You own a nice little co-op apartment, you want to pass it along to your next of kin when ... you know. But, as they say, death be not proud – and neither should boards be when it comes to the delicate matter of whether to allow an heir to inhabit.
In most cases, that doesn’t become an issue. Virtually every proprietary lease provides that if a spouse dies, the survivor takes over. But what happens if the widowed mom or pop die, and junior’s got his own home and family and doesn’t want to pay monthly maintenance on an apartment he doesn’t live in? And what if he doesn’t want to take on the headaches of being an absentee landlord (that is, if the board even consents to sublets)?
Mostly what happens, according to attorney Alfred M. Taffae, a partner at Racht & Taffae, is that the apartment gets sold like any other co-op apartment, with the underlying shares being transferred to an approved buyer. But there are less cut-and-dried cases. Sometimes, Taffae notes, “people seek to keep an apartment in the family and an heir decides to move in. And because of that, there’s a lack of knowledge among boards and shareholders about the corporation’s rights.”
He cites the case of a woman taking over her late son’s apartment and then installing two nieces and one of the niece’s daughters into the unit without transferring the shares or even letting the board know. “Often, boards try to be accommodating to the bereaved party, and that can sometimes come back to hurt you when successors take advantage of your kindness.”
Be sensitive to an heir – but not too sensitive. You have a responsibility to see that an heir – even one who had already lived there prior to the shareholder’s death – passes financial muster. If you allow the heir to stay without approval, you are setting a bad precedent that can also have consequences for the building: the number of non-owner-occupied apartments increases – which is bad for any refinancing attempts – and you also have less control over the co-op.
But approving the new owners is not as simple as it is with a normal transfer. “It’s not like an outside sale, where a board can withhold consent without stating a reason except for discrimination issues,” warns Taffae. “In the case of an heir, the standard is that the co-op can’t unreasonably withhold consent to a financially responsible member of the shareholder’s family.”
In practical terms, this means going over the heir’s financials – job and income data, assets and liabilities, maybe even a letter of financial reference – to ensure that he or she can pay the monthly charges. “Technically, they’re not allowed to live in the apartment until all the estate issues are resolved,” Taffae says, “but if someone’s been living there with the shareholder, you’re not going to kick them out. If they haven’t been living there, you don’t want them to move in until a representative of the estate is established.” That means either an executor, generally named in a will, or a court-appointed administrator.
Note that the board has the right to get a copy of the death certificate as well as “letters testamentary” saying the executor has power to act on behalf of the estate (or, in the case of an administrator, “letters of administration”).
The final word: a co-op has a right to require that shares be transferred expediently from the estate, either to an heir or to a new owner. If someone is dragging his feet on making such a transfer, you should first send him a polite letter explaining that this must be done. You might also add that it is a matter of policy (and if the requirement isn’t in your proprietary lease, then you should change it). If all else fails, turn to your lawyer.