Ground Lease Renewal Bill Saves Co-ops in Queens and Westchester

The financial complications of about 100 Queens and some Westchester co-ops with land leases just eased with passage of the Ground Lease Renewal Bill (A10467A). Without this legislative fix, says Janice Schreibersdorf, president of the 816-unit Beech Hills co-op in Douglaston, Queens, “Shareholders were in danger of losing everything they have in these apartments” because buyers couldn’t get 30-year mortgages and “in a couple of years nobody would be able to sell apartments” to someone who needs financing..

In a land lease co-op, the ground the co-op sits on belongs to someone else, and like most leases there is an expiration date. In order for purchasers to buy apartments in these co-ops, lenders want to see a land lease that is longer than the term of their loan. According to Geoffrey Mazel, a partner in the law firm Hankin & Mazel, most of the land lease co-ops in Queens and Westchester were built in 1950 and had original leases running through 2050, with automatic renewals in 2149. “We thought we were good,” he says. “There’s a renewal, so why should we care?” It turns out the reason to care was Fannie Mae, the authority that guarantees most mortgages. 

Starting in 2020, says Mazel, buyers of apartments in these co-ops started having difficulty getting 30-year loans. “Fannie Mae was basically writing 20-year mortgages or nothing at all,” he said. “And buyers for these co-ops were asking, ‘ What’s wrong with this co-op?’” Even though the land lease was set to automatically renew for co-ops “in good standing,” Fannie Mae wasn’t willing to take a risk.

“There was a little technicality that was killing these buildings,” Mazel points out. That was the requirement that a co-op couldn’t exercise the renewal until 24 months before the lease expired. He tried to explain this to Fannie Mae, but “dealing with them is beyond frustrating,” Mazel adds. There’s no person to contact and no address. If you’re selling your apartment today and your co-op doesn’t qualify for a Fannie Mae conventional 30-year mortgage, you’re in trouble. This was an existential threat to these co-ops over complete stupidity.”

So Mazel marshaled the support of the entire Queens legislative delegation, including Sen. Chuck Schumer, to write to Fannie Mae. “Even with this massive support it fell on completely deaf ears,” he says. “The clock was running and everyday when someone couldn’t sell their apartment meant their life savings were tied up. It sort of became this perfect storm, and that’s why we went the legislative route.” There was already a much larger bill tackling ground lease issues, but it wasn’t moving forward. “We had momentum on these issues and learned there was an opportunity to do a smaller bill. It got fast tracked, passed unanimously in the assembly and, despite some opposition in the Senate, passed there too,” he says. 

“All the people who have lived here more than five or seven years are nurses, doctors, firemen  — regular people,” says board president Schreibersdorf. “To lose their biggest asset would devastate anybody. Our state legislators really pulled through for us.”