"Buy land, they're not making it anymore"- Mark Twain
Ironically or not, this quote from Mark Twain captures the intangible and unique value that comes from owning a piece of real estate. The sweep of your ownership may not end at the roof of your building. In many jurisdictions, including New York City and the surrounding municipalities, each parcel of property contains a certain amount of development rights commonly referred to as "air rights". As the price of real estate continues to rise, the sale of air rights has become a niche industry, allowing property owners to turn a profit by selling off development rights they had no intention of using on their own property.
To understand how the transfer of air rights works, we first need to understand what air rights are. The New York City Zoning Resolution allots a certain amount of buildable square feet on each property lot in the city. The amount of buildable space is called the Floor Area Ration (FAR) and is determined in part by the size of the lot and its location. Many homes and buildings in the city are completed without using all of the FAR allotted to the property lot thus there are millions of square feet of unused/undeveloped air rights available for purchase.
For the most part, a person can only sell or transfer their air rights to a lot in which it shares a border with. Owners of landmarked property can offer their air rights to a larger pool of buyers. Even with these limitations in place, air rights are still a hot commodity. In some cases, air rights have sold for as much as 85% of the price of actual real estate in the area. As developers have continued to put up new apartments and cooperative units to address the city's housing shortage, the demand for air rights has surged. Because of zoning restrictions, most developers must first assess how much unused air rights remain in order to determine if they can complete their project to the height and size as they desire. This is especially true in older residential neighborhoods in the outer-boroughs which have seen an increase in multi-unit buildings in traditional one or two family building neighborhoods.
The sale of air rights is normally done through a Zoning Lot Development Agreement (ZLDA). This transaction differs greatly from the sale of traditional real estate and its implications for your property will be permanent. If you have been approached by a neighbor or developer about selling your air rights or if you are considering buying air rights to enlarge your building, we strongly encourage you to contact our firm and allow us to guide you through this process to ensure that your ZLDA is completed correctly.
Please feel free to contact our office at (718) 713-3499 to discuss your matter in depth.
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