Staying in Place

The rules. The basic premise of succession at Mitchell-Lama co-ops is that families should not be displaced when a shareholder dies. So if you are an adult family member, either by blood or nontraditional relationship, you may apply to take over ownership if you have lived in the apartment with the shareholder for two years before the shareholder dies or permanently vacates. 

Rejection is risky. The state and city, which regulate Mitchell-Lamas, have strict regulations regarding succession. While boards aren’t directly involved, there are a lot of administrative costs that co-ops have to bear in the succession process. And it’s their fiduciary duty to ensure that the managing agent knows the government procedures and that process is followed. Co-ops can reject an application if someone is not financially qualified. But an affordable Mitchell-Lama apartment is an incredible windfall, and people are highly incentivized to litigate if their claim is denied. I can think of only a handful of cases where a co-op has been successful in rejecting one.

Consistency is key. I think the prudent thing for boards to do is to have a discussion with their managing agents as to what the co-op’s policies are and make sure there are clear guidelines, especially when it comes to occupancy. Under state and city regulations, boards can apply their occupancy standards to succession. If a married couple with children have a three-bedroom apartment and then the children move out and one of the parents dies, you’d end up with a single elderly shareholder in that unit. Boards can vote to have occupancy standards applied to succession rights so there isn’t a misallocation of apartment resources, but they have to be uniformly applied.