In New York City it is very common that a person may own a cooperative apartment. Essentially, the ownership of a co-op apartment has two aspects. A person is a stockholder of and owns shares in the cooperative corporation. The vested interest in the corporation provides a person with the right to be the lessee in a proprietary lease for his apartment.
As most cooperative apartment dwellers know, the co-op owner is subject to many corporate rules and regulations that are contained in various forms such as the proprietary lease, the corporation’s by-laws and the house rules. Perhaps the most well known rule or restriction regarding these apartments is that the ownership rights cannot be sold or transferred without the express approval of the corporation. The general law in New York provides that cooperative corporations have broad and usually unreviewable discretion to approve or disapprove of a prospective purchaser or transferee. While the corporation cannot engage in discriminatory conduct, it can disapprove a transaction for any reason and generally does not need to disclose the reason for such rejection.Due to the uncertainty of corporate transfers and the immense value some cooperative apartments may have, estate planning for the distribution of a co-op can be complicated. New York Estate Lawyers have often encountered this problem, particularly when the estate fiduciary, such as an executor or administrator, attempts to sell or transfer an apartment owner by a decedent.
I have represented many clients in connection with the purchase or sale of a cooperative apartment. In numerous cases these transactions have involved estate ownership.
A recent decision by the Appellate Division, First Department, on February 11, 2016, in a case entitled Terzo v. 33 Fifth Avenue, provides a typical example of the difficulties encountered when an estate involves cooperative ownership. In Terzo the cooperative apartment had been owned by a husband and wife who had two sons. The family had lived in the apartment for many years. After the parents died the two sons inherited the apartment. However, only one son planned on remaining in the apartment while the other son was already living in another state. After the sons submitted their application to the cooperative corporation to have the apartment ownership transferred to them, the corporation rejected the application. As it turned out, the cooperative corporation claimed that it rejected the transfer because the son that was remaining in the apartment was not financially responsible enough. The corporation also had objections to the son who was not living in the apartment being a non-resident owner and that potentially, if both sons lived in the apartment, it would exceed the occupancy requirements for the unit.
The Court reviewed all of the cooperative corporation’s arguments against the transfer and noted that the proprietary lease stated that the transfer of the apartment to a member of the decedent’s family who was financially responsible would not be unreasonably withheld. Thus, the Court found that the lower court ruling was correct in finding that the sons could own the apartment and that the corporation breached the proprietary lease. Terzo is an interesting case to read for an insight into the complicated area of the transfer of cooperative apartment ownership.
The New York Probate Lawyer Blog has talked about the many problems faced by fiduciaries in the process of estate settlement with regard to the administration of estate assets. As can be seen by the Terzo case, the estate planning and transfer of cooperative apartments as part of a decedent’s estate can be particularly challenging. The advice and guidance of an attorney experienced with cooperative ownership and estates can be essential.
If you have a question or concern regarding cooperative apartment transfer or ownership or estate administration call me now for a free discussion.
New York Trusts and Estates Attorney Jules Martin Haas has helped many clients over the past 30 years resolve issues relating to probate, estate settlement and real estate cases throughout New York City including Manhattan and Brooklyn. If you or someone you know has any questions regarding these matters, please contact me at (212) 355-2575 for an initial consultation.
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