Commercial Leasehold Condominium Basics - Part 2

New York Real Estate Journal recently published an article authored by Olshan Real Estate partner Thomas Kearns entitled, “Commercial Leasehold Condominium Basics - Part 2” (by subscription). The article is a follow-up to Tom’s 2018 article, which outlined the basics of commercial leasehold condominiums but was limited to a not-for-profit’s (NFP) use of an entire building. The current article focuses on the basic structure of how to get the benefits of Section 420-a of N.Y.’s Real Property Tax Law when an NFP occupies only a portion of a building. After a landlord ground leases a property to a “Newco” and the Newco submits the leasehold interest to a condominium regime, Tom explains, the Newco then deeds the unit to the NFP that will occupy the unit. “Note,” Tom reminds, “that the deed transfers title to the leasehold condominium unit for the full term of the leasehold estate. By operation of law, the NFP will lose title to the condominium unit at the expiration of Newco’s ground lease. The NFP must be ready to own the unit and be obligated for condominium common charges for the life of the ground lease.” Navigating the legal and financial aspects of a 30-year leasehold condominium which would normally be a 30-year lease also warrants considerable skill: “In sum, the financial aspects of the relationship need an in-depth analysis and structure which is often done by a sophisticated broker and/or outside consultant in consultation with the lawyers and after a full analysis of how the building operates.”