Using Leasehold Condominiums to Reduce Rent for Educational Institutions, Medical Centers

New York Real Estate Practice Group Leader Stuart Saft authored an article for The Real Estate Finance Journal exploring how leasehold condominium structures can help educational institutions and medical centers reduce occupancy costs while enabling landlords to maintain net rental economics. Mr. Saft explains that converting a lease into a leasehold condominium unit may allow a qualifying nonprofit to obtain a real property tax exemption for the portion of the building it uses for nonprofit purposes, potentially lowering the tenant's effective rent and reducing the landlord's tax burden without converting the fee interest. The article also outlines relevant structural requirements and considerations, including minimum lease term and tax payment provisions, lender and mortgage implications, as well as more complex approaches such as "condo-within-a-condo" (CWC) structures. It notes that similar strategies may be viable in other jurisdictions that recognize leasehold condominiums and provides comparable exemptions.

Mr. Saft also published a Holland & Knight alert on this topic.

READ: Using Leasehold Condominiums to Reduce Rent for Educational Institutions, Medical Centers