November 26th 2013
The Real Deal
An apartment in a landleased building can save a buyer as much as 35 percent when compared with a unit where the building owner also owns the land — but there are risks and extra costs to weigh.
The annual costs for occupying the land are generally divvied up among shareholders in the form of common charges, meaning common charges could be much higher in a cond-op, as a unit in a building that is landleased is known, experts told Brick Underground.
Any portion of such fees that goes to paying ground rent is also not tax deductible, Shirley Hackel, a broker with Warburg Realty, told the blog. And, having a ground lease can make borrowing money for capital improvements tricky.
“Lenders typically want to see about 40 years left on the lease term … because lenders usually want the mortgage secured by both the structure and the land,” Hackel said.
German fashion designer Karl Lagerfeld sold his Gramercy Park cond-op for $4.5 million in January — representing a $2 million loss — and the $7,439 a month maintenance charges was blamed for the relatively low sale price.