What options are there for a board at a ground-lease co-op or condo? Three: negotiating to extend the lease, adjust the rent, or purchase the land.
Taking the 2 Fifth
That last proved successful at 2 Fifth Avenue in Greenwich Village. In March 2005, nearly 20 years after the building went co-op, the shareholders paid landowners the Rudin family $29.25 million for the land.
"That's one strategy," says attorney Jeffrey Reich, a partner at Wolf Haldenstein Adler Freeman & Herz. "Go to the landowner and say, 'We want to buy the land. We're willing to pay market value for it. You're only making whatever it is per year,' since if the lease was written in a way not favorable to the landowner, it might be trailing inflation. Otherwise, you don't have a lot of leverage."
A collection of condos at Battery Park City — where the state-owned land is administered by the Battery Park City Authority — successfully executed the other strategies: renegotiating the ground rent and lease terms. In May 2011, the Battery Park City Homeowners Coalition, representing 11 condominiums, worked with New York State Assembly Speaker Sheldon Silver to reduce an estimated $804 million the authority wanted to collect over three decades, bringing it down to a more manageable $525 million.
30 Years Is Not a Long Time
"We wanted to do a deal [that extended] to the end of the master lease in 2069, but the authority wound up doing a 30-year period," says Anthony Notaro, board president of the Liberty Terrace condominium at 380 Rector Place, and chair of Community Board 1's Battery Park City Committee. "We'll probably go back to them and negotiate the remainder of the lease."
It behooves any board in a ground-lease building to develop long-term plans. Even after negotiating new ground-lease terms through 2042, the Battery Park City homeowners are staying on top of their situation. The coalition recently added six more condominiums, bringing to seventeen the number that are negotiating together.
"Something will be negotiated: a renewal of the lease, a takeover by the city, a sale of the land to us," says Notaro. "No one's worried that I'll have to take my building and leave."
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Thinking of buying a co-op or condo? Already bought, and not sure how co-op/condo life and rules work? Learn all about purchasing a place and living in your new community. It's not like renting, and its not like owning a house. What's it like?