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Bills to Limit Co-Op Land Lease Spikes Fail in Legislative Session

New York City

Land lease, co-op boards, state Legislature, REBNY.

The Carnegie House co-op on Billionaires' Row was at the center of the debate on capping hikes in land leases.

June 11, 2024

The New York Post and the Real Estate Board of New York (REBNY) painted it as a handout for "millionaire co-op owners." Proponents painted it as a lifeline for the 25,000 New Yorkers who live in co-ops that do not own the land their buildings stand on and therefore must deal with periodic, and potentially crippling, increases in their "land lease."

"It" was a pair of bills introduced in the state Legislature that would have put a cap on the increases in the long-term land leases. The bills were sponsored by Sen. Liz Kreuger (D-Manhattan) and Assembly member Linda Rosenthal (D-Manhattan), who said in a statement: "Some residents have difficulty selling their home, especially near the end of a ground-lease term, since purchasing an apartment with an expiring ground lease is too risky for potential homebuyers. This legislation will protect residents from exorbitant increases and ensure they receive a fair deal when negotiating rent increases once the ground lease expires."

(Buyers of land-lease co-ops tend to pay 20% to 30% less to purchase, but then face higher monthly maintenance costs to cover the lease on the land.)

REBNY's Zachary Steinberg told the Post that the proposed legislation was "an unconstitutional solution in search of a problem." He added: "It is simply bad public policy to give a legislative handout to the millionaire co-op owners who bought their homes at cut prices years ago with full knowledge of these ground-lease arrangements."

When the state legislative session ended last week and the smoke cleared, neither bill had gained enough support to become law. However, The Real Deal reports, the Senate and Assembly did sign off on a separate bill sponsored by Sen. Toby Ann Stavisky (D-Queens) and Rosenthal that allows the city's 100 ground-lease co-ops to renew or extend their lease terms (so long as their contract has provisions allowing such extensions or renewals) at any point, as a way to provide more certainty for shareholders. The bill is not nothing, but it's small consolation for those who were hoping for a firm cap on future land-lease hikes.

Much of the debate over the proposed legislation centered on Carnegie House, a 324-unit, postwar co-op at 100 W. 57th St., where the land-lease expires on March 2025, making it virtually impossible for shareholders to sell their apartments. Though a middle-class building, its location on Billionaires' Row led some to assume it is home to rich people who don't need legislative relief for their soon-to-rise rent on the land. The new owner of the land, who was not involved in crafting the current land lease, says the new rent should be based on what he paid for the land — quadruple the previous valuation.

A group advocating for the bill, the Ground Lease Co-op Coalition, has said that it will keep pushing for the legislation to save middle-income shareholders from exorbitant increases.

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