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No Man's Land

September 25, 2004 -- MANY New York buyers are used to co-ops, where they don't own the walls of their apartments. But fewer are used to land-lease buildings, where the apartment complex doesn't own the real estate it sits on. Whether an apartment in a land-lease building is a great bargain or a big lemon is a matter of debate. There's no denying that - despite drawbacks - buying in a land-lease building is often a unique way to land an inexpensive apartment.

A 500-square-foot alcove studio in Carnegie House, a Midtown West building, is currently listed at $329.000 - significantly cheaper than similar co-ops and 50 percent cheaper than that neighborhood's luxury condos. But since residents must pay fees on the land lease, the maintenance is high - nearly $1,000. In general, maintenance or common charges are higher than those of non-land-lease buildings by an average of 20 percent to 30 percent.

There's also the fear that the holders of the underlying land won't renew the building's lease - so the buyers risk losing their apartment.

Fans of land-lease buildings point out this doomsday scenario has never come to pass in New York. "But there's always a first," says Amelia Gewirtz, a senior vice president at Halstead Property. "I always tell buyers a land-lease building is an option, as long as you are clear that your apartment may not be here in 99 years."

In addition, buyers should know that re-selling an apartment in a land-lease building can take longer than selling an apartment in a non-land-lease building.

Because of these risks, you'll want to understand all the advantages and disadvantages of buying a land-lease apartment.

"People say, 'Don't show me anything in a land-lease building,'" says Jacky Teplitzky, an executive vice president at Douglas Elliman. "But that's because they have misconceptions about what it is." Teplitzky recently handled the sale of a one-bedroom in Battery Park City. Monthly common charges were $1,364, and monthly taxes were $698; on the other hand, the place went for a shockingly low $339,000.

City Realtors estimate there are fewer than 100 land-lease buildings in Manhattan, with many found in Battery Park City and the Upper East Side. You'll also find buildings in Queens and on Roosevelt Island.

The Easton, a land-lease building at 360 E. 65th St., currently has multiple properties on the market. There are two-bedroom units listed at just under $600,000 - a fabulous deal for the neighborhood - but the maintenance is an eye-scorching $2,900 a month.

Still, maintenance fees can be just as high in non-land-lease buildings, says Paul Firstenberg, who shopped around with his wife, Joanne, before buying a roomy three-bedroom in The Easton.

The couple looked at a number of apartments, but The Easton "was the most attractive in terms of layout and price," says Paul.

The only hassle, he notes, was the Byzantine process of closing on an apartment in a land-lease building, which can require more paperwork.

"We received a 2-inch-thick booklet from the sponsors of the building," he says.

Many buyers of apartments in land-lease buildings are looking to settle down, according to Diane Ramirez, president of Halstead Property.

"They're not thinking, 'I'm going to flip this,'" says Ramirez. "They've been in New York for a while and aren't concerned if the apartment goes down in value because it's going to be their home for the long term."

Financing a place in a land-lease building shouldn't be a problem, as long as the building's land lease expires after the mortgage period ends, says Marc Kunen at Empire Preferred Mortgage.

Meanwhile, there's always the chance your building will buy the land. The residents at 201 E. 77th St. recently purchased their underlying land, according to Susan Kaplan, senior vice president at Douglas Elliman, although she admits this scenario isn't common.

Unless the building has a good deal of money in their reserve funds, tenants will have to fork out a lot of cash for the land. Maintenance - which may already be high - will likely rise again. "But the upside is that the residents own the land," she says. "Now they have equity."



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