Question: I run a large nonprofit in New York City that operates homeless shelters. I am advised that a leasehold condominium may be a beneficial structure for us instead of a long-term lease. Can you give an overview of leasehold condominiums and how they are created, as well as confirm whether operating a shelter qualifies for any special benefits?

Answer: You are correct that a leasehold condominium structure may, in fact, be more beneficial for a nonprofit versus a long-term lease. That is, so long as the anticipated long-term lease was for 30 years or more, which is the minimum length of time needed to create a leasehold condominium compliant with Article 9-B of the Real Property Law (known as the Condominium Act). The benefit to a nonprofit that owns a leasehold condominium unit or units is the potential eligibility for a valuable tax exemption under N.Y. Real Prop. Law §420-a (the “420-a Exemption”). And yes, the New York City Department of Finance (DOF) confirmed in 2022 that a nonprofit that operates a homeless shelter can apply for the 420-a Exemption.

Overview of Leasehold Condominiums

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