When Welcoming New Residents …

When people sell apartments in cooperative buildings, they are actually transferring their shares in a corporation and assigning their interest in a proprietary lease. The assignment sounds very simple on its face, but sometimes has complications resulting from apartment alterations. Proprietary lessees may alter apartments with the consent of the corporation. The process for alterations is typically spelled out in an alteration agreement between the proprietary lessee and the corporation.

When a lease is assigned, the cooperative wants to make sure that the new proprietary lessee assumes the obligations of the prior proprietary lessee with respect to any alterations made to the apartment. The new lessee may be asked by the transfer agent to sign a new proprietary lease or to sign an assumption of the existing lease, which, when coupled with an executed assignment of lease and consent form, becomes that new shareholder’s proprietary lease. That assumption of the lease should provide that, among other things, the new lessee assumes all obligations of any predecessors in interest relating to alterations. A best practice would be to actually deliver and attach any prior alteration agreement to the new proprietary lease or to a prior proprietary lease that was assigned to the new purchaser as well.

The obligations assumed may include repairs to plumbing, kitchen fixtures, walls, ceilings, and floors – things that might not otherwise be the clear obligations of a proprietary lessee. When a repair becomes necessary, if a proprietary lessee says, “This is not my obligation under the lease,”  the corporation has the documentation in hand to say, “Yes, it is. You assumed that obligation of your predecessor in interest, and now it’s yours.”

Likewise, applications for the purchase of apartments should clearly specify that anyone buying an apartment in a cooperative must assume the obligations of any predecessor in interest to that apartment with respect to alterations. This enables a prospective purchaser doing due diligence to be aware of the obligations being assumed such that there should be no reason for obligations clearly spelled out in an alteration agreement to become contentious issues later on. Simply stated, being proactive and properly documenting a purchaser’s obligations with respect to existing alterations to an apartment may help avoid conflicts and frustration later on.