Land-lease co-ops in Manhattan

Which co-op buildings of this kind are actually in Manhattan?

• Post-war towers in Midtown and on the Upper East and West Sides built on ground retained by an estate, a family holding or an institution
• Buildings on land owned by religious bodies and universities, where the landowner’s own plans for the parcel become the shareholders’ problem at renewal
• A small number of corporations by citywide standards, but the ones whose resets set the terms of the public argument, because a reset is an appraisal of the land as if vacant and unimproved and Manhattan land carries the largest appraised value
• Buildings where the corporation has tried, sometimes successfully, to buy the land from its owner

What do board approval and financing look like in Manhattan?

• Lenders measure the remaining lease term against the loan term, and a term that expires inside a thirty-year loan is frequently declined outright
• A reset scheduled inside the loan term is underwritten as payment shock, because the increase passes through as maintenance
• Appraisers discount a leasehold co-op against comparable fee-owned buildings nearby, which is the mechanism that turns a lease term into a price
• Some lenders will not write a share loan in a land-lease building at all, which narrows both financing and the future resale pool

Which taxes and recording steps apply in Manhattan?

• No mortgage recording tax and no ACRIS instrument for the purchase, the same as any co-op
• New York State transfer tax and the New York City real property transfer tax apply to the share transfer
• Ground rent is not a tax: it is a lease payment funded out of maintenance, and it is the number that moves after a reset
• The mansion tax is reached less often than in a comparable fee-owned Manhattan building, because leasehold discounting holds prices down

What pattern does a purchaser meet in Manhattan?

• Manhattan land values are the reason resets here are severe: the appraisal is of the ground, and the ground is the most valuable thing about the site
• Read what happens at expiry before anything else: renewal terms, a purchase option, or surrender of the building are three very different futures
• The land can be sold during the term, so the identity and intentions of the current landowner are part of the diligence
• Maintenance in these buildings is not comparable to a fee-owned building at the same price, because it carries ground rent as well as operations

What else should you read before closing on one of these?