BPCA president B.J. Jones replied, “that angle is certainly the worst-case scenario. If this issue went unaddressed until 2069, and the Authority of the future decided to exercise every fair-market-value reset as currently structured in the lease, it would be untenable. And in 2069, if the Authority decided not to do anything about that and take possession of the condos, that would be terrible.”
He added, “I think we at the Authority agree with people who are concerned about the fair-market-value reset formula, that it’s untenable, and we do want to address it. Even though 2069 feels far off, we also recognize that it’s not that far off. And the Authority shouldn’t kick that can down the road longer than it needs to. We believe that there is a path forward to address that and potentially extend the ground lease.”
“The only way this intolerable situation will be resolved is for State Senator Brian Kavanagh and other elected officials to get involved, as they did in the successful 2009-11 negotiations, and convince the BPCA to enter direct good-faith negotiations with the Homeowners Coalition,” says Pat Smith, president of the Battery Pointe condominium board, and a member of the Homeowner’s Coalition.
The BPCA’s most recent effort to address these concerns was a December proposal, which would eliminate ground rent resets based on the fair market value of the land, but instead impose flat-rate increases of three percent per year on the ground rent charged to each condominium owner through 2069. The same plan would assess “flip taxes” on all future sales of condo units, amounting to eight percent for the first transaction after such an agreement is concluded, and one percent on all subsequent sales, also through 2069. This proposal would additionally mandate “sustainability targets” for all condominiums, which would levy an as-yet-unknown cost on each building.
Concerns cited by multiple community leaders about negotiations between the BPCA and condominium owners being direct and held in good faith are references to the fact that, rather than negotiating in-person with condominium representatives, the Authority has hired (at a cost of $500,000) HR&A, a real estate and economic development consulting firm, to bargain on its behalf.
While these indirect talks continue, costs for people who have purchased an apartment in Battery Park City are spiraling. A 2011 deal negotiated by the Coalition (representing a dozen condominiums) capped ground rent increases through 2042 at three percent per year, after initial step-ups (in some cases amounting to millions of dollars) that varied between buildings. (This is the baseline and precedent that the BPCA’s most recent proposal contemplates extending.) But such a deal would mean that a hypothetical condominium owner now paying $24,000 in annual ground rent (which is billed monthly, as a component of common charges) will be paying $32,254 per year a decade from now, and $44,647 per year in 2042. And after 2042, the “protected” condominium owners will face costs that could increase by orders of magnitude, as their leases once again revert to the original terms of fair-market-value resets. Even if such a unit owner were to retain the three-percent cap on ground rent increases after 2042 (as the BPCA proposes), by the time of the lease expiration in 2069, he or she would be paying $99,175 per year, just in ground rent. All of these amounts will be in addition to taxes, mortgage payments, and other costs.
A further illustration of how these forces are converging to squeeze homeowners was provided by Bob Zack, a leader of the Homeowners Coalition, at a 2020 meeting of CB1’s Battery Park City Committee. Mr. Zack announced the result of financial projections he had tabulated, showing that, “if present trends continue, and I am still alive in the 2060s, the common charges on my apartment will come to more than $100,000 per month. And that doesn’t include a mortgage payment. Those numbers assume that I own my unit free and clear.”
Perspective on this dilemma was recently shared by apartment owner Daniel Akkerman—a resident of Hudson View West, where he serves on that condo’s board. Mr. Akkerman, who is a co-founder of the Battery Alliance, says, “I moved here eight years ago, and since then I have become very concerned. My building’s common charges have not increased during that period, but government-related fees—PILOT and ground lease—have increased by 50 percent. We need to go to our elected officials, because they not only represent us as citizens, but the government, which they are members of, is our landlord.”
Mr. Dellaportas adds that, “the obligations contained in the original leases between condominium owners and the BPCA are never going to be paid, under any circumstances. Not because residents will refuse to do so, but because it is financially impossible. The only choice facing the Authority is whether they want to force thousands of homeowners into default, and then evict them through foreclosure. Or whether they want to renegotiate those leases under more realistic terms.”
Matthew Fenton
