing and offset the risks for many people which is what happened with the Marais, the original owners got amazing deals on their purchase prices, and when the market was happening, made a good deal of money on the resale in a few short years. As far as the Chelsea Enclave, my understanding is that the land lease is very favorable to the owners, due to the agreement with the Seminary, HOWEVER, the asking prices are laughable, I do not think they have actually gotten a signed contract yet, they also made completely the wrong mix of units in this building for the neighborhood. They should have concentrated on studios and 1 beds, as in West Chelsea they sell much faster. They should also have learned from 445 Lafayette that huge floorplans in a landlease building are a toxic combination.

i agree the pricing on the enclave is such a disaster. and the fact the opened their sales office the week wall street imploded. its a shame cause if it was affordable i would love it.

jasonkyle, it is a great location, and neighborhood, and the floorplans were nice too, just not a great business plan behind it in terms of sales price and unit mix. Also although the advertising has it looking nice, the developer is Brodsky who does not have a ton of experience with Condo development, they are mostly a rental building developer, and their contractor has mostly done rental building contracting work, so my guess is in the long run you are not missing out. it may end of being one of those products ala Chelsea Verde that does not look like the advertising materials suggested--

yeah i wasn't wowed by the mock kitchen and bathroom and the realtor did mention the quality of brodsky's rentals (with pride) at our meeting and all i could think was the walls would be paper thin.

are there any building in that hood that you like enough to recommend looking at?

Jasonkyle, there are definitely some that have better reputations/ and will have better future resales than others, but I guess it depends on what your own personal preferences are too, I mean are you looking for a boutique style building, or prewar versus postwar? how many bedrooms..What kind of floorplan.. I would definitely avoid anything that is not for the most part already sold and closed, because the brand new new developments like the Enclave, are going to have lots of issues getting people to contract now that banks are requiring a lot more percentage sold to commit to a loan. But right now there are some developers who have a handful of units left who are getting ahead of the curve and are REALLY negotiating a lot to seal a deal, one example would be the Oculus at 50 west 15. Do not let the asking price fool you, they are quite willing to negotiate substantially. If you are interested I can explain which ones, but are you also considering resales because this will greatly expand your choices as well.

not to totally derail the lease lease thread but we are looking for a largish (over 1400 sf) two br (preferably split bedroom layout). type of building doesn't matter but a doorman would be nice for packages which we get lots of. i didn't love the oculus. i preferred their other building the indigo but the only layout that would work there was a 3 bedroom that was over our range. although maybe not over our range for long.

Where did you eventually buy?

the building 63rd street is ridiculous. studio maintenance is like 2k.