Pied a Terre's Guide
Pied a Terre's Guide
CityRealty: Pied-a-terre Guide
Thinking about becoming a parttime New Yorker? Then that means you’ll need an apartment to crash while you’re visiting such a place is better known as a pied-a-terre. Here’s a guide to explain what, exactly, constitutes a pied-a-terre, what to consider before you purchase one, and the property taxes associated with it.
Pied-a-terre: what it is
In French, pied-a-terre means “foot on the ground.” In New York, it is known as an apartment, either located in a condo or coop building, that the resident only lives in part time maybe for weekends, business trips or the occasional vacation. This type of apartment is categorized as a “nonprimary residence” for the owner. Pied-a-terres range from impressive apartments in luxury condo developments, often purchased by wealthy foreign buyers, to more modest, small studios that aren’t priced into the six or seven figures.
However, pied-a-terre is not a legal definition for a type of apartment. The meaning is subjective, and coop and condo boards often have different interpretations of it. That means that finding and purchasing one comes with some extra considerations and hurdles for the buyer.
Luxury vs. affordable pied-a-terres
There are two ends of the pied-a-terre market. The luxury pied-a-terre market is most prevalent in central Manhattan neighborhoods known for luxury real estate think Upper East Side, Central Park South or SoHo. These wealthy buyers, often foreign investors, are not just looking for a central location but a building that’s outfitted with impressive amenities reminiscent of a hotel. Highend pied-a-terre buyers often seek out buildings with concierge services to help plan their trip, like making travel arrangements and restaurant reservations. Common areas like roof decks and lounges, as well as spa and fitness centers are also considered perks. Even better? Condo buildings that actually offer services like doormen, housekeeping, laundry and room service amenities that help make a second home feel like a vacation.
On the other end of the market, pied-a-terres tend to be small onebedroom apartments or alcove studios with price tags that will not break the bank. It’s hard to find an affordable pied-a-terre in the central Manhattan neighborhoods preferred by highend investors, so buyers may have to extend their search to other boroughs. Tudor City, a coop complex in East Midtown known for its dearth of studio apartments, is often a popular destination for buyers seeking affordable pied-a-terres. Here, the small spaces come with a few sacrifices, like murphy beds and kitchenettes with mini fridges and microwave convection ovens.
Condo vs. Coop
In general, coop buildings put forth much stricter rules about pied-a-terres than condo buildings many coop boards flatout ban them. Other boards will allow pied-a-terres only on a casebycase basis, while a few coop buildings do allow them. (5 Tudor Place, in Tudor City, is one example.) Coop listings will often state upfront what the building’s pied-a-terre policies are. And while prices for coops tend to be lower than condo prices, the buying process if you’re even able to find a pied-a-terre coop requires a full board process and an interview with the board. Buyers will need to carefully work with their brokers and do due diligence before putting an offer on a pied-a-terre coop.
Condos, on the other hand, offer a hasslefree purchasing process. Because condo buildings don’t designate if they are pied-a-terre friendly or not, pretty much any building is fair game. The only criteria that usually needs to be met by the potential buyer is verified financials.
What the board needs to know
Buyers should be clear about their intended pied-a-terre uses before making an offer on an apartment. Boards and management will often want to know how often the buyer will be there, and who will have access to the apartment when the buyer’s away. If a buyer plans to use the apartment as an office space, they should check with the board first home businesses that bring in foot traffic may be a problem. A buyer should also inform the board of any plans to renovate.
Renting out a pied-a-terre
Both condo and coop buildings typically set forth rules about renting out pied-a-terres while the buyer isn’t occupying it. While rules are particular to each building, subletting rules often require that a renter has to be there for one year minimum. Coops typically restrict the length of time an apartment can be rented out to onetwo years within a fiveseven year period. And many buildings don’t allow guests other than immediate family to live there.
Nabbing financing for a pied-a-terre can be a tricky proposition. If it’s a second home, pied-a-terres must be at least 60 miles away from the buyer’s primary residence for them to secure a fixed rate loan. Banks will often charge higher interest rates because the apartment is not a primary residence.
Property taxes on pied-a-terre have been a source of controversy in the NYC real estate world, especially as more foreign buyers have purchased luxury pied-a-terres. According to this article in Crain’s, nonresidents have accounted for 30% of purchases in the Manhattan luxury market since 2008. And tax abatements and tax laws have generally shielded those nonresidents from contributing real estate tax dollars to the city. Developers argue that pied-a-terre owners aren’t in need of city services like fulltime residents, so fully taxing second homes would be unfair to those buyers. But politicians have started pushing for a higher pied-a-terre tax to help fund city services, according to Crain’s. Calls for legislation to amend the Real Property Tax Law would allow the city to tax pied-a-terres at an escalating rate depending on the value of the property. This would mostly affect pied-a-terre buyers from the top pricing bracket.
Buyers should also be aware that if you own a property in New York State and spend 183 or more days in the state (say, at your Manhattan pied-a-terre), you a considered a resident of the state a must pay an income tax.