The perils and potentials of land-lease co-ops were starkly illustrated by the very different fates of two properties we recently profiled – a Greenwich Village co-op that succeeded in purchasing the land it sits on, and a Chelsea co-op that was unable to purchase the land beneath the building, and wound up dissolving.
There are roughly 100 co-ops in New York City that don’t own the land they sit on. Less known and less common are their distant cousins – land-lease condominiums, sometimes called lease-hold condos. Under this arrangement, condo unit-owners get an actual deed and therefore own their property, but the building is technically under lease to a larger ownership entity, typically a public authority, to which it pays rent.
The big fear of land-lease co-ops is that the rent will soar or the co-op will get booted when the long-term land lease expires. Lease-hold condos have a different kind of worry.
“Lease-hold condos are an anomaly,” attorney Steve Wagner, a partner at Wagner Berkow, tells Brick Underground, adding that they exist only on Roosevelt Island and in Battery Park City. “Think of it like a regular condominium, but instead of owning a little piece of the land, each unit owner owns a little piece of the lease. If one unit-owner didn't pay their common charges, for instance, then Battery Park wouldn't terminate the lease for the whole condominium, [but] they have the ability to terminate the lease for that individual unit-owner.”
Lease-hold condo owners technically don't pay taxes, but rather, have payments known as PILOT (Payment in Lieu of Taxes) rolled into the building's rent, which are all lumped into the common charges. They’re also less likely to get the boot than their co-op counterparts.
“Even at the end of these leases that were 75 years long,” Wagner says, “it's likely that they will be renewed, because public authorities are not in the business of throwing people out on the street.”
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