
The New York City real estate market is like no other in the world. There are tons of niche quirks and unusual types of purchases that can be daunting to those who aren’t familiar with NYC real estate terminology. One extremely common question we hear is this:
What is a land-lease building in New York City?
A land-lease building is a building that doesn’t own the land it sits on. Instead, the building rents the land from a separate landowner, who retains ownership of a parcel of land but leases the building constructed on it. Land-leases are typically around 100 years in length at their inception.
Transacting on apartments in land-lease buildings comes with a few unique hurdles to jump through. For most buyers (especially if they aren’t working with a NYC real estate broker yet), it can be difficult to tell if a building is a land-lease or not, and even more difficult to track down who the landowner is.
Read on to learn the pros and cons of owning an apartment in a land-lease building, what happens when the land-lease expires, and what you can expect from your lender should you make an offer on a land-lease home.
If you’d rather listen along, we have a podcast episode all about land-leases! Tune in below.
A Comprehensive Guide to Land-lease Buildings in New York City
What Exactly is a Land-lease Building?
While the definition above captures the gist of what a land-lease building is, there is a little more to it than that. For starters, land-leases are also sometimes referred to as ground leases.
These buildings make up a tiny percentage of the apartment buildings in New York City – and most of them are sprinkled throughout the city with a few exceptions such as Battery Park City, which is entirely on a land-lease from the Port Authority and warrants a separate discussion altogether.
They’re also usually set up as cooperatives rather than condominiums. If you happen to find a land-lease co-op, know that they typically do not have to pay property taxes because they rent the land vs. own it.
Because the land beneath it is leased by the building, a portion of the monthly maintenance fees owed in a land-lease building is the land rent that everyone in the building contributes towards. This makes the monthly fees higher in land-lease buildings. The asking price of such an apartment is usually significantly lower than market value to compensate.
So, if you see a co-op listed at roughly 20%-30% below market value with high monthly fees, there is a strong chance that it is a land-lease building.
Tired of reading? Watch our podcast episode about land-lease buildings at the link below!
Perks of Land-lease Buildings
While land-leases definitely have some unique drawbacks compared to traditional co-ops and condos, there are also some perks.
- The biggest perk in a land-lease building is that a buyer will get more square footage for their dollar.
- Given that most land leases are legally structured as co-ops, a buyer also avoids two of the larger closing costs paid in condo transactions – title insurance and the mortgage recording tax.
- Although structured as co-ops, most land-lease buildings are governed by condominium type by-laws, allowing for more flexibility in ownership as well as the option to sublet the apartment immediately.
The flexibility of ownership and the significantly lower purchase price and closing costs may not seem like a good enough deal in comparison with the monthly maintenance fees – but for some, it could make sense financially.
Doing the math on a land-lease apartment, especially over the period of time you expect to own it, might surprise you. Savvy New Yorkers and their brokers know that sometimes the best deal out there is a land-lease – because most potential buyers won’t even consider it. That can make the sellers a little more flexible when it comes to negotiations.
When considering an offer on an apartment in a land-lease building, make note of how long is left in the lease. If there’s decades to go before it expires and you and your broker agree the math makes sense, it could be a great investment.
Drawbacks of Land-lease Buildings
Ultimately one of the most influential drawbacks of buying in a land-lease building is that you are still paying rent monthly, albeit just for the land instead of the apartment itself. That money you spend each month doesn’t go towards any capital improvements and there aren’t any tax deductions you can take to compensate for it.
The lower market value of apartments in land-lease buildings may be attractive when you’re a buyer, but when you become a seller it becomes more of a negative. As a seller of a land-lease, you have a smaller segment of New Yorkers who will actually consider the purchase, and they usually require a good amount of education along the way.
This combination can result in your apartment sitting on the market for a while, which can impact your bottom line. Additionally, if you will own the home as the land-lease gets closer to expiration you may be in for some serious complications, including having trouble finding a lender if you’re financing.
What Happens When a Land-lease Expires?
Most of the time a building and the landlord are able to negotiate a renewal of the land-lease decades before it expires. This is especially true in cases where local governments are the land-owners, such as in Battery Park City.
The Battery Park City Authority manages the land-leases in Battery Park City, and they are a nonprofit organization with the express purpose of maintaining and improving the neighborhood. This community-driven instead of profit-driven approach makes them incredibly motivated to negotiate lease renewals.
However, in rare cases, usually involving private landowners, the land-lease renewal negotiations are not successful. If there is no lease renewal, then ownership of the land, building, and any improvements immediately revert back to the landowner.
Yes, you read that right.
The risk of this nightmare scenario exists with all landlords, but especially with private landowners. And because of this, in the event a renewal cannot be negotiated, the value of an apartment in a land-lease building gradually decreases to $0 by the end of the lease.
In some cases, building owners have been able to buy the land from the landowner. Ultimately, this doesn’t lower costs for building residents. Effectively, all you do in that scenario is swap your monthly land rent for a mortgage OR fork over a lot of cash up front for the purchase.

What Are the Different Types of Landlords of Land-lease Buildings?
What happens as the land-lease on a building draws to a close is greatly influenced by what type of landlord owns the land under it. There are three main types: government, non-profit, and private. We’ve ranked them in order of lowest risk (1) to highest risk (3).
- Government – Battery Park City, as mentioned in the previous section, is a prime example of a government landlord. Because BPCA and others like it are a government entity, they do not have to pay property taxes. This means that the monthly land rent can be reinvested into the neighborhood instead of set aside to cover property taxes.
- Non-profit – The Roman Catholic Church and the Episcopalian church are some of the larger non-profits who invest in real estate and lease their land to building owners. Like a government entity, churches and some non-profit organizations also don’t pay taxes, so they too are usually more community driven.
- Private – These landowners are everyday people just like you and me – with their own motivations and goals. Private landowners are typically more profit driven and harder to negotiate with. The land under your building could be sold at the end of the lease without you ever knowing it, until the new landowner decides to hike land rent. Even if the land doesn’t change hands, the end of a land-lease often marks a significant increase in land rent for residents.
How to Find Out if an Apartment is in a Land-lease Building?
A good real estate broker can help you find out if the apartment you have your eye on is in a land-lease building, and it is important to know the facts before any sort of offer is made or value decided on a property.
Another person you may want to call on before making significant moves towards purchasing a land-lease apartment is your real estate attorney. A good real estate attorney can investigate and advise you from a legal standpoint and should be relied upon for the nitty gritty sort of information/terms of the lease.
It is important to note that not all land-leases are created equal, so if the general features we discussed make it appealing to explore, rely on experts in your corner to advise you on the ins and outs of the lease in any specific building.
If you’re trying to ascertain whether a building is a land-lease or not before you make an offer, remember what we discussed earlier: Co-ops that are 20-30% below market value with steep monthly maintenance fees are usually in land-lease buildings.
Getting a Mortgage for an Apartment in a Land-lease Building
The easiest way to purchase a land-lease apartment is to pay cash up front. You might be able to secure a loan for the apartment, though. Emphasis on might. It’s important to be aware that your application will face significantly more analysis than a mortgage on a non land-lease apartment.
The first and most important factor your lender will consider is how much time is left in the lease. It will be virtually impossible for you to get a mortgage on the apartment if the land-lease will expire before the 15 or 30 year loan is up.
It is also much more challenging to build equity on land-lease purchases, because buildings depreciate in value over time while the land they are on appreciates. Lenders take this factor into account when reviewing the risk vs. reward when it comes to your application.
The Mysterious Land-lease Building, Deciphered
If you have further questions about land-leases or other nuances of New York City real estate, send us an email. Whether you become a client or not, we genuinely appreciate the opportunity to chat about the city we love and your place in it.
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