New York Magazine has an excellent write-up on the implications of land-lease properties, which are not a rarity in New York City. According to Wisegeek:

A land lease is a type of financial arrangement in which the ground under a structure is leased, rather than sold to the builder, meaning that the land and the structure are owned independently.

In other words, it is when you buy your apartment but still rent the land beneath it. NY Mag’s diagram makes this very clear. A land lease property means that you are on the hook for a rental for as long as you own the property. In essence, you’re a landlord and a tenant at the same time.

This will shock and offend anyone raised on the American dream, where home buying means independence and freedom. Urbanites, however, are aware that home ownership is more complicated in large cities. Condos and co-ops involve one form or another of “shared ownership” and shared responsibility. This shared responsibility can be particularly dicey in co-ops, although condo management companies are there to ensure that the legal rights and interests of the condo tenants are respected and upheld.

The financial implications of land leasing will also shock many Americans, who believe that home ownership means the end to monthly rental payments. However, inevitable HOA fees, property taxes, and maintenance costs mean that no form of housing involves no monthly payments of any sort.

A much larger concern is what happens at the end of land lease contracts. While these contracts are usually very long–New York Magazine gives a 96 year lease as an example–the shorter the contract, the cheaper the land lease property will be. This makes sense; a new contract involves a great deal of risk, bringing the price of the property down. However, what looks like a real bargain today might become a depreciating money pit in just a decade or two, as the land lease comes near its end.

Here at CondoDomain, we always recommend condo purchases, because they involve shared ownership of the structure and the land, and as I’ve noted before, land is and always will be at a premium on Manhattan. Why not schedule an appointment with one of our agents to discuss the issues in land leasing and condo ownership? Give us a call at 1-877-852-6636 or visit our website today!