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Leases extended on Babylon barrier beaches

Barbara McGinn poses for a portrait beside waterfront

Barbara McGinn poses for a portrait beside waterfront homes on Oak Beach. (Aug. 18, 2012) Credit: Barry Sloan

To ensure the liquidity of the real estate market, Babylon officials have extended through 2065 the leases on town-owned barrier beaches off the South Shore.

The previous leases were set to expire in 2050, a deadline that was uncomfortably soon for banks being asked to give 30-year mortgages.

Barbara McGinn, a real estate agent who specializes in the barrier beaches and lives there, said the extension was significant because many lenders will not finance a long-term mortgage on a house on leased land unless it has at least 38 years left under the agreement.

"This helps the market, and it helps real estate people," McGinn said.

The arrangement would impact about 415 properties in Oak Beach, Gilgo Beach and Oak Island, communities where residents own their homes and other improvements but not the land on which they sit.

They pay property taxes and rent, in an arrangement that originated in the 1700s, with officials' efforts to regulate the harvest of salt hay. Today, the regulations limit development and preserve public access to the waterfront, town officials say.

Officials decided to extend the leases by 15 years, after recent appeals from beach residents and real estate professionals, including James Netter of West Islip-based Netter Real Estate, another beach resident.

In the past 12 months, Oak Beach had four sales, with a median price of $438,000; Gilgo Beach, three, with a median price of $350,000; and Oak Island had one sale for $175,000. About 12 houses are for sale on the beaches, McGinn said.

The $3,200 in annual rent homeowners now pay is set to increase $500 every five years through 2065.

In 1997, the town, seeking to fill a budget hole during Rich Schaffer's first term as supervisor, sold the right to collect those rents for 25 years to a Greenwich, Conn., investment company for $7.2 million. When that pact expires in 2022, rent collection will revert to the town.

Additionally, residents pay a "flip tax" to the town of 2 percent on the first $200,000 on the sale of their homes and 5 percent of anything above that.

A number of town officials, including chief of staff Ron Kluesner and Industrial Development Agency head Robert Stricoff, own homes on the beaches. Councilman Lindsay Henry, who is buying a home there, recused himself from the board's vote last week.

In an interview this week, Schaffer said the extension is a win-win for the town. "It would be malpractice for us not to extend the leases . . . The overall benefit is to the town, not to individual leaseholders."

The hearing and 4-0 vote was over in a matter of minutes: nothing like the lease extension debate in 1990, when a state lawsuit contending the beach properties posed a risk to the environment threatened the communities' existence.

Banks stopped issuing mortgages or equity loans, residents stopped improvements or additions, and leases could not be transferred to new owners.

The communities raised more than $100,000 in legal fees and won the support of state Sen. Owen H. Johnson (R-West Babylon), Assemb. Robert Sweeney (D-Lindenhurst) and then-Nassau County Executive Thomas Gulotta.

After they and town officials reached an agreement with the state that permitted beach life to go on, Kluesner -- at the time a private citizen -- was spotted in a corridor of Town Hall singing, "Happy days are here again!"

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