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05.03.22

The benefits of leasehold condominiums for nonprofits

By , Laura Mehl Sugarman

On Tuesday, April 26, 2022, Nixon Peabody's Ruben Ravago and Laura Mehl Sugarman had an informative discussion on the benefits of leasehold condominiums, particularly for nonprofits. Not only do nonprofit tenants feel the impact of New York City's exorbitant real estate taxes through high rents, they often bear direct responsibility for pass-through real estate tax costs. Creating a leasehold condominium can provide relief, allowing an eligible organization to obtain an exemption from real estate taxes and use those dollars to fund its mission. They touched upon the leasehold condominium structure and the factors informing whether it is worthwhile for a given nonprofit. Ruben and Laura provided insights on the following related topics:

  • Section 420-a of the New York State Real Property Tax Law grants eligible nonprofits a full exemption from their real estate taxes on real property they own; eligible organizations include educational, healthcare/hospitals, charitable, religious, mental health, and social services entities
  • A minimum 30-year lease term is required for non-residential purposes, although dormitories and homeless shelters qualify as "non-residential"
  • The difference between a "PSA structure" vs. "Condo in a Condo" structure vs. a single-tenant leasehold condo structure, and when to use each of these structures
  • The formation process for a leasehold condominium can take up to nine months. It is important to fully complete the 420-a application as the appeals process can be lengthy
  • The nonprofit entity's landlords, architects, lenders, agencies, expeditors, and lawyers must be involved throughout the application process when creating a leasehold condominium
  • General costs of formation for a leasehold condominium include fees for filing, architects, expediting, and legal. 

Ruben and Laura covered a lot of information in a short amount of time during this webinar. If you have any questions or would like additional details about leasehold condominiums, general real estate issues or information regarding cooperatives, be sure to reach out to them directly! We hope you will join us for future programs.

 

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Author

Ruben M. Ravago

Counsel

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Author

Laura Mehl Sugarman

Partner

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