The Ins and Outs of Air Rights

When purchasing property, what you build on the land is just as important as what you build above it. Owning, renting and leasing land or a building includes the right to use the space above the land, also called air rights. There are strict limitations on your air rights depending on where you live. Local zoning laws may affect the rights you have to the space above your property.

Because air rights can also be bought or sold, buyers and sellers should be aware of air rights when considering buying or selling a property.

— What are air rights?

— How do they work?

— Do all properties have air rights?

— Do all areas of the country have air rights?

— Can you sell air rights?

— Can you buy air rights?

What Are Air Rights?

Air rights refer to the right to use and develop the empty space above or near a building or vacant lot. There are limitations to your air rights, though.

“The amount of air rights equals the maximum amount of floor area permitted in a zoning lot minus the amount of floor area utilized by any existing structures on the lot,” explains Sonja Gosine, spokesperson at Hauseit, a real estate service in New York and Florida. “Air rights are also referred to as unused development rights, excess developments, transferred development rights and available development rights.”

Because air rights can get complicated, this definition is a general guideline. Air rights don’t continue endlessly and property owners must always consider local zoning laws when building vertically. A property owner’s air rights extend to the space above the property that could be reasonably used in connection with the land.

Additionally, the usage and development of air space must not intrude on the neighbor’s space above their property. If your building hangs over the neighbor’s property line, then they could demand that you remove the structure.

[Read: How Do Real Estate Commissions Work?]

How Do They Work?

As an example, Gosine says that in a New York City zoning district with a floor-to-area ratio of 10, a 5,000 square foot lot would allow the development of a property with up to 50,000 square feet of floor area. If the existing structure on the lot is 10,000 square feet, it means there are 40,000 square feet of air rights.

Property owners have several options when it comes to air rights and development. This includes enlarging an existing building by adding additional floors or an extension, building an entirely new and larger structure or selling air rights to another lot owner, says Gosine.

Do All Properties Have Air Rights?

Both commercial and residential properties can have air rights, but the amount of air rights vary based on local zoning regulations. “In (New York City), the Zoning Resolution of the City of New York determines the extent of permitted development rights for each zoning lot,” Gosine states. “The permitted floor-to-area ratio varies by zoning district and location as well as the use of the building — residential, commercial and manufacturing — among other factors.”

[See: 10 Home Renovations Under $5,000.]

Do All Areas of the Country Have Air Rights?

Air rights extend across the nation; however, zoning laws are also a factor. Zoning laws regulate the use of land within a municipality. These laws control how the land can be developed as well as what purposes the land may serve. This means that even though you technically own the air space above your property, local zoning restrictions may state that you cannot add several additional stories to your home. This is also why you cannot build a skyscraper in a residential neighborhood even if you have air rights.

Can You Sell Air Rights?

Selling air rights is usually subject to strict limitations. In New York City, Gosine says that air rights are sold and transferred through a purchase and sale agreement, similar to what is used when selling a condo, co-op or house.

Air rights can also be transferred through a zoning lot merger of contiguous tax lots. “Through this method, the owner of the property with unused development rights sells her or his air rights to a neighboring lot which is contiguous for a minimum of 10 linear feet, located within the same block,” explains Gosine.

[See: 10 Ways Millennials Are Changing Homebuying.]

Can You Buy Air Rights?

Air rights may be purchased by a developer of adjacent or nearby lots in order to build a larger structure, protect views and increase the sellout value of a project.

“One example is The Orion, a 60-story condo high-rise at 340 West 42nd Street in Hell’s Kitchen, Manhattan, which was built in 2007,” Gosine says. “In order to preserve the westerly Hudson River views, the developer purchased the air rights from the neighboring buildings on the corner of 9th Avenue and West 42nd Street.”

You may also buy the air rights from noncontiguous properties utilizing a Special Zoning District Transfer or a Landmark Transfer, Gosine adds. She also explains that contracts may even contain a light and air easement provision, which prevents the seller from blocking the views from the upper floors of the developer’s building.

Air rights aren’t cheap. “Air rights in (New York City) range from $200 to $400 per square foot, but this is negotiable and pricing varies by location and project,” says Gosine.

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