Land Lease in NYC - What You Need to Know
By Alex Mikoulianitch on February 21, 2025
Most buyers are probably well aware of all the homework they need to do before buying an apartment in New York City.
Those interested in co-ops should learn what types of co-op layouts exist, what buying a co-op in NYC entails, and the board application process. Condo buyers, in turn, must familiarize themselves with navigating the process of a condo purchase. But there’s another essential piece of the puzzle that both co-op and condo buyers should take note of: land lease buildings.
Land lease properties are co-op or condo buildings that sit on land owned by a separate landowner from whom the building leases the land. These buildings typically involve paying a land rent included in the monthly fees of apartment owners. Those owners can be the city, a private landowner, or an institution or entity.
Though a rare occurrence with a little more than 100 such buildings, land lease buildings are typically found in neighborhoods like Lincoln Square on the Upper West Side, Upper East Side, and Battery Park City. These buildings present a specific real estate scenario that affects buyers’ considerations when they want to purchase a unit.
Starting to feel overwhelmed by the idea of having another thing to worry about? Don’t sweat it. The land lease "dilemma" isn’t as frightening as it seems. Below, the team from will explain what a land lease means and what you need to know so you can make an informed decision before buying a NYC apartment in a land lease building.
Understanding land lease buildings in NYC
- What is a land lease in NYC?
- How does a land lease work in NYC?
- Key differences between land lease co-ops and condos
- Benefits of buying in a land lease building
- Risks of buying in a land lease building
- What happens when a land lease ends?
- Getting a mortgage for a land lease purchase in NYC
- Questions to ask when buying in a land lease building
What is a land lease in NYC?
In simple terms, a land lease means that while you own the apartment or the building, someone else owns the land on which the building sits. Land lease buildings may also be referred to as ground lease buildings - as the terms are fairly interchangeable.
The lease can last anywhere from a few decades to over a hundred years, depending on the original terms. The building owner pays rent to the landowner for the right to use the land beneath your building. Once the lease expires, the landowner can renew the lease, which may result in an increase to the rent, or even take the land back—meaning, in some cases, you might be evicted or lose ownership of the unit. When a land lease expires, there can be significant consequences such as fee hikes and financing challenges, which can affect property values and investment viability.
This is a significant departure from traditional ownership, where buying an apartment means you - as a condo unit owner or co-op shareholder - own both the building and the land beneath it. With a land lease, you’re essentially leasing the land much like one might rent an apartment. The lease terms for use of the land can vary widely, and it’s crucial to fully understand the lease’s duration, terms for renewal, and any potential escalations in monthly lease payments.
Land leases are relatively rare but not unheard of in NYC. There are slightly more than 100 land lease buildings in the city, and they are commonly found in specific neighborhoods, attached to luxury buildings in prime locations where institutions or private estates own the land.
How does a land lease work in NYC?
Land leases are a unique arrangement. They sometimes have lengthy terms and affect a small number of buildings in the NYC real estate scene. Understanding them is a straightforward process, but knowing what they imply in terms of costs can be a bit tricky at first.
In essence, if you buy into a land lease building, you’ll also be responsible for land lease payments each month, along with typical costs like maintenance fees or mortgage payments. These fees can vary greatly depending on the location, the building, and the lease terms, but they should be a careful consideration when calculating monthly expenses. In some cases, the lease payments can even increase over time, so it’s vital to understand how those adjustments are made so you can plan for the future. Ground leases can vary in duration and terms, affecting marketability and financial projections for buyers.
Additionally, the lease term can significantly impact both your property value and your ability to secure financing. Banks and lenders may be hesitant to provide mortgages on buildings where the land lease is about to expire. If the lease isn’t renewed, the ownership of the building could revert to the landowner, leaving you and your lender in a tricky situation. A short remaining lease term could also affect your ability to resell the property, as potential buyers might be wary of the risk involved.
So, when buying into a land lease building, ask how many years are left on the lease and what the renewal terms look like. It’s not uncommon to see leases with 99-year terms in NYC, but others could be as short as 20 or 30 years remaining. Understanding these details will help you determine whether the investment is a good fit for your investment horizon.
Key differences between land lease co-ops and condos
Land lease buildings can be either co-ops or condos, and the ownership structure of each can affect your experience as a resident.
In a land lease co-op, you’re purchasing shares in the cooperative corporation that owns the building, giving you a stake in the entity but not title to the apartment itself. This means the co-op board negotiates the land lease on behalf of all residents, which can lead to more stability but less individual control over lease terms. The role of the land owner, such as the Battery Park City Authority, is crucial in these negotiations, as their management and ownership can significantly influence lease expiration outcomes and reassure potential buyers about the terms.
Land lease condo buildings are rarer and the vast majority are found in Battery Park City
In this case, you own your unit while leasing the land beneath the building. This can give you more autonomy in some respects but can also complicate the lease renewal process, as individual owners must collectively agree on how to handle the lease. The monthly lease payments may also differ between co-ops and condos, with co-op owners typically paying these fees through their monthly maintenance fees.
Benefits of buying in a land lease building
Now that we’ve gotten all the jargon-heavy information out of the way, it’s essential to mention the most attractive benefit land lease buildings in NYC may present for buyers: a lower purchase price.
Since you’re not buying the land, only the unit itself, land lease properties are often priced significantly lower than their non-land lease counterparts in similar locations. This can be a huge draw for buyers who want to own property in coveted areas like Manhattan but must stay within a more affordable budget.
Another significant benefit is the potential to live in a desirable location with premium amenities. Many land lease buildings, particularly in NYC, are located in high-demand areas – think the famous streets of the Upper East Side and the cultural richness of the Upper West Side – offering residents proximity to top-notch restaurants, entertainment, and transportation hubs.
These buildings often come with luxurious amenities like concierge services, fitness centers, and rooftop decks, making it possible to enjoy an upscale lifestyle at a lower upfront cost. This trade-off can be well worth it for buyers who prioritize location and building features over long-term ownership of the land.
Additionally, land lease properties can offer buyers more flexibility in how they use their funds. Buyers might have more room to invest in renovations, high-end furnishings, or even other investment properties by paying less for the unit upfront. For those looking to stretch their real estate investment dollars further, buying in a land lease building could open doors to financial opportunities that wouldn’t be possible with a traditional real estate purchase.
Risks of buying in a land lease building
While the lower purchase price and prime locations make land lease buildings attractive to many buyers, it’s crucial to understand the risks involved before committing.
One of the primary concerns is the uncertainty surrounding lease renewals. Land leases typically last for a set number of years, and when the lease expires, the renewal terms may be unpredictable. If the landowner decides not to renew the lease, buyers could be left with the risk of losing their home, or they may face significant increases in lease payments if a new agreement is reached.
However, the most important thing to remember is a large number of land lease buildings are owned by the city, which adds a layer of stability to the situation.
"It’s important for buyers to keep in mind that city-owned land leases are more stable in terms of land lease products," said Sara Gladstone, a Licensed Real Estate Salesperson with Prevu. "For example, the land lease properties in Battery Park City are all subject to lease renewal negotiations when the time comes, but these negotiations are made with the shareholders and owners in mind, so there is less of a chance that owners are displaced due to precipitous rent increases."
Another potential risk is securing financing for a land lease property.
Banks and mortgage lenders are often more hesitant to approve loans for units in land lease buildings, particularly if the lease has fewer than 30 years remaining. This can limit your mortgage options or result in less favorable loan terms, such as higher interest rates or larger down payment requirements. Buyers should also be aware that resale value can be affected, as future buyers may also struggle to secure financing, making it harder to sell the property down the line.
Here again, however, there’s a silver lining.
"Lenders are often familiar with land lease buildings such as those found in Battery Park City, so they’re aware that the risk isn’t as high as it may be with other land lease buildings. This in turn, makes securing financing easier in some cases," said Gladstone.
Lastly, buyers need to factor in the ongoing cost of the land lease payments into their budget, as well as the potential of an additional closing cost if buying into a land lease building in Battery Park City.
These monthly payments are in addition to regular maintenance fees or property taxes, and they can increase over time, depending on the terms of the lease agreement.
In terms of the additional closing cost, buyers who consider a land lease condo building in Battery Park should be aware that some buildings require a security deposit to the Battery Park City Authority, which is then locked in until the property owner decides to sell.
What happens when a land lease ends?
When a land lease ends, it can bring significant uncertainty for property owners, and the outcome largely depends on the lease terms and the landowner’s decisions.
One of the primary concerns is whether the lease will be renewed. If the landowner agrees to renew the lease, it typically involves new terms, including possible increases in monthly lease payments or adjustments to the duration of the new lease. Buyers and their real estate attorneys should carefully review the terms of any potential renewal before purchasing a unit in a land lease property to ensure they’re prepared for any significant cost changes.
However, if the landowner decides not to renew the lease, the consequences can be an issue for the unit owners.
In this scenario, the building and the land return to the landowner’s control, and residents may lose their homes or be required to negotiate an agreement with the landowner to purchase the land.
In some cases, landowners offer compensation to residents for the building, but this is not guaranteed, and buyers could be left without any recourse if the landowner chooses to take possession of both the land and the building. This makes it essential for prospective buyers to fully understand the remaining duration of the lease and the likelihood of renewal.
Another possible outcome is renegotiating the lease terms. In some cases, the landowner may be open to extending the lease with revised terms, including higher payments or different conditions.
While this option allows residents to remain in their units, the financial burden may increase significantly. It’s also important to note that properties with land leases nearing expiration may become more challenging to sell, as prospective buyers may be wary of the uncertainty surrounding the lease’s end.
Buyers should always consult with their real estate agent and a NYC real estate attorney before making any decisions about purchasing in a land lease building with a limited number of years left on the lease.
Getting a mortgage for a land lease purchase in NYC
We mentioned earlier that some land lease buildings can be viewed as more secure by certain lenders, making the financing process a bit easier. In general, however, the situation can present a unique challenge.
Securing a mortgage for a land lease property can be more challenging than a traditional apartment purchase, primarily because lenders view land lease agreements as riskier.
One of the first things mortgage lenders will look for is the remaining duration of the land lease. In most cases, lenders typically require that the lease has at least 30 years remaining after the mortgage term ends. This means if you’re taking out a 30-year mortgage, the land lease should ideally have a minimum of 60 years remaining. The closer the lease is to its expiration date, the more hesitant lenders may be, as it creates uncertainty about the property's future.
Another factor lenders will consider is the stability and reputation of the landowner. Lenders may feel more secure in approving the mortgage if a well-established institution owns the land – like the Battery Park City Association in the case of Battery Park land lease properties – because there’s a greater chance that the lease will be renewed.
However, if the land is privately owned or the lease renewal terms are unclear, lenders may view the situation as more risky, potentially resulting in less favorable loan terms or even a denial of the mortgage application.
Ensure you understand the lease terms during your due diligence, including its renewal options, potential escalations in lease payments, and any conditions that might affect the property's value. You’ll also want to work with a real estate agent and a mortgage broker with land lease building experience, as they can help you navigate the complexities and identify lenders who are more comfortable working with these kinds of properties.
Land leases and property values
Land leases can significantly influence property value in NYC, presenting both challenges and opportunities for buyers. The uncertainty surrounding lease renewals and the potential for increased rent payments can create a sense of risk, which may affect the resale value of a property. However, for savvy buyers, land lease buildings can offer unique advantages.
One of the most notable benefits is the lower purchase price. Since you’re not buying the land, only the unit itself, land lease properties are often priced more affordably than their non-land lease counterparts in similar locations. This can be an attractive option for buyers looking to enter the market at a lower cost, especially in high-demand areas.
However, it’s essential to understand the implications of a land lease on property value. The lease term can significantly impact both the property’s market value and the ability to secure financing. Lenders may view land lease agreements as riskier, particularly if the lease has a short remaining term. This can limit your mortgage options or result in less favorable loan terms.
To mitigate these risks, it’s crucial to work with an experienced buyer’s agent who can provide valuable insights into land lease buildings. They can help you navigate the complexities of land lease agreements and ensure that you understand the implications of the lease on property value. By doing so, you can make a more informed decision and potentially capitalize on the unique opportunities that land lease properties offer.
Questions to ask when buying in a land lease building
- How many years are left on the lease?
- What are the monthly carrying costs?
- Do I buy a co-op or condo?
- Am I planning to sell in the near future?
- Will I be able to get a mortgage for a land lease unit?
Tips for buying in a NYC land lease building
- Understand the lease terms: Before making an offer, it’s essential to understand the lease terms, including the length of the lease, the rent payments, and any potential escalations. Knowing these details will help you plan for future costs and avoid surprises.
- Research the landlord: Different landlords create different degrees of stability for current and future tenants. Research the building’s financials and the landlord’s history to mitigate risks. A reputable and stable landowner can provide more security and predictability.
- Work with an experienced buyer’s agent: An experienced buyer’s agent can provide valuable insights into land lease buildings and help you navigate the complexities of land lease agreements. They can also assist in identifying properties that align with your investment goals.
- Consider the property taxes: While land lease buildings may not pay property taxes directly, the landowner may pass on these costs to the building owners. Understand how property taxes will be handled in the building to avoid unexpected expenses.
- Review the ground lease language: Reviewing the ground lease language regarding rent step-ups is crucial for buyers to estimate future maintenance costs. This will help you budget accurately and avoid financial strain.
- Identify lenders who are comfortable with land lease buildings: Securing financing for a land lease property can be more challenging than a traditional apartment purchase. Identify lenders who are more comfortable working with these kinds of properties to improve your chances of securing a favorable mortgage.
- Understand the stability and reputation of the landowner: The stability and reputation of the landowner can impact the value of the property. Research the landowner’s history and reputation to ensure that they are a reliable partner. A well-established landowner can provide more security and predictability for the future.
By following these tips, you can make an informed decision when buying in a land lease building and ensure that you’re getting the best possible deal. Working with knowledgeable professionals and thoroughly understanding the lease terms will help you navigate the complexities of land lease agreements and make a sound investment.
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