Ground Lease

[Morris Missry]

Good morning and happy holidays to all. I have a very interesting scenario that I wanted to run by you. Here are the facts:

There is a plot of land in New York City (the “Property”) and Person A owns 2/3 of the Property and Person B owns 1/3. 

They both enter into a ground lease (the “Ground Lease “) of the Property to A’s affiliate. Person A builds a large office building on the Property. 

The Ground Lease contemplates entering into an agreement that addresses what happens if the Ground Lease is terminated, but they never do. 

What in your opinion happens in the event the Ground Lease is terminated?  Do the two fee owners own their interests in the combined Property as tenants in common?  Is Person A required to demolish the large office building and build two separate and independent buildings etc? Please give me your thoughts. I could not find any case law on this exact scenario.

Thank you. 

Morris Missry, Esq. 

WACHTEL MISSRY LLP

One Dag Hammarskjold Plaza 

885 2nd Avenue | New York, NY 10017

Telephone:  212 909-9557

Facsimile:    212 909-9448

Website:      www.wmllp.com

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[Howard Berglas]

How are you Morris.

I would say that the termination of the ground lease, or any provision of the ground lease, does not in any way affect the property's ownership. The two fee owners continue to own their portions of the property as contemplated by the deed. Presumably as tenants in common. As to what happens to the large office building, that would be governed by the provisions of the ground lease. Commercial leases normally have a provision as to what happens to tenant improvements upon expiration or termination of the lease. If the lease is silent as to that, an improvement such as this one remains on the property and belongs to the property owner. 

You indicated that the ground lessee was A's affiliate. Did A construct the building or did the affiliate do so? That might make a difference. I would assume it was the affiliate/ground lessee in which case it's a landlord-tenant situation and is governed by the provisions of the ground lease agreement. if A did it independently of its affiliate, the issue of the building would be determined by any agreement between A & B governing improvements to the property. If there is no such agreement, you're undoubtedly looking at lengthy litigation.  

Howard Berglas, Esq.

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[Morris Missry]

Thank you, Howard. A., who owns 2/3 of the land constructed the building ground leased a portion of the land from B. A. owns the building and runs the building. The problem is that it can’t afford to pay the ground rent to B and now has to default under the ground lease. Let’s assume the ground lease terminates. The building is still there on land owned by two different parties. I would think that A and B would be tenants in common.  The building is still there on land owned by two different parties. I would think that A. and B. would be tenants in common, but the case law doesn’t specifically state that so I’m trying to figure out whether each party would be constructively a tenant in common or something else.

Morris Missry, Esq. 

WACHTEL MISSRY LLP

One Dag Hammarskjold Plaza 

885 2nd Avenue | New York, NY 10017

Telephone:  212 909-9557

Facsimile:    212 909-9448

Website:      www.wmllp.com

On Dec 25, 2025, at 5:23 PM, 'Howard Berglas' via nyclarealprop <nyclar...@googlegroups.com> wrote:



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[Marc Ripp]

Morris, 

Try consulting Joshua Stein’s treatise on Ground Leases. It will be helpful. 

Regards,

Marc

On Dec 25, 2025, at 9:09 PM, Morris Missry <mmi...@gmail.com> wrote:

Thank you, Howard. A., who owns 2/3 of the land constructed the building ground leased a portion of the land from B. A. owns the building and runs the building. The problem is that it can’t afford to pay the ground rent to B and now has to default under the ground lease. Let’s assume the ground lease terminates. The building is still there on land owned by two different parties. I would think that A and B would be tenants in common.  The building is still there on land owned by two different parties. I would think that A. and B. would be tenants in common, but the case law doesn’t specifically state that so I’m trying to figure out whether each party would be constructively a tenant in common or something else.

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[Mark Mermel]

Morris,

 

I haven’t researched for cases, but here are my quick takes on the situation.

 

There are certain principles to consider:

 

I would imagine that each owner owns the portion of the building that is located on the respective parcels.  There should not be a merger of ownership simply because the building straddles 2 properties.

 

Neither owner should claim ownership of the entire building or an undivided interest.  I don’t think a tenancy-in-common would apply, since the ownership of the building is based on the ownership of the parcels, which are separate.   The building does not change the separate ownership of the parcels, nor should it effect the ownership of the parcels.  Neither owner should be permitted to demolish the building or materially alter it and damage the other’s interest in the improvement or destroy the structural integrity.  This might be analogous to a party wall doctrine.

There may also be an implied easement by necessity, as a matter of law.  Recognized to prevent waste.

 

Litigation strategies are:

Declaratory judgment action to establish proportions, existence of implied easement, injunction to prevent demolition, unilateral alterations and irreparable injury to real property, rights to possession and use and division of profits.  You’ll probably end up negotiating a settlement or buyout.

 

Mark D. Mermel, Esq.

MERMEL ASSOCIATES PLLC
One Hollow Lane, Suite 303
Lake Success, New York 11042
Tel. (516) 570-4000
Cell (516) 946-0222
Fax (516) 570-4333
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[Rosenberg, Gary M.]

A and B still own the land independent of each other.  It is only the building which is jointly owned.  Interesting in that the building is now owned by A&B jointly subject only to the A ground lease

Which presumably is not in  default. Could be very interesting.  

Gary M. Rosenberg
	T: +1 (212) 551-8410 grose...@rosenbergestis.com 733 Third Avenue, New York, NY 10017

On Dec 26, 2025, at 9:09 AM, Morris Missry <mmi...@gmail.com> wrote:



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[Mark Mermel]

As a follow up, the reason I don’t think it creates a TIC is because there is no undivided interest in the same property.  They each own their properties separately, divided by the lot line.

 

Mark D. Mermel, Esq.

MERMEL ASSOCIATES PLLC
One Hollow Lane, Suite 303
Lake Success, New York 11042
Tel. (516) 570-4000
Cell (516) 946-0222
Fax (516) 570-4333
Email: ma...@mermellaw.com

 

[Kearns, Thomas D.]

I lived through a scenario like this on a Broadway property a couple of years ago.  Here is a write up of one aspect:  https://www.clearygottlieb.com/news-and-insights/news-listing/times-square-jv-wins-specific-performance-of-sale-of-parcel-under-times-square-crowne-plaza-hotel-for-121-million But that arrangement had a much more robust agreement between the parties.  Since I’m a deal guy and not a litigator, I see 4 paths:

1. Since B is really ticked off here, A should propose a third party to act as manager for the building.  But it can’t be just a property manager arrangement.  And it shouldn't be an affiliate of A.  The manger needs authority and the right in invest at a return and a promote.  And then divide the profits up according to the percentages.  And perhaps a forced sale of entirety in x years. This agreement will be hard to pull off.   

2. A could say to B: if you don’t agree to a reasonable settlement I will hire a BK lawyer to file an 11 for the tenant and who knows what might happen there.  BK judge could force a sale of everything including the fee positions. (My BK partner is great at these types of paths.)

3. A could say to B - let’s do a shotgun buy/sell that will be binding.  I will put a value on the table and you may elect to  be the buyer or the seller.  

4. Negotiate a buy out of one or the other. 

Thomas D. Kearns

O L S H A N

OLSHAN FROME WOLOSKY LLP
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On Dec 26, 2025, at 7:50 AM, 'Rosenberg, Gary M.' via nyclarealprop <nyclar...@googlegroups.com> wrote:



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[Stuar...@hklaw.com]

Person A and Person B are tenants in common. If either party wants to terminate the relationship and nothing is in writing, pursuant to NYS Real Property Law 240-C(3)(c), they would seek a court order to sell the TIC interests or could avoid the Tax Consequences of a sale and enter in a TIC Agreement.

 

Stuart M. Saft | Holland & Knight 
Partner and Real Estate  Practice Group Leader 
Holland & Knight LLP 
787 Seventh Avenue, 31st Floor | New York, New York 10019 
Phone +1.212.513.3308 | Fax +1.212.385.9010 
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From: nyclar...@googlegroups.com <nyclar...@googlegroups.com> On Behalf Of Morris Missry
Sent: Thursday, December 25, 2025 8:18 AM
To: nyclar...@googlegroups.com
Subject: [nyclarealprop] Ground Lease

 

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[Wolk, Lawrence (OAG)]

Agree with stuart's analysis

Lawrence Wolk

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From: 'Stuar...@hklaw.com' via nyclarealprop <nyclar...@googlegroups.com>
Sent: Friday, December 26, 2025 5:34 PM
To: nyclar...@googlegroups.com <nyclar...@googlegroups.com>
Subject: [nyclarealprop] RE: Ground Lease

 

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[Stephen Anderson]

I need some additional instruction as to the creation of a tenancy in common. My memory (of the law in Massachusetts) is that, with some exceptions not relevant here (e.g. one joint tenant conveys his or her interest to a stranger), the creation of a tenancy in common requires a conveyance from the fee holder(s) to two or more persons, usually by deed, or perhaps under a will.

 

My understanding of the facts here is that Persons A and B start out as fee holders of separate parcels, become reversioners of their respective parcels under the long term lease, and then, when the long-term lease terminates, Persons A and B once again become fee holders of their respective parcels of land and each of those parcels permanent attachments (I.e., the portions of the office building that occupy each of those parcels).

 

Persons A and B may have some rights and obligations as to each other  (e.g., lateral support or, perhaps as suggested by another poster, those relating to a party wall), but I don’t understand how they could be those of tenants in common.

 

What action, transaction, or document could be said to create a TIC upon termination of the long-term lease?  We are told that the long-term lease did not provide for any such arrangement, so that’s not the source.

 

I realize this is New York which could be the basis of the suggested result.

 

Steve Anderson

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[Kearns, Thomas D.]

I agree Stephen as to fee ownership.  I don’t believe Stuart meant that the fee ownership of the real property changes.   But, as a practical matter the fee owners may face the same result, I.e., a forced sale. So whether the nature of the fee ownership changes or not  may not make much difference.   Stuart may have also meant that the ownership of the building is a TIC since the ownership of the building can be different than the ownership of the fee estate.   And since the economics are in the building, again, whether the fee ownership changes or not is largely irrelevant.   If you can’t agree on a path forward, the whole thing may get sold. 

PS: I don’t agree with your “portions of the office building that occupy each of those parcels)” statement since it’s probably not practical to divide up a building that straddles 2 lots.   

Thomas D. Kearns

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On Dec 27, 2025, at 4:42 PM, Stephen Anderson <s...@scandersonlaw.com> wrote:



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[lfielding]

The written designation of the fee owners/lesssors in the ground lease documents would be most helpful.  I suspect that the ground lease was executed by the two fee owners as ground lessors (rather than an entity created by them to execute the ground lease). Should that be so,  a common law partnership (sharing the income of the ground lease) would have been created and upon the expiration/termination of the ground lease and the reversion of the building to the ground lessors, the building would become property of the common-law partnership. Not a tenancy in common but partnership property.  That  partnership would need to be wound up and discontinued by a distribution of the  partnership "assets" i.e. the building.  (I assume that   the partnership property interest in the fee would be solely the right to lease the fee interests for the term in the ground lease). A common law partnership can be terminated through court intervention; but, as others have stated, this matter would best be addressed through negotiation rather than through cumbersome litigation.

  It might be helpful to know how the ground lease lessor income was divided between the ground lessors, I suspect that as the fee parcels were unequal, and one of the "partners" built the building that the distribution of income was unequal.  

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[Eliza Hall]

Based on the scenario described in the first email (from Morris Missry), I agree with Stuart Saft: persons A and B own the parcel as tenants in common. That has nothing to do with the ground lease — it’s how they owned the parcel from the beginning, before the ground lease was entered into. 

Caveat: This analysis depends Morris’s statement that "There is a plot of land in New York City (the ‘Property') and Person A owns 2/3 of the Property and Person B owns 1/3.” If that plot of land is a single parcel that they each own an unequal part of, then by definition they own it as TIC. Some later emails in the thread seemed to interpret the scenario as being that there are two adjacent parcels, one owned by A and the other by B, and then A and B agreed to enter into a ground lease that resulted in the construction of a commercial building straddling both parcels. If that’s the case, then obviously it’s a different situation.

Lisette Fielding’s analysis that the ground lease may have created a common-law partnership is interesting. What a mess this is! An interesting mess, though.

	Eliza Hall Consulting Counsel Potomac Law Group, PLLC Pittsburgh, Pennsylvania (412) 996-1617 • eh...@potomaclaw.com  www.potomaclaw.com • LinkedIn
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From: nyclar...@googlegroups.com <nyclar...@googlegroups.com> on behalf of lfielding <lewette....@lfieldinglaw.com>
Date: Tuesday, December 30, 2025 at 6:15 PM
To: nyclar...@googlegroups.com <nyclar...@googlegroups.com>

Subject: Re: [nyclarealprop] Re: Ground Lease

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[Morris Missry]

It wasn’t one tax lot. Two tax lots that were leased to the developer.

Morris Missry, Esq. 

WACHTEL MISSRY LLP

One Dag Hammarskjold Plaza 

885 2nd Avenue | New York, NY 10017

Telephone:  212 909-9557

Facsimile:    212 909-9448

Website:      www.wmllp.com

On Jan 1, 2026, at 4:57 PM, 'Eliza Hall' via nyclarealprop <nyclar...@googlegroups.com> wrote:



Based on the scenario described in the first email (from Morris Missry), I agree with Stuart Saft: persons A and B own the parcel as tenants in common. That has nothing to do with the ground lease — it’s how they owned the parcel from the beginning, before the ground lease was entered into. 

Caveat: This analysis depends Morris’s statement that "There is a plot of land in New York City (the ‘Property') and Person A owns 2/3 of the Property and Person B owns 1/3.” If that plot of land is a single parcel that they each own an unequal part of, then by definition they own it as TIC. Some later emails in the thread seemed to interpret the scenario as being that there are two adjacent parcels, one owned by A and the other by B, and then A and B agreed to enter into a ground lease that resulted in the construction of a commercial building straddling both parcels. If that’s the case, then obviously it’s a different situation.

Lisette Fielding’s analysis that the ground lease may have created a common-law partnership is interesting. What a mess this is! An interesting mess, though.

<C2_signature_plglogo_7a02796c-779c-4f7f-8806-e152716d7661.jpg>

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[Morris Missry]

That’s an interesting theory.

There was no income split, although the ground lease does contemplate a proportionate split after termination, but again that same provision contemplated the parties entering into this phantom agreement that was never entered into. The developer merely paid the fee owner, who owned 1/3 of the combined property (the property was not legally combined at the time and still constitutes two separate tax lots I believe) ground rent. The developer did not pay himself any ground rent on the property that he owned.

Morris Missry, Esq. 

WACHTEL MISSRY LLP

One Dag Hammarskjold Plaza 

885 2nd Avenue | New York, NY 10017

Telephone:  212 909-9557

Facsimile:    212 909-9448

Website:      www.wmllp.com

On Dec 30, 2025, at 6:15 PM, lfielding <lewette....@lfieldinglaw.com> wrote:



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[Lewette Fielding]

Morris:  In general,  upon expiration of any ground lease the real property and improvements revert to the ground lessor.  The question here is who or what entity is the ground lessor.  For example, if the two ground lessors created an LLC (or any entity, whether a common-law partnership or an LLC)  to lease the two fees, it would be obvious that the improvements revert to the  ground lessor as described and designated in  the ground lease.  

 But what is described below is a little different than the initial scenario - now it seems that the owner of parcel A built a building on Parcel A and Parcel B and then paid the owner of Parcel B ground rent.  Initially, I assumed that the building was leased to a third party, but, it seems I misunderstood the underlying facts. 

Is the lease  between the owner of Parcel B as lessor and the Parcel A owner as tenant of Parcel B?  In that scenario, A has built a portion of a building on B's land and B as lessor, upon the expiration of the ground lease, is now the owner of those portions of the building on B's land.  If so, owner of Parcel B needs to examine closely the boilerplate language of the lease - does it permit the ground lessor to demand that the lessee remove tenant improvements and is there a time frame within the lessor must demand that improvements be removed?  

It seems that B would have the right to knock down their 1/3 of the building as any ground lessor/landlord would in this situation.  Dear me, can we construe the dividing line between 2/3 and 1/3 of the building as a "party wall"?

Best to you Morris and a very happy New Year!

https://groups.google.com/d/msgid/nyclarealprop/CE75246F-6C0C-4A9C-8A17-FF8DB8F004E8%40gmail.com

.

[Morris Missry]

There are two fee owners that own two distinct lots that entered into the ground lease with the developer. The fee owner that owns one of the lots is not an owner of the building.

Morris Missry, Esq. 

WACHTEL MISSRY LLP

One Dag Hammarskjold Plaza 

885 2nd Avenue | New York, NY 10017

Telephone:  212 909-9557

Facsimile:    212 909-9448

Website:      www.wmllp.com

On Dec 26, 2025, at 7:49 AM, Mark Mermel <Ma...@mermellaw.com> wrote:



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[Morris Missry]

Thanks for everyone’s thoughts and analysis. I do appreciate them and will update you as things unfold.

Morris Missry, Esq. 

WACHTEL MISSRY LLP

One Dag Hammarskjold Plaza 

885 2nd Avenue | New York, NY 10017

Telephone:  212 909-9557

Facsimile:    212 909-9448

Website:      www.wmllp.com

On Jan 7, 2026, at 12:07 PM, 'Lewette Fielding' via nyclarealprop <nyclar...@googlegroups.com> wrote:



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