HABITAT

CO-OP/CONDO BUYERS

Transferring Co-op Shares after a Death

Frank Lovece in Co-op/Condo Buyers

heir

Your folks own a nice little co-op apartment, and they want to pass it along properly when ... you know. Virtually every proprietary lease provides that if a spouse dies, the survivor takes over. But what happens if your widowed mom or pop die, you've already got your own home, and you now face monthly maintenance payments on an apartment in which you don't live? Would you want to relocate and move in? Would you want to rent it out, provided the co-op board consents to sublets? Would you want to sell it? Whichever you choose, there are issues you'll have to deal with at one of the most vulnerable times of your life.

Mostly what happens, according to attorney Alfred M. Taffae, a partner at Racht & Taffae, is that simplest scenario, the third, in which an heir sells the apartment outright, 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" — or to move someone else in. He cites the case of a woman taking over her late son's apartment and installing two nieces and one of the niece's daughters into the unit without transferring the shares or even letting the board know. "Often," says Taffae, "boards try to be accommodating to the bereaved party, and that can sometimes come back to hurt [the building] when successors take advantage…."

Boards should be sensitive to an heir, but it's not prudent for them to be too sensitive. A board has a responsibility to see that an heir — even one who had already lived there prior to the shareholder's death — passes financial muster. If they allow an heir to stay without approval, that means the number of non-owner-occupied apartments increases, which is bad for any refinancing attempts. That doesn't help the building or the heir.

Splitting Heirs

But approving an heir isn't 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," says 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 your financials — job and income data, assets and liabilities, maybe even a letter of financial reference — to ensure that you can pay the monthly charges. "Technically, [an heir is] not allowed to live in the apartment until all the estate issues are resolved," Taffae says.

While they generally won't kick you out if you've already been living there with the shareholder, the board in most cases won't let an heir 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 can require that shares be transferred expediently from the estate, either to an heir or to a new owner. You in turn, once you're able to get through the initial mourning, have a responsibility to make such a transfer within a reasonable period of time.

 

Adapted from Habitat June 2008. For the complete article and more, join our Archive >>

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